Tax Structure

The State of Iowa has a tax structure that is business friendly. Tax advantages for Iowa businesses include:

State Corporate Tax:

Iowa’s Corporate Income Tax is based on single factor non-unitary tax formula. Tax is levied on the net income derived from sales conducted within the State of Iowa. The corporate tax is imposed on the net income received or earned after adjustment by subtracting 50% of the federal income taxes. The rate ranges from 6-12%.

Federal Deductibility:

Iowa is one of five states that offer Federal Deductibility. This allows 50 percent deductibility of federal taxes on corporate income tax in Iowa.

Iowa is a Right-to-Work State:

Under Iowa law, an employee is not required to join a union as a condition of employment. Management/employee relations are extremely positive in our area.

Unemployment Compensation Contribution Rate:

The new employers unemployment compensation contribution rate is 1.0% (lowest permitted by federal law) of the first $30,600 of each employee’s wage for non-construction jobs in 2019.

Workers Compensation - Decreased effective January 1, 2018

Iowa Insurance Commissioner Doug Ommen approved a rate filing by the National Council on Compensation Insurance that decreased workers compensation premiums by an average of 8.7%. The reduction is for voluntary and assigned risks beginning on January 1, 2018 for new and renewal policies. This is in addition to the 3.9% mid-year decrease as a result of the workers' compensation reform legislation  that was signed into law in 2017 in Iowa. 

Sales Tax:

• State 6%
• Local/County 1%

Property Tax:

Property tax rates on land and buildings are at levels determined by each local community. Generally those property taxes are levied at a rate of $25-$42 per $1,000 of assessed value with the assessment being 90% of market value for commercial and industrial property. There are no property taxes on new industrial machinery and equipment or inventories in Iowa. 

Utility (Sales) Tax:

Utility Rates:

Electric utility rate calculations can be figured based on a prospect’s expected kw demand, usage, load factor and operational hours per day/weekly. The rate for industrial users varies among utilities in our communities.

Utility Franchise Fee:

Supplemental Utility Franchise Fee (City of Waterloo ONLY) - 3% gas & electricity

New Jobs Tax Credit:

Businesses entering into an agreement under the New Jobs Tax Credit program that increases their workforce by at least 10 percent, qualify for this credit to their Iowa corporate income tax. The credit is equal to 6 percent of the state unemployment insurance taxable wage base. The credit for 2016 is $1,698 per new employee. The tax credit can be carried forward up to 10 years.

Research and Development Tax Credit:

A refundable credit for increasing research activities is up to 6.5 percent of the company’s allotted share of qualifying research expenditures in Iowa. A company must meet the qualifications of the federal research activities credit in order to be eligible for the credit on the Iowa return. Companies approved for expansion in an Enterprise Zone or under the High Quality Jobs program may be eligible for the amount of the tax credit to be doubled for qualifying research and development activities

Iowa has eliminated the following tax burdens:

• No sales or use tax on industrial machinery/equipment/computers
• No sales tax on purchases of electricity or natural gas used directly in the manufacturing process
• No sales or use tax on computer/peripherals used in the processing or storage of data
• No property tax on manufacturing machinery/equipment/computers
• No tax assessment on personal property (includes corporate inventories of salable goods, raw materials and goods in process)

See Incentives & Financial Assistance for more information.