Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 304 - Adjustments to Computed Tax and Tax Credits › Rule 701-304.11 - Research Activities Credit

Current through Register Vol. 47, No. 3, July 24, 2024
The taxes imposed on individual income shall be reduced by a
				  state tax credit for increasing research activities in this state. For
				  individual income tax, the requirements of the research activities credit are
				  described in Iowa Code section
				  422.10. This rule explains terms
				  not defined in the statute and procedures for claiming the credit.
(1)
Definitions.
"Accountant"
means a person authorized under
				  Iowa Code chapter 542 to engage in the practice of public accounting in Iowa as
				  defined in Iowa Code section
				  542.3(23)  or
				  authorized to engage in such practice in another state under a similar law of
				  another state.
"Architect"
means a person licensed under
				  Iowa Code chapter 544A or a similar law of another state.
"Aviation and aerospace"
means the design,
				  development or production of aircraft, rockets, missiles, spacecraft and other
				  machinery and equipment that operate in aerospace.
"Collection agency"
means a person primarily
				  engaged in the business of collecting debt, including but not limited to
				  consumer debt collection subject to the provisions of the federal Fair Debt
				  Collections Practices Act in 15 U.S.C. §
											1692 et seq., the
				  Iowa debt collection practices Act in Iowa Code sections
				  537.7101 through
				  537.7103, or other similar state
				  law.
"Finance or investment company"
means a
				  person primarily engaged in finance or investment activities broadly consisting
				  of the holding, depositing, or management of a customer's money or assets for
				  investment purposes, or the provision of loans or other similar financing or
				  credit to customers. "Finance or investment company" includes but is not
				  limited to a person organized or licensed under Iowa Code chapter 524, 533, or
				  533D or other similar state or federal law, or an investment company as defined
				  in 15 U.S.C. §
											80a-3.
"Life sciences"
means the sciences concerned
				  with the study of living organisms, including agriscience, biology, botany,
				  zoology, microbiology, physiology, biochemistry, and related subjects.
"Manufacturing"
means the same as defined in
				  2018 Iowa Acts, Senate File 2417, section 183.
"Publisher"
means a person whose primary
				  business is the publishing of books, periodicals, newspapers, music, or other
				  works for sale in any format.
"Real estate company"
means a person
				  licensed under Iowa Code chapter 543B or otherwise primarily engaged in acts
				  constituting dealing in real estate as described in Iowa Code section
				  543B.6.
"Retailer"
means a person that primarily
				  engages in sales of personal property as defined in 2018 Iowa Acts, Senate File
				  2417, section 158, or services directly to an ultimate consumer. A business
				  that primarily makes sales for resale is not a retailer.
"Software engineering"
means the detailed
				  study of the design, development, operation, and maintenance of
				  software.
"Transportation company"
means a person
				  whose primary business is the transportation of persons or property from one
				  place to another.
"Wholesaler"
means a person that primarily
				  engages in buying large quantities of goods and reselling them in smaller
				  quantities to retailers or other merchants who in turn sell those goods to the
				  ultimate consumer.
(2)
Requirement that the business claim and be allowed the federal
				credit.
To claim this credit, a taxpayer's business must claim and be
				allowed a research credit for such qualified research expenses under Section 41
				of the Internal Revenue Code for the same taxable year as the taxpayer's
				business is claiming the credit.
a.
Being "allowed" the federal credit.
For purposes of this
				subrule, a federal credit is "allowed" if the taxpayer meets all requirements
				to claim the credit under Section 41 of the Internal Revenue Code and any
				applicable federal regulation and Internal Revenue Service guidance and such
				credit has not been disallowed by the Internal Revenue Service.
b.
Applicability of requirement to
				pass-throughs.
If the individual received the Iowa credit through a
				pass-through entity, the pass-through entity that conducted the research must
				have claimed and been allowed the federal credit in order for the individual to
				claim the Iowa credit.
c.
Impact of federal audit.
If the Internal Revenue Service
				audits or otherwise reviews the return and disallows the credit, the taxpayer
				shall file an amended Iowa return along with supporting schedules, including an
				amended federal return or a copy of the federal revenue agent's report and
				notification of final federal adjustments, to add back the Iowa credit to the
				extent not previously disallowed by the department.
d.
Authority of the
				department.
Nothing in this subrule shall limit the department's
				authority to review, examine, audit, or otherwise challenge an Iowa tax credit
				claim under Iowa Code section
				422.10, regardless of inaction,
				a settlement, or a determination by the Internal Revenue Service under Section
				41 of the Internal Revenue Code.