Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 304 - Adjustments to Computed Tax and Tax Credits › Rule 701-304.23 - New Capital Investment Program Tax Credits

Current through Register Vol. 47, No. 3, July 24, 2024
Effective for tax periods beginning on or after January 1,
				  2003, a business which qualifies under the new capital investment program is
				  eligible to receive tax credits. An eligible business under the new capital
				  investment program must be approved by the Iowa department of economic
				  development and meet the qualifications of 2003 Iowa Acts, chapter 125, section
				  4. The new capital investment program was repealed on July 1, 2005, and has
				  been replaced with the high quality job creation program. See rule
				  701-42.29 (15) for information
				  on the tax credits available under the high quality job creation program. Any
				  tax credits earned by businesses approved under the new capital investment
				  program prior to July 1, 2005, remain valid and can be claimed on tax returns
				  filed after July 1, 2005.
(1)
Research activities credit.
A business approved under the new
				capital investment program is eligible for an additional research activities
				credit as described in 701-subrule 52.7(5). This credit for increasing research
				activities is in lieu of the research activities credit described in subrule
				42.11(3).
(2)
Investment
				tax credit.
a.
General
				rule.
An eligible business can claim an investment tax credit equal to
				a percentage of the new investment directly related to new jobs created by the
				location or expansion of an eligible business. The percentage is equal to the
				amount provided in paragraph
"b."
New investment directly
				related to new jobs created by the location or expansion of an eligible
				business includes the following:
(1) The cost
				of machinery and equipment, as defined in Iowa Code section
				427A.1(1),
				paragraphs
"e"
and
"j,"
purchased for use in
				the operation of the eligible business. The purchase price shall be depreciated
				in accordance with generally accepted accounting principles.
(2) The purchase price of real property and
				any buildings and structures located on the real property.
(3) The cost of improvements made to real
				property which is used in the operation of the eligible business.
For eligible businesses approved by the Iowa department of
				  economic development on or after March 17, 2004, certain lease payments made by
				  eligible businesses to a third-party developer will be considered to be new
				  investment for purposes of computing the investment tax credit. The eligible
				  business shall enter into a lease agreement with the third-party developer for
				  a minimum of five years. The investment tax credit is based on the annual base
				  rent paid to a third-party developer by the eligible business for a period not
				  to exceed ten years. The total costs of the annual base rent payments for the
				  ten-year period cannot exceed the cost of the land and the third-party
				  developer's cost to build or renovate the building used by the eligible
				  business. The annual base rent is defined as the total lease payment less
				  taxes, insurance and operating and maintenance expenses.
Any credit in excess of the tax liability for the tax period
				  may be carried forward seven years or until used, whichever is the
				  earlier.
If the business is a partnership, S corporation, limited
				  liability company, cooperative organized under Iowa Code chapter 501 and filing
				  as a partnership for federal tax purposes, or estate or trust electing to have
				  the income taxed directly to an individual, an individual may claim the credit.
				  The amount of the credit claimed by an individual must be based on the
				  individual's pro rata share of the individual's earnings of the partnership, S
				  corporation, limited liability company, cooperative organized under Iowa Code
				  chapter 501 and filing as a partnership for federal tax purposes, or estate or
				  trust.