Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 307 - Withholding › Rule 701-307.10 - Targeted Jobs Withholding Tax Credit

Current through Register Vol. 47, No. 3, July 24, 2024
For employers that enter into a withholding agreement with
				  pilot project cities approved by the economic development authority and create
				  or retain targeted jobs in a pilot project city, a credit equal to 3 percent of
				  the gross wages paid to employees under the withholding agreement can be taken
				  on the Iowa withholding tax return. The employer shall remit the amount of the
				  credit to the pilot project city. The administrative rules for the targeted
				  jobs withholding tax credit program administered by the economic development
				  authority may be found in 261-Chapter 71.
If the amount of withholding by the employer is less than 3
				  percent of the wages paid to the employees covered under the withholding
				  agreement, the employer can take the remaining credit against Iowa tax withheld
				  for other employees or may carry the credit forward for up to ten years or
				  until depleted, whichever is the earlier.
If an employer also has a new job credit from withholding
				  provided in rule 701-307.8 (260E) or the
				  supplemental new jobs credit from withholding provided in subrule 307.9(1),
				  these credits shall be collected and disbursed prior to the collection and
				  disbursement of the targeted jobs withholding tax credit.
The following nonexclusive examples illustrate how this rule
				  applies:
EXAMPLE 1: Company A does not have a withholding credit under
				  Iowa Code chapter 260E or a supplemental new jobs credit under Iowa Code
				  chapter 15E. Company A enters into a withholding agreement, and the withholding
				  rate for employees covered under the agreement is 4 percent of the wages paid.
				  Company A will be allowed a credit on the Iowa withholding return equal to 3
				  percent of the wages paid to each employee covered under the withholding
				  agreement, since the targeted jobs withholding tax credit cannot exceed 3
				  percent.
EXAMPLE 2: Company B does not have a withholding credit under
				  Iowa Code chapter 260E or a supplemental new jobs credit under Iowa Code
				  chapter 15E. Company B enters into a withholding agreement, and the withholding
				  rate for employees covered under the agreement is 2.5 percent of the wages
				  paid. Company B will be allowed a credit on the Iowa withholding return equal
				  to 3 percent of the wages paid to each employee covered under the withholding
				  agreement. The extra withholding credit equal to 0.5 percent may be used to
				  offset withholding tax for Company B's employees not covered under the
				  withholding agreement.
EXAMPLE 3: Company C has a withholding credit under Iowa Code
				  chapter 260E of 1.5 percent of the wages paid to new employees and a
				  supplemental new jobs credit under Iowa Code chapter 15E of 1.5 percent of the
				  wages paid to new employees. Company C also enters into a withholding agreement
				  for the same employees covered under the 260E agreement and supplemental new
				  jobs credit agreement, and the withholding rate for employees covered under
				  these agreements is 5 percent of the wages paid. Company C will be allowed a
				  credit on the Iowa withholding return equal to 5 percent of the wages paid to
				  each employee covered under these agreements. Since the community college
				  receives disbursement of the credit before the pilot project city, the
				  community college will receive 3 percent of the wages paid to each employee
				  covered under the agreements, and the pilot project city will receive the
				  remaining 2 percent of the wages paid to each employee covered under the
				  agreements.
EXAMPLE 4: Company D has a withholding credit under Iowa Code
				  chapter 260E of 1.5 percent of the wages paid to new employees and a
				  supplemental new jobs credit under Iowa Code chapter 15E of 1.5 percent of the
				  wages paid to new employees. Company D also enters into a withholding agreement
				  for the same employees covered under the 260E agreement and supplemental new
				  jobs credit agreement, and the withholding rate for employees covered under the
				  agreement is 2.5 percent of the wages paid. Company D will be allowed a credit
				  on the Iowa withholding tax return equal to 6 percent of the wages paid to each
				  employee covered under these agreements. The extra withholding credit equal to
				  3.5 percent may be used to offset withholding tax for Company D's employees not
				  covered under these agreements.
(1)
Notification by the employer.
Once a withholding agreement is
				entered into with a pilot project city, the employer shall notify the
				department of revenue that an agreement has been executed. With this
				notification, the employer must also provide its address, tax identification
				number and the number of new jobs created under the agreement. In addition, for
				each year that the withholding agreement is in place, the employer must notify
				the department of revenue by January 31 of the number of new jobs created as of
				December 31 of the preceding year.
(2)
Notification by the pilot project
				city.
The pilot project city must notify the department of revenue on
				a quarterly basis of the amount of the targeted jobs withholding credit that
				each employer covered by a withholding agreement remitted to the city. This
				notification must occur within 45 days after the end of each calendar quarter.
				In addition, the pilot project city must notify the department of revenue
				immediately when a withholding agreement with an employer is
				terminated.
This rule is intended to implement Iowa Code section
				  403.19A as amended by 2013 Iowa
				  Acts, Senate File 433.