Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 304 - Adjustments to Computed Tax and Tax Credits › Rule 701-304.14 - Investment Tax Credit-new Jobs and Income Program and Enterprise Zone Program

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
General
				rule.
An investment tax credit of up to 10 percent of the new
				investment which is directly related to new jobs created by the location or
				expansion of an eligible business is available for businesses approved by the
				economic development authority under the new jobs and income program and the
				enterprise zone program. The new jobs and income program was repealed on July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 investment tax credit under the high quality job creation program. Any
				investment tax credit earned by businesses approved under the new jobs and
				income program prior to July 1, 2005, remains valid and can be claimed on tax
				returns filed after July 1, 2005. The credit is available for machinery and
				equipment or improvements to real property placed in service after May 1, 1994.
				The credit shall be taken in the year the qualifying asset is placed in
				service. The enterprise zone program was repealed on July 1, 2014. Any
				investment tax credit earned by businesses approved under the enterprise zone
				program prior to July 1, 2014, remains valid and can be claimed on tax returns
				filed after July 1, 2014. For business applications received by the economic
				development authority on or after July 1, 1999, purchases of real property made
				in conjunction with the location or expansion of an eligible business, the cost
				of land and any buildings and structures located on the land will be considered
				to be new investment which is directly related to new jobs for purposes of
				determining the amount of new investment upon which an investment tax credit
				may be taken. For projects approved on or after July 1, 2005, under the
				enterprise zone program, the investment tax credit will be amortized over a
				five-year period, as described in subrule 42.29(2).
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 ten 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 year
				  may be carried forward seven years or until used, whichever is the
				  earlier.
If the business is a partnership, S corporation, limited
				  liability company, or an 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 the individual must be based on the individual's pro rata
				  share of the individual's earnings of the partnership, S corporation, limited
				  liability company, or estate or trust.
(2)
Investment tax credit-value-added
				agricultural products or biotechnology-related processes.
For tax
				years beginning on or after July 1, 2001, an eligible business whose project
				primarily involves the production of value-added agricultural products may
				elect to receive a refund for all or a portion of an unused investment tax
				credit. For tax years beginning on or after July 1, 2001, but before July 1,
				2003, an eligible business includes a cooperative described in Section 521 of
				the Internal Revenue Code which is not required to file an Iowa corporation
				income tax return and whose project primarily involves the production of
				ethanol. For tax years beginning on or after July 1, 2003, an eligible business
				includes a cooperative described in Section 521 of the Internal Revenue Code
				which is not required to file an Iowa corporation income tax return. For tax
				years ending on or after July 1, 2005, an eligible business approved under the
				enterprise zone program whose project primarily involves biotechnology-related
				processes may elect to receive a refund for all or a portion of an unused
				investment tax credit.
Eligible businesses shall apply to the Iowa department of
				  economic development for tax credit certificates between May 1 and May 15 of
				  each fiscal year through the fiscal year ending June 30, 2009. The election to
				  receive a refund of all or a portion of an unused investment tax credit is no
				  longer available beginning with the fiscal year ending June 30, 2010. Only
				  those businesses that have completed projects before the May 1 filing date may
				  apply for a tax credit certificate. The Iowa department of economic development
				  will not issue tax credit certificates for more than $4 million during a fiscal
				  year for this program and eligible businesses described in subrule 42.29(2). If
				  applications are received for more than $4 million, the applicants shall
				  receive certificates for a prorated amount.
The economic development authority will issue tax credit
				  certificates within a reasonable period of time. Tax credit certificates are
				  valid for the tax year following project completion. The tax credit certificate
				  must be included with the tax return for the tax year during which the tax
				  credit is claimed. The tax credit certificate shall not be transferred, except
				  for a cooperative described in Section 521 of the Internal Revenue Code which
				  is required to file an Iowa corporation income tax return and whose project
				  primarily involves the production of ethanol for tax years beginning on or
				  after January 1, 2002, or for a cooperative described in Section 521 of the
				  Internal Revenue Code which is required to file an Iowa corporation income tax
				  return for tax years beginning on or after July 1, 2003.
For value-added agricultural projects, for a cooperative that
				  is not required to file an Iowa income tax return because it is exempt from
				  federal income tax, the cooperative must submit a list of its members and the
				  share of each member's interest in the cooperative. The Iowa department of
				  economic development will issue a tax credit certificate to each member on the
				  list.
See 701-subrule 52.10(4) for examples illustrating how this
				  subrule is applied.
For tax years beginning on or after January 1, 2002, but
				  before July 1, 2003, a cooperative described in Section 521 of the Internal
				  Revenue Code which is required to file an Iowa corporation income tax return
				  and whose project primarily involves the production of ethanol may elect to
				  transfer all or a portion of its tax credit to its members. For tax years
				  beginning on or after July 1, 2003, a cooperative described in Section 521 of
				  the Internal Revenue Code which is required to file an Iowa corporation income
				  tax return may elect to transfer all or a portion of its tax credit to its
				  members. The amount of tax credit transferred and claimed by a member shall be
				  based upon the pro rata share of the member's earnings in the cooperative. The
				  economic development authority will issue a tax credit certificate to each
				  member of the cooperative to whom the credit was transferred provided that tax
				  credit certificates which total no more than $4 million are issued during a
				  fiscal year. The tax credit certificate must be included with the tax return
				  for the tax year during which the tax credit is claimed.
(3)
Repayment of credits.
If
				an eligible business fails to maintain the requirements of the new jobs and
				income program or the enterprise zone program, the taxpayer may be required to
				repay all or a portion of the tax incentives taken on Iowa returns.
				Irrespective of the fact that the statute of limitations to assess the taxpayer
				for repayment of the tax credits may have expired, the department may proceed
				to collect the tax incentives forfeited by failure to maintain the requirements
				of the new jobs and income program or the enterprise zone program because this
				repayment is a recovery of an incentive, rather than an adjustment to the
				taxpayer's tax liability. Details on the calculation of the repayment can be
				found in 261-subrule 187.5(4) of the administrative rules of the economic
				development authority. If the business is a partnership, limited liability
				company, S corporation, estate or trust where the income of the taxpayer is
				taxed to the individual owner(s) of the business, the department may proceed to
				collect the tax incentives against the partners, members, shareholders or
				beneficiaries to whom the tax incentives were passed through. See Decision of
				the Administrative Law Judge in
Damien & Colette Trebilcock, et
				al.,
Docket No. 11DORF 042-044, June 11, 2012.
If the eligible business, within five years of purchase,
				  sells, disposes of, razes, or otherwise renders unusable all or a part of the
				  land, buildings, or other existing structures for which a tax credit was
				  claimed under this rule, the income tax liability of the eligible business for
				  the year in which all or part of the property is sold, disposed of, razed, or
				  otherwise rendered unusable shall be increased by one of the following
				  amounts:
a. One hundred percent of the
				investment tax credit claimed if the property ceases to be eligible for the tax
				credit within one full year after being placed in service.
b. Eighty percent of the investment tax
				credit claimed if the property ceases to be eligible for the tax credit within
				two full years after being placed in service.
c. Sixty percent of the investment tax credit
				claimed if the property ceases to be eligible for the tax credit within three
				full years after being placed in service.
d. Forty percent of the investment tax credit
				claimed if the property ceases to be eligible for the tax credit within four
				full years after being placed in service.
e. Twenty percent of the investment tax
				credit claimed if the property ceases to be eligible for the tax credit within
				five full years after being placed in service.
This rule is intended to implement Iowa Code section
				  15.333 as amended by 2010 Iowa
				  Acts, Senate File 2380.