Value-Added Agriculture Investment Tax Credit – Iowa

  • Nov 21, 2008
  • ILSR
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  • State Policy
  • Food Security
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    In1999 the Iowa legislature passed a law allowing value-added agricultural businesses to claim a ten percent corporate tax credit on new investment which is "directly related to new jobs created by the location or expansion of an eligible business." But co-ops, which don’t pay state income tax, weren’t eligible. HF 716, signed into law on July 1, 2001, changes that by making ethanol cooperatives eligible for the$4 million in annual available tax credits. It allows investors in non-profit co-ops, organizing to create new ethanol plants, to use tax credits up to 10% of their investment. Cooperatives must submit a list of its members and the share of each member’s interest in the cooperative. A tax credit certificate will be issued by the department of economic development to each member on the list. The members can then claim the investment tax credit on their individual income tax returns.

    Iowa Value Added Ag Investment Tax Credit

    Section1. Section 15.333, subsection 1, Code Supplement 1999, as amended by 2000 Iowa Acts, chapter 1213, section 1, is amended to read as follows:

    1.An eligible business may claim a corporate tax credit up to a maximum of ten percent of the new investment which is directly related to new jobs created by the location or expansion of an eligible business under the program. Any credit in excess of the tax liability for the tax year may be credited to the tax liability for the following seven years or until depleted, whichever occurs earlier. Subject to prior approval by the department of economic development in consultation with the department of revenue and finance, an eligible business whose project primarily involves the production of value-added agricultural products may elect to refund all or a portion of an unused tax credit.

    Forpurposes of this section, an eligible business includes a cooperative described in section 521 of the Internal Revenue Code which is not required to file an Iowa corporate income tax return, and whose project primarily involves the production of ethanol. The refund may be used against a tax liability imposed under chapter 422, division II, III, or V. If the business is a partnership, subchapter S corporation, limited liability company, or estate or trust electing to have the income taxed directly to the individual, an individual may claim the tax credit allowed. The amount claimed by the individual shall be based upon the pro rata share of the individual’s earnings of the partnership, subchapter S corporation, limited liability company, or estate or trust.

    Forpurposes of this section, "new investment directly related to new jobs created by the location or expansion of an eligible business under the program" means the cost of machinery and equipment, as defined in section 427A.1, subsection 1, paragraphs "e" and "j", purchased for use in the operation of the eligible business, the purchase price of which has been depreciated in accordance with generally accepted accounting principles, and the cost of improvements made to real property which is used in the operation of the eligible business and which receives a partial property tax exemption for the actual value added under section 15.332.

    1A. An eligible business whose project primarily involves the production of value-added agricultural products, that elects to receive a refund of all or a portion of an unused tax credit, shall apply to the department of economic development for tax credit certificates. An eligible business whose project primarily involves the production of value-added agricultural products shall not claim a tax credit under this section unless a tax credit certificate issued by the department of economic development is attached to the taxpayer’s tax return for the tax year during which the tax credit is claimed.

    For purposes of this section, an eligible business includes a cooperative described in section 521 of the Internal Revenue Code which is not required to file an Iowa corporate income tax return, and whose project primarily involves the production of ethanol. A tax credit certificate shall not be valid until the tax year following the date of the project completion. A tax credit certificate shall contain the taxpayer’s name, address, tax identification number, the date of project completion, the amount of the tax credit, other information required by the department of revenue and finance. The department of economic development shall not issue tax credit certificates which total more than four million dollars during a fiscal year. If the department receives applications for tax credit certificates in excess of four million dollars, the applicants shall receive certificates for a prorated amount. The tax credit certificates shall not be transferred.

    For a cooperative described in section 521 of the Internal Revenue Code that is not required to file an Iowa corporate income tax return, the department of economic development shall require that the cooperative submit a list of its members and the share of each member’s interest in the cooperative. The department shall issue a tax credit certificate to each member contained on the submitted list.

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