[CGI News] Iowa research giveaway: $54.4 million in business perks in '24

DES MOINES, Iowa — Iowa gave out $54.5 million in Research Activities tax credits in 2024, the vast majority going to large, established companies, a new state report finds.

Companies with over $500,000 in Research Activities Credit (RAC) claims accounted for $37.7 million, 69% of the total, the state Department of Revenue (DOR) reported this week. The state paid two-thirds of the total amount — $36.3 million — directly as subsidies to firms owing no state income tax.

“Each year we see Iowa’s generosity to big businesses, and this tax credit program emphasizes the point,” said Mike Owen, deputy director of Common Good Iowa.

“It’s a repeated lesson since these annual reports started in 2010. The RAC was designed to help small start-up businesses, but to qualify for $500,000 in credits a firm must do more than $7 million in new research. These are not small companies. They don’t need taxpayer help.”

The DOR reported that DuPont – or EIDP Inc. – claimed the largest amount of credits, $20.4 million, in 2024. DuPont has been one of the leading recipients of the credit over the last 15 years, claiming over $87 million.

A recent change in tracking methods by the Department of Revenue (DOR) makes historical comparisons of annual reports more difficult than in the past. But they do provide a look at claims beyond the total numbers that state revenue forecasters use to understand the impact of credits on tax revenue.

The RAC is a 6.5% tax credit for new, qualified research in Iowa. The credit is “refundable,” so companies are paid by the state for any amount of their credits not needed to pay income tax. That feature is helpful to a new company that could do valuable research but is not yet profitable enough to owe state income tax.

The annual reports from DOR require reporting of claims and refunds from both the RAC and a supplemental RAC, with the list of companies with over $500,000 in claims. They do not disclose what specific purposes the credits are subsidizing, and do not list the so-called “refunds” by company.

“These are not what most would think of as ‘refunds.’ They are not returns of excess tax payments. Rather, they are refunds of tax credits earned but not needed to offset taxes owed. They are subsidies made outside the budget process to companies that do research in Iowa,” Owen said. “Taxpayers never receive an explanation showing the public purpose of these subsidies.”

Recent changes to the RAC law have made some limitations on eligible companies, in refundability and in application of the supplemental RAC. A Reynolds administration proposal outlined for a legislative committee would cap the use of the credit, which currently is uncapped and showed $84.6 million in claims in 2023. Over the last 15 years, claims have averaged $60 million.

CGI Executive Director Anne Discher said the state should prioritize affordable health care, great public schools, affordable college tuition and clean water — not boosting profits for big companies to do research they would do on their own.

“We call on lawmakers to bring the RAC back to its original purpose,” she said. “Big profitable corporations should be contributing their fair share meeting to our state’s responsibilities.”

The official Department of Revenue report is available at this link:

https://revenue.iowa.gov/media/4172/download?inline

___

DuPont claims $20.4 million in taxpayer aid under research credit

EIDP Inc., which does business as DuPont, posted the highest amount of Research Activities Credit (RAC) claims in 2024, $20.4 million, more than half of the large claims identified by company in the annual report.

The second-highest recipient in 2024 was Skyworks Solutions Inc., a California-based semiconductor company, at $4.6 million. Beckman Coulter Inc., another California-based firm in biomedical and life sciences, was next with $2.3 million in claims.

A 2009 state law requires an annual report from the Department of Revenue on the RAC, including identification of firms with over $500,000 in credits — 14 companies for 2024.

Historically, Deere and Rockwell Collins (now RTX) have been the largest claimants in 15 years of reports, with well over $100 million. But neither was in the list for 2024.

Eight companies topped $1 million in the 2024 report, compared with 17 in 2023.

#     #     #     #     #

For More Information:

Mike Owen, deputy director of Common Good Iowa. mowen@commongoodiowa.org.