Fiscal Note
Fiscal Services Division
HF 2660 – Research Activities Credit, Agricultural Production (LSB5768HV)
Staff Contact: Eric Richardson (515.281.6767) eric.richardson@legis.iowa.gov
Fiscal Note Version – New
Description
House File 2660 includes agriscience research as an eligible activity for claiming the Research
Activities Tax Credit (RAC) and defines “agriscience research.”
The Bill applies retroactively to tax years beginning on or after January 1, 2017.
Background
2018 Iowa Acts, chapter 1161 (Income and Sales Tax Modification Act), made changes to the
RAC that restricted the types of industries eligible for the credit, which were retroactively
effective to tax year (TY) 2017. Iowa Code chapter 422 details the RAC, which is available to
claim against the individual income tax and corporate income tax for qualified research activities
in the State. There is currently an exclusion from the RAC for persons engaged in agricultural
production as defined in Iowa Code section 423.1. The Bill redefines “agriscience research” to
include qualified research activities in the areas of animal science, veterinary medicine,
nutritional science, or genetic science that may be eligible to claim the RAC. From FY 2019 to
FY 2023, approximately $294.9 million in credits was claimed against the State individual
income and corporate income taxes.
Assumptions
• The Bill makes no provision to allow tax returns to be amended beyond the standard three-
year amendment period in current law, according to the Iowa Department of Revenue (IDR).
Therefore, it is assumed that tax years prior to TY 2020 would not have amendments filed.
• It is assumed that $24.3 million in pending tax credit appeals filed with the IDR is included in
this fiscal analysis, which includes pending appeals from tax years beginning in TY 2017.
• The initial fiscal impact of the Bill will occur in FY 2024 due to amended tax returns.
• The tax credit is fully refundable for tax years beginning prior to January 1, 2023.
• According to the IDR, aggregate tax credit claims will increase by $21.9 million for TY 2020
based on appeals filed with the IDR.
• Tax credits due to the Bill will increase at a rate of 2.9% based on historical claim data.
• For tax years beginning on or after January 1, 2023, any refundable portion of the tax credit
is limited to a percentage of the excess of the tax liability as follows: 70.0% for tax years
beginning in 2023, 65.0% for tax years beginning in 2024, 60.0% for tax years beginning in
2025, 55.0% for tax years beginning in 2026, and 50.0% for tax years beginning in 2027 or
later.
• The tax credit is refundable and will have no impact on the income surtax for schools.
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• According to the IDR, it is assumed that 94.7% of the tax credits will be claimed, with the
timing of claims indicated below:
• Year 0 = 0.0%
• Year 1 = 10.1%
• Year 2 = 50.4%
• Year 3 = 28.8%
• Year 4 = 3.0%
• Year 5 = 2.4%
Fiscal Impact
The proposed expansion of the RAC in House File 2660 is projected to decrease net General
Fund revenue by the following amounts each fiscal year:
• FY 2024 = $37.7 million
• FY 2025 = $48.3 million
• FY 2026 = $28.0 million
• FY 2027 = $16.5 million
• FY 2028 = $13.7 million
• FY 2029 = $13.0 million
Sources
Iowa Department of Revenue
Legislative Services Agency analysis
/s/ Jennifer Acton
March 19, 2024
Doc ID 1448082
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
www.legis.iowa.gov
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Statutes affected:
Introduced: 422.10, 423.1