1. Iowa Tax Credit and Incentive Programs for Biotech Companies
Presented to the
Iowa Biotech Association
By Dwayne Vande Krol
November 2016

2. Types of Tax Credits and Incentives
Direct Financial Assistance and Grants
Statutory Tax Credits, Refunds, and Abatement
Negotiated Tax Credits, Refunds, and Abatement
What’s the difference and why does it matter?

3. Demonstration Fund
Type: Direct Financial Assistance Description: Provides assistance to companies with market-ready innovative technologies, with a focus on assisting the performance of marketing and business development activities.

4. Demonstration Fund Eligibility:
Iowa-based company with innovative technology solution
Fewer than 500 employees
Advanced manufacturing, bioscience or information technology industries
Competitive and protectable product, technology or process
Business with a commitment to commercialize the product in the targeted industries
Product ready for market introduction (exception for bioscience & medical device requiring regulatory approval)
Essential management team in place (business development, financial operations & technology) 

5. Demonstration Fund
Structure/Amount: Awards of up to $100,000, primarily in the form of loans or royalty arrangements.
To Qualify/Claim: Submit application to the Iowa Economic Development Authority. Applications are reviewed for funding decisions on a bi-monthly basis.

6. Proof of Commercial Relevance Fund
Type: Direct Financial Assistance Description: Assists in defining and articulating the opportunities for businesses that have demonstrated a proof-of-concept for innovative technology.

7. Proof of Commercial Relevance Fund
Eligibility:
Iowa-based company with innovative technology solution
Fewer than 500 employees
Advanced manufacturing, bioscience or information technology industries
Demonstrated proof-of-concept
Minimum of two co-founders/principals actively engaged in the business (expertise in core technology and business development and/or financial operations)

8. Proof of Commercial Relevance Fund
Structure/Amount: Awards of up to $25,000, primarily in the form of low interest loans. Private match is required. To Qualify/Claim: Submit application to the Iowa Economic Development Authority. Applications are reviewed for funding decisions on a bi-monthly basis.

9. Innovation Acceleration Fund
Type: Direct Financial Assistance
Description:
Promotes the formation and growth of businesses that engage in the transfer of technology into competitive, profitable companies that create high paying jobs.
Includes two components that correspond to different stages of growth for investment-grade, high-growth enterprises (i.e., the Propel Program and the Innovation Expansion Program).

10. Innovation Acceleration Fund
Eligibility:
Iowa-based company with innovative technology solution
Fewer than 500 employees
Advanced manufacturing, bioscience or information technology
Competitive and protectable product, technology or process
Business with a commitment to commercialize the product in the targeted industries
Complete management team
Proven business model and established customer base
Mature technology
Significant/substantive revenue
Demonstrated financial and operational stability

11. Innovation Acceleration Fund
Structure/Amount: Awards of up to $300,000 for Propel program and $500,000 for Expansion program will be in the form of royalty arrangements or loans. Each $1 of State funds must be matched by a minimum of $1 of private funds. To Qualify/Claim: Submit application to the Iowa Economic Development Authority. Funding decisions are made on a bi-monthly basis through a competitive application process.

12. Research and Development Tax Credits
Type: Statutory Income Tax Credit/Refund Description: Credit provided for a percentage of qualifying expenditures apportioned to Iowa and incurred for increasing research activities. Eligibility: Qualifying activities including research and development of new products, as well as designing and testing new and improved manufacturing processes.

13. Research and Development Tax Credits
Eligibility (continued):
Qualifying expenditures include:
Wages paid to employees for performing or supporting research activities or who directly supervise or directly support research activities.
Supplies, including tangible property other than land, improvements to land, or depreciable property
65% of expenses related to contract research

14. Research and Development Tax Credits
Structure/Amount:
Based on the federal credit, with the Iowa credit based on the ratio of Iowa research expenditures over total research expenditures.
Companies may elect to claim the basic research credit, which is equal to 6.5% of the state’s apportioned share of qualifying expenditures; or companies may claim the alternative simplified credit in a manner consistent with the federal credit (equal to 4.55% and 1.95% of qualifying expenditures).
A supplemental research credit (of either 3% or 10%) is available for participants in the High Quality Jobs Program.
Amounts in excess of Iowa income tax liability are refundable.
To Qualify/Claim: Report on annual Iowa income tax return.

15. Renewable Energy Tax Credit
Type: Statutory Income Tax Credit
Description:
Credit provided for a producer or purchaser of energy from an eligible renewable energy facility approved by the Iowa Utilities Board.
A power purchase agreement is signed between the purchaser and producer which sets forth which party will receive the tax credit.
The credit can also be received for renewable energy produced for on- site consumption by certain producers.

16. Renewable Energy Tax Credit
Eligibility:
A wind energy conversion facility, a biogas recovery facility, a biomass conversion facility, a methane gas recovery facility, a solar energy conversion facility, or a refuse conversion facility that meets all of the following requirements:
located in Iowa;
at least 51% owned by an Iowa resident, farm corporation, or other authorized entity;
initially placed in service between July 1, 2005 and January 1, 2017;
not less than three-fourths megawatts of nameplate capacity or energy capacity equivalent if all or a portion of the renewable energy is for on-site consumption; and
no greater than 60 megawatts of capacity (excluding wind facilities).

17. Renewable Energy Tax Credits
Structure/Amount:
$0.015 per kilowatt-hour of electricity, or
$4.50 per million British thermal units of heat for a commercial purpose, or
$4.50 per million British thermal units of methane gas or other biogas used to generate electricity, or
$1.44 per one thousand standard cubic feet of hydrogen fuel generated by and purchased from an eligible renewable energy facility.
A producer or purchaser of renewable energy may receive renewable energy tax credits for a 10-year period for each eligible renewable energy facility.

18. Renewable Energy Tax Credits
To Qualify/Claim:
Qualified facilities are provided a tax credit certificate, which is utilized to claim the credits on an annual Iowa tax return.
The credits are not refundable, but may be carried forward for up to 7 years.
Credits earned by pass-through entities are claimed pro-rata, based on ownership percentage.
Tax credit certificates are transferrable, but only once.

19. New Jobs Training (260E) Tax Credits
Type: Statutory Withholding and Income Tax Credits
Description:
Assists businesses which are creating new positions to provide training to new employees.
The company’s partner community college sells bonds to finance the cost of the company’s training program.
Dollars available through the program are dependent upon the training and development needs and the projected tax revenue from the new positions created.

20. New Jobs Training (260E) Tax Credits
Eligibility:
Must enter into job training agreement with community college
Businesses may be new, expanding their Iowa workforce, or relocating to the state.
Employees qualifying for training services must fill newly-created positions and be subject to Iowa withholding tax.
A business must be engaged in interstate or intrastate commerce for the purpose of manufacturing, processing, assembling products, warehousing, wholesaling, or conducting research and development.
A business which provides services must have customers outside of Iowa.

21. New Jobs Training (260E) Tax Credits
Eligibility (continued):
A business cannot have closed or substantially reduced its employment base at any of its other business sites in Iowa in order to relocate substantially the same operation to another area of the state.
As part of the project, costs expended for on-the-job training can be no more than 50% of the annual gross payroll for up to one year of the new jobs.

22. New Jobs Training (260E) Tax Credits
Structure/Amount:
The business is eligible for a withholding tax credit equal to 1.5% of gross Iowa wages generated by the new positions. Those amounts are diverted to the community college to retire the bonds.
A supplemental new jobs withholding tax credit equal to an additional 1.5% of gross Iowa wages may be available to businesses participating in the High Quality Jobs Program.

23. New Jobs Training (260E) Tax Credits
Structure/Amount (continued):
Qualified companies are also eligible to receive a nonrefundable, nontransferable income tax credit equal to 6% of the taxable wages which the employer is required to contribute to the State unemployment compensation fund (i.e., for a credit of $1,638 per job for 2015) times the number of new jobs existing in the tax year that directly result from the project covered by the agreement or new jobs that directly result from those new jobs.
To receive the income tax credit, the company must increase its Iowa employment by at least 10%.

24. New Jobs Training (260E) Tax Credits
To Qualify/Claim:
Qualification is based on application to one of Iowa’s community colleges.
Credits are claimed on quarterly Iowa withholding tax returns and annual Iowa income tax returns.

25. High Quality Jobs Program
Type: Direct Financial Assistance; Negotiated Tax Credits and Refunds
Description:
The amount of direct financial assistance and/or tax incentives awarded is dependent on the number of jobs created or retained and the qualifying investment made.
Actual award amounts will be based on the business’s level of need, the quality of the jobs, the percentage of created jobs defined as “high quality,” and the economic impact of the project.

26. High Quality Jobs Program
Eligibility:
If the qualifying investment is over $10 million, the community has approved sponsorship of the project by ordinance or resolution.
The business has not closed or substantially reduced operations in one area of Iowa and relocated substantially the same operations in a community in another area of Iowa.
The business shall meet the qualifying wage thresholds (based on laborshed wage rates).

27. High Quality Jobs Program
Eligibility (continued):
The business shall provide a sufficient package of benefits to each employee holding a created or retained job.
The business shall demonstrate that the jobs created or retained will have a sufficient impact on state and local government revenues.
The business shall not be a retail business or a business where entrance is limited by a cover charge or membership requirement.
Tax Credit/Refund Amounts: See chart on next page.

28. High Quality Jobs Program

29. High Quality Jobs Program
Direct Financial Assistance Amounts: Amounts of grants and forgivable loans are negotiated, but generally equal $5,000 - $10,000 per new job.
To Qualify/Claim:
Credits are awarded based on application to IEDA.
Sales and use tax refunds are computed using forms provided by contractors and subcontractors, and must be filed with the Department of Revenue within 12 months of “project completion.”
Investment tax credits are claimed on annual Iowa income tax returns. Total ITCs awarded are claimed over a five-year amortization period. ITCs are nonrefundable and nontransferable, but can be carried forward for 7 years.

30. High Quality Jobs Program
To Qualify/Claim:
Supplemental research and development tax credits and/or refunds are claimed on annual Iowa income tax return.
Property tax exemption is administered by county/city assessor.

31. Renewable Chemical Production Tax Credits
Type: Statutory Income Tax Credits/Refunds (enacted during 2016 legislative session)
Description:
The program aims to incentivize the production of high- value “building block” chemicals.
IEDA is currently developing the administrative rules and application process. The first round of applications will be accepted beginning January 1, 2018, for the 2017 calendar production year.

32. Renewable Chemical Production Tax Credits
Eligibility:
The business is physically located in this state.
The business is operated for profit and under single management.
The business is not an entity providing professional services, health care services, or medical treatments or an entity engaged primarily in retail operations.
The business organized, expanded, or located in the state on or after April 6, 2016.
The business is not relocating or reducing operations.
The business is in compliance with all agreements entered into with IEDA.

33. Renewable Chemical Production Tax Credits
Structure/Amount:
$0.05 per pound of renewable chemicals produced in the prior calendar year.
Annual limits of $1 million for start-ups (i.e., in operation in Iowa for five years or less) and $500,000 for established businesses (i.e., in operation in Iowa for more than five years).
Credits earned by pass-through entities are claimed based on pro-rata ownership percentage.
Amounts in excess of Iowa tax liability are refundable.

34. Renewable Chemical Production Tax Credits
To Qualify/Claim:
An application will be required to be filed with IEDA during the calendar year following the calendar year in which the renewable chemical are produced.
Successful applicants will receive a tax credit certificate.
The credit is claimed by attaching the certificate to the annual Iowa income tax return.

35. Local Incentives
Cities and counties may have programs available to assist companies that are locating or expanding in their jurisdiction, including:
Property Tax Abatement or Exemption
Property Tax Increment Financing
Infrastructure Improvements
Grants
Other Financial or Non-Financial Incentives

36. Examples, Comments, or Questions?