Iowa Businesses Face September 30 Deadline for New State R&D Tax Credit Program

Iowa has replaced its traditional Research Activities Credit with a new application-based Research and Development Tax Credit for tax years beginning on or after January 1, 2026.

Under the new program, an eligible business can no longer simply calculate the credit and include it with its Iowa income tax return. Instead, the business must first apply to the Iowa Economic Development Authority (IEDA) and be certified as a “qualified business.”  Businesses intending to pursue the new Iowa R&D Tax Credit must submit this precertification application by September 30, 2026. Without that certification, the business cannot apply for or claim the Iowa R&D Credit.

A New Two-Step Process

The new Iowa R&D Tax Credit requires businesses to complete two separate steps:

1. Qualified business certification: The business must submit a precertification application through the Opportunity Iowa Portal. Applications for the initial certification period must be submitted no later than September 30, 2026.
2. Annual tax credit application: Once certified, the business must apply separately for the credit based on its eligible Iowa research expenditures. The annual application must include detailed expenditure information and verification from an independent CPA.

Businesses typically will remain certified up to five years, although businesses must continue satisfying the program’s requirements and file annual reports. Because certification is a prerequisite to the annual credit application, missing the September 30 deadline could prevent an otherwise eligible business from receiving an Iowa R&D credit for the applicable certification period.

Who May Qualify?

Eligibility is narrower than under the prior Iowa R&D Credit. A business must be primarily engaged in one of the following targeted industries:

• Advanced manufacturing
• Bioscience
• Insurance and finance
• Technology and innovation

IEDA will evaluate factors such as the applicant’s NAICS classification, revenue sources, customer base, business operations, and Iowa research activities when determining eligibility. Accordingly, performing software development or other technical activities does not necessarily establish eligibility if the company’s primary business falls outside an approved industry or sector.

How Much Is the Credit?

The new credit may equal up to 3.5% of eligible Iowa research expenditures. While the previous Iowa Credit limited the amount of wages and supplies that could be included in the R&D Credit calculation, the new Iowa R&D Tax Credit generally allows all qualified research expenditures under IRC 41 conducted in Iowa. The credit remains refundable, but it is not transferable.

Iowa has also imposed a statewide annual program limit of $40 million. If eligible applications exceed the available funding, awards may be reduced on a pro rata basis. The amount shown on the resulting tax credit certificate is claimed in the tax year immediately following the year in which the eligible expenditures were incurred.

Do Not Wait Until September

The precertification application requires more than basic identifying information. Applicants may need to provide organizational documents, recent federal and Iowa tax returns, information about related entities, descriptions of their business operations, and details regarding the qualified research conducted in Iowa. IEDA may also request additional documentation before approving certification.

IEDA anticipates that certification reviews may take up to 90 days after receiving a complete submission. Businesses should therefore begin evaluating eligibility and assembling the required information well before September.

Any business that expects to claim an Iowa R&D Tax Credit should act now. McGuire Sponsel can help businesses evaluate their eligibility, prepare the required research information, coordinate with their tax advisors, and navigate both the precertification and annual credit application processes. Businesses with Iowa research activities should contact us as soon as possible to avoid missing this opportunity.

Interested in speaking to a member of our team? Click here.