Iowa Tax Incentives to Grow Soy Feedstock

Thinking about creating climate-friendly replacements for chemicals historically derived from oil or natural gas? A new tax credit positions Iowa as a prime spot to plant your facility.

Legislation aimed at accelerating growth of the emerging biotech industry–turning  crop feedstocks into high value “building block” chemicals –may also be a good thing for product manufacturers looking for price competitive, sustainable feedstock suppliers.

Giving Credit Where Credit is Due

The Renewable Chemical Production Tax Credit passed the Iowa Legislature in March 2016 and was signed into law in April 2016.  The law gives a tax credit to businesses that produce qualified renewable chemicals in the state.

The credit is equal to $0.05 per pound of qualified chemicals produced, applies to individual and corporate income tax, and is refundable. The credit is available for chemicals produced beginning January 1, 2017, and ending December 31, 2026 (10 years).

The tax credit is limited to no more than $10.0 million per fiscal year in total awards and the credit is placed under the Economic Development Authority’s (EDA) $170.0 million aggregate annual tax credit cap established in Iowa Code section 15.119.

Should valid tax credit applications exceed the annual $10.0 million available, the excess applications are awarded the first tax credits the following year. After the final year of eligible production (calendar year 2026), any eligible tax credit applications that do not receive tax credits due to the annual limit will receive tax credits the next year until the backlog is eliminated or until the end of FY 2030, whichever occurs first.

The credit will begin being awarded July 1, 2018, and cannot be redeemed until September 1, 2018. The maximum annual amount an existing business may receive in tax credits is $500,000 and the maximum annual amount a new business may receive is $1.0 million. In both instances, a company may only receive the credit for five years. Eligibility for the new credit is limited to businesses that organize, expand, or locate in Iowa on or after the effective date of the bill.