Companies that conduct research in Iowa received received $49.1 million in state tax credits in 2016 through the Research Activities Credit, according to an annual report released Wednesday by the Iowa Department of Revenue.
Eighty-two percent of the total credits issued — $40.4 million — were paid out through more than 200 checks as refunds to companies that paid no state income tax, according to an analysis by the Iowa Fiscal Partnership.
Overall, the credit program cost $58.4 million in calendar year 2016, with $49.1 million of that in claims by corporations and the rest by individuals. The credit is refundable, which means that if a company has more tax credits available than it owes in taxes, the state makes a payment for the difference.
Companies made 305 claims totaling $49.1 million for the RAC and the related supplemental RAC for which some claimants are eligible, down $1 million from the previous year. Of those claims:
- 207 (68 percent) were paid in whole or in part as checks to companies that paid no state corporate income tax.
- Very large claimants — companies with over $500,000 in RAC claims — had at least 88 percent of those corporate checks ($35.6 million) while paying no income tax.
- The large claimants accounted for 90 percent of the corporate claims.
The three largest payments were made to Rockwell Collins Inc. and its subsidiaries, which received $12,255,474 in credits, followed by Deere & Co. with $8,018,652, and DuPont, which received $5,099,050.
Mike Owen, executive director of the nonpartisan Iowa Policy Project, noted that fewer than 6 percent of the corporate claimants took 90 percent of the benefit of the program.
"It is really time to examine whether this is a wise use of what legislators tell us are scarce resources," he said.
Nicole Crain, senior vice president for public policy with the Iowa Association of Business and Industry, said she hadn't reviewed the report or IFP's analysis.
"It's important to look at the whole picture — employment taxes, property taxes and investment to the local community," she said in an email. "The beneficiaries of the Research Activities Credit are some of the best employers in the state. They employ thousands of people and invest millions of dollars in research IN IOWA. Otherwise they would not be able to claim this credit."