Iowa legislature adjourns, state budget finalized & final bills passed

The Iowa Legislature adjourned on the morning of Wednesday, May 14, finalizing their budget and passing final policy bills. 

This session presented opportunities on many priorities, including reform of Iowa’s economic development incentives, unemployment insurance tax reform and the creation of a new Major Events and Tourism Fund to assist the state in landing large-scale events.

IEDA (Iowa Economic Development Authority) Tax Credit Reform

Iowa’s economic development incentives have needed a refresh as large-scale projects bring automation alongside job creation. As a result, the existing High Quality Jobs Program has made it more difficult to incentivize projects with high impact, but potentially lower job creation. The biggest change in IEDA's rewrite includes a reorientation from the High Quality Jobs Program to a new Business Incentives for Growth (BIG) program. The final bill will: 

• Sunset the High Quality Jobs Program and replace it with the Business Incentives for Growth (BIG) program ($50 million allocation)
• Replace the Angel Investor Program, and create a new Seed Investor Tax Credit ($10 million allocation)  
• Reduce the Innovation Fund Certification criteria from $15 million to $3 million
• Allocate $10 million to the Renewable Chemical Production Tax Credit and the new Sustainable Aviation Fuel Production Tax Credit
• Replace the Research Activities Credit Program with a Research and Development Tax Credit ($40 million allocation)
• Sunset the Targeted Jobs Withholding Tax Credit by 2027
• Repeal the Assistive Device Tax Credit
• Provide a short-term increase to the Workforce Housing Tax Credit cap - $43 million in FY 26, $40 million in FY 27, before reverting back to $35 million for the following years
• Replace the combined IEDA business development and community development cap of $170 million with a separate business development incentive cap of $110 million
• Establish a 2-year pilot program for the Iowa Film Production Incentive Program ($10 million allocation)
• Repeal the Employer Childcare Tax Credit

Unemployment Insurance Tax Reform

Iowa’s unemployment insurance tax system has some of the highest rates among neighboring states and nationwide. The Legislature addressed this issue and provided significant relief to Iowa businesses. The final bill will:

• Reduce Iowa’s taxable wage base calculation by half, from 66.7% to 33.4%
• Exclude wages paid in other states if that state provides reciprocity
• Amend the taxable payroll limit by reducing the number of benefit ratio ranks and contribution tables. 

Major Events and Tourism 

For the past couple of years, Sen. Carrie Koelker has been working to create a way to assist Iowa’s tourism industry in competing for large-scale events that often require a significant retainer or bid guarantee to be eligible to compete. This initiative aims to make Iowa competitive and eligible for some of these larger, signature events and bring them to the state. Late in session, this bill was included in the Rebuild Iowa Infrastructure Appropriation bill, providing $4 million for the program. We plan to monitor this legislation through the rules process to ensure the Quad Cities can take advantage of the program.

Priority bills that did not pass

• Joining the Midwest Interstate Passenger Rail Compact
• Updates to the Targeted Small Business program
• Land Redevelopment Trusts
• Casino Moratorium (blocking Cedar Rapids casino approval)