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Majority of Iowa R&D tax credit paid out as refunds in 2016

A vast majority of an Iowa tax credit for research and development were paid out as payments to businesses last year.

Companies conducting research in Iowa, and individuals tied to those corporations, made $58.4 million worth of claims from the state’s Research Activities Tax Credit program in 2016, a recent Iowa Department of Revenue report shows. That’s the highest dollar amount of claims made since 2013.

The tax credit is refundable, meaning companies who get tax credits and have no Iowa tax liability receive money from the state.

More than 80 percent of tax credits last year — $40.4 million — went to 207 companies in the form of tax refunds. This continues a trend as between 68 and 95 percent of the tax credit claims in a given year have gone as refunds to corporations from 2010 through 2016.

Of the total claims last year, just 12 companies accounted for 76 percent, or $44.3 million. They include Rockwell Collins, which made $12.3 million in claims, Deere & Co. with more than $8 million in claims, and DuPont with about $5.1 million.

This chart shows the companies that each had more than $500,000 in Research Activities tax credit claims in 2016. (From Iowa Department of Revenue report)

Arguments for and against the tax credit have been fairly cut and dry in the past.

Supporters have said the tax credit helps foster additional investment in Iowa and ensures research is done inside the state.

Critics have pointed out that the vast majority of the benefit goes to just a few companies and is not being spread to smaller firms. They’ve also criticized the state for giving money to large companies when Iowa is dealing with a budget crunch.

“This report illustrates a budget choice,” said Mike Owen, executive director of the Iowa Policy Project, in a recent memo. “Legislators this month approved about $40 million in additional state aid to local schools for (the) next budget year. This report suggests they could have doubled that if they were willing to cut back this tax break to simply excusing taxes owed.”

Nicole Crain, senior vice president for public policy for the Iowa Association of Business and Industry, told the Business Record last week the companies that receive the tax 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,” she told the Record.

Most the tax credit claims and the refunds – more than 84 percent and 90 percent, respectively – are attributed to corporations each year since 2010.

Matthew Patane is the managing editor and co-founder of Clay & Milk. Send him an email at

Majority of Iowa R&D tax credit paid out as refunds in 2016 | Clay & Milk
A central Iowa ag-tech accelerator has secured more backers and finally has a name. The Greater Des Moines Partnership first announced the accelerator last year, naming four initial investors. On Monday, the Partnership said the program will be called the "Iowa AgriTech Accelerator" and named three new investors. The new investors include Grinnell Mutual, Kent Corp. and Sukup Manufacturing, all Iowa companies. They join investors Deere & Co., Peoples Co., Farmers Mutual Hail Insurance Co. and DuPont Pioneer. Each investor has agreed to put up $100,000 for the first year of the accelerator. Startups entering the program will receive $40,000 in seed funding in exchange for 6 percent equity. Tej Dhawan, an angel investor and local startup mentor, is serving as interim director until the AgriTech Accelerator names a permanent leader. Dhawan held a similar role with the GIA before Brian Hemesath was named as managing director. As interim director, Dhawan said his main job includes hiring the accelerator's executive director, establishing a business structure and initial recruiting for the first cohort. The accelerator will place few filters, such as location and product, on the applicant pool, Dhawan said. "When you’re seeking innovation, innovation can come from every corner of the world so why restrict ourselves," he said. One area the the AgriTech Accelerator won't recruit from is biotech. For its first cohort, the AgriTech Accelerator will work out of the GIA's space in Des Moines' East Village, Dhawan said. A future, permanent home is still to be decided. The accelerator's program will host startups from mid-July through mid-October, ending with an event connected to the annual World Food Prize. The GIA, which the AgriTech Accelerator is based on, also ends with presentations at an industry event. The accelerator has also started lining up a mentor pool. The Iowa Corn Growers Association, Iowa Soybean Association and the Iowa Pork Producers Association have agreed to provide mentors, as has Iowa State University. While the AgriTech Accelerator is loosely based off of the GIA, it will differ in its business structure, Dhawan said. The GIA runs through a for-profit model for both operations and its investment fund. The AgriTech Accelerator will have a nonprofit model for its operations and a for-profit setup for its fund. Dhawan said the nonprofit model is being used so the accelerator can better work with other nonprofit partners, such as trade associations. "These are all organizations that are nonprofits and can be amazing stakeholders without ever having to be investors in the accelerator," he said. "It becomes easier to work with trade associations in their nonprofit role when we are also a nonprofit." When it's up and running, the AgriTech Accelerator would be one of a handful of ag-focused startup development programs in Iowa. Others include the Ag Startup Engine out of Iowa State University and the Rural Ventures Alliance from Iowa MicroLoan. Matthew Patane is the managing editor and co-founder of Clay & Milk. Send him an email at
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