Line 26: Other Refundable Credits

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Expanded Instructions

Line: 26
Step: 6
Step Subject: Refundable Credits and Payments
Instruction Year: 2023

Enter the total of other credits from the IA 148 Tax Credits Schedule, Part II. Your credit claim may be denied if the IA 148 Tax Credits Schedule, or any other required tax credit schedule is not included with your return.

Adoption Tax Credit

An Adoption Tax Credit is available for individual income tax equal to the first $5,000 of unreimbursed expenses related to an adoption per child placed in Iowa. There is no limit on the amount of income earned by an individual to be eligible for the credit. All claims for the adoption of a child cannot exceed the applicable limit based on the year the adoption became final.

The Adoption Tax Credit can only be claimed once the adoption has been finalized. Beginning in tax year 2019, all qualifying adoption expenses paid in or before the year the adoption is finalized must be claimed in the tax year the adoption is finalized, up to the credit limit, regardless of the prior year in which the expenses were paid.

EXAMPLE: Taylor and Jordan are married. Taylor and Jordan adopt a child who is permanently placed in Iowa. The adoption process begins in 2020 and becomes final in 2023. Because the adoption becomes final on or after January 1, 2017, Taylor and Jordan qualify for a credit up to the maximum amount of $5,000. Additionally, because the adoption becomes final on or after January 1, 2019, Taylor and Jordan may claim an Iowa adoption tax credit for unreimbursed qualified adoption expenses paid or incurred prior to or in the year the adoption becomes final. Taylor and Jordan incur and pay unreimbursed qualified adoption expenses of $5,000 in 2020, $10,000 in 2021, $2,000 in 2022, and $2,000 in 2023. Taylor and Jordan jointly file their Iowa individual income tax return in 2023. Taylor and Jordan may claim an Iowa adoption tax credit of $5,000 on their 2023 Iowa income tax return. Taylor and Jordan are not allowed to amend a prior year return in an attempt to claim the credit for unreimbursed qualified adoption expenses paid or incurred prior to the tax year in which the adoption became final.

If additional qualifying expenses are paid after the year the adoption is finalized, and your previous expenses are under the credit limit, those expenses must be claimed in the year they were paid, up to the credit limit.

EXAMPLE: Jason and Tammy are married. Jason and Tammy adopt a child who is permanently placed in Iowa. The adoption process begins in 2021 and becomes final in 2022. Because the adoption becomes final on or after January 1, 2022, Jason and Tammy qualify for a credit up to the maximum amount of $5,000. Jason and Tammy incur and pay unreimbursed qualified adoption expenses of $1,000 in 2021, and $1,000 in 2022. Jason and Tammy jointly file their Iowa individual income tax return in 2022. Jason and Tammy may claim the Iowa adoption tax credit in 2022 in the amount of $2,000. In 2023, Jason and Tammy incur and pay $5,000 in unreimbursed qualified adoption expenses in connection to the adoption finalized in 2022. Jason and Tammy may claim the remaining $3,000 credit on their jointly filed Iowa individual income tax return for 2023 for unreimbursed qualified adoption expenses incurred and paid in 2023. Jason and Tammy shall not amend their 2022 return to reflect the additional unreimbursed qualified adoption expenses from 2023.

A part-year resident of Iowa may claim the credit if they were a resident of Iowa at the time the child was permanently placed.

The IA 177 is used to compute the credit and must be included with the Iowa income tax return. The tax credit must also be reported on the IA 148 Tax Credit Schedule using tax credit code 66. If multiple children are adopted in a tax year, complete a separate IA 177 for each Adoption Tax Credit and report each claim on a separate line on the IA 148. Any tax credit in excess of tax liability is refundable.

The adoption tax credit may only be claimed by a person who adopted the child. When a married couple adopts a child together and the couple files jointly on the same return, the credit may only be claimed once between the couple. When any other two persons adopt a child together, including married persons filing separately or any unmarried persons filing on separate returns, the credit must be divided between the adoptive parents. Two adoptive parents, other than persons who are married filing jointly, may agree to divide the credit in any way. The total adoption tax credit claimed for all years by both parents combined may not exceed the applicable limit based on the year the adoption became final.

Iowa Code section 422.12A

Angel Investor Tax Credit

An Angel Investor Tax Credit, formerly known as Venture Capital Qualifying Business Tax Credit, equals 25% of the equity investment made by “angel investors” in a qualifying business approved by the Iowa Economic Development Authority. The credit is refundable when claimed against the individual income tax.

When the tax credit is awarded, the taxpayer receives a tax credit certificate number that must be reported on the IA 148 Tax Credits Schedule when the refundable tax credit is claimed using tax credit code 68.

Iowa Code sections 15E.43 and 422.11F

Biodiesel Blended Fuel Tax Credit

A retail dealer of diesel fuel who sells B5 or higher blends of biodiesel during the tax year at a retail motor fuel site can claim a Biodiesel Blended Fuel Tax Credit. B5 or higher blends are biodiesel blended fuels with a biodiesel content of 5% and higher by volume. Tank wagons are considered retail motor fuel sites.

and 10% biodiesel and 5.5 cents per gallon with a blend of 11% or higher of biodiesel. For fuel sold on or after January 1, 2023, the tax credit equals 5 cents per gallon with a blend between 11% and 19% biodiesel and 7 cents per gallon with a blend of 20% biodiesel. The IA 8864 is used to compute the credit or report and must be included with the Iowa income tax return.

The Biodiesel Blended Fuel Tax Credit must be reported on the IA 148 Tax Credits Schedule using tax credit code 52. Any tax credit in excess of tax liability is refundable.

If the tax credit is earned by a partnership, limited liability company, S corporation, estate, or trust, the tax credit shall be claimed by the individual based on the pro rata share of the income of the entity. Taxpayers receiving the credit from a pass-through entity should report the credit on the IA 8864, line 8 and on the IA 148 Tax Credit Schedule.

The credit is repealed on January 1, 2028.

Iowa Code section 422.11P

Claim of Right Tax Credit

A Claim of Right Tax Credit may be claimed by a taxpayer who repaid income during the 2022 tax year that was reported and taxed on a prior Iowa income tax return. To calculate the credit, recompute tax liability in the prior tax year excluding the repaid income. The Claim of Right Tax Credit equals the calculated reduction in tax liability in that prior year. However, it may be more advantageous to report the amount of repaid income as an income adjustment on Schedule 1, line 19. You may claim either the Claim of Right Tax Credit or take a deduction of the amount repaid on Schedule 1, line 19, but not both.

Example of Claim of Right Tax Credit: A taxpayer received a $5,000 bonus in 2021 and reported it on the 2021 Iowa return. In 2023 the taxpayer's employer advised that the bonus was awarded in error and was to be repaid. The bonus was repaid by the end of 2023. After recomputing the 2021 Iowa return, there is a $440 reduction in tax. The taxpayer may claim a credit of $440 on the 2023, IA 1040, line 26 or apply an income deduction of $5,000 on Schedule 1, line 19.

The Claim of Right Tax Credit must be reported on the IA 148 Tax Credits Schedule using tax credit code 53. Any tax credit in excess of the tax liability is refundable.

Iowa Code section 422.5(11)

E15 Plus Gasoline Promotion Tax Credit

A retail dealer of gasoline who sells E15 plus gasoline during the tax year at a retail motor fuel site can claim an E15 Plus Gasoline Promotion Tax Credit. E15 plus gasoline is ethanol blended gasoline with an ethanol content between 15% and 69% by volume. Tank wagons are considered retail motor fuel sites.

For sales made on or after January 1, 2023, the credit equals nine cents per gallon of E15 plus gasoline sold in any month. The IA 138 form is used to compute the credit and must be included with the Iowa income tax return.

The E15 Plus Gasoline Promotion Tax Credit must be reported on the IA 148 Tax Credits Schedule using tax credit code 65. Any tax credit in excess of tax liability is refundable.

The credit is repealed on January 1, 2026.

Iowa Code section 422.11Y

E85 Gasoline Promotion Tax Credit

A retail dealer of gasoline who sells E85 gasoline during the tax year at a retail motor fuel site can claim an E85 Gasoline Promotion Tax Credit. E85 gasoline is ethanol blended gasoline with an ethanol content between 70% and 85% by volume. Tank wagons are considered retail motor fuel sites.

The tax credit equals sixteen cents per gallon of E85 gasoline sold. The IA 135 form is used to compute the credit and must be included with the Iowa income tax return.

The E85 Gasoline Promotion Tax Credit must be reported on the IA 148 Tax Credits Schedule using tax credit code 55. Any tax credit in excess of tax liability is refundable.

The credit is repealed on January 1, 2028.

Iowa Code section 422.11O

Historic Preservation Tax Credit

A Historic Preservation Tax Credit is available for 25% of the qualified rehabilitation expenditures of eligible property in Iowa. This credit is administered by the Iowa Economic Development Authority and the State Historic Preservation Office. When the tax credit is awarded, the taxpayer will receive a tax credit certificate number that must be reported on the IA 148 Tax Credits Schedule when the tax credit is claimed using tax credit code 56, if refundable.

Applications must be filed during a limited registration period and a scoring system is used to select rehabilitation projects eligible for Historic Preservation Tax Credits. However, credits for small projects defined as projects with qualified rehabilitation expenditures up to $750,000 can apply at any time. The project must be completed within 36 months of the date on which the project agreement was signed.

The Historic Preservation Tax Credit can be transferred to any person or entity. For Historic Preservation Tax Credit agreements under Iowa Code section 404A.3(3) entered into on or after January 1, 2023, taxpayers claiming the refundable tax credit must also complete Part V, section B of the IA 148 Tax Credit Schedule before completing Part II of the IA 148.

If the tax credit is issued to a partnership, limited liability company, S corporation, estate, or trust, the tax credit shall be claimed by the individual based on the pro rata share of the income of the entity.

Note: For Iowa income tax purposes, the increase in the basis of the rehabilitated property that would otherwise result from the qualified rehabilitation costs will be reduced by the amount of the tax credit received.

Iowa Code chapter 404A and Iowa Code section 422.11D

Redevelopment Tax Credit

A Redevelopment Tax Credit equals a percentage of the qualifying investment in redeveloping a brownfield or grayfield site. A brownfield site is defined as an abandoned, idled, or underutilized industrial or commercial facility where expansion or redevelopment is complicated by real or perceived environmental contamination. A grayfield site is defined as a property that has been developed and has infrastructure in place but the property's current use is outdated or prevents a better or more efficient use of the property. Such property includes vacant, blighted, obsolete, or otherwise underutilized property. A higher tax credit rate is available if the redevelopment meets established “green development” standards. Projects must first apply to the Iowa Economic Development Authority to be considered for an award allocation during the annual application process.

Non-profit applicants can receive a refundable, but nontransferable, tax credit, in that case the tax credit is claimed on the IA 148 using tax credit code 67. For refundable Redevelopment Tax Credit awards approved by the Economic Development Authority Board on or after January 1, 2023, taxpayers claiming the refundable tax credit must also complete Part V, section B of the IA 148 Tax Credit Schedule before completing Part II of the IA 148.

Note: For Iowa income tax purposes, the increase in the basis of the redeveloped property that would otherwise result from the qualified redevelopment costs will be reduced by the amount of the tax credit received.
Iowa Code sections 15.291,15.293A, 15.293B, 15.294, and 422.11V

Renewable Chemical Production Tax Credit

A Renewable Chemical Production Tax Credit is available to an eligible business producing chemicals from biomass feedstock in the state. The tax credit equals five cents per pound of renewable chemicals produced in a calendar year to the extent such production exceeds the eligible business’s pre-eligibility production threshold. The credit is available for renewable chemicals produced on or after January 1, 2017, and on or before December 31, 2026.

The tax credit is available to businesses that apply to the Iowa Economic Development Authority. The maximum amount of credit that may be issued to an eligible business that has been in operation in the state for five years or less is $1 million. The maximum amount of credit, which may be issued to an eligible business that has been in operation in the state for more than five years is $500,000. An eligible business shall not receive more than five tax credits under the program.

When the tax credit is awarded, the taxpayer will receive a tax credit certificate number that must be reported on the IA 148 Tax Credits Schedule when the tax credit is claimed using tax credit code 69. Any tax credit in excess of tax liability is refundable. If the tax credit is issued to a partnership, limited liability company, S corporation, estate, or trust, the tax credit shall be claimed by the individual based on the pro rata share of the income of the entity.

Iowa Code sections 15.315 through 15.321 and 422.10B

Research Activities Tax Credit

An Iowa Research Activities Tax Credit (RAC) is available for expenditures on research that is technological in nature as specified under the Federal Research Credit of Internal Revenue Code section 41 if the researching entity meets the following two requirements: the business must claim and be allowed a Federal Research Credit for the same taxable year, and the business must be engaged in manufacturing, life sciences, agriscience, software engineering, or aviation and aerospace. In addition, the business cannot be engaged in agricultural production or cannot be an agricultural cooperative, accountant, architect, collection agency, finance or investment company, publishing company, real estate company, retailer, transportation company, or wholesaler. The business also cannot be a contractor, subcontractor, builder, or contractor-retailer engaged in commercial and residential installation / repair including but not limited to HVAC installation / repair, plumbing and pipe fitting, security system installation, or electrical installation / repair. For more information, see Iowa Administrative Code rule 701-—304.11 and Department guidance on the tax credit changes.

The Iowa credit equals 6.5% of Iowa's apportioned share of qualifying expenditures for increasing research activities when claimed on the IA 128.

The tax credit can alternatively be calculated using the "Alternative Simplified Research Activities Tax Credit" method on form IA 128S with a 4.55% rate of qualifying research expenditures.

A taxpayer must use the same method (regular method or alternative simplified method) to calculate their Iowa RAC as they elected or were required to use in calculating their federal research credit.

The RAC must be reported on the IA 148 Tax Credits Schedule using tax credit code 58. Taxpayers claiming the tax credit must complete Part V, section B of the IA 148 Tax Credit Schedule before completing Part II of the IA 148.

If the tax credit is earned by a partnership, limited liability company, S corporation, estate, or trust, the tax credit shall be claimed by the individual based on the pro rata share of the income of the entity. Taxpayers receiving the credit from a pass-through entity should report the credit on the IA 128, line 37 or the IA 128S, line 32 and on the IA 148 Tax Credit Schedule.

Iowa Code section 422.10

Supplemental Research Activities Tax Credit

Taxpayers who are approved by the Iowa Economic Development Authority under the High Quality Jobs Program can be awarded a Supplemental Research Activities Tax Credit claimed on either form IA 128 or IA 128S. The amount of the Supplemental Research Activities Tax Credit depends upon the gross receipts of the eligible business. For businesses with average gross revenues of $20 million or less, the supplemental credit cannot exceed 10% of the qualified research expenditures eligible for the Research Activities Tax Credit calculated using the IA 128.

For businesses with gross revenues exceeding $20 million, the supplemental credit cannot exceed 3% of qualified research expenditures. For Research Activities Tax Credits calculated using the IA 128S, see the form instructions for supplemental credit percentages.

When the tax credit is awarded, the taxpayer receives a tax credit certificate number that must be reported on the IA 148 Tax Credits Schedule when the tax credit is claimed using tax credit code 59. Taxpayers claiming the tax credit must complete Part V, section B of the IA 148 Tax Credit Schedule before completing Part II of the IA 148.

If the tax credit is earned by a partnership, limited liability company, S corporation, estate, or trust, the tax credit shall be claimed by the individual based on the pro rata share of the income of the entity. Taxpayers receiving the credit from a pass-through entity should report the credit on the IA 128, line 38 or the IA 128S, line 33 and on the IA 148 Tax Credit Schedule.

Iowa Code sections 15.335 and 422.10

Third Party Developer Tax Credit

Taxpayers who are approved by the Iowa Economic Development Authority under the High Quality Jobs Program can be awarded a Third Party Developer Tax Credit for certain sales taxes paid in completion of a High Quality Jobs Program project.

When the tax credit is awarded, the taxpayer may submit an application to the Department of Revenue after contract completion as defined in Iowa Code section 15.331A(4). The last day to submit an application is one year after the project completion date stated in the agreement between the taxpayer and IEDA. Upon approving the claim, the Department of Revenue issues another tax credit certificate for the final amount of credit that can be claimed based on the submitted contractor’s statements and invoices, up to the award amount as either a refundable or nonrefundable credit, based on the designation requested by the taxpayer.

The taxpayer then claims the credit using its tax credit certificate number that must be reported on the IA 148 Tax Credits Schedule when the tax credit is claimed using tax credit code 62 or 97 (see certificate for which code applies). For Third Party Developer Tax Credit agreements issued for High Quality Jobs Program agreements under Iowa Code section 15.330 entered into on or after January 1, 2023, taxpayers claiming the refundable tax credit must also complete Part V, section B of the IA 148 Tax Credit Schedule before completing Part II of the IA 148.