Changes in state tax credits

Democrats in the legislature plan to make some changes in state tax credits.  Details here in Radio Iowa story.

There will be no change, however, in what had been among the most controversial proposals:  imposing new restrictions on the state tax credit companies like Rockwell Collins, Pioneer and John Deere claim for “research activities.”  Democrats are proposing changes in what’s known as the “supplemental research activities credit” but those credits are awarded by the Department of Economic Development to research-oriented companies that promise to create new jobs.  Democrats didn’t have the votes to significantly change the research activities credit that is part of the tax code, despite the desire on the part of some Democrats to end the practice of the state cutting checks to some of the companies that claim the research activities credit.  If you’ve not been following this debate closely, companies sometimes have a research activities credit that is worth more than the amount of overall taxes they owe the state.  Therefore, the Iowa Department of Revenue writes a check to the company equal to total taxes owed minus the companies research activities credit.  That last part would look cooler and perhaps be more understandable if I was writing on a chalkboard and wrote:

State tax liability – research activities credit = check for our biz

Democrats do propose a new “cap” on Department of Economic Development tax credits, lowering that cap from $185 million to $120 million.  Senator Joe Bolkcom (D-Iowa City), the chairman of the Senate Ways & Means (tax policy) Committee, put it this way in a news conference earlier today:  “I think we felt that everybody needs to share in the pain of this downturn, not just teachers and not just health care providers and prison workers and state employees but that this part of spending, which is kind of over here and out of our site, needs to step up.”