IFP News: Iowa Paid $36 Million in Research Checks in 2013

The state of Iowa spent $36.2 million on research subsidy checks to 140 companies that paid no state income tax in 2013.

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Iowa Department of Revenue report, 4 pages

Iowa Paid $36 Million in Research Checks in 2013

Rockwell Collins, Deere & Dupont Leading RAC Beneficiaries over Four Years

The state of Iowa spent $36.2 million on research subsidy checks to 140 companies that paid no state income tax in 2013, the Iowa Department of Revenue reported Friday.

The largest recipients of the Research Activities Credit (RAC) shared at least $29.1 million in those checks, while also gaining the most from the credit itself, according to Iowa Fiscal Partnership analysis of the annual state report on the use of the credit.

The report shows that overall, 185 corporations claimed a total of $53.3 million from the RAC and a separate, supplemental RAC, but 12 corporations claimed about 87 percent of those funds.

The RAC is a “refundable” credit, which means companies receive “refunds” from the state for the amount of the tax credit that is left over when there is no tax liability. In other words, the refunds are not for overpayment of taxes, but of extra value of tax credit available. For the fourth straight year, $4 out of every $5 in those refunds went to some or all of the largest beneficiaries.

While the report does not disclose specifically which companies received the checks, it does show which companies have more than $500,000 in claims.

In each of the last four years, the same four companies have been the biggest recipients, with Rockwell Collins claiming over $54 million in credits from 2010-13, and Deere & Co. claiming over $50 million.

In 2013, the leader was Deere & Co., with $13.8 million in claims, followed by Rockwell Collins at $11.8 million, Dupont at $8.6 million and John Deere Construction at $4.8 million.

“What this very helpful state report shows us every year is that Iowa is spending a lot of money on this one program for big, profitable companies outside the regular budget process,” said Mike Owen, executive director of the nonpartisan Iowa Policy Project, part of the Iowa Fiscal Partnership (IFP).

“It might be interesting to see how legislators would vote on big subsidies to companies that don’t pay income tax, if they had to approve it every year. This budget choice is being made on autopilot.”

IFP reports in recent years have examined the credit, which is used less to reduce taxes than to provide subsidies directly to big companies through the tax code.

The latest state report shows that eliminating the refunds — as recommended by a special state tax-credit review panel in 2010 — would have cut the cost of the corporate RAC credits from $53.3 million to $17.1 million in 2013.

“The difference would be enough to fund about 1 percent of allowable growth for K-12 schools in Iowa,” Owen said.

The cost of the credit is projected to grow. The state, which spent $21.2 million on the credit in FY2010, is projected to spend $80.3 million on it in FY2018 if there are no changes.

This is the fifth annual report — and fourth full-year report — from the Department of Revenue as a result of a 2009 law requiring disclosure of the overall amount of individual and corporate RAC claims and refunds, and individual company claim amounts in excess of $500,000 for a year. While the law requires reporting of claims for large beneficiaries, it does not require that the amount of “refunds” be individually disclosed.

In addition, the report showed 659 individuals claimed a total of $4.9 million from the RAC, with $1.9 million of that paid as refunds to 168 claimants. Individual claimants are not identified in the report.

The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonpartisan, nonprofit Iowa-based organizations, the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines. Reports are at

For more information about Iowa fiscal issues, visit the Iowa Fiscal Partnership at Other Resources on the Research Activities Credit from the Iowa Fiscal Partnership:
A $40 Million Budget Hole: Persistent and Growing, IFP backgrounder, Feb. 25, 2013
Iowa’s Gift to Corporations Keeps on Giving, IFP backgrounder, Feb. 21, 2012
Secret Checks No More: Report Identifies Big Takers, IFP backgrounder, Feb. 11, 2011
Tax Credit Showers Benefits on Non-Taxpaying Companies, IFP Statement, Feb. 11, 2011
Spotlight on Secret Checks, Feb. 4, 2008, 2-page PDF
Perks for the Most Profitable, April 2008, 6-page PDF


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