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2020 IA 128 Iowa Research Activities Tax Credit (TaxFormFinder - One Stop, Every Tax Form)

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2020 IA 128
Iowa Research Activities Tax Credit
tax.iowa.gov
41-128a (09/29/2020)
Name(s): ________________________________ SSN or FEIN: ____________________________________
Industry in which researching business is engaged (see instructions): _____________________________________
Pass-through entity (if applicable): _________________________________________________________________
Pass-through FEIN: ________________________________ Tax period ending date: _______________________
PART I –
Calculation of U.S. Qualified Research Expenses
1. Did the researching business claim the federal research credit for this same tax year?
Yes ☐ ...... Continue to Part I, line 2 (if pass-through only, continue to Part II, line 32).
No ☐ ...... Taxpayer is not eligible for the Iowa Research Activities Tax Credit. Stop.
2. Certain amounts paid or incurred to energy consortia ............................................................. 2. _______________
3. Basic research payments to qualified organizations ................................................................ 3. _______________
4. Qualified organization base period amount .............................................................................. 4. _______________
5. Wages for qualified research services ...................................................................................... 5. _______________
6. Cost of supplies used in conducting qualified research ........................................................... 6. _______________
7. Rental or lease costs of computers used in conducting qualified research ............................ 7. _______________
8. Applicable portion of contract research expenses ................................................................... 8. _______________
9. Total qualified research expenses. Add lines 5 through 8 ....................................................... 9. _______________
10. Fixed-base percentage to four decimals, but not more than 16.00% ..................................... 10. _____________ %
11. Average U.S. annual gross receipts for tax years 2016 through 2019 ................................... 11. ______________
12. Multiply line 11 by the percentage on line 10 .......................................................................... 12. ______________
13. Subtract line 12 from line 9. If zero or less, enter zero ............................................................ 13. ______________
14. Multiply line 9 by 50% (0.5) ...................................................................................................... 14. ______________
15. Enter the smaller of line 13 or line 14 ...................................................................................... 15. ______________
16. Total allowable U.S. qualified research expenses. Add lines 2 and 15 .................................. 16. ______________
PART II – Calculation of Tax Credit Based on Percentage of Research Occurring within Iowa
17. Basic research payments to qualified organizations in Iowa ............................................
17. ______________
18. Iowa apportioned qualified organization base period amount .......................................... 18. ______________
19. Subtract line 18 from line 17. If zero or less, enter zero ................................................... 19. ______________
20. Multiply line 19 by 6.5% (0.065) ...................................................................................... 20. ______________
21. Wages for qualified research services performed in Iowa ................................................ 21. ______________
22. Cost of supplies used in conducting qualified research in Iowa ....................................... 22. ______________
23. Rental or lease costs of computers used in conducting qualified research in Iowa ......... 23. ______________
24. Applicable portion of contract research expenses incurred in Iowa ................................. 24. ______________
25. Total Iowa qualified research expenses. Add lines 21 through 24 ................................... 25. ______________
26. Total U.S. qualified research expenses. Add lines 2 and 9 .............................................. 26. ______________
27. Iowa share of research. Divide line 25 by line 26, enter percentage to four decimals
(ex. 72.18%) ..................................................................................................................... 27. _____________ %
28. Expenses allocable to Iowa. Multiply line 16 by the percentage on line 27 ...................... 28. ______________
29. Multiply line 28 by 6.5% (0.065) ....................................................................................... 29. ______________
30. Iowa Research Activities Tax Credit. Add lines 20 and 29.Enter in column K of Part II
on the IA 148 Tax Credits Schedule ................................................................................. 30. ______________
31. Supplemental Research Activities Tax Credit. See instructions. Enter in column K of
Part II on the IA 148 and include the tax credit certificate number in column J ................ 31. ______________
32. Pass-through Iowa Research Activities Tax Credit received from partnership, LLC,
S corporation, estate, or trust. Enter on Part II and Part IV of the IA 148. ....................... 32. ______________
33. Pass-through Supplemental Research Activities Tax Credit received from partnership,
LLC, S corporation, estate, or trust. Enter on Part II and Part IV of the IA 148 and
include the tax credit certificate number ........................................................................... 33. ______________
IA 148 Tax Credits Schedule must be completed.
2020 IA 128 Instructions, page 1
41-128b (09/23/2020)
The IA 128 is used if the taxpayer elects to claim the
regular Research Activities Tax Credit. The IA 128S is
used only if the taxpayer elects to claim the Alternative
Simplified Research Activities Tax Credit. The taxpayer
may elect to use this method regardless of the method
used in computing the federal research tax credit. The
taxpayer is not required to use this method in computing
the Research Activities Tax Credit for subsequent years.
Research expenses qualified for the Iowa Research
Activities Tax Credit are based on the rules governing the
federal research tax credit, see Section 41 of the Internal
Revenue Code (IRC). A taxpayer may only claim the Iowa
tax credit if the business conducting the research also
claims and is allowed the federal research credit for the
same taxable year and is engaged in an eligible industry
in Iowa.
The Iowa credit equals 6.5% of increased research
expenses plus 6.5% of increased basic research
expenses in Iowa. Any tax credit in excess of tax liability
can be refunded or credited to tax liability for the following
year.
Industry in Which the Researching Business is
Engaged
You must report the industry in which the business
conducting the research is engaged. A taxpayer may only
claim the Iowa tax credit if the business conducting the
qualified research is engaged in manufacturing, life
sciences, agriscience, software engineering, or the
aviation and aerospace industry. For definitions of these
industries, please see Iowa Admin. Code r. 701—42.11.
Ineligible businesses include, but are not limited to, those
engaged in agricultural production, an agricultural
cooperative, a finance or investment company, a retailer,
a wholesaler, a publisher, a transportation company, a
real estate company, a collection agency, an accountant,
an architect, a contractor, a subcontractor, or a builder, or
a business that engages in commercial and residential
repair and installation including but not limited to heating
or cooling installation and repair, plumbing and pipe
fitting, security system installation, and electrical
installation and repair.
Innovative Renewable Energy Generation
Under the High Quality Jobs Program, taxpayers may be
awarded a Research Activities Tax Credit for the
development and deployment costs of innovative
renewable energy generation components manufactured
or assembled in Iowa. This cannot include components
with more than 200 megawatts of installed effective
nameplate capacity. These costs are not eligible for the
federal research tax credit. A separate IA 128 must be
completed to account for these costs, which can be
included on lines 5 and 21 of the separate form. The
amount of the additional tax credit relating to these costs
is not eligible for the Supplemental Research Activities
Tax Credit.
Example: An eligible business with gross receipts of $20
million or less earns an Iowa Research Activities Tax Credit
of $50,000, excluding any costs relating to innovative
renewable energy generation components. The business
is allowed a supplemental credit of $76,923, which would
result in an Iowa tax credit of $126,923. The Iowa tax
credit relating to innovative renewable energy generation
components is $25,000. This can be added to the regular
and supplemental tax credit, resulting in a total Iowa
Research Activities Tax Credit of $151,923.
Trades or Businesses under Common Control
For a group of trades or businesses under common
control (whether or not incorporated), the Iowa Research
Activities Tax Credit is calculated as if all the
organizations are one trade or business. The tax credit
calculated for the group must be shared among the
members on the basis of each member’s proportionate
contribution to the increase in research expenses.
Adjustments
for Certain
Acquisitions and
Dispositions
If a major portion of a trade or business is acquired or
disposed of, adjustments must be made to research
expenses for the period before or after the acquisition or
disposition.
Short Tax
Year
For any short tax year, qualified research expenses are
annualized.
Pass-Through Entities - Apportionment
of Tax
Credit
The tax credit calculated on lines 2 through 30 by a
partnership, LLC, S corporation, estate, or trust is
apportioned to the members. The pass through entity
must file the IA 128 and the Federal 6765 with its return.
Report the tax credit for each member on Schedule K-1 or
on an attachment to Schedule K-1. Instruct the members
to complete line 1, report the apportioned tax credit on line
32 of from IA 128, and include it with their tax returns.
If the taxpayer earns a tax credit by conducting research
and is a member of a business that has passed through a
tax credit to the taxpayer, calculate the tax credit on IA
128, lines 2 through 30. Also enter the pass-through tax
credit on line 32. Report each separately on the IA 148
Tax Credits Schedule.
Supplemental
Research
Activities Tax Credit
Businesses with tax incentive contracts under the High
Quality Jobs Program or the Enterprise Zone Program
can be awarded a Supplemental Research Activities Tax
Credit by the Iowa Economic Development Authority
(IEDA). The total eligible supplemental tax credit claim is
provided in the contract along with the tax credit
certificate number. The maximum supplemental tax credit
cannot exceed 10% of the sum of lines 19 and 28 for
businesses with annual gross receipts of $20 million or
less (as reported on line 11). The maximum supplemental
tax credit cannot exceed 3% of the sum of lines 19 and 28
for businesses with annual gross receipts exceeding $20
million.
If the Supplemental Research Activities Tax Credit is
earned by a pass-through entity, report the supplemental
tax credit separately on Schedule K-1 and provide the
2020 IA 128 Instructions, page 2
41-128c (09/23/2020)
tax credit certificate number. Instruct members to report
their tax credit on line 33 of the IA 128 and include it with
their tax returns.
2020 IA 128 Line Instructions
Provide your name, Social Security Number (SSN) or
Federal Employer Identification Number (FEIN), tax
period ending date, and industry.
Line 1: Claim to federal research credit
Iowa law requires that the researching business must
claim and be allowed the Federal Credit for Increasing
Research Activities under IRC section 41 for the same
taxable year in order for the business to be eligible to
claim the Iowa credit. Even if this is true, the researching
business must also meet the industry requirements under
Iowa law noted above (see Industry in Which
Researching Business is Engaged).
Lines 2 through 8: U.S. qualified research expenses
Enter amounts from the Federal Credit for Increasing
Research Activities, federal form 6765. Lines 2-4 are the
same as federal lines 1-3; lines 5-8 equal federal lines 5-
8.
Line 10: Fixed-base percentage
Use the same fixed-base percentage calculated for the
federal research tax credit, rounding to four decimal
places (1/100
th
of 1%), not to exceed 16.00%.
Line 11: U.S. annual gross receipts
Enter the average U.S. annual gross receipts for the four
tax years preceding the tax year for which the tax credit
is being determined. For any short year you may be
required to annualize gross receipts. See IRC sections
41(c)(1)(B) and 41(f)(4) and Treas. Reg. § 1.41-3 for
details. Use this value to determine the calculation of the
Supplemental Research Activities Tax Credit, if applicable.
Line 17: Iowa basic research payments
Corporations other than S corporations, personal holding
companies, service organizations, LLCs, and partnerships,
enter cash payments, pursuant to a written contract, made
to a qualified university or scientific research organization in
Iowa for basic research. See IRC section 41(e) for details.
Line 18: Iowa base period amount
Enter the qualified organization base period amount based
on minimum basic research amounts for the preceding three
years, see IRC section 41(e) for details. For purposes of
apportionment, multiply the amount on line 4 by the quotient
of amount on line 17 divided by the amount on line 3 [i.e. line
4 x (line 17 / line 3)].
Line 21: Iowa expenses on research wages
Enter any wages paid to an employee for qualified
research services performed in Iowa.
Line 22: Iowa expenses on research supplies
Enter the amounts paid or incurred for supplies used to
conduct qualified research in Iowa.
Line 23: Iowa research expenses on computers
Enter the amount paid or incurred to another person for
the right to use computers to conduct qualified research
in Iowa. This entry must be reduced by any amount
received or accrued from any other person for the right to
use substantially identical personal property.
Line 24: Iowa contract research expenses
Include 65% of qualified research performed on your
behalf in Iowa. Use 75% for payments made to a qualified
research consortium and 100% for payments made for
qualified energy research performed by an eligible small
business, university, or federal laboratory. Include
payments to those same entities to the extent they are
included as basic research payments on line 17, not to
exceed the base period amount on line 18, subject to the
65% or 75% limitation.
Line 30: Research Activities Tax Credit
Individuals and C corporations must enter this amount on
the IA 148 Tax Credits Schedule in column K of Part II; use
tax credit code 58 in column I and leave column J blank.
Line 31: Supplemental Research Activities Tax Credit
Individuals and C corporations must enter this amount on
the IA 148 Tax Credits Schedule in column K of Part II; use
tax credit code 59 in column I and report in column J the
tax credit certificate number from the tax credit certificate
issued by IEDA.
Line 32: Pass-through Research Activities Tax Credit
If the taxpayer has received any pass-through Research
Activities Tax Credit from a partnership, LLC, S
corporation, estate, or trust, indicate that amount on this
line. Also enter this amount in column K of Part II on the
IA 148 Tax Credits Schedule; use tax credit code 58 in
column I and leave column J blank. Provide the pass-
through name in column M and FEIN in column N of Part
IV on the IA 148 as well as on the top of this form. File a
separate IA 128 for each pass-through Research
Activities Tax Credit received. Also list the claims
separately on Part II of the IA 148 Tax Credits Schedule,
providing each pass-through name and FEIN in Part IV.
Line 33: Pass-through Supplemental Research
Activities Tax Credit
If the taxpayer has received any pass-through
Supplemental Research Activities Credit from a
partnership, LLC, S corporation, estate, or trust, indicate
that amount on this line. Also enter this amount in column
K of Part II on the IA 148 Tax Credits Schedule; use tax
credit code 59 in column I. Include the tax credit certificate
number reported on Schedule K-1 in column J, and provide
the pass-through name in column M and FEIN in column N
of Part IV on the IA 148. File a separate IA 128 for each
pass-through Supplemental Research Activities Tax Credit
received. Also list the claims separately on Part II of the IA
148 Tax Credits Schedule, providing each pass-through
name and FEIN in Part IV.
Include this form, the Federal 6765, and the IA 148 with
your IA 1040, IA 1041, or IA 1120.
Include this form and the Federal 6765 with your IA 1065
or IA 1120S.
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