Iowa replaced its R&D tax credit with an application-based program.

Rate	Up to 3.5% of Iowa QRE (IEDA program, TY2026 on)
Refundable	Yes
Note	$40M statewide cap; application and CPA verification

For most of its life, Iowa's Research Activities Credit was one of the most generous state R&D credits in the country: 6.5 percent of qualifying research, refundable, and claimed straight on the return with form IA 128. Senate File 657 ended that. For tax years beginning on or after January 1, 2026, the old credit is gone and a new program takes its place.

The new program is a different animal. Instead of computing a credit on your return, you apply to the Iowa Economic Development Authority for an award. The main changes:

• It is application-based, not return-based. You pre-certify with the IEDA, then apply each year by January 31. The IEDA, not your return, determines the credit.
• It is limited to qualifying sectors. Only businesses in advanced manufacturing, bioscience, finance and insurance, or technology and innovation qualify. Real estate, agriculture, construction, retail, and wholesale are excluded. A software company falls under technology and innovation.
• The rate dropped. The award is up to 3.5 percent of qualifying Iowa research expenses, down from 6.5 percent.
• It is capped and allocated pro rata. Awards are limited to $40 million statewide per year. If approved applications exceed that, every award is scaled down proportionally, so you do not know your final number until the IEDA issues a tax credit certificate.
• An independent CPA must verify your expenses. Each annual application has to include a report from an independent Certified Public Accountant verifying your eligible Iowa research expenditures.

The first application under the new program is due January 31, 2027, for the 2026 tax year. Tax year 2025 and earlier still fall under the old Research Activities Credit; tax year 2026 forward is the new program.

The award still rests on the federal definition of research, then narrows it to Iowa and routes it through an application. The mechanics:

• Same expense definition as federal. Qualified research expenses follow Internal Revenue Code Section 41: wages for qualified services, supplies, and contract research. The work that supports your federal claim supports the Iowa figure, limited to the Iowa-performed portion.
• Rate. The IEDA may approve an award of up to 3.5 percent of your qualifying Iowa research expenses. The exact rate is at the IEDA's discretion within that ceiling.
• Refundable, with carryforward. A credit that exceeds your tax can be refunded, and unused amounts carry forward. The credit is not transferable to another taxpayer.
• The cap. Total awards are limited to $40 million across the state each year and allocated pro rata, so a year with heavy demand reduces every award.
• Certification and qualifying sectors. You first certify with the IEDA that your business is in a qualifying sector and is performing qualifying research. Certification is renewed every five years.
• Annual application and CPA verification. Each year you apply by January 31 with an independent CPA's report verifying your eligible Iowa research expenditures, broken out by entity, expense type, and business component.

The practical effect: the documentation bar is higher than it was. The old credit was a number on a form; the new award is an application the state scrutinizes, backed by a CPA's signature on your expenses.

R&D Binder produces federal Section 41 documentation from your GitHub commit history. The binder is what supports your federal Form 6765 and, starting tax year 2026, the mandatory Form 6765 Section G appendix. Because Iowa's new program uses the same Section 41 expense definition, that same evidence supports the Iowa expenses your CPA verifies and the IEDA reviews.

For an Iowa applicant, R&D Binder produces an Iowa-attributable research expense workpaper:

• Iowa qualified research expenses broken out the way the application asks: wages, supplies, and contract research tied to research performed in Iowa, by entity and by expense type.
• The same business-component partition as the federal binder, so each dollar maps to a specific project and the four-part-test rationale behind it.
• A trail from each figure back to the underlying commit history and payroll, which is the contemporaneous support an independent CPA needs to verify the numbers.

What R&D Binder does not do for Iowa: we do not perform the independent CPA verification the program requires, we do not file the IEDA application, and we do not set your credit amount, which the IEDA decides within the 3.5 percent ceiling and the $40 million pro-rata cap. Our scope is the documentation, the same as on the federal side. The independent CPA review stays with your CPA; the application stays with you or your CPA.

Because the program is application-based and limited to qualifying sectors, we scope Iowa documentation per engagement rather than offering it as a flat checkout add-on. Tell us your sector and we will confirm fit before quoting.

A worked example. A Des Moines SaaS company with 14 engineers and $2.6M in qualifying wages, most of that research performed in Iowa. Software falls under the technology and innovation sector, so the company can certify with the IEDA.

• Federal Section 41 credit. Computed on the full federal QRE pool through Form 6765, claimed by the CPA. R&D Binder produces the binder, the QRE workpaper, and the Form 6765 Section G appendix.
• Iowa application. The company certifies with the IEDA as a technology and innovation business, then applies by January 31 with an Iowa-attributable expense breakdown. Say $2.0M of the QREs are tied to research performed in Iowa. At the 3.5 percent ceiling that is up to $70,000, before any pro-rata reduction the cap may impose.
• The CPA verification. An independent CPA reviews and verifies the Iowa expenses. R&D Binder's workpaper, with its commit-level and payroll trail, is the support the CPA works from. The CPA signs; R&D Binder does not.
• The uncertainty to plan for. The final award is whatever the IEDA certifies, which can be less than 3.5 percent and can be scaled down if statewide applications exceed $40 million. The documentation work is the same either way; the award amount is the state's call.

The expense allocation and the in-state portion are specific to each company; the figures above are illustrative. The CPA files; R&D Binder never appears on the federal return or the Iowa application.

The independent CPA verification Iowa now requires asks for the same kind of substantiation the IRS expects under federal Section 41: business-component identification, four-part-test rationale, contemporaneous evidence, and qualified research expenses allocated by employee, contractor, and supplies, plus support that the research was performed in Iowa. The binder R&D Binder produces is built to that standard on the federal side, and the Iowa workpaper inherits the same business-component structure and adds the in-state allocation. That is the form a verifying CPA can work from directly.

Our standard scope ends at delivering the binder and the Iowa workpaper. Engagement support for an IEDA review or a Department of Revenue examination is a separate scope at $250 per hour, scoped per incident. We do not represent you before the IEDA or the Department; that remains your CPA's or your tax controversy attorney's role.

• Iowa Senate File 657, 91st General Assembly (2025), signed June 6, 2025, which replaced the Research Activities Credit with the application-based R&D Tax Credit Program for tax years beginning on or after January 1, 2026. Iowa Legislature, Bill Book.
• Iowa Economic Development Authority, Iowa Research and Development Tax Credit Program, for the IEDA certification, the qualifying sectors, the $40 million pro-rata cap, the annual January 31 application, and the independent CPA verification requirement.
• Iowa Department of Revenue, Research Activities Credit, for the prior credit that applied through tax year 2025 (the 6.5 percent rate, the federal Section 41 requirement, and forms IA 128 and IA 128S).
• IRS Form 6765 (federal Credit for Increasing Research Activities) and Internal Revenue Code Section 41, the federal definition of qualified research expenses that Iowa incorporates.

This page is general informational content, not tax advice for any specific taxpayer. The Iowa R&D Tax Credit Program is administered by the Iowa Economic Development Authority. Rates, the cap, qualifying sectors, and procedural requirements reflect Senate File 657 and IEDA program guidance as of June 2026. The program is new and application-based; confirm current figures, sector eligibility, and deadlines with your CPA or the IEDA before applying.

• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• Arizona R&D credit
• Connecticut R&D credit
• Delaware R&D credit
• Maryland R&D credit