IOWA CITY, Iowa (Feb. 10, 2012) — Three large corporations received over $31 million in Iowa research subsidies without paying any state income tax, part of nearly $45 million paid by the state in 2011 for unused research tax credits.
A report released late Friday by the Iowa Department of Revenue showed that 181 corporations claimed a total of $47.6 million from the Research Activities Credit (RAC) in 2011. That figure includes both the regular RAC and a separate supplemental credit.
Of those credits, according to the report, $44.9 million was paid to 131 claimants as refunds, which means they paid no state income tax because they had more credits than tax liability.
“The Iowa Fiscal Partnership has noted the RAC began as way to support start-up companies to do research in Iowa, but it has become a costly program that benefits very large companies with little scrutiny,” said Charles Bruner, executive director of the Child & Family Policy Center and co-director of IFP. “Unlike spending that is done through the normal budget process, spending through the tax code is largely undisclosed.”
The biggest claimants in 2011, as in 2010, were:
— Rockwell Collins Inc. and subsidiaries, $14.31 million;
— Deere and Co., $11.76 million; and
— Dupont, $7.76 million.
Those claimants received the majority of their claims as checks from the state, not as reductions of taxes owed, because they wound up paying no state income tax.
The report further disclosed that only 4 percent of the corporations (seven) claimed 81 percent of the credits, or $38.6 million.
This is the third annual report from the Department of Revenue as a result of a 2009 law requiring disclosure of overall individual and corporate RAC claims and refunds, and individual company claim amounts in excess of $500,000 for a year.
Due to limitations of the disclosure requirements, it is unclear exactly how much of those individual corporate claims were paid out as checks — or “refunds,” not of taxes paid, but of credits not needed to erase tax liability. But the overall difference of claims vs. refunds provides some insight into the minimum refund amounts of the larger claimants.
Besides the top three claimants, John Deere Construction had $2.2 million in claims, Monsanto $1.3 million, Skyworks $667,515, and Vermeer $622,650.
In addition, the report showed 817 individuals claimed a total of $4 million from the RAC, with $1.3 million of that paid as refunds to 209 claimants.
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For more information about Iowa fiscal issues, visit the Iowa Fiscal Partnership at www.iowafiscal.org.
The Iowa Fiscal Partnership is a joint initiative of two nonpartisan, Iowa-based organizations, the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines.
Other Resources on the Research Activities Credit from the Iowa Fiscal Partnership:
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