(Radio Iowa) – Iowans for Tax Relief president Chris Hagenow is optimistic Iowa lawmakers will be open to making changes next year in a tax break for big corporations. It’s called the “research activities” tax credit and it’s refundable. That means the state is required to cut the corporation a check for any amount above what the company owes in taxes. Hagenow says the latest data from the state of Iowa shows John Deere received over 19 million dollars in tax credits for research activities last year.

“The conditions are ripe for a new conversation about these credits,” Hagenow says, “and not even necessarily because of this one particular example with regards to John Deere.” John Deere was the state’s largest recipient of Iowa’s research activities tax credit in 2023. Hagenow says Iowans may find that worrisome given recent layoffs at Deere facilities in Iowa, as well as the company’s plan to build a plant in Mexico.

“We generally support a flatter, fairer tax code for everyone without carve outs for anyone,” Hagenow says. “With regard to John Deere, then, being the biggest recipient of those credits, it really makes it much more difficult to take.” In tax year 2023, about 350 corporations filed for the state research activities tax credit — with claims totaling 77 million dollars. Hagenow, a former Republican lawmaker, says he hears from small business owners who cannot qualify for this kind of a lucrative subsidy.

“I think Iowans instinctively know a lot of these incentives are there and they’re not always fairly applied,” Hagenow says.

The 1984 Iowa legislature created the research activities credit. Businesses may receive a credit worth up to six-and-a-half percent of the company’s annual budget for research. Backers of the credit say it keeps companies in Iowa that are doing high value research — with highly paid staff. According to a state report, the salaries paid to employees who do research accounted for over 56 percent of the total amount of the tax credits awarded last year.