Tax News Update    Email this document    Print this document  

September 29, 2022
2022-1462

Iowa certifies corporate income tax rate reductions for tax years beginning on or after January 1, 2023

On September 27, 2022, the Director of the Iowa Department of Revenue issued Order 2022-03, certifying that the top corporate income tax rates will be reduced to 8.4% from 9.0% and 9.8% in 2023.

Background

House File 2317, which was enacted earlier this year, amended Iowa Code Section 422.33 to reduce the corporate income tax beginning in 2023 if certain revenue triggers were satisfied. (See Tax Alert 2022-0351.) New Iowa Code Section 422.33(1)(b) requires both the Iowa Department of Revenue (DOR) and the Iowa Department of Management (DOM) to determine by November 1, 2022 (and by November 1st of each year thereafter) whether net corporate income tax receipts in the prior fiscal year exceeded $700 million. If the revenue triggers are satisfied, then the 9% and 9.8% rate brackets will be adjusted to generate $700 million in net corporate income tax receipts. The new rates will apply to tax years beginning on or after January 1st of the year following the determination date. The rates cannot decrease below 5.5%.

Corporate income tax rates for 2023

On September 26, 2022, the DOM concluded that the net corporate income receipts exceeded $700 million for the prior fiscal year. The following day, the DOR determined that the top corporate income tax rates should be reduced and announced that the corporate income tax rate schedule for tax years beginning on or after January 1, 2023 is as follows:

Bracket

Tax rate

$0 - $25,000

5.5%

$25-001 - $100,000

5.5%

$100,001 - $250,000

8.4%

$250,001 and above

8.4%

Implications

By statute, the DOR had until December 31, 2022, to post the rate changes. Both the DOR and DOM acted early, which is a welcome development for corporate taxpayers. Corporate taxpayers should consider the application of these rate changes.

———————————————

Contact Information
For additional information concerning this Alert, please contact:
 
State and Local Taxation Group
   • Bill Nolan (william.nolan@ey.com)
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 1996 – 2024, Ernst & Young LLP

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

EY US Tax News Update Master Agreement | EY Privacy Statement