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:

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.

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