Iowa Governor Declares Tax Credit Reform a Top Priority Following Release of New Recommendations

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In his recent “Condition of the State Address,” Iowa Governor Chet Culver identified tax credit reform as one of his “top legislative and budget priorities for the 2010 session.”  Specifically, the Governor urged the legislature to act on the recommendations just released by a panel charged with evaluating both the state’s tax credits, and the mechanisms in place for monitoring those credits.  In addition to recommending the outright elimination of eight tax credits, and the addition of a means-test to another credit, the panel produced a number of good-government recommendations that set the stage for the upcoming legislative session.

The panel recommended, among other things:

- Subjecting all business-related tax credits to an annual $185 million cap and scheduling them to sunset in five years;
- Eliminating the “transferability” for all tax credits (i.e. preventing firms from selling their tax credits);
- Ending the refundability of the state’s research activities credit;
- Requiring the state’s revenue estimates to include analyses of the types and amounts of tax credits claimed, in order to produce a more complete picture of the state’s budgetary situation.

Implementing the panel’s recommendations would save the state $55 million in FY2011, and $106 million in FY2012.  This fact alone should be enough to spur lawmakers in cash-strapped Iowa to give the recommendations some serious consideration.  

Be sure to visit the Iowa Fiscal Partnership’s website to stay up-to-date on the upcoming debates on this issue.

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