The Iowa economy is an innovative one. The
Hawkeye state has a robust manufacturing sector, a constantly evolving
automotive manufacturing industry and an enormous food processing
community. All of these industries have one thing in common – a
commitment to innovation.
In the manufacturing sector, companies like
Affordable Buckets in Victor, Iowa develop new bucket products and
integrate process improvements in order to minimize costs and produce
buckets faster. In the automotive sector, aftermarket parts
manufacturers like JB Autosports Inc., in Pleasant Hill forge and stamp
new products to meet a rising demand in the automotive
market. In the food processing industry, companies like
Iowa Best Beef Brand in Postville, compete on nutritional value, taste,
shelf life and cost of production.
When companies such as these develop new products
and undergo process improvements, they may be eligible for Research and
Development tax credits which are available to stimulate
The Research &
Development Tax Credit
Enacted in 1981, the federal Research and
Development (R&D) Tax Credit allows a credit of up to 13 percent of eligible spending
for new and improved products and processes. Qualified research must
meet the following four criteria:
New or improved
products, processes, or software
Technological in nature
Eligible costs include employee wages, cost of
supplies, cost of testing, contract research expenses, and costs
associated with developing a patent. On December 18, 2015 President
Obama signed the bill making the R&D Tax Credit permanent.
Beginning in 2016, the R&D credit can be used to offset Alternative
Minimum Tax and startup businesses can utilize the credit against
$250,000 per year in payroll taxes.
Iowa Research &
Iowa sets itself apart from the rest of the nation,
being one of only a few states in the U.S. to offer a refundable
research activities credit. Iowa companies earn refundable tax
credits for research and development investments that may be paid
directly in cash to the company once its tax liabilities have been
met. Specifically, the qualified research expenditures include:
Wages paid to an
employee for performing or supporting a research activity conducted at
an Iowa facility or for an employee in Iowa who directly supervises or
directly supports research activities
tangible property other than land, improvements to land and depreciable
65 percent of expenses
related to contract research
Iowa’s Economic Atmosphere
Iowa is great place for companies to grow their
business. It consistently ranks among the nations lowest in cost
of doing business. Manufactures in particular are attracted to
the State for its competitive business environment. From 2005 to
2015, Iowa manufacturing exports have grown 78%; and with more than
$774 million annually invested in the university research, Iowa spends
$249 per citizen on R&D at the academic level. The Iowa
landscape is diverse and robust. In addition to agriculture and
manufacturing, it is also well known for bioscience, food processing,
aerospace and professional services.
Iowa is a manufacturing state as much as it is an
agricultural state. The $31.7 billion advanced manufacturing industry
is the state's largest single business sector. Manufacturing represents
18.8% of Iowa’s total GDP. Iowa consistently ranks among the top
quartile for percentage of GDP from manufacturing. In 2015, they
ranked 8th. That same year, the State exported $13.1 billion worth of
manufactured and value-added goods. Those goods included
tractors, insecticides, bulldozers and tractor parts.
Almost 4,000 manufacturers employ over 210,000 Iowans.
Innovation is the cornerstone to any successful
manufacturing company. 78 percent of all Iowa patents
impact advanced manufacturing. Industrial metal processing,
automation precision machinery, environment control systems, digital
and electronic devices and power generation equipment are key
contributing manufacturing related industries. Other key industries
that the advanced manufacturing industry serves include aerospace and
defense, industrial chemicals, construction components,
commercial/industrial motor vehicles, food and food ingredients,
printing and packaging, as well as medical drugs and devices.
Examples of companies related to the manufacturing
industry and their innovative activities are described below.
Dickten Masch Plastics, LLC: Dickten Masch Plastics, located in
Ankeny, Iowa is a full service plastics molding company that provides
high-quality tooling, engineering and design services. Their
scientific molding approach enables maximum control of the most
efficient process for any application. Meanwhile, electronic data
interchange (EDI) capability keeps customers in close contact with
their products’ progress at all times.
Inc.: Des Moines, Iowa-based Katecho is an internationally
recognized, full service original equipment manufacturer specializing
in medical and cosmetic devices. They provide everything from
small volume, hand-assembled products to highly automated
3D Systems Corp in Pella provides comprehensive 3D products and
services, including 3D printers, print materials, on-demand parts
services and digital design tools. Its ecosystem supports
advanced applications from the product design shop to the factory floor
to medical operating rooms.
The automotive industry is the anchor of Iowa’s
economy. According to the Center for Automotive Research, the
industry employs 79,000 Iowans. There are 11,200 direct and
indirect jobs in the state for automakers and 18,900 direct and
indirect jobs for motor vehicle dealers. Access to innovative
research facilities such as the National Advanced Driving Simulator
(NADS) at the University of Iowa is a key advantage to automotive
companies looking to locate in Iowa. The NADS facility is home to a
range of simulators that offer carrying levels of driving realism.
Development and research conducted at the NADS – sponsored by
government, military, and industry partners – saves lives, improves
quality of life for motorists, advances the state fo the art in driving
simulation improves the efficiency and productivity of the vehicle
Many Iowa companies that supply parts for the
automotive industry also supply parts for other compatible markets,
such as heavy agricultural and construction equipment. Some of these
companies and their efforts are described below.
Oskaloosa Engineering & Manufacturing: This company is a
precision machine shop that specializes in the machining of gray iron,
ductile iron, steel bar stock, steel forgings, aluminum, bronze and
many other ferrous and non-ferrous metals.
JC Dubil Race Car Parts: Located in Bettendorf, this
company specializes in manufacturing and selling parts for circle track
Axtell Sales Inc.:
Sales, located in Des Moines, this company designs and
manufactures innovative car, race car and motorcycle pars. In fact,
they have over 50 years experience producing high quality cylinders and
pistons for Harley Davidson.
The food processing industry in Iowa is
thriving. Over 900 Iowa food processors generate more than $35
billion worth of food products annually. The State is home to 36
of the largest 100 food manufacturers/processors in the country.
It is number one in the nation in corn, soybean, pork and egg
production. 20 percent of Iowa’s manufacturing GDP comes from the food
processing industry. In 2013, Iowa’s food industry invested over $997
million in capital investment to expand operations.
Iowa is a state leading breakthroughs in food
security due to significant research advancements at Iowa State
University and the University of Northern Iowa; through Iowa-based
research and development operations of global leaders in seed
production within DuPont Pioneer, Monsanto and other companies; through
the state’s significant presence at USDA facilities; and lastly,
through the leadership of the World Food Prize in food security issues.
Each of these global leaders in its own field are based in Iowa,
working together to both feed and fuel a world doubling its population
amid diminishing resources. Smaller organizations, as highlighted
below, are also contributing through innovation.
Premium is a beef processing company in Tama. Their newly
renovated 200,000-square-foot state-of-the-art facility meets the
highest standards for food safety, quality assurance and
sustainability. At the facility, technologies have been incorporated to
protect the State’s natural resources and minimize the company’s
Industries: Based out of Des Moines, Kemin Industries is a
nutritional ingredient manufacturer. Their lines of products
include natural and synthetic agricultural additives for the feed
industry, food and beverage additives for the human consumables
industry, nutraceuticals, as well as supplements and personal care
Iowa’s biosciences industry is robust. Since
2001, Iowa’s growth in 3 of the 4 bioscience subsectors far outpaced
the overall nation’s growth rates. These subsectors include AG
Feedstock and chemicals, Drug and pharmaceuticals and Research, Testing
and medical laboratories. In fact, during the past decade, overall
industry growth in Iowa surpassed the national average by 64.5
percent. Since 2008, the number of Iowan bioscience companies
expanded by more than 350 percent. This industry growth rate may
be a product of significant R&D spending. After all, bioscience
R&D expenditures in Iowa are 12 percent higher than the national
average. Today, Iowa is home to roughly 525 bioscience entities and
nearly 7 percent of the industry’s total U.S. workforce regarding
agricultural feedstock and chemical manufacturing.
Iowa provides an ideal
environment for the biosciences industry. The State contains more
of the crops used in biofuel production, biomedicines and
biodegradables than any other state. Moreover, they are home to
three public universities (the University of Iowa, Iowa State
University and the University of Northern Iowa) that make research,
science and innovation an important part of their mission.
Together, these three universities leverage over $600 million in
cumulative grants, contracts and cooperative research on an annual
basis. Local companies partner with these universities to
develop bio-science innovations. Two regional Iowa companies are
Genetics: Newlink Genetics located in the City of Ames is a
biopharmaceutical company focused on discovering, developing, and
commercializing novel immuno-oncology products to improve the lives of
patients with cancer.
Emmyon Metabolic Health: Emmyon Metabolic Health in Coralville
is a biotechnology company that discovers and develops natural and
pharmaceutical compounds that improve muscle mass, strength, exercise
capacity, and metabolism.
Aerospace is another pillar industry in Iowa. There
are a total of 40 aerospace and defense industry companies in the
State. Some of those companies are illustrated below.
Angel Aircraft Corp.: Angel Aircraft, based out of Orange City,
designs and manufactures “The Angel” aircraft, a graceful sleek pusher
aircraft with fully retractable landing gear and seating for
eight. The plane offers comfort and ease of handling plus a high
load capacity, while providing the peace of mind of a twin-engine,
Ltd.: MidAmerican Aerospace in Cedar Rapids, Iowa
designs and engineers aircrafts, engines and components. The company
invests enormous resources into identifying the key rotable components
that need to be in stock ready-to-go to support customers’ operating
PLC: Located in Davenport, Cobham PLC is a leading global
technology and services innovator that provides solutions to the most
challenging aerospace problems.
Iowa has a diverse and
innovative economy. Key economic sectors include agriculture,
advanced manufacturing, biosciences and aerospace. When companies
in these and other industry develop products and process improvements,
they may be eligible for Research and Development tax credits which are
available to stimulate innovation.