41-124: IA 128S Alternative Simplified Research Activities Tax Credit 41-124 (2024)
Iowa · Iowa DOR · Used for tax years 2024
The 2024 Iowa IA 128S calculates the Alternative Simplified Research Activities Tax Credit using Iowa qualified research expenses. It also reports U.S. research expense information, supplemental research credits, and credits received from pass-through entities.
Who files this form
Use IA 128S to claim the Iowa Alternative Simplified Research Activities Tax Credit (RAC), including credits received from a pass-through entity. Use IA 128 instead if you claim the regular RAC. Your Iowa calculation method must match the method used for your federal research credit.
The business conducting the research must:
- Timely file the required Iowa credit form.
- Claim and be allowed the federal research credit for the same tax year.
- Conduct research in an eligible Iowa industry: manufacturing, life sciences, agriscience, software engineering, or aviation and aerospace.
The instructions also describe a separate credit award for certain innovative renewable energy generation costs under the High-Quality Jobs Program. Those costs require a separate IA 128S.
What you'll need
Have these forms and details available:
- Federal Form 6765, Credit for Increasing Research Activities.
- Your name, SSN or FEIN, tax period ending date, and industry.
- U.S. research expense amounts and average U.S. annual gross receipts for tax years 2020 through 2023.
- Iowa research wages, supplies, contract research expenses, basic research payments, and research expenses for the prior three years.
- The pass-through entity’s name, FEIN, and credit amounts, if applicable.
- Each controlled-group member’s name, FEIN, and Iowa qualified research expenses, if Schedule A applies.
- Your IEDA award and tax credit certificate number, if claiming the Supplemental RAC.
For IA 1040, IA 1041, or IA 1120 filers, the attachment instructions specifically name the 2023 IA 148 Tax Credits Schedule, even though this is the 2024 IA 128S.
How to file
Include IA 128S with your Iowa tax return.
- IA 1040, IA 1041, or IA 1120: Include IA 128S, Federal Form 6765, and the IA 148 Tax Credits Schedule identified in the attachment instructions.
- IA 1065 or IA 1120S: Include IA 128S and Federal Form 6765.
Answer the eligibility questions in Part I and follow the form’s directions. Use dollars and cents. If you calculate the credit as a controlled group or a group under common control, complete Schedule A and report your share on line 30.
File a separate IA 128S for each pass-through Alternative Simplified RAC or Supplemental RAC received. Report credit claims separately on the applicable tax credit schedules. Use credit code 58 for the Alternative Simplified RAC and code 59 for the Supplemental RAC.
The supplied text does not provide a mailing address or e-file directions.
Common mistakes
- Counting all research supplies: For tax years beginning during 2024, only 60% of eligible Iowa research supply costs qualify.
- Including third-party computer costs: These costs no longer qualify as Iowa research expenses.
- Rounding research wages up to 100%: Iowa requires the actual qualifying wage allocation and applies a majority-work limitation. Contract research expenses also have a majority-work limitation.
- Using special pass-through allocations: These are not permitted. Allocate the credit according to each member’s share of the entity’s earnings.
- Leaving an overstated claim unchanged: If a researching business or pass-through claimant discovers an overstatement, it must reduce the claim on an amended Iowa return.
Questions people ask
Can I choose a different credit calculation method for Iowa?
No. Use the same method used to calculate your federal research credit for the tax year.
What if I only received a credit from another entity?
The form directs pass-through-only claimants to Part III, line 32. Report a pass-through Supplemental RAC on line 33. Provide the entity’s name and FEIN, and file separate forms as required for each pass-through credit received.
What if I had no Iowa research expenses in one of the prior three years?
Enter zero on line 23 and skip lines 24 through 27. Calculate line 28 by multiplying line 22 by 1.95%.
Is the entire unused credit refundable for 2024?
No. For tax year 2024, the refund is limited to 80% of the Iowa RAC and 90% of the Iowa Supplemental RAC that exceeds your Iowa tax liability. Amounts above these refund limits cannot be carried forward.