41-124: IA 128S Alternative Simplified Research Activities Tax Credit 41-124 (2025)
Iowa · Iowa DOR · Used for tax years 2025
The 2025 IA 128S calculates the Iowa Alternative Simplified Research Activities Tax Credit using qualified research expenses in Iowa. It also reports supplemental research activities credits, credits received from pass-through entities, and credit shares for members of controlled
Who files this form
Use IA 128S to claim the Iowa Alternative Simplified Research Activities Tax Credit (RAC), including a credit received from a pass-through entity.
A business conducting research generally must:
- Claim and be allowed the federal research credit for the same tax year.
- Use the same calculation method for its Iowa and federal research credits.
- Properly file its Iowa credit claim on time.
- Be engaged in manufacturing, life sciences, agriscience, software engineering, or the aviation and aerospace industry in Iowa.
Taxpayers using the regular research credit method must use IA 128, not IA 128S.
The instructions also provide a separate IA 128S procedure for certain innovative renewable energy generation costs awarded a credit under the High-Quality Jobs Program.
What you'll need
Have these forms and details available:
- Federal Form 6765, which supplies the amounts for IA 128S lines 2 through 8 and must be included with your return.
- 2025 IA 148 Tax Credits Schedule, if filing IA 1040, IA 1041, or IA 1120.
- Your name, SSN or FEIN, tax period ending date, and the researching business's industry.
- U.S. qualified research expense amounts and average U.S. annual gross receipts for tax years 2021 through 2024.
- Iowa research payment, wage, supply, and contract research expense amounts, plus Iowa qualified research expenses for the prior three years.
If applicable, also have:
- The pass-through entity's name, FEIN, and credit amounts received.
- Each controlled-group member's name, FEIN, and Iowa qualified research expenses for Schedule A.
- Your Iowa Economic Development Authority (IEDA) Supplemental RAC award information and tax credit certificate number.
How to file
- Enter your identifying information and industry, then answer the eligibility questions in Part I. If you are filing only to claim a pass-through credit, the form directs you to Part III, line 32.
- Complete the applicable research expense and credit calculations. Use dollars and cents. Businesses calculating the credit as a controlled group or group under common control must complete Schedule A.
- Include IA 128S and Federal Form 6765 with your Iowa return. For IA 1040, IA 1041, or IA 1120, also include the 2025 IA 148. For IA 1065 or IA 1120S, include IA 128S and Federal Form 6765.
- Report the credit on the applicable tax credit schedule. Use code 58 for the Alternative Simplified RAC and code 59 for the Supplemental RAC. Supplemental claims also require the IEDA tax credit certificate number. List each earned or received credit separately.
File a separate IA 128S for each pass-through Alternative Simplified RAC received and for each pass-through Supplemental RAC received.
The supplied text does not give a mailing address or e-filing directions.
Common mistakes
- Counting all Iowa research supplies. For tax years beginning during 2025, only 40% of qualifying Iowa supply costs are eligible.
- Including third-party computer costs as Iowa research expenses. These costs no longer qualify.
- Rounding qualifying wages up to 100%. Iowa does not allow the federal “substantially all” wage rule. Use the employee's actual qualifying wage allocation and apply the majority-work limitation.
- Ignoring contract research restrictions. Exclude contract research expenses that fail the majority-work limitation.
- Making special pass-through allocations. Credits must be allocated according to each member's share of the entity's earnings. Special allocations are not permitted.
- Leaving an overstated claim unchanged. A researching business or pass-through claimant that discovers an overstatement must reduce the claim on an amended Iowa return.
Questions people ask
Can I use a different credit calculation method for Iowa than for my federal return?
No. You must use the same method used to calculate your federal research credit for the tax year. Use IA 128S for the alternative simplified method and IA 128 for the regular method.
What if I both conduct research and receive a pass-through credit?
Calculate your own credit on lines 2 through 30 and enter the pass-through Alternative Simplified RAC on line 32. Report each credit separately.
What if I had no Iowa qualified research expenses in one of the prior three years?
Enter zero on line 23 and skip lines 24 through 27. On line 28, multiply line 22 by 1.95%.
Is the entire unused credit refundable for 2025?
No. For tax year 2025, the refund is limited to 70% of the Iowa RAC and 85% of the Iowa Supplemental RAC that exceeds your Iowa tax liability. Amounts exceeding those refund limits cannot be carried forward to another tax period.
Who can receive the Iowa Supplemental RAC?
Businesses with tax incentive contracts under the High-Quality Jobs Program can receive an award from IEDA. The allowable credit is the lesser of the available IEDA award or the maximum supplemental credit calculated under the instructions.