41-128: IA 128 Research Activities Tax Credit 41-128 (2024)
Iowa · Iowa DOR · Used for tax years 2024
The 2024 IA 128 is Iowa’s Research Activities Tax Credit form. It calculates the credit using U.S. and Iowa qualified research expenses and reports supplemental research credits and credits received from pass-through entities.
Who files this form
Use the 2024 IA 128 to claim the regular Iowa Research Activities Tax Credit (RAC). If you use the alternative simplified method, use IA 128S instead. Your Iowa calculation method must match your federal method for the same tax year.
The researching business must timely file its claim, claim and be allowed the federal research credit for the same year, and operate in an eligible Iowa industry:
- Manufacturing
- Life sciences
- Agriscience
- Software engineering
- Aviation and aerospace
Special rules apply to awards for innovative renewable energy generation costs under the High-Quality Jobs Program.
Recipients of pass-through Iowa RAC or Supplemental RAC also use IA 128 to report those credits.
What you'll need
Have the following information and forms available:
- Your name, SSN or FEIN, tax period end date, and qualifying industry.
- Federal Form 6765, which supplies the amounts for IA 128, lines 2 through 8.
- U.S. and Iowa qualified research expense information, including wages, supplies, and contract research expenses.
- Average U.S. annual gross receipts for tax years 2020 through 2023.
- The name, FEIN, and credit amount for each pass-through entity whose credit you are claiming.
- Group members’ names, FEINs, and Iowa qualified research expenses if Schedule A applies.
- Your IEDA award and tax credit certificate information if claiming the Iowa Supplemental RAC.
Include Federal Form 6765 with IA 128 and your return. Also include the 2024 IA 148 Tax Credits Schedule when filing with IA 1040, IA 1041, or IA 1120.
How to file
Include IA 128 with your Iowa tax return. The supplied text does not give a mailing address or e-filing directions.
- With IA 1040, IA 1041, or IA 1120, include IA 128, Federal Form 6765, and the 2024 IA 148 Tax Credits Schedule.
- With IA 1065 or IA 1120S, include IA 128 and Federal Form 6765.
Complete 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 37. Otherwise, follow the eligibility directions before completing the calculations in Parts II and III.
Report regular RAC using tax credit code 58. Report Supplemental RAC using code 59 and the IEDA tax credit certificate number. List each credit claim separately on the applicable credit schedule. Pass-through entities also report members’ or beneficiaries’ allocated credits on the applicable Iowa Schedule K-1.
Common mistakes
- Using a different calculation method from your federal claim. Iowa requires the same method.
- Counting all Iowa research supplies. For tax years beginning during 2024, only 60% of qualifying Iowa supply costs are eligible.
- Including third-party computer-use costs as Iowa research expenses. These costs no longer qualify for Iowa RAC.
- Overstating qualifying wages or contract research costs. Apply the printed majority-work restrictions. For Iowa wages, use the actual qualifying allocation rather than rounding an allocation of at least 80% up to 100%.
- Combining pass-through claims. File a separate IA 128 for each pass-through RAC received and each pass-through Supplemental RAC received.
- Leaving an overstated claim unchanged. If you discover an overstatement, reduce the claim on an amended Iowa return.
- Using special allocations for pass-through credits. Credits must be allocated according to each member’s share of the entity’s earnings; special allocations are not permitted.
Questions people ask
Can I claim both my own research credit and a pass-through credit?
Yes. Calculate your own credit on lines 2 through 34, or line 35 when applicable, and enter the pass-through RAC on line 37. Report each credit separately.
What if my business belongs to a controlled group?
Calculate the Iowa RAC as if the group were one business and complete Schedule A with information for every group member. Report your share of the credit on Part III, line 35.
Is the credit fully refundable for 2024?
No. For tax year 2024, the refundable portion is limited to 80% of the regular Iowa RAC and 90% of the Supplemental RAC that exceeds your Iowa tax liability. Amounts above these refund limits cannot be carried forward.
Who can receive the Iowa Supplemental RAC?
Businesses with tax incentive contracts under the High Quality Jobs Program may receive an award from IEDA. The allowable credit is the smaller of the available award or the maximum supplemental credit calculated under the instructions.