Iowa Code 422.35 – Net income of corporation — how computed
Current as of: 2023 | Check for updates
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The term “net income” means the taxable income as properly computed for federal income tax purposes under the Internal Revenue Code, with the following adjustments:
1. Subtract interest and dividends from federal securities.
Attorney's Note
Under the Iowa Code, punishments for crimes depend on the classification. In the case of this section:| Class | Prison | Fine |
|---|---|---|
| Simple misdemeanor | up to 30 days | between $105 and $855 |
Terms Used In Iowa Code 422.35
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Business: means any trade, occupation, activity, or enterprise engaged in for the purpose of selling or distributing tobacco products in this state. See Iowa Code 453A.42
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Dependent: A person dependent for support upon another.
- Director: means the director of the department of revenue. See Iowa Code 453A.42
- dominant in its field of operation: means having more than twenty full-time equivalent positions and more than three million dollars in annual gross revenues, and "affiliate or subsidiary of a business dominant in its field of operation" means a business which is at least twenty percent owned by a business dominant in its field of operation, or by partners, officers, directors, majority stockholders, or their equivalents, of a business dominant in that field of operation. See Iowa Code 422.7
- Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Intellectual disability: means a diagnosis of intellectual disability or intellectual developmental disorder, global developmental delay, or unspecified intellectual disability or intellectual developmental disorder which diagnosis shall be made only when the onset of the person's condition was during the developmental period and based on an assessment of the person's intellectual functioning and level of adaptive skills. See Iowa Code 4.1
- Internal Revenue Code: means the Internal Revenue Code of 1954, prior to the date of its redesignation as the Internal Revenue Code of 1986 by the Tax Reform Act of 1986, or means the Internal Revenue Code of 1986 as amended and in effect on January 1, 2020. See Iowa Code 422.7
- net income: means the taxable income as properly computed for federal income tax purposes under section 63 of the Internal Revenue Code, with the following adjustments:
1. See Iowa Code 422.7Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses. Partnership: means an entity subject to taxation under subchapter K of the Internal Revenue Code and the regulations thereunder and includes but is not limited to a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on and which is not, within the meaning of this chapter, a trust, estate, or corporation. See Iowa Code 422.25A Physical or mental impairment: means any physiological disorder or condition, cosmetic disfigurement, or anatomical loss affecting one or more of the body systems or any mental or psychological disorder, including intellectual disability, organic brain syndrome, emotional or mental illness, and specific learning disabilities. See Iowa Code 422.7 Probation: A sentencing alternative to imprisonment in which the court releases convicted defendants under supervision as long as certain conditions are observed. Sale: means any transfer, exchange, or barter, in any manner or by any means whatsoever, for a consideration, and includes and means all sales made by any person. See Iowa Code 453A.42 state: when applied to the different parts of the United States, includes the District of Columbia and the territories, and the words "United States" may include the said district and territories. See Iowa Code 4.1 year: means twelve consecutive months. See Iowa Code 4.1
2. Add interest and dividends from foreign securities, from securities of state and other political subdivisions, and from regulated investment companies exempt from federal income tax under the Internal Revenue Code, except for those securities the interest and dividends from which are exempt from taxation by the state of Iowa as otherwise provided by law, including those set forth in section 422.7, subsection 2.
3. a. If the taxpayer is a small business corporation, subtract an amount equal to sixty-five percent of the wages paid to individuals, but not to exceed twenty thousand dollars per individual, named in subparagraphs (1), (2), and (3) who were hired for the first time by the taxpayer during the tax year for work done in this state:
(1) An individual with a disability domiciled in this state at the time of the hiring who meets any of the following conditions:
(a) Has a physical or mental impairment which substantially limits one or more major life activities.
(b) Has a record of that impairment.
(c) Is regarded as having that impairment.
(2) An individual domiciled in this state at the time of the hiring who meets any of the following conditions:
(a) Has been convicted of a felony in this or any other state or the District of Columbia.
(b) Is on parole pursuant to chapter 906.
(c) Is on probation pursuant to chapter 907, for an offense other than a simple misdemeanor.
(d) Is in a work release program pursuant to chapter 904, subchapter IX.
(3) An individual, whether or not domiciled in this state at the time of the hiring, who is on parole or probation and to whom the interstate compact for adult offender supervision under chapter 907B applies.
b. This deduction is allowed for the wages paid to the individuals successfully completing a probationary period named in paragraph “a”, subparagraphs (1), (2), and (3), during the twelve months following the date of first employment by the taxpayer and shall be deducted in the tax years when paid.
c. For purposes of this subsection:
(1) “Physical or mental impairment” means any physiological disorder or condition, cosmetic disfigurement, or anatomical loss affecting one or more of the body systems or any mental or psychological disorder, including intellectual disability, organic brain syndrome, emotional or mental illness, and specific learning disabilities.
(2) (a) “Small business” means a profit or nonprofit business, including but not limited to an individual, partnership, corporation, joint venture, association, or cooperative, to which the following apply:
(i) It is not an affiliate or subsidiary of a business dominant in its field of operation.
(ii) It has either twenty or fewer full-time equivalent positions or not more than the equivalent of three million dollars in annual gross revenues as computed for the preceding fiscal year or as the average of the three preceding fiscal years.
(iii) It does not include the practice of a profession.
(b) “Small business” includes an employee-owned business which has been an employee-owned business for less than three years or which meets the conditions of subparagraph division (a), subparagraph subdivisions (i) through (iii).
(c) For purposes of this definition, “dominant in its field of operation” means having more than twenty full-time equivalent positions and more than three million dollars in annual gross revenues, and “affiliate or subsidiary of a business dominant in its field of operation” means a business which is at least twenty percent owned by a business dominant in its field of operation, or by partners, officers, directors, majority stockholders, or their equivalents, of a business dominant in that field of operation.
4. a. If the taxpayer is a business corporation and does not qualify for the adjustment under subsection 3, subtract an amount equal to sixty-five percent of the wages paid to individuals, but shall not exceed twenty thousand dollars per individual, named in subparagraphs (1) and (2) who were hired for the first time by the taxpayer during the tax year for work done in this state:
(1) An individual domiciled in this state at the time of the hiring who meets any of the following conditions:
(a) Has been convicted of a felony in this or any other state or the District of Columbia.
(b) Is on parole pursuant to chapter 906.
(c) Is on probation pursuant to chapter 907, for an offense other than a simple misdemeanor.
(d) Is in a work release program pursuant to chapter 904, subchapter IX.
(2) An individual, whether or not domiciled in this state at the time of the hiring, who is on parole or probation and to whom the interstate compact for adult offender supervision under chapter 907B applies.
b. This deduction is allowed for the wages paid to the individuals successfully completing a probationary period named in paragraph “a”, subparagraphs (1) and (2), during the twelve months following the date of first employment by the taxpayer and shall be deducted in the tax years when paid.
c. The department shall develop and distribute information concerning the deduction available for businesses employing persons named in paragraph “a”, subparagraphs (1) and (2).
5. a. Add any federal net operating loss deduction carried over from a taxable year beginning prior to January 1, 2023.
b. Any Iowa net operating loss carried over from a taxable year beginning prior to January 1, 2023, may be deducted as provided in section 422.35, subsection 11, Code 2018.
6. Subtract the loss on the sale or exchange of a share of a regulated investment company held for six months or less to the extent the loss was disallowed under section 852(b)(4)(B) of the Internal Revenue Code.
7. Add, to the extent it reduced federal taxable income, any amount contributed under section 170 of the Internal Revenue Code to the extent such contribution was made to an organization for the purpose of deposit in the Iowa education savings plan trust established in chapter 12D, and the taxpayer designated that any part of the contribution be used for the direct benefit of any dependent of a shareholder of the taxpayer or any other single beneficiary designated by the taxpayer.
8. Subtract the amount of foreign dividend income, including subpart F income as defined in section 952 of the Internal Revenue Code, based upon the percentage of ownership as set forth in section 243 of the Internal Revenue Code.
9. Subtract, to the extent included, the amount of any biodiesel production refund provided pursuant to section 423.4.
10. Any adjustment subtracted from federal taxable income for an adjustment year pursuant to section 6225 of the Internal Revenue Code and the regulations thereunder shall be added back in computing net income of the partnership and the partners for state tax purposes for the adjustment year.
11. a. Section 163(j) of the Internal Revenue Code does not apply in computing net income for state tax purposes. If the taxpayer’s federal taxable income for the tax year was increased or decreased by reason of the application of section 163(j) of the Internal Revenue Code, the taxpayer shall recompute net income for state tax purposes under rules prescribed by the director.
b. For any tax year in which paragraph “a” does not apply, a taxpayer shall not be permitted to deduct any amount of interest expense paid or accrued in a previous taxable year that is allowed as a deduction in the current taxable year by reason of the carryforward of disallowed business interest provisions of section 163(j)(2) of the Internal Revenue Code, if either of the following apply:
(1) The interest expense was originally paid or accrued during a tax year in which paragraph “a” applied.
(2) The interest expense was originally paid or accrued during a tax year in which the taxpayer was not required to file an Iowa return.
12. Subtract, to the extent included, global intangible low-taxed income under section 951A of the Internal Revenue Code.
13. a. Subtract, to the extent included, the amount of a federal, state, or local grant provided to a communications service provider, if the grant is used to install broadband infrastructure that facilitates broadband service in targeted service areas at or above the download and upload speeds.
b. As used in this subsection, “broadband infrastructure”, “communications service provider”, and “targeted service area” mean the same as defined in section 8B.1, respectively.
14. a. Subtract, to the extent included, the amount of any qualifying COVID-19 grant issued to a business by the economic development authority, the Iowa finance authority, or the department of agriculture and land stewardship.
b. For purposes of this subsection, “qualifying COVID-19 grant” means the same as defined in section 422.7, subsection 41, paragraph “b”.
c. The economic development authority, Iowa finance authority, or the department of agriculture and land stewardship shall notify the department of any COVID-19 grant program that may qualify under this subsection in the manner and form prescribed by the department.
d. This subsection is repealed January 1, 2024, and does not apply to tax years beginning on or after that date.