The Department of Revenue last week released its listing of claims for the Iowa research credit over $500,000 for 2013. Unlike the federal credit, the Iowa credit is “refundable” — if the company claiming the credit has less tax due than its credit, the state writes the company a check for the difference. Of the $58.2 million in credits claimed, about 65% of them exceeded taxes due and were granted as refunds, according to the report.
Two John Deere entities combined to claim over $18 million in credits in 2013; assuming the 65% figure applies to them, that means the got a net $12 million subsidy from Iowa taxpayers.
The Des Moines Register reports:
Twelve of Iowa’s major employers accounted for more than 86 percent of tax credit money awarded for research and development last year, according to a new Revenue Department report.
Companies claimed a total of $53.3 million in credits for research and development in 2013, with 12 companies claiming $46.2 million of that amount. Including individuals who claimed credits, the total rises to $58.2 million.
While recipients of the credits will always argue passionately for their virtues, it’s impossible to justify cash operating subsidies from the state for a dozen well-connected corporations. The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would benefit all taxpayers, not just those who hire tax credit harvest consultants to get cash for what they would do anyway.
Liz Malm, Richard Borean, Lyman Stone, Map, Spirits Excise Tax Rates by State, 2014 (Tax Policy Blog)
It looks like Iowa hits the sauce pretty hard.
Annette Nellen, State income tax filing post-Windsor.
Jason Dinesen, Glossary of Tax Terms: Enrolled Agent
Russ Fox, Tax on the Run Owners Run to ClubFed:
Here’s a scheme for you: The government has set up this new tax credit worth thousands of dollars. What if we find some impoverished individuals, have them fill out tax returns claiming this credit, and we pocket all that cash? We’ll just phony up some other parts of the return to make it look real. They’ll never catch us!
As an aside, this sort of thing happens with all refundable tax credits. It’s one of the reasons why they attract fraudsters like moths are drawn to bright lights.
Yes, this really happened…except for the part about never being caught.
But even if you catch them, that money is gone.
Christopher Bergin, To Fix the IRS, You Have to Fund It (Tax Analysts Blog)
This agency is so mismanaged that there may very well be corruption. But I have no proof of that. I do, however, agree with those who are calling for a special prosecutor. Because the way House Democrats are behaving – ignoring that there is any problem at all – is almost scandalous, and what the Obama administration is doing is useless.
And that brings me to the House Republicans. They think it’s a good idea to punish the IRS by cutting its budget. That won’t fix the problem, and it’s the classic cutting-off-your-nose-to-spite-your-face move.
We tax practitioners deal with the degrading IRS service levels every day, and it’s clear the IRS should be better funded. It won’t happen, though, unless the IRS finds a way convince Republican appropriators that it isn’t a political arm of the other party. Dropping the proposed 501(c)(4) regulations is probably a necessary, though not sufficient, first step.
TaxProf, The IRS Scandal, Day 284
Tax Justice Blog, Congress Is About to Shower More Tax Breaks on Corporations After Telling the Unemployed to Drop Dead. Apparently the “extenders” bill is showing some life.
Jack Townsend, Government Files Protective Appeal in Ty Warner Sentencing
The $70 million doggie treat. The greyhound industry is a legacy of the early days of gambling in Iowa, but as opportunities to lose money recreationally have expanded, gamblers have lost interest in the doggies. Yet state law still requires two casinos to retain their dog tracks. Now the Des Moines Register reports that the casinos are willing to buy out the dogs for $70 million:
Combined betting on greyhound races in Dubuque and Council Bluffs has dropped from $186 million in 1986 to $5.9 million in 2012, a 97 percent decline. Both dog tracks typically have only a scattering of fans in grandstands that once held thousands of patrons.
The proposed legislation envisions a payment of $10 million annually for seven years for Iowa’s greyhound industry. This would include a total of about $55 million from Horseshoe Casino in Council Bluffs and about $15 million from the smaller Mystique Casino in Dubuque.
The casinos say they are losing $14 million annually on the dogs. I would guess that horse racing in Iowa has a similarly hopeless economic model.
Somewhat related: Tyler Cowen, Triply stupid policies.
News from the Profession: Just What Every Accountant Wants for Valentine’s, Another Calculator (Going Concern)