2020 Iowa Corporation Income Tax Instructions To obtain copies of schedules and forms: Additional information can be found on the Department website (tax.iowa.gov). Questions: Email: [email protected] Phone: 515-281-3114 or 1-800-367-3388 Hours: 8 a.m. – 4:15 p.m. CST, Monday – Friday

eFile or mail your return to: Corporation Tax Return Processing Iowa Department of Revenue PO Box 10468 Des Moines, IA 50306-0468

Internal Revenue Code (IRC) Changes CARES Act for tax years 2018-2020 do not For tax years beginning on or after January 1, apply for Iowa purposes. 2020, Iowa has adopted rolling conformity, Capital Loss Carryback meaning the state will automatically conform to Corporations may still carry back a capital loss any changes made to the IRC, except as to the three preceding tax years. Refund specified by Iowa law. requests for a capital loss carryback must be For purposes of calculating the Iowa Alternative made on form IA 1139-CAP. Minimum Tax only, Iowa conforms with the IA 148 Tax Credits Schedule Internal Revenue Code (IRC) in effect on The IA 148 Tax Credits Schedule must be December 21, 2017. See IA 4626 completed for any tax credits claimed other than Paycheck Protection Program (PPP) the fuel tax credit on Schedule C1. PPP loans that are forgiven and properly Other Forms excluded from gross income for federal The IA 1120X must be used to change a purposes will also qualify for exclusion from previously filed IA 1120 unless the change was income for Iowa tax purposes. due only to a capital loss carryback. For tax years beginning on or after January 1, Auxiliary Schedules 2020, Iowa fully conforms to the relevant tax provisions of the federal Consolidated Form IA 4562B Iowa Depreciation Accumulated Appropriations Act, 2021 (P.L. 116-260) Adjustment Schedule must be completed to including the provisions allowing certain record the cumulative effect of the depreciation deductions for business expenses paid using adjustment and must be included with the return. these loans. Schedules F and G must be completed when Net Operating Loss (NOL) Carryback net operating losses are being carried forward. For tax years beginning on or after January 1, Schedule H must be completed by corporations 2009, corporations are no longer allowed to with filing status 2 or 3 to document the carry back Iowa net operating losses. All net computation of any federal tax deduction and/or operating losses are allowed to be carried refunds included in the Iowa return. forward for 20 tax years. However, any federal Schedules I, J, and L must be used by refund due to the carryback of a federal net corporations with filing status 3 to document operating loss must still be reported as income information included in the Iowa return. on the Iowa return to the extent a deduction for federal taxes was allowed on prior Iowa returns. The federal NOL carrybacks allowed under the

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General Instructions

Which Return to File When to File • Regular Corporations: Every corporation • Regular Corporations Calendar Year doing business in this state or deriving filers: Return is due no later than April 30, income from sources within this state, unless 2021. exempt by Iowa Code section 422.34, must • Fiscal Year: Return is due within four months file an Iowa corporation income tax return, IA after the end of the fiscal year. 1120. • Cooperative: Cooperative associations have • Cooperatives, nonprofits subject to until the 15th day of the ninth month after the unrelated business income tax (UBIT): close of their tax period to file a return. Cooperative associations as defined in • Short Period: If a corporation is required to section 6072(d) of the IRC and entities file a short period return under the IRC then subject to UBIT must file an IA 1120 the Iowa short period return is due 45 days • Foreign Sales Corporations (FSCs): FSCs after the original federal due date. domiciled or incorporated in Iowa must file an • UBIT A nonprofit corporation reporting IA 1120S if any income or loss is reportable unrelated business income on federal form to Iowa. 990-T must file on or before the 15th day of • S Corporations, Interest Charge Domestic the fifth month following the end of the tax International Sales Corporations (IC- period. If the nonprofit corporation has no DISCs): S corporations and IC-DISCs must unrelated business income, even if filing a file an Iowa Income Tax Return for an S form 990-T to claim the small business health Corporation, IA 1120S. care tax credit, no Iowa return or copy of the federal return is required to be filed. • Limited Liability Companies (LLCs): LLCs Automatic Extension of Time to File that are taxed as corporations for federal purposes must file IA 1120. All other LLCs All taxpayers who have paid 90% or more of their must file form IA 1065, Partnership Return of correct tax on or before the original due date of Income. Single member LLCs do not need to their return automatically have an additional six file an IA 1065. They must include their months in which to file their return and pay any business income from federal Schedule C on additional tax due with no penalty. Taxpayers their individual tax returns or on the who have not paid 90% or more of their correct corporation income tax return of the owner. tax on or before the original due date of their corporation income tax return are not allowed the • Financial Institutions: Every bank, savings additional six-month period of time to file, and and loan association, and other financial owe both penalty and interest on the additional institution as defined in Iowa Code section tax due after the original due date of their return. 422.61 doing business in this state as a If an additional payment is necessary in order to financial institution must file an Iowa meet the 90% requirement, it must be made by Franchise Tax Return, IA 1120F. the original due date of the return. The automatic • Credit Unions: State credit unions are extension does not change the due date of the subject to Moneys and Credits tax under Iowa return; it only extends the time to file the return. Code section 533.329. State credit unions Such payments can be made electronically on must file an Iowa Credit Union Moneys and eFile & Pay or by using form 1120V, Iowa Credits Tax Return, Form 57-150. Corporation Tax Payment Voucher. Interest will accrue on any tax due after the original due date of the return. All elections made on a return filed within six months of the original due date will be considered timely.

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IA 1120 Instructions All corporations filing a return with the Step 2 - Filing Status Department must complete all lines on the front Filing Status/Type of Return page for the return to be accepted. “See schedule Mark the appropriate box for filing status and included” is not acceptable; the return will be return type. considered incomplete and may be returned. Inactive Return Step 1 - Taxpayer Information Mark the appropriate box if the corporation has no

Tax Period business operations in any state. Enter dates as MMDDYY. Federal Changes Name/Address Mark the appropriate box. If yes, provide the tax If name and address is different from your prior periods changed and file an IA 1120X for each period return and you have not previously notified period, if not already filed. Checking the box is the department of the change, check the not sufficient notice to inform the Department name/address change box. Include name of that federal changes have occurred. contact person and phone number. Property in Iowa Note: Taxpayer information is confidential. The Mark the appropriate box. Property is defined as Iowa Department of Revenue will discuss any tangible or real property owned or leased confidential tax information only with the taxpayer with its primary location in Iowa. or an individual authorized under Iowa Code section 421.59(2)(d), unless the taxpayer has a Step 3 - Net Income and Additions to Income valid power of attorney form on file with the Line 1: Net Income - Enter the amount of federal Department. If the taxpayer wants to allow the taxable income computed after federal dividend Department to discuss its 2020 IA 1120 with the deduction and before federal NOL deduction. preparer who signed the return or the contact Line 2: Federal Refund - Enter 50% of any person listed on the return, the taxpayer must federal refunds received in or accrued to this tax complete and submit an IA 2848 Iowa Power of period. Check the appropriate box to indicate the Attorney Form, for that person. basis of this refund computation. See step 4, line Short Period 5 for additional instructions. If the current filing is for less than 12 months, Line 3: Other Additions - Enter the total from line check the short period box. 16 of Iowa Schedule A, page 2 of IA 1120 return. Federal Employer Identification Number Step 4 - Reductions to Income (FEIN) Line 5: Federal Tax Paid or Accrued - Enter 50% This is the corporation’s Federal Employer of federal income taxes paid or accrued. The Identification Number. deduction must be computed using one of the following methods: Business Code Enter the business code from the list provided by Accrual Basis: Taxpayers must determine the the IRS for the specific industry group total tax shown on page 1 of federal form 1120 corresponding to the corporation’s primary and multiply by 50%. business activity. Cash Basis: Taxpayers must compute the sum of federal taxes paid in the tax year and fuel tax County Number credits applied against the tax liability in the tax Enter the number of the Iowa county, which can year. Multiply the resulting amount by 50%. be found on the Department’s website, that is the Consolidated Federal Return: If the company is corporation’s commercial domicile or principal a member of an affiliated group that files a place of business. Enter 00 if the commercial consolidated federal return but the company files domicile or principal place of business is not a separate Iowa corporation tax return, or the located in Iowa. Iowa consolidated return does not include all of First/Final Return the same members as the federal consolidated If this is a first or final return, check the box that return, the federal income tax deduction using the best describes the reason.

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formula on the Iowa Schedule H1 must be Line 26: Failure to Timely File a Return - A computed. penalty of 10% will be added to the tax due for Check the appropriate box to indicate the basis of failure to timely file a return if the return is filed this federal tax deduction computation. If filing after the original due date of the return and if at status 2 or 3, include pages 1-5 of the least 90% of the correct amount of tax is not paid consolidated federal return, consolidating income by the original due date of the return. statements, and complete the Iowa Schedule H1. All lines on Schedule H must be completed. Failure to Timely Pay the Tax Due or Penalty A penalty of 5% will be Line 6: Other Reductions - Enter the total from IA for Audit Deficiency 1120 Schedule A, line 16. added to the tax due if the return is filed by the original due date and at least 90% of the correct Step 5 - Taxable Income amount of tax is not paid by the original due date Line 11: Iowa Percentage - Enter the amount of the return. from IA 1120 Schedule E, line 13, or 100%, if the When the failure to file penalty and the failure to corporation’s business is entirely within Iowa. pay penalty are both applicable, only the failure Line 15: Net Operating Loss - Enter amount from to file penalty will apply. IA 1120 Schedule F, column E. A copy of IA 1120 Penalty for Willful Failure to File A penalty of Schedule F must be included with the return. 75% will be added to the tax due for willful failure Step 6 - Tax, Credits, and Payments to file a return or for filing with intent to evade tax. Line 17: Tax - Enter the amount of tax computed Note: Penalties can only be waived under limited from the tax rate schedule, IA 1120, page three. circumstances, as described in Iowa Code If the corporation has annualized for federal section 421.27. income tax purposes, the corporation must Line 27: Interest - If payment is received after the annualize for Iowa income tax purposes. If tax is due date of the return, interest accrues on the annualized, check the box and include a schedule unpaid tax at a rate prescribed by law from the of the formula used to compute the tax. original due date of the return until payment is Line 18: Alternative Minimum Tax - A small received. Any portion of a month is considered a business corporation or a new corporation for its full month in calculating interest due on unpaid first year of existence, which under IRC section tax. 55(e) is exempt from the federal alternative Line 28: Total Amount Due - Payment options minimum tax, is not subject to Iowa alternative include payment through Modernized eFile minimum tax. A small business corporation may (MeF), ePay (direct debit), ACH Credit, or apply any alternative minimum tax credit payment by check. Go to the Department’s carryforward to the extent of its regular website for electronic payment options. Do not corporation income tax liability. send cash. Submit IA 1120V if making payment Enter the amount from IA 4626, line 17. Complete by check. IA 4626 even if no alternative minimum tax is due. Make check payable to “Iowa Department of Check the box if claiming a small business Revenue”. exemption. Step 8 - Overpayment Step 7 - Balance Due Line 29: Overpayment - Underpayment penalty Line 25: Penalty for Underpayment of Estimated may be applicable. Subtract any IA 2220 penalty Tax - Corporations underpaying estimated tax for on IA 1120, line 25; enter remaining the entire tax shown on IA 1120, line 19 may be overpayment, if any. subject to a penalty for this underpayment. The underpayment penalty is in addition to the Line 30: Credit to Next Period’s Estimated Tax - penalties on IA 1120, line 26. The underpayment Enter the amount of overpayment to be credited penalty is computed on IA 2220 and the total from to the next tax period. This credit can only be that form is placed on IA 1120, line 25. If the changed after the due date if the change is penalty is computed, IA 2220 must be included requested by the last day of the subsequent year. with the return. First return taxpayers are subject to this penalty.

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Schedule A - Other Additions: Line 3: Enter any net capital loss previously not Line 1: Enter the amount of IRC section 613 allowed as an Iowa deduction that was not taken percentage depletion of an oil, gas, or geothermal at the federal level. well that exceeds the cost depletion amount Line 4: Enter any net contributions previously not determined under IRC section 611 as claimed on allowed as an Iowa deduction that was not taken the federal return. at the federal level. Line 3: Enter any net capital loss included in the Lines 5-7: Enter income amounts related to sale- computation of IA 1120, line 1. leaseback safe harbor leases for property. This Line 4: Enter any net contributions deducted in includes rent income for the lessor and interest excess of the federal limitation. income and depreciation expense for the lessee. Lines 5-7: Enter deductions relating to sale- Line 8: Expensing and depreciation allowed on leaseback safe harbor leases for property placed the Iowa return may differ from amounts allowed into service prior to January 1, 1986. This on the federal return. Refer to IA 4562A and IA includes interest expense and depreciation 4562B. expense for the lessor and rent expense for the Line 10: Enter the amount of Iowa tax refund lessee. included in federal income. Do not include Iowa Line 8: Expensing and depreciation allowed on tax refunds from Iowa refundable tax credits. the Iowa return may differ from amounts allowed Line 11: Enter the amount of wages not on the federal return. Refer to IA 4562A and IA subtracted from federal taxable income due to 4562B. the Work Opportunity Credit, federal form 5884. Line 9: Enter the amount of interest and Line 12: Enter the amount added to federal dividends exempt from federal tax. Exclude taxable income due to the Alcohol and Cellulosic interest received from certain Iowa bonds, which Biofuel Tax Credit, federal form 6478. are listed in Iowa Administrative Code rule 701— Line 13: Foreign dividend income exclusion: 40.3. If municipal interest taxable for Iowa Complete Schedule B. purposes differs from total municipal interest The foreign dividend exclusion, including subpart reported on the federal return, a schedule must F income, follows the same criteria as IRC be included. section 243 does for domestic dividends. Line 10: Enter the amount of Iowa tax expensed • If the percentage of ownership is less than on the federal return. Provide a breakdown of line 20%, then 50% of the dividend income is 17, taxes and licenses, shown on the federal excluded. return. • If the percentage of ownership is equal to or Line 15: Refer to IA 101 Nonconformity greater than 20%, then 65% of the foreign Adjustments. dividend income is excluded. Line 16: Enter any amounts not specifically • If the taxpayer is a small business investment identified above. A detailed schedule must be company operating under the Small Business included or these amounts may not be allowed. If Investment Act of 1958 then 100% of the adjusting an amount from a partnership or LLC, foreign dividend income is excluded. include a reconciliation of federal income to • If the dividend is a qualifying dividend as income reported on the Iowa partnership return. defined in IRC section 243(b) then 100% of The difference must be specifically identified to the foreign dividend is excluded. indicate the Iowa adjustment being made. Include any adjustment from IA 163 Interest Expense These amounts are shown on federal form 1120 Adjustment resulting in an addition to income on Schedule C, lines 13, 14, 16a, 16b, 16c, and 18. this line. Include IA 163 with your return. Line 14: Enter the amount of interest and Schedule A - Other Reductions: dividends from federal securities included in federal income. Do not include interest on federal Line 2: Enter the amount of Social Security taxes refunds. Include a schedule showing a for tips not subtracted from federal taxable breakdown of federal security interest by payer. income due to the tip credit, federal form 8846.

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Line 15: Refer to IA 101 Nonconformity Schedule C2 - Payments Adjustments. Enter all applicable amounts on the lines Line 16: Enter any amounts not specifically specified. identified above. A detailed schedule must be Note: Make sure to correctly distinguish between included or these amounts may not be allowed. credits and payments. For example, credit from If adjusting an amount from a partnership or LLC, prior period overpayment must be listed as a include a reconciliation of federal income to payment on Schedule C2. income reported on the Iowa partnership return. Additional Information The difference must be specifically identified to Complete all applicable statements and indicate the Iowa adjustment being made. questions. Amounts entered on this line may include, but Enter the FEIN or PTIN for the preparer’s are not limited to, the following: identification. • The net Global Intangible Low-Taxed Income Schedule E - Business Activity Ratio (BAR) (GILTI) to the extent included on IA 1120, line If all corporate business is conducted within 1. Iowa, do not complete Schedule E. • The amount of a federal, state, or local grant Complete all applicable lines. All figures are net provided to a communications service of amounts used in Iowa Schedule D. Dividends provider during the tax year, to the extent are net of special deductions and the Iowa included on IA 1120, line 1, if the grant was foreign dividend exclusion. used to install broadband infrastructure that Business income means income which arises facilitates broadband service in targeted from the corporation’s unitary trade or business, service areas at or above the download and a part of which is conducted within Iowa. upload speeds. Business income must be apportioned to Iowa by means of the BAR. Investment income may, at • The amount of any financial assistance grant the taxpayer’s election, be included in the provided to an eligible small business by the computation of the BAR. On the return, the Iowa economic development authority under taxpayer elects whether to include investment the Iowa small business relief grant program income which was determined to be business created during calendar year 2020 to provide income in the computation of its BAR for that and financial assistance to eligible small all subsequent years. Consequently, the businesses economically impacted by the subsequent year’s total investment income COVID-19 pandemic to the extent included which is determined to be business income is on IA 1120, line 1. included in the numerator as follows: • Any adjustment from IA 163 Interest Expense (1) Accounts receivable interest is to be Adjustment resulting in a reduction to income. included in the numerator to the extent Include IA 163 with your return. allocable to Iowa. • Any adjustment from 2020 IA 163A Interest (2) Other interest, net dividends, capital and Expense Carryforward Adjustment. Include ordinary gains, and royalties from IA 163A with your return. intangibles must be included in the numerator if the commercial domicile is in Schedule B - Foreign Dividend Exclusion Iowa. See Iowa Admin. Code r. 701— See instructions for IA 1120 Schedule A, line 13. 54.2(3) for attributing certain income from Schedule C1 - Credits intangibles. Enter all applicable amounts on the lines (3) Capital and ordinary gains, rent, and specified. Include fuel credit, nonrefundable royalties from tangible and real property credits, and other refundable credits. Include must be included in the numerator if the schedule IA 4136 and schedule IA 148. property is located in Iowa.

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For a corporation first doing business in Iowa, the 422.33(2); Iowa Admin. Code r. 701—54.1 et inclusion of investment income determined to be seq. business income in the BAR of that year’s initial Confidentiality and Fair Information Practices return is binding on all subsequent years’ Notice: Information from this return may be made returns. The election to include business available to the IRS or to tax officials of another investment income in the BAR can later be state under a tax information exchange program. changed only with permission of the Director of Except as allowed by law, information on this the Iowa Department of Revenue. return cannot be released to anyone who is not Special Apportionment Guidelines: Some an Iowa Department of Revenue or IRS corporations are required to use an alternate employee. Any Department of Revenue calculation of the BAR (i.e. service companies, employee who discloses tax information without transportation, broadcasting). See Iowa Code § legal authority is subject to a fine of $1,000.

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