State & Local Tax Impacts of COVID-19 for Iowa – 2020

Thoughtware Alert Published: Dec 11, 2020 | Updated: May 05, 2021

Information current as of December 31, 2020.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Iowa

  • Iowa is extending filing and payment deadlines for income, franchise and moneys, and credits taxes with a due date on or after March 19 and before July 31 to July 31. This includes corporate income tax, individual income tax, composite returns, fiduciary returns, franchise tax, partnership returns, S corporation returns, and credit union reports. The order excludes estimated payments.
  • Iowa also extended the income tax withholding deposit due date for the period ending March 15 from March 25 to the new deposit due date April 10.
    • Order 2020-01, March 19, 2020.
  • Iowa has temporarily suspended collections of property taxes as well as penalties and interest.
    • Gov. Kim Reynolds Supplemental State Public Health Emergency Declaration, March 20, 2020.
  • Iowa continues the suspension of the imposition of property tax late payment penalties and interest. In addition, the 10 percent late filing penalty is waived if beer and wine sales reports are not filed/paid timely.
    • Governor’s Proclamation, April 2, 2020.
  • Iowa is providing a reduced schedule of amounts due for the first and second installments of corporate and individual income tax estimated payments for tax year 2020 due between April 30 and July 15. Estimates will meet the underpayment penalty safe harbor if they are 25 percent of the current year liability or 2018 tax year liability for the first installment and 50 percent of the current year liability or 2018 tax year liability for the second installment. Note that for individuals with a 2018 federal AGI greater than $150,000 (or $75,000 for married filing separately) the revised safe harbor percentages are 27.5 percent and 55 percent respectively. The difference between what normally should have been paid and the reduced amount for these estimates is required to be added to the third installment for tax year 2020.
    • Iowa DOR Order 2020-03, April 9, 2020.
  • Iowa is accepting applications for tax deferral through April 30 for sales and withholding tax filings due during the period beginning March 20 through the closure of business on April 30. The deferral would be an additional 60 days from the original due date to file a return and remit tax payment, with all penalties and interest waived.
    • Iowa DOR Notice, April 8, 2020.
  • Iowa has extended its public health emergency declaration for excise and property tax purposes, extending to May 27 from April 15 the date for a county or a city to file a resolution to begin the annual levy for collection commencing July 1 and suspending alcohol license expiration through May 27.
    • Governor’s Proclamation, May 6, 2020.
  • Iowa is extending its Small Business Relief Program, which is now available for tax periods beginning May 1, 2020, through June 30, 2020. Sales tax and withholding tax returns must be timely filed on or before the due date. If tax returns aren’t timely filed, the taxpayer will be disqualified from the program and late payment and filing penalties will apply. Each payment included in the new program is deferred for 30 days. Payments deferred between and including March 20, 2020, and April 30, 2020, are still deferred for 60 days as indicated in the notice previously received. Businesses that have already submitted an application and been accepted for the program won’t need to reapply.
    • Iowa DOR e-News, May 6, 2020.
  • Iowa has provided guidance that a taxpayer’s PPP loan that’s forgiven and properly excluded from federal gross income under §1106 of the federal CARES Act in a tax year beginning on or after January 1, 2020, also will qualify for exclusion from income for Iowa tax purposes. However, Iowa hasn’t conformed with §1106 of the CARES Act for tax years beginning prior to January 1, 2020. If a taxpayer receives PPP loan forgiveness for a tax year beginning prior to January 1, 2020, that discharge of indebtedness may be considered income for Iowa tax purposes, unless the income qualifies for exclusion under another applicable provision of federal or Iowa law.
  • Due to the COVID-19 pandemic, Iowa won’t consider the presence of one or more employees working remotely from within Iowa solely due to the COVID-19 pandemic, by itself, sufficient business activity within the state to establish Iowa corporate income tax nexus. Nor does the state consider such presence by nonsales employees due to the pandemic sufficient, by itself, to cause a corporation to lose the protections of Public Law 86-272.
    • Iowa DOR FAQs, updated May 15, 2020.
  • Iowa legislation creates an income tax exemption for the forgiven loan proceeds a business receives through the PPP; the income taxpayers receive through the federal CARES Act in the form of stimulus tax refund payments; and income taxpayers receive through the federal CARES Act in the form of emergency student grants (as applies to any tax year ending after March 27, 2020).
    • Iowa H.F. 2641, Laws 2020, effective July 1, 2020.
  • Iowa guidance reflects the state generally conforms with the CARES Act to the extent it affects Iowa income taxes for tax years beginning on or after January 1, 2020, but not for prior tax years. For individual income taxpayers, the guidance notes that economic impact payments, rebates, or refundable tax credits shouldn’t be included when calculating Iowa income for 2020. For corporate income taxpayers, a PPP loan that’s forgiven and properly excluded from federal gross income in a tax year after 2018 also will qualify for exclusion from income for Iowa tax purposes. Iowa conforms with the CARES Act suspension of the excess business loss limitation (IRC §461(l)) for tax year 2020, but not for tax years 2018 and 2019. Iowa doesn’t conform with the changes to the limitation on business interest (IRC §163(j)) to the extent they apply retroactively to a tax year beginning during 2019. Iowa doesn’t conform with the treatment of the depreciable life of qualified improvement property placed in service in 2018 and 2019 under the CARES Act but instead treats this property as 39-year property.
    • Iowa DOR Nonconformity: CARES Act of 2020, July 14, 2020.
  • Iowa announced further extension of various tax provisions due to the COVID-19 outbreak, including 1) suspension of penalty and interest for delay in payment until July 31; 2) requirements for county treasurers to hold tax sales for tax-delinquent properties until July 31; 3) the collection of delinquent taxes by an alternative remedy, including by personal judgment; 4) the requirement for class A beer and wine permit holders to report sales and pay taxes due on or before the 10th day of each calendar month, including the 10 percent penalty; and 5) the expiration of rights of redemption after tax sales.
    • Governor's Proclamation of Disaster Emergency, effective July 24, 2020, through August 24, 2020.
  • Iowa released guidance regarding the property tax payment deadline extension due to COVID-19, which includes information on the waiver of penalty and interest that would have accrued on property tax not paid by April 1, and clarified the revised deadline extension will expire on July 31.
    • Iowa DOR FAQs, July 24, 2020.
  • Iowa has extended the tax payment deadlines for sales tax and individual income tax withholding with a due date on or after August 27, 2020, but before October 1, 2020, until October 31, 2020, for businesses that operate as a bar or other alcohol establishment and were ordered to close to the general public pursuant to Gov. Reynolds’ August 27, 2020, COVID-19 Proclamation in the counties of Black Hawk, Dallas, Johnson, Linn, Polk, and Story. 
    • Iowa DOR Order 2020-04, August 27, 2020.
  • Iowa further extended the suspension of certain excise tax provisions due to the COVID-19 pandemic to include the 10 percent late payment penalty associated with class “A” alcohol permit and wine direct shipper permit holder excise taxes, the one-year expiration of most liquor permits, unless revoked or suspended sooner, provisions prohibiting refunds of fees paid for seasonal alcohol licenses, provisions prohibiting the refund of raffle license fees, and provisions requiring raffles to conclude only during the license period. 
    • Governor’s Proclamation of Disaster Emergency, October 16, 2020, and expires on November 15, 2020, unless terminated further extended.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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