Incentive Spotlight
Iowa Sales and Use Tax Incentive Program

As technology continues to drive economic growth, Iowa is positioning itself as a prime destination for data center development. Through its Sales and Use Tax Incentive Program, the state offers substantial tax benefits to businesses investing in data center infrastructure.

Program Overview

Iowa’s Sales and Use Tax Incentive Program is designed to attract large-scale data center projects by reducing the tax burden on qualifying purchases. Businesses can either receive full exemptions or partial refunds on sales and use taxes for equipment, energy, and infrastructure investments. Administered by the Iowa Department of Revenue, the program offers distinct benefits depending on the scale and location of the investment.

Benefits

• Full Exemption: Investments of $200 million or more qualify for 100% exemption on eligible purchases, including computers, cooling systems, power infrastructure and components, and electricity with no limit on exemption value. Equipment purchases receive permanent exemption, while real property improvements qualify for an exemption lasting 10 or 15 years, based on whether the investment site is in a community with fewer than 30,000 residents.
• Partial Refunds:
  • $10 million minimum investment: 50% refund for 7–10 years. These benefits significantly lower upfront costs, making Iowa an attractive hub for data-driven enterprises.
• $1 million minimum investment: 50% refund for up to 5 years.

Eligibility

• Operate a data center business in Iowa
• Facility size: at least 5,000 sq. ft.
• Facility design: must meet sustainable design standards (Iowa Code 103A.8B)
• Investment thresholds:
  • $200 million for full exemption (within 6 years)
  • $10 million (or $5 million for rehabilitated buildings) for partial refund (within 6 years)
  • $1 million for smaller partial refund (within 3 years)
• Lease agreements must be at least 5 years if leasing a facility

Application Deadline and Timeline

• Register for full exemption using Form 78-013 via Iowa’s online portal (registration is not required for partial refunds)
• Annual reporting is due by January 31 each year for full exemption (reporting is not required for partial refunds)
• Refund claims must be filed within one year of purchase and within three months after the refund year ends
• Investment timelines begin with construction or site preparation

Conclusion

Iowa’s Sales and Use Tax Incentive Program offers a compelling opportunity for data centers to reduce costs and maximize ROI. By leveraging these benefits, businesses can accelerate growth while contributing to Iowa’s expanding data center and tech ecosystem.