USA – IOWA Law and Practice Contributed by: David M. Erickson, Christopher S. Talcott, Amy S. Montgomery and Shannon M.H. Hasse, Dentons Davis Brown PC
certificate of occupancy must, at a minimum, state that the building complies with the Iowa state building code.
on its Iowa-source income independent from the entity in which it has an ownership interest. As in all states, withholding for federal income tax is often required. At the federal level, the sale of real property in Iowa is generally subject to withholding at a rate of 15%, and foreign inves - tors must file a federal tax return to recoup this amount where no tax is ultimately due. 8.5 Tax Benefits Real estate investors benefit greatly from utilis - ing depreciation deductions from their federal and state tax returns. While this creates addi - tional gain on the eventual sale of the real estate, tax benefits such as 1031 exchanges or invest - ment in qualified opportunity funds can defer the recognition of that gain for long periods of time. Additionally, financing costs are generally amor - tised over the life of the loan and many opera - tional costs can be deducted currently, further reducing an investor’s taxable income. Depending on the nature of a development, real estate investors may be able to utilise state and federal tax credits programmes – such as historic, brownfield or new market tax credits – to reduce the investors’ tax burden or reduce development costs by sale of the benefits of the tax credits to outside investors. Utilisation of these programmes typically requires a co-ordinated approach from start to finish among an experienced team of legal counsel, tax and accounting specialists, inves - tor diligence professionals, state and/or federal agency representatives, and engineering and design professionals to ensure compliance with detailed regulations, as well as a proper struc - ture to ensure that the intended benefits accrue to the intended parties.
8. Tax 8.1 VAT and Sales Tax
No VAT or equivalent is payable on the sale or purchase of corporate real estate in Iowa, only transfer tax. See 2.10 Taxes Applicable to a Transaction . 8.2 Mitigation of Tax Liability The transfer tax due upon conveyance of Iowa real estate is only payable upon consideration given for real property. Accordingly, two meth - ods to reduce or avoid the payment of transfer tax are: • to allocate a portion of the total considera - tion paid in a transaction to personal property acquired, if any; and • to acquire equity interests in an entity that owns real estate rather than acquiring the real estate itself. 8.3 Municipal Taxes No municipal taxes are paid on the occupation of business premises or payment of rent in Iowa. 8.4 Income Tax Withholding for Foreign Investors Beginning in 2022, most Iowa pass-through enti - ties must file a composite tax return and pay Iowa income tax on behalf of its non-resident owners’ Iowa-source income from the pass- through entity. A non-resident owner and the related Iowa pass-through entity may annually file a joint election out of this requirement if the non-resident owner agrees to pay income taxes
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