USA – IOWA Trends and Developments Contributed by: David M. Erickson, Christopher S. Talcott, Amy S. Montgomery and Shannon M.H. Hasse, Dentons Davis Brown PC
that employ Iowans in well-paying jobs. Under the current HQJ programme, the vehicles of assistance include loans, forgivable loans, tax credits and exemptions and/or refunds. To qualify under the HQJ programme, eligible businesses are required to meet certain wage threshold and job creation requirements. Data centre developers in the State of Iowa frequently utilise the HQJ programme to obtain financial assistance for development projects, including but not limited to local property tax exemptions. Under the programme, some data centre devel- opments have been eligible for 50% or even 100% refunds on sales and use tax for certain business-related expenses, which includes elec- tricity. Proponents of incentive programmes such as the HQJ programme argue that large-scale data centre developers are key to increasing prop- erty tax revenue over time, as the data centres and surrounding development eventually help to pay the cost of public services for growing cities. Critics of the HQJ programme have argued that these incentives for highly automated business- es have created relatively few well-paying jobs and utilise machinery made outside the State of Iowa, with little positive economic impact within the state. In response to concerns raised by critics, the Iowa legislature passed a bill (HSB 305 and SSB 1205, with amendments SF 657) proposed by the IEDA overhauling Iowa’s tax credit system, including the HQJ programme. The legislation replaces the HQJ programme with a new USD50 million Business Incentives for Growth (BIG) programme. While the BIG programme shares a similar goal as the HQJ programme of encour- aging business investment in Iowa facilities, the BIG programme specifically excepts data cen -
tres from the scope of businesses eligible for the programme. The BIG programme raises signifi - cant concerns for data centre developers in the State of Iowa who stand to lose an important incentive in the HQJ programme. The legislation now goes to the Governor’s desk for signature. Tax increment financing Tax increment financing (TIF) is an incentive commonly used for data centre development projects that reallocates property tax revenues within a designated area of a city in order to finance projects within that designated area. TIF is implemented and approved at the local level by city councils, and TIF areas allow a city to make direct economic development grants or loans to developers for projects. Prior to the develop- ment of improvements, a base property value is established. The property is then assessed with a new valuation post-development. The differ - ence between the pre- and post-development values is the incremental amount that the por- tion of taxes being reallocated back to a city or county is based on. The creation of TIF areas involves an intricate statutory framework with certain restrictions on the areas that can be designated as TIF, including requiring the local governmental body to hold a public hearing and pass resolutions and ordinances to establish urban renewal and revitalisation areas as well as corresponding detailed plans for such areas. In connection with TIF incentives, data centre developers are often required to enter into a minimum assessment agreement with the relevant governmental entity, which establishes the minimum post-develop- ment assessed value for the property. Legislation proposed during the 2025 session would have capped the amount of tax levies available to cities at 2%, meaning a city’s abil-
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