Iowa imposes a franchise tax on all financial institutions. Therefore, the Franchise Tax Credit is allowed to avoid double taxation of income.
If a financial institution as defined in section 581 of the Internal Revenue Code elects to file as an S corporation for federal income tax purposes and therefore have its income taxed directly to the shareholders, those shareholders qualify for a Franchise Tax Credit. The Franchise Tax Credit is also available to members of a financial institution organized as a limited liability company.
The IA 147 (pdf) must be used to calculate the credit and included with the return. Report the claim on the IA 148 Tax Credits Schedule using tax credit code 04.
The amount of any unused tax credit may not be carried forward and must be reflected as expired on the IA 148 Tax Credits Schedule.