A bill for an act creating a state corporate income tax deduction for net controlled foreign corporation tested income, and including retroactive applicability provisions.

2025-2026 Regular Session

Iowa now deducts net CFC tested income (NCTI) under the same federal treatment as GILTI, retroactive to 2026.

Committee report approving bill, renumbered as SF 2492.

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What the bill does

Creates a state corporate income tax deduction for net controlled foreign corporation tested income (NCTI).

Replaces the current reference to GILTI (global intangible low-taxed income) with NCTI by aligning state law with the federal change that recharacterized GILTI as NCTI under IRC §951A.

Provides retroactive applicability to tax years beginning on or after January 1, 2026.

Key provisions and changes

Section 422.35(12) (Code 2026) is amended:

The bill retains the existing deduction for income under IRC §951A but removes the specific wording that references GILTI.
It clarifies that the deduction applies to NCTI, which is the broader category of net income from controlled foreign corporations subject to federal tax.

Retroactive applicability:

The act applies retroactively to January 1, 2026, for tax years beginning on or after that date.

Who is affected

Iowa corporate taxpayers that have controlled foreign corporations (CFCs) and generate NCTI under the federal treatment.

Multinational corporations with Iowa apportionment or nexus engaging in international income arrangements that would qualify for the NCTI deduction.

Iowa Department of Revenue administers the deduction as part of the state corporate income tax calculation.

Substantive impact

Consistency with federal tax treatment:

Iowa’s deduction will now align with the federal treatment of NCTI (formerly GILTI) under IRC §951A, ensuring the state’s deduction mirrors the updated federal framework.

Tax liability implications:

For entities with NCTI, the deduction reduces Iowa corporate income tax liability for the applicable tax years beginning in 2026 forward.
The explicit retroactive applicability means affected taxpayers may have potential adjustments or refunds/credits for prior filings to reflect the new alignment if applicable under Iowa law.

Procedural and timeline notes

Introduction and committee action:

The bill originated in the Senate Commerce Committee and has undergone subcommittee discussions and committee hearings.
By mid-April 2026, it was reported out with renumbering to SF 2492, indicating potential procedural changes or amendments (the action history shows renumbering to SF 2492 in the committee reports).

Effective date:

Retroactive to tax years beginning on or after January 1, 2026.

Implementation:

The Iowa Department of Revenue would implement the deduction in accordance with the amended Code section 422.35(12) and coordinate any retroactive adjustments as required.

Plain-language takeaway

SF 2292 updates Iowa’s state corporate income tax deduction to reflect the federal recharacterization of GILTI as NCTI, ensuring consistency between state and federal rules. It preserves the deduction for NCTI, removing the outdated GILTI terminology, and applies this change retroactively starting with tax year 2026. Taxpayers with dual-country income from controlled foreign subsidiaries may see a reduced Iowa tax liability for qualifying income.

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