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SF 2492

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 allows a corporate tax deduction for NCTI (federal 951A) from CFCs, updating terminology to NCTI with retroactive applicability to 2026 tax years.

Signed by Governor.
#corporatetaxes #foreignbusinesses #income #incometaxes #internalrevenuecode
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WeVote Research Nonpartisan
Bill Summary · SF 2492

Summary: SF 2492 (Iowa, 2025-2026) – State CICT Deduction for NCTI with Retroactive Applicability

Purpose and intent

  • The bill creates a state corporate income tax deduction tied to net controlled foreign corporation tested income (NCTI).
  • It aligns Iowa’s deduction with federal tax treatment, updating the state code to reflect the federal shift from GILTI to NCTI.

Key provisions and changes

  • Amendment to existing deduction reference

    • Section 422.35(12) is amended to remove the explicit reference to “global intangible low-taxed income (GILTI)” and to continue allowing the deduction for income under IRC section 951A, now characterized as NCTI.
    • The deduction remains available for the same category of income previously described as GILTI, but the terminology is updated to reflect the new federal construct (NCTI).

  • NCTI defined and scope clarified

    • NCTI represents the aggregate net income from controlled foreign corporations that is subject to federal taxation, and it encompasses a broader scope of foreign income than GILTI did.
    • Although the bill keeps the deduction in place, the key change is updating the reference to reflect NCTI (as per the current federal law).

  • Retroactive applicability

    • The act applies retroactively to January 1, 2026, for tax years beginning on or after that date.
    • This creates potential adjustments or considerations for taxpayers filing for 2026 and later years.

Who/what is affected

  • Taxpayers subject to Iowa corporate income tax
    • Corporations with income attributed to NCTI from controlled foreign corporations may be eligible for a deduction against Iowa taxable income.
  • State tax administration
    • Iowa Department of Revenue would implement the updated deduction in tax calculations and forms, ensuring NCTI is treated consistently with federal treatment under IRC 951A.

Procedural and timeline details

  • Introduction and advancement
    • Introduced on April 15, 2026, with placement on the Ways and Means calendar.
    • Committee report approved, indicating initial legislative support and movement toward potential passage.
  • Retroactive timing
    • The act’s retroactive applicability starts January 1, 2026, for tax years beginning on or after that date. Taxpayers with 2026 tax year filings may need to apply the deduction, subject to administrative guidance and any further legislative action.

Practical impact and considerations

  • Taxpayers with foreign-derived income from controlled foreign corporations could see an Iowa corporate income tax deduction equal to the federal NCTI amount, subject to Iowa’s conformity and calculation rules.
  • The change corrects the state code to mirror federal changes, reducing confusion between GILTI terminology and NCTI, while preserving the same substantive tax relief.
  • Retroactive applicability may require taxpayers to review 2026 filings for potential amendments or adjustments as guidance is issued.

If you’d like, I can provide a side-by-side comparison of GILTI vs. NCTI treatment under Iowa law post-enactment and outline potential filing steps for taxpayers.

Compiled from official sources — confirm details with the bill’s official record.

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