Edgerton Public School District; refundable sales and use tax exemption provided for construction materials used in certain projects.

2025-2026 Regular Session Introduced by Joe Schomacker

Raising the targeted small business income cap from 4 million to 10 million (three-year average) expands eligibility for more women, minority, veteran, and disability‑owned firms.

Introduction and first reading, referred to Taxes

#education-schooldistricts #taxation-salesanduse

Main purpose

HF 872 raises the maximum annual gross income threshold that an enterprise may have and still qualify as a “targeted small business” under Code section 15.102(12)(a). The bill changes the current $4 million ceiling to $10 million (income computed as a three‑year average), and clarifies related eligibility language.

Key provisions / changes

Defines “targeted small business” as an enterprise that is 51% or more owned, operated, and actively managed by one or more women, minority persons, service‑disabled veterans, or persons with a disability, and that meets all of the following:

Is located in Iowa.
Is operated for profit and under a single management.
Meets at least one of these business size criteria:
- Has fewer than 20 employees; OR
- Has annual gross income of less than $10,000,000, computed as the average of the three preceding fiscal years.

Replaces the prior maximum annual gross income of $4,000,000 with $10,000,000.

Uses a three‑year average of prior fiscal years to determine the gross income measure.

Who is affected

Businesses seeking designation or certification as a targeted small business for state programs, procurement preferences, technical assistance, or contracting set‑asides.

State agencies and contracting officers that administer small/targeted‑business programs will see an expanded eligible population.

Current certified targeted small businesses may face increased competition for set‑asides or program dollars as larger enterprises become eligible.

Potential indirect effects on suppliers, prime contractors, and program budgets depending on how expanded eligibility is used in procurement.

Procedural status and timeline highlights

Introduced: March 7, 2025 (referred to Commerce).

Amendments adopted: H‑1153 and H‑1173 (March 24–25, 2025); H‑1173 modified H‑1153.

House passage: Passed the House March 25, 2025 (yeas 96, nays 1); immediate message.

Subcommittee actions and recommendations occurred late March / early April 2025 (Subcommittee recommended passage April 2).

Explanation of vote recorded April 22, 2025.

Practical impact

Raising the income threshold from $4M to $10M substantially enlarges the pool of firms eligible as targeted small businesses under state definitions, potentially increasing participation in supplier development programs and access to procurement opportunities for a broader set of women‑, minority‑, veteran‑, and disability‑owned firms. Agencies will need to apply the revised size test (three‑year average gross income or employee count) in certification and contracting processes.

Bill