Federal and State Policy Action to Boost Iowa Manufacturing

Business decisions for manufacturers are shaped by markets, but the public policy, thoughtfully implemented, can often help in the decision to start, expand or relocate a business. Quarterly surveys of ABI CEOs indicate that companies are poised for growth and capital investment. 2026 is the first full calendar year since federal tax legislation HR1, known alternately as the “Working Families Tax Cut” or the “One Big Beautiful Bill Act" was enacted. Major portions of the new law are aimed at properly incentivizing pro-growth manufacturing decisions.

Consider these pro-growth provisions:
• For C-corps, the new law made the federal corporate income tax rate of 21% permanent, rather than allowing it to return to a rate of up to 35%. The lower rate is important, and the permanence allows long-term tax planning.
• For pass-through entities, the new law made the 20% Qualified Business Income deduction permanent allowing for a lower tax burden and long-term tax planning for projects.
• The law made permanent 100% bonus depreciation for qualifying property.
• The law increased the Section 179 expensing allowance for equipment and software.
• Allows, on a temporary basis, the immediate expensing of real estate used in production.

All of the above policy changes will help manufacturing businesses nationwide as they consider opportunities for growth and investment across the country. To make Iowa stand out as a preferred location for manufacturing growth and investment, ABI began working with Governor Reynolds and legislators in 2025 soon after the federal law was enacted. The policy goal was to ensure that the federal tax benefits were reflected in Iowa tax law. Efforts were successful and the 2026 legislature allocated over $200 million to make sure Iowa manufacturers received both the federal benefits and matching state tax treatment. This does make Iowa a standout regionally, as efforts to follow or “couple” with the federal tax law were unsuccessful in Illinois and Minnesota and projects in those states will have a higher total tax burden. It is hoped that this pro-growth tax policy will help businesses start, grow, and locate in Iowa and compete globally. ABI