Apportionment of Gross Receipts

Iowa’s franchise tax applies only to income attributable to Iowa activity. The amount of Iowa income is determined through "apportionment." Iowa taxpayers with activity in other states can often reduce their franchise tax by using apportionment.

Iowa apportions financial institution income based on gross receipts from Iowa and non-Iowa sources. For both corporate and franchise tax purposes, Iowa uses only a single apportionment factor for determining net taxable income attributable to this state. The apportionment factor used for Iowa corporate and franchise taxes is based on gross receipts.

Gross receipts commonly received by financial institutions from sources outside of Iowa include:

• Receipts from the lease, rental, sale or other use of real property located outside of Iowa.
• Interest and other receipts from loans (including federal funds sold, banker’s acceptances and loan participations) from non-Iowa borrowers.
• Credit card receipts, including fees and interest, from individual cardholders with an out-of-state residence or from a commercial cardholder domiciled in another state.

Many software systems today make the job of generating reports based upon customer addresses and other criteria relatively simple. This is a good place to start the evaluation of loans currently outstanding that might qualify for out-of-state apportionment.