Iowa general fund receipts down $460 million through Feb. 3; PTET decline drives steep drop

Eric Richardson, senior fiscal analyst with the Iowa Legislative Services Agency, said Friday that Iowa’s net general fund receipts fell $460,000,000, or 8.6 percent, through Feb. 3, 2025, compared with the same period a year earlier.

Richardson said the decline was driven mainly by a $453,000,000, or 71.4 percent, drop in “other taxes” tied to a reduction in pass-through entity tax (PTET) receipts and continuing PTET tax credit claims. "Through February 3, net general fund receipts show a growth of negative $460 million and minus 8.6%," Richardson said.

The drop in PTET receipts and credit processing has also affected the composition of revenue lines, Richardson said. When PTET tax credit claims are processed, the Iowa Department of Revenue reallocates PTET amounts from the "other taxes" line to the individual income tax line, temporarily boosting individual income tax collections in some periods.

Breaking the figures down, Richardson reported that through Feb. 3 individual income tax collections were up 6.0 percent year over year, sales and use tax collections were down 1.6 percent, and corporate income tax collections were down 21.2 percent. Gross receipts through Feb. 3 were down 5.3 percent, while regular refunds increased 37.6 percent, he said.

School infrastructure transfers rose 0.5 percent through the same date, Richardson added. He said overall net revenue growth through Feb. 3 was $261,000,000 lower than the growth calculation reported through Jan. 3. He attributed most of that change to a roughly $130,000,000 decrease in other taxes (PTET-related) and a $61,000,000 decrease in individual income tax during the later period.

Richardson also noted that recently enacted tax-rate reductions are expected to weigh on net revenue as the fiscal year continues. "Previously enacted tax rate reductions to the franchise tax, individual income tax, inheritance tax, and insurance premium tax are expected to weigh on net revenue growth as fiscal year 2025 continues," he said. He added that stronger national economic growth—including a recently reported 2.3 percent U.S. GDP increase in the fourth quarter of 2024—could buoy state revenue later in the fiscal year.

Richardson closed the January video memo by noting the timing of key tax payments: Jan. 31 is a major tax due date for withholding and estimated payments and a set of monthly and annual sales and use tax filings, and that accounting procedures delayed some processing until Feb. 3 for this update. He said the Iowa Legislative Services Agency will publish the next monthly video memo in early March.