The Des Moines City Council has been busy. Throughout 2025, they passed multiple initiatives affecting small businesses—tax incentives, development programs, infrastructure investments, and regulatory changes that directly impact your bottom line.

And your accountant probably hasn't mentioned any of it.

Most Des Moines contractors are so focused on federal and state taxes that they completely ignore local incentives worth thousands of dollars annually. They miss property tax abatements, facade improvement grants, workforce development credits, and TIF (Tax Increment Financing) opportunities that could significantly reduce their tax burden.

Here's the uncomfortable truth: While you were bidding jobs and managing crews, the City Council created programs that could save you $5,000-$25,000—but only if you know they exist and meet application deadlines.

This article breaks down every major 2025 Des Moines City Council initiative affecting contractors and small businesses, explains the tax implications, and shows you exactly how to capture these benefits before your competitors do.

Understanding Des Moines' Economic Development Priorities

The City Council's 2025 initiatives focused on three main priorities:

Priority #1: Downtown and Urban Core Revitalization
Incentivizing development and business expansion in downtown, East Village, Western Gateway, and River Bend areas.

Priority #2: Neighborhood Commercial Corridors
Supporting small businesses along Martin Luther King Jr. Parkway, Ingersoll Avenue, East 14th Street, and other neighborhood commercial districts.

Priority #3: Workforce Development and Job Creation
Programs targeting businesses that create quality jobs and invest in workforce training.

Why contractors should care: These priorities translate into cash—property tax abatements, grants, low-interest loans, and infrastructure improvements that reduce your business costs or create new project opportunities.

City Council Initiative #1: Expanded Property Tax Abatement Program

Passed: March 2025
Effective: Projects starting after July 1, 2025

What Changed

The City Council expanded Des Moines' property tax abatement program to include:

• Commercial renovations ($50,000+ investment)
• New construction in designated areas
• Building facade improvements
• Energy efficiency upgrades
• ADA compliance improvements

Previous rules: Only new construction or major renovations over $250,000 qualified

New rules: Projects as small as $50,000 qualify for partial abatements

How Property Tax Abatement Works

Basic Structure:When you improve commercial property in Des Moines, your property tax increases based on the increased assessed value. An abatement exempts you from paying taxes on that increase for a specified period.

Example:
Commercial property current value: $400,000
Annual property tax: $12,000
You invest $150,000 in renovations
New assessed value: $550,000
New annual tax without abatement: $16,500
Annual increase: $4,500

With 5-year abatement:

• Years 1-5: Pay original $12,000 (save $4,500/year)
• Year 6+: Pay full $16,500
• Total 5-year savings: $22,500

Qualifying Projects and Abatement Schedules

Tier 1: Major Projects ($250,000+)

• New construction or substantial renovation
• Abatement: Up to 100% for 5-10 years
• Downtown/targeted areas: Up to 10 years
• Other areas: Up to 5 years

Tier 2: Medium Projects ($100,000-$249,999)

• Building improvements, additions, renovations
• Abatement: Up to 75% for 3-5 years

Tier 3: Small Projects ($50,000-$99,999)

• Facade improvements, energy upgrades, accessibility
• Abatement: Up to 50% for 2-3 years

The Contractor Opportunity

If you own your commercial building:
Plan improvements to qualify for abatement and reduce future property taxes.

If you're a contractor doing work for building owners:
Educate your clients about abatements. This becomes a selling point that helps win bids.

Real Example:

West Des Moines remodeling contractor pitched downtown building owner on $180,000 renovation project.

Owner's objection: "The increased property taxes will eat up any rental income increase."

Contractor's response: "The City offers property tax abatement. Your taxes stay the same for 5 years while you collect higher rent."

Result: Project approved. Contractor won bid. Owner saved $18,000 in property taxes over 5 years.

How to Apply

Application Process:

1. Pre-Application Consultation:
   Meet with Des Moines Economic Development staff before starting project
2. Submit Application:
   Detailed project description, budget, timeline, economic impact analysis
3. City Council Approval:
   Projects over $100,000 require City Council approval (public hearing)
4. Execute Agreement:
   Sign development agreement outlining obligations and abatement terms
5. Complete Project:
   Must complete within agreed timeline (typically 12-24 months)
6. Submit Certification:
   Prove project completed as proposed, submit actual costs
7. Receive Abatement:
   Assessor applies abatement to future tax bills

Timeline: 60-90 days from application to approval for straightforward projects

Cost: No application fee for projects under $500,000

Learn about tax incentive strategies.

The Tax Reporting Requirement

Property tax abatements are NOT taxable income at federal or state level.

However, you must:

• Track abatement amounts received
• Maintain project documentation
• Report if you sell property during abatement period (recapture provisions may apply)

Recapture Rules:

If you sell the property or change use before abatement expires:

• Partial recapture of benefits
• Proportional to time remaining

Example:
5-year abatement, annual savings $4,000
Sell after year 3
Recapture: $8,000 (2 remaining years × $4,000)
Due at closing

Planning tip: Structure sale to occur after abatement expires, or negotiate recapture into sale price.

City Council Initiative #2: Small Business Facade Improvement Grants

Passed: May 2025
Effective: Applications accepted September 2025

Program Details

Grant Amount:
Up to $15,000 (50% of project cost, max grant $15,000)

Eligible Improvements:

• Exterior painting
• Signage replacement/upgrades
• Window/door replacement
• Awning installation or replacement
• Exterior lighting
• Masonry repair/tuckpointing
• Roof repair/replacement (visible from street)

Eligible Properties:

• Commercial properties in designated corridors
• Must be visible from public right-of-way
• Must be currently occupied business or bringing in new tenant

Eligible Areas:

• East Village
• Ingersoll Avenue
• Martin Luther King Jr. Parkway
• East 14th Street
• Drake neighborhood commercial
• Beaverdale commercial
• Highland Park commercial

How to Maximize This Grant

Strategy #1: Bundle with Other Improvements

Property needs $40,000 in exterior improvements.

Without grant:
$40,000 out-of-pocket
Tax savings: $14,400 (36% deduction)
Net cost: $25,600

With grant:
$30,000 eligible improvements (facade work)
Grant: $15,000
Out-of-pocket: $15,000
Tax savings: $5,400 (36% of $15,000)
Net cost: $9,600

Additional: Complete $10,000 in interior work (ineligible for grant but deductible)

Total renovation: $40,000
Total out-of-pocket after grant and tax savings: $19,200
Effective discount: 52%

Strategy #2: Time with Property Tax Abatement

Apply for BOTH facade grant AND property tax abatement.

Example:
$80,000 building renovation project

• $30,000 facade work (apply for grant)
• $50,000 interior work

Benefits:

• Facade grant: $15,000
• Property tax abatement: Save $3,200/year for 3 years
• Federal tax deduction: $23,400 (on $65,000 after grant)

Total 3-year benefit: $38,400 on $80,000 project
Effective cost: $41,600

The Tax Treatment of Grants

Facade improvement grants ARE taxable income at federal and state level.

Example:
$15,000 grant received

Tax impact:

• Federal tax (24% bracket): $3,600
• Iowa tax (8.53%): $1,280
• Total tax: $4,880

But: The $30,000 improvement is deductible (depreciated over 39 years for building improvements or Section 179 for equipment like signage).

Net Economic Analysis:

Grant received: $15,000
Tax on grant: -$4,880
Tax savings on improvements: +$10,800 (36% of $30,000 depreciated over time)
Net benefit: $20,920 (over life of asset)

The accounting: Your CPA must report the grant as income in the year received, then depreciate the improvement costs over appropriate recovery period.

Get help with grant accounting.

Application Process

Step 1: Pre-Application (Required)

• Meet with Neighborhood Development staff
• Discuss project feasibility
• Get preliminary approval

Step 2: Formal Application

• Submit detailed project plan
• Provide contractor bids (minimum 2 required)
• Include photos, renderings if applicable

Step 3: Review (30-45 days)

• Staff reviews for compliance
• May request additional information

Step 4: Approval

• Receive grant agreement
• Sign and return

Step 5: Complete Project

• Must complete within 6 months of approval
• Cannot start work before approval

Step 6: Reimbursement

• Submit completion photos
• Provide paid invoices and lien waivers
• Receive grant payment (typically 30 days)

Critical: This is a reimbursement grant. You pay contractors first, then get reimbursed. Plan cash flow accordingly.

City Council Initiative #3: Workforce Housing Tax Credit Program

Passed: June 2025
Effective: January 1, 2026

What It Is

Des Moines partnered with the state to provide state tax credits for businesses that invest in workforce housing development.

Goal: Encourage construction of affordable housing for workers earning 60-120% of area median income.

Tax Credit: 10% of qualifying investment, up to $50,000 per project

Why Contractors Should Care

If you're a residential contractor/builder:
You can claim the credit for projects you develop (not just build for others).

If you're a commercial contractor:
Some mixed-use projects qualify if they include workforce housing component.

Qualifying Projects

Requirements:

• New construction or substantial renovation ($50,000+ per unit)
• Located in Des Moines city limits
• At least 25% of units reserved for workforce income levels
• 10-year compliance period

Workforce Income Levels (2025 Des Moines MSA):

• 60% AMI: $45,600 (individual), $65,160 (family of 4)
• 80% AMI: $60,800 (individual), $86,880 (family of 4)
• 100% AMI: $76,000 (individual), $108,600 (family of 4)
• 120% AMI: $91,200 (individual), $130,320 (family of 4)

Project Types:

• Multi-family rental (4+ units)
• Townhome developments
• Single-family homes sold to qualifying buyers
• Mixed-use with residential component

The Tax Credit Value

Example Project:

8-unit apartment building
Total development cost: $1,600,000
Cost per unit: $200,000
Workforce housing units: 4 (50%)

Tax Credit Calculation:

• Qualifying investment: $800,000 (4 units × $200,000)
• Tax credit: $80,000 (10% of $800,000)
• Maximum allowed: $50,000

Tax credit received: $50,000

How credits work:

• Applied against Iowa income tax liability
• Can carry forward 10 years if credits exceed tax owed
• Can be transferred/sold to other Iowa taxpayers

The Business Model Opportunity

Contractor as Developer:

Johnston general contractor identified opportunity: Build workforce housing, capture tax credits, hold as rental property.

Project:

• 12-unit building, Des Moines
• Total cost: $2,400,000
• 6 units workforce housing (50%)
• Tax credit: $50,000 (maximum)

Financing:

• Construction loan: $1,800,000
• Personal investment: $600,000

First Year:

• Rental income: $180,000
• Operating expenses: $75,000
• Mortgage payment: $108,000
• Cash flow: -$3,000 (breakeven)

Tax Benefits:

• Depreciation deduction: $61,538 (building only, not land)
• Tax savings: $22,154 (36% bracket)
• Tax credit: $50,000
• Total tax benefit: $72,154

Net first-year outcome: +$69,154 (cash flow + tax benefits)

Plus: Real estate appreciation and mortgage paydown build long-term wealth.

The strategy: Contractors with development skills can use these tax credits to build rental portfolios while creating needed workforce housing.

Application Process

Step 1: Project Pre-Certification

• Submit project plan to Des Moines Housing Services
• Get preliminary determination of eligibility

Step 2: Complete Development

• Obtain necessary permits
• Complete construction
• Pass inspections

Step 3: Submit Final Application

• Prove compliance with workforce housing requirements
• Submit actual project costs
• Provide tenant income certifications (for rentals)

Step 4: Receive Credit Allocation

• State issues tax credit certificate
• Use on Iowa tax return or sell to other taxpayer

Timeline: 90-120 days from project completion to credit issuance

Explore real estate investment strategies.

City Council Initiative #4: Accelerated Permitting for Small Businesses

Passed: August 2025
Effective: October 1, 2025

What Changed

Des Moines created expedited permitting track for qualifying small business projects.

Standard Permitting Timeline:

• Building permit review: 15-20 business days
• Site plan review: 30-45 business days
• Occupancy permit: 10-15 business days after completion

Expedited Track Timeline:

• Building permit review: 5-7 business days
• Site plan review: 10-15 business days
• Occupancy permit: 3-5 business days

Savings: 3-4 weeks faster project completion

The Financial Impact

Time is money in construction:

Project: $150,000 commercial renovation
Standard timeline: 14 weeks
Expedited timeline: 11 weeks
Time saved: 3 weeks

Cost savings:

• Contractor overhead: 3 weeks × $2,000/week = $6,000
• Delayed rent/revenue for tenant: 3 weeks × $3,000/week = $9,000
• Financing costs: 3 weeks interest savings = $650
• Total value: $15,650

Expedited permit fee: $500

Net benefit: $15,150 (3,000% ROI on expedited fee)

Qualifying Projects

Eligible for expedited review:

• Interior tenant improvements under $250,000
• Exterior renovations under $150,000
• New construction under 5,000 sq ft
• Change of occupancy for existing businesses

Not eligible:

• Projects requiring zoning variances
• Historic buildings (additional review required)
• Projects in floodplain or environmentally sensitive areas

How to Access Expedited Track

Step 1: Pre-Application Meeting
Schedule with Development Services Department to confirm eligibility

Step 2: Submit Complete Application
All required documents, drawings, specifications at initial submission (incomplete applications revert to standard track)

Step 3: Pay Expedited Fee
$500 flat fee for expedited review

Step 4: Respond Quickly to Comments
Any requested revisions must be submitted within 48 hours (or revert to standard track)

The lesson: Expedited track requires upfront preparation. Plans must be thorough and complete. But for projects where time matters, the ROI is enormous.

The Contractor Advantage

Use expedited permitting as competitive advantage:

"We can complete your project 3-4 weeks faster using the City's expedited permitting program. That means you're open and generating revenue a month earlier."

For retail/restaurant clients, this is huge:

Opening 3 weeks earlier:

• Captures additional holiday season sales
• Avoids winter weather delays
• Reduces financing costs
• Improves cash flow

Market this advantage to win bids.

City Council Initiative #5: Infrastructure Investment in Commercial Corridors

Passed: September 2025
Funding: $12 million allocated

What's Happening

City Council approved infrastructure investments in:

• Martin Luther King Jr. Parkway (street reconstruction, utilities)
• East 14th Street (water main replacement, street improvements)
• Merle Hay Road corridor (streetscaping, pedestrian improvements)
• University Avenue commercial district (utility upgrades)

Construction Timeline

2026-2027: Phased construction across all corridors

For contractors: These are project opportunities. Monitor bid opportunities through Des Moines Public Works.

For business owners in these corridors: Infrastructure improvements increase property values and customer accessibility.

The Tax Implications

Special Assessments:

When the City improves infrastructure, adjacent property owners may receive special assessments to pay for improvements.

Example:
Street reconstruction in front of your commercial property
Special assessment: $18,000
Payment options: Lump sum or 10-year financing at 4%

Tax Treatment:

Special assessments are NOT deductible as ordinary business expense. Instead:

• Add to property basis
• Depreciate over 39 years (nonresidential property)
• Recover through increased depreciation deductions

Annual deduction: $18,000 ÷ 39 years = $462/year

vs. If it were deductible: $18,000 × 36% = $6,480 immediate tax savings

The planning: Factor special assessments into property acquisition and hold period decisions.

The Property Value Increase

Good news: Infrastructure improvements typically increase property values 10-25%.

Example:

Property value before improvements: $400,000
Special assessment: $18,000
Property value after improvements: $480,000

Your investment: $18,000
Property value increase: $80,000
ROI: 344%

Plus: Improved street, parking, utilities make property more attractive to tenants/buyers.

City Council Initiative #6: Commercial Corridor Beautification Matching Grants

Passed: October 2025
Effective: Applications accepted January 2026

Program Details

Grant Amount: Up to $5,000 (50% match)

Eligible Improvements:

• Landscaping
• Outdoor seating
• Bike racks
• Exterior lighting
• Decorative fencing
• Sidewalk cafes
• Public art

Eligible Businesses:

• Located on designated commercial corridors
• Street-facing improvements visible to public
• Permanent improvements (not seasonal/temporary)

The Tax Treatment

Matching grants are taxable income but improvements are deductible.

Example:

Landscaping project: $10,000
Grant received: $5,000
Your cost: $5,000

Tax impact:

• Taxable income from grant: $5,000
• Tax on grant (36% bracket): $1,800
• Deduction for landscaping: $10,000 (depreciated over 15 years)
• Annual deduction: $667
• Annual tax savings: $240

First year net:
Grant: +$5,000
Tax on grant: -$1,800
Tax savings on deduction: +$240
Net benefit first year: $3,440

Over 15 years: Total tax savings from depreciation = $3,600
Total net benefit: $6,800 on $10,000 project (68% effective discount)

The Business Impact

Improved curb appeal drives revenue:

Des Moines restaurant invested $8,000 in exterior improvements (landscaping, lighting, outdoor seating).

Revenue impact:

• Increased outdoor seating capacity: +16 seats
• Average check: $45
• Average table turnover: 2 per evening
• Additional revenue: 16 seats × 2 turns × $45 × 180 days = $259,200 annually

ROI: 3,240% on $8,000 investment

Even with conservative assumptions (25% of theoretical capacity), additional revenue = $64,800 annually

The lesson: Beautification grants aren't charity. They're business investments with measurable ROI.

City Council Initiative #7: Small Business Energy Efficiency Rebate Program

Passed: November 2025 (Partnership with MidAmerican Energy)
Effective: Applications accepted January 2026

Program Details

Rebates for:

• LED lighting retrofits: Up to $0.50 per watt reduced
• HVAC upgrades: Up to $500 per ton
• Insulation improvements: Up to $1.50 per sq ft
• Smart thermostats: Up to $200 per unit
• High-efficiency windows: Up to $100 per window

Maximum rebate: $25,000 per property per year

The Multi-Layered Tax Benefits

Energy improvements create three tax benefits:

Benefit #1: Utility Rebates (Not Taxable)
MidAmerican rebates are not taxable income (reduces basis in property)

Benefit #2: Section 179D Deduction
Commercial buildings can claim immediate deduction for energy-efficient improvements (up to $5.65/sq ft in 2025)

Benefit #3: Regular Depreciation
Remaining costs depreciated over 39 years

Real Example

Clive warehouse owner (15,000 sq ft):

Energy Efficiency Project:

• LED lighting throughout: $45,000
• HVAC upgrade: $65,000
• Insulation improvements: $28,000
• Total: $138,000

Rebates Received:

• LED rebate: $15,000
• HVAC rebate: $8,000
• Insulation rebate: $12,000
• Total rebates: $35,000

Net cost: $103,000

Section 179D Deduction:Building qualifies for $3.50/sq ft deduction
15,000 sq ft × $3.50 = $52,500 immediate deduction

Tax Benefits:

• Section 179D deduction: $52,500 × 36% = $18,900 tax savings
• Remaining $50,500 depreciated over 39 years

First-year outcome:

• Project cost: $138,000
• Rebates: -$35,000
• Tax savings: -$18,900
• Net first-year cost: $84,100

Energy savings: $18,000/year (reduced utility bills)

Payback period: 4.7 years
Then: Pure profit from energy savings ($18,000/year) for 20+ years

Application Process

Step 1: Energy Audit
Schedule free audit with MidAmerican Energy (identifies opportunities)

Step 2: Get Pre-Approval
Submit planned improvements, receive rebate pre-approval

Step 3: Complete Project
Hire licensed contractors, complete work

Step 4: Submit Documentation
Provide invoices, photos, product specifications

Step 5: Receive Rebates
Typically 4-6 weeks after approval

Important: Must receive pre-approval before starting work. No retroactive rebates.

Get energy efficiency tax planning.

How to Track and Maximize All These Programs

Most contractors and business owners get overwhelmed by the number of programs, deadlines, and requirements.

The solution: Systematic tracking and strategic planning.

The Performance Financial Approach

January: Annual Planning Session

• Review all available incentive programs
• Identify opportunities applicable to your business
• Create application timeline
• Budget for required match/investment

Quarterly: Progress Review

• Track application deadlines
• Monitor project completion timelines
• Ensure compliance with program requirements
• Adjust strategy based on business performance

Year-End: Benefit Maximization

• Accelerate projects to capture expiring incentives
• Coordinate timing of income recognition (grants/rebates)
• Ensure proper tax reporting
• Plan for next year's opportunities

Tax Return Preparation:

• Report all incentives correctly
• Maximize deductions and credits
• Properly calculate basis adjustments
• Support with bulletproof documentation

The Integrated Strategy

Example: Des Moines Contractor Expansion

Goal: Expand into larger facility

Available Incentives:

• Property tax abatement: Save $22,000 over 5 years
• Facade grant: $15,000
• Energy efficiency rebates: $18,000
• Workforce housing tax credit: $50,000 (if including residential)
• Expedited permitting: Save 4 weeks time

Strategy:

1. Identify property in eligible corridor
2. Apply for property tax abatement before purchase
3. Design improvements to qualify for facade grant
4. Include energy-efficient systems for rebates
5. Consider mixed-use with workforce housing component
6. Use expedited permitting for faster completion

Total project cost: $650,000
Incentives captured: $105,000
Tax benefits: $89,000 (depreciation, credits, etc.)
Net cost: $456,000

Effective discount: 30% through strategic use of available programs

vs. Contractor who doesn't use incentives:
Net cost: $650,000 - $89,000 tax benefits = $561,000

Difference: $105,000 in wealth preserved by knowing and using available programs

Take Action in Q1 2026

Most of these programs have January 2026 application dates. That means you need to be preparing NOW.

By March 31, 2026:

✅ Review your business facility needs for 2026-2027
✅ Identify which City Council incentive programs apply
✅ Schedule pre-application consultations
✅ Prepare required documentation
✅ Model financial impact of each opportunity
✅ Submit applications for Q1 consideration

The contractors who win these incentives:

• Plan ahead (not last-minute)
• Prepare complete applications
• Coordinate multiple programs strategically
• Maintain proper documentation
• Report benefits correctly on tax returns

The contractors who miss out:

• Don't know programs exist
• Miss application deadlines
• Submit incomplete applications
• Don't coordinate with tax planning
• Leave money on the table

Schedule your Des Moines incentive planning session.

The Performance Financial Advantage

We specialize in helping Des Moines area contractors navigate local, state, and federal tax incentive programs.

Our services include:

Incentive Identification:
We monitor City Council actions, identify new programs, and alert clients to opportunities

Application Support:
We help prepare applications, financial projections, and compliance documentation

Tax Integration:
We ensure incentives are reported correctly and tax benefits are maximized

Ongoing Compliance:
We track requirements, deadlines, and reporting obligations so you stay compliant

Strategic Planning:
We coordinate multiple incentives to maximize total benefit

Our Des Moines CPA firm serves contractors throughout the metro including West Des Moines, Ankeny, Johnston, Clive, Grimes, and surrounding areas.

Learn from successful businesses like Des Moines Commercial Builders, Capital City Contractors, Midwest Property Solutions, Metro Renovation Pros, and Greater Des Moines Construction who leverage City incentive programs for significant savings.

Don't let your competitors capture incentives while you pay full price.

Schedule your incentive planning consultation today →

Meta Title: Des Moines City Council Small Business Tax Incentives 2025 | Contractors Guide

Meta Description: Des Moines contractors: City Council passed $100K+ in available incentives. Property tax abatements, facade grants, workforce credits. Application guide. CPA experts.

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