Iowa lawmakers approve, governor signs into law $1.4B in tax breaks for steel plant
Nearly $1.4 billion in state tax breaks — the most ever to a single project in Iowa — can be awarded to a Minnesota-based, India-owned company that plans to build a $15 billion steel plant in southeast Iowa — the largest in the country, according to company officials — after Gov. Kim Reynolds and state lawmakers on Oct. 2 expanded a state economic development program.
During a special legislative session at the Iowa Capitol — and despite some strong, bipartisan pushback — lawmakers doubled tax incentives in the state’s Major Economic Growth Attraction, or MEGA program, which is designed to entice projects worth more than $1 billion to the state.
Reynolds immediately signed the provision into law Oct. 2, giving the state’s economic development agency the ability to offer a nearly $1.4 billion incentive package to Mesabi Metallics.
When signing the bill, Reynolds called the company’s planned steel plant “the most consequential economic development project ever to come to our state,” and the incentive program expansion “reasonable and limited changes.”
Debi Durham, director of the Iowa Economic Development Authority, testified to lawmakers Oct. 2 that the incentive package would be “the largest investment Iowa’s ever made” and would “set a new economic course for our state.”
Iowa was in competition for Mesabi’s planned steel mill with other states, including Kentucky and Arkansas, Durham said Oct. 2.
Mesabi Metallics President and CEO Joe Broking also spoke to lawmakers Oct. 2 in legislative hearings during the special session.
The legislation expanding the MEGA program, House File 2801, passed the Iowa House by a 75-17 vote and the Senate by a 28-19 vote.
Mesabi Metallics officials announced Monday at the White House that they plan to build a roughly $15 billion steel plant in southeast Iowa. The plant is expected to be located in Lee County. Reynolds on Tuesday called for the special session.
Iowa state lawmakers convene for a special session of the Iowa Legislature to consider nearly $1.4 billion in state tax incentives for a proposed $15 billion steel plant in southeast Iowa at the Iowa Capitol in Des Moines on Friday, Oct. 2, 2026.
What’s in the bill
Under the newly expanded MEGA program, IEDA can provide a 10% tax credit on the planned steel plant’s qualifying investment over 10 years. The total package would equate to nearly $1.4 billion over 10 years, including $1.1 billion in Investment Tax Credits and $215 million in sales tax Withholding Tax Credits, according to an analysis by the nonpartisan Legislative Services Agency.
The program’s previous limit was a 5% tax credit on two projects.
The updated program requires that the tax credits not be awarded until prescribed portions of the project are in service and at least half the qualifying jobs created by the project have been added to the company’s payroll.
It also allows the tax credit to be transferable to another “person or entity,” subject to approval by the Iowa Economic Development Authority. The transfer, under the legislation, could not be made to an entity “associated with a foreign adversary or foreign adversary entity.”
Durham, while speaking to lawmakers during legislative hearings on the proposal Oct. 2, stressed that the state incentive package included no up-front state investment.
“Many states will come in with up-front financing. Ours is strictly performance-based,” Durham said. “We are not asking the state to basically commit anything until these plants are up and operational, and that is the key factor here.
“They have to build the capital of what they contract for. They have to hire the jobs at the wage scale plus full benefits and all of that,” Durham said. “Before they get one tax credit issued to them, it has to be an operational plant. And I think that’s very important to point out here.”
The incentive package would result in lower state tax revenue by $575 million over 10 years, including high marks of $115 million in the 2037 and 2038 state budget years, according to LSA’s projections.
About the plant
According to Broking, the Mesabi CEO, the planned steel plant will take high-grade iron ore pellets, mined from the company’s new, $3 billion facility in Minnesota, and ship them to the new Iowa plant, either via rail or the Mississippi River.
At the Iowa plant, the pellets would be fed into a direct production furnace and then an electric arc furnace to produce steel, Broking said.
Broking said it would be the “largest integrated steel complex in the country.”
“Taking American-made (high purity iron ore) pellets, shipping them to the state of Iowa to produce a high-quality steel product to rebuild supply chains in this country — this will lead to high-paying, family-sustaining jobs, the types of jobs that we desperately need, that industry can provide. And it’s something that we’re very, very proud of.”
Company officials say the plant would create roughly 1,750 new jobs. Durham said Oct. 2 those jobs would pay an average wage of $48 per hour and up to $76 per hour.
While the state program does not require it, Broking said the company will try to hire locally and work with Iowa community colleges and universities to train and develop the workforce the plant would require.
Broking also addressed skepticism that the company will ever actually build the steel plant in Iowa.
“We are completing a $3 billion investment, currently starting up this plant (in Minnesota), and we’ll be delivering the highest-quality (high purity) pellets in the world here in the very near future,” he said. “And we’re committed to making this happen in partnership with all of the stakeholders of this community."
“This is not a traditional steel mill. This is the next generation of advanced manufacturing and advanced industrial process manufacturing,” he added. “It’s something that this country desperately needs, and we’re committed to make it happen again right here in the state of Iowa.”
The day's debate
Throughout the special legislative session, Democrats raised concerns over not having enough time to learn about the project and have their questions answered.
During discussion in the Senate’s Ways and Means Committee on tax policy, Sen. Tom Townsend, D-Dubuque, said he was not opposed to economic development but wanted to make sure he was making an informed decision.
“I guess my concern is with the speed that all this is happening,” Townsend said. “I’m not against economic development per se, and I really don’t want to discard these jobs or anything like that. I’m just concerned about having enough answers to all the questions to make an informed decision.”
Sen. Janet Petersen, D-Des Moines, asked Broking what funding already was committed to the project. Broking said he could not answer with specifics, saying the company was “still developing a capital structure.”
It was not only Democrats who expressed concern with the proposed state tax breaks. Six Senate Republicans voted against the bill — including the chairman of the chamber’s tax policy committee — as did two House Republicans.
“As the Ways and Means chair of this chamber, I, in good conscience, cannot support giving any single corporation and their financiers $1.2 billion in refundable and transferable tax credits to what simply amounts to the largest giveaway, the largest corporate giveaway in the state of Iowa’s history,” Sen. Dan Dawson. R-Council Bluffs, said during a passionate speech on the Senate floor. “I choose conservatism, not corporatism. …
“From a precedent standpoint, I don't care about legacy. I care about precedents for this chamber,” Dawson said. “From a precedent standpoint, I cannot endorse a process where a company goes outside of IEDA and negotiates a deal directly with the gubernatorial, with the executive branch, for a 10% transferable refundable tax credit as the baseline going forward for every other future site selector that comes to state line. Because the ceiling now becomes a floor.”
Democrats also prodded Republicans on a statement made by U.S. Commerce Secretary Howard Lutnick that the planned steel plant was “a done deal” and did not require any state tax incentives.
“No, I think this deal’s done. This deal is done. They’ve already worked it out,” Lutnick said during Monday’s announcement in the Oval Office. “That’s why we’re all together with the president. The president doesn’t bring people together unless it’s a done deal.”
“I was surprised by that comment as well,” Durham said when asked by Senate Democrats about Lutnick’s comment. “This is not a done deal, I don’t know why that was said.”
In the House, Rep. Blaine Watkins, R-Lee Count, said the proposed steel mill would create a great opportunity for southeast Iowa.
“I am thrilled to stand here today and vote ‘yes’ on this bill. Proud to vote ‘yes’ for a historic investment in Iowa, an investment that will bring high-paying jobs to the southeast part of the state, revitalizing my home in Lee County and creating new opportunities for my community,” Watkins said. “This project will bring great jobs, attract young families, and it’s about time young people start to call Lee County home.”
Rep. Dave Jacoby, the top Democrat on the House Ways and Means Committee, from Coralville, cautioned that the project was not yet official but also said he hoped it came to fruition because it was needed to help boost Iowa’s economy.
“I hope this plan is real. Not that I don’t trust promises from the White House,” Jacoby said. “It’s with this hope that today I’m going to vote ‘yes’ on this bill. But I have a commitment to fiscal responsibility. I think it’s our duty to audit — audit every step of the way, audit every step in the progress if this were to move forward.”
Republican leaders react
Iowa House Speaker Pat Grassley, a Republican from New Hartford, pointed to the bill’s bipartisan support and said he believes the planned steel mill could create “transformational change for the State of Iowa.”
“We need to have growth in all parts of the state. We really believe that the bill that we passed today puts us in a position where we can start seeing that kind of growth in southeast Iowa,” Grassley told reporters after the special session.
At the bill-signing ceremony, Iowa Senate Majority Leader Mike Klimesh, a Republican from Spillville, said the planned steel plant will be “a magnet for wraparound industries, jobs, investment, and growth.”
“Today is result of a decade of pro-growth policies delivering the largest private investment in Iowa history,” Klimesh said.
