Iowa lawmakers approve bill allowing $1.4B in tax incentives for steel mill project

Iowa lawmakers sent Gov. Kim Reynolds a bill Friday changing a state’s economic development program that could provide nearly $1.4 billion in tax incentives for a $15 billion steel mill project planned in southeast Iowa.

Lawmakers called it the largest economic development deal in the state’s history.

The Iowa House approved House File 2801 in a 75-17 vote, and the Senate approved the bill in a 28-19 vote after convening a special session Friday morning for the sole purpose of considering the legislation. The proposal would modify the state’s Major Economic Growth Attraction (MEGA) program to include further incentives for businesses within rural areas, a targeted change to benefit the Mesabi Metallics project planned in Lee County.

At a news conference Monday, President Donald Trump announced the steel plant was a $15 billion project. When operational — with a goal of 2030 — the steel mill is estimated to create 1,750 permanent jobs paying an average of $48 per hour, alongside 6,000 temporary construction jobs as the facility is built, state and business officials said.

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Rep. Matt Rinker, R-Burlington, said the project would be a major victory for southeast Iowa and was the culmination of years of work from local, state and federal officials alongside Mesabi Metallics.

During his time at the Burlington City Council and as a state legislator, Rinker said he has thousands of conversations with members of his community about what was needed to bring success to the area. He told the House, “I’m proud to say that what everyone has been asking for has finally arrived.”

“Our vote today isn’t just about a change to something that already exists, or just about incentives for a steel plant, or just about bringing a new industry to Iowa,” Rinker said. “It’s about mortgage payments, grocery bills, dance lessons. It’s about infrastructure and public safety. It’s about opportunities for Iowans and growing our communities while also supporting them at the same time. It’s about thousands of new homes. It’s about the revitalization of a region of our state that has experienced its fair share of tough times.”

Sen. Dan Dawson, R-Council Bluffs, who voted against the bill, called it the “largest corporate giveaway in the state of Iowa’s history.”

He also warned the change to the tax incentive program for Mesabi Metallics would influence any future negotiations between the state and companies considering bringing their facilities to Iowa, “because the ceiling now becomes the floor.”

“Incentives are supposed to make a good deal better, not a bad deal good,” Dawson said. “So to all my colleagues, I know you’ve been put in a difficult position. And you’ve been put into position by people and entities who, frankly, do not care. If they did, you wouldn’t be jammed with this bill in front of you today.”

The bill would allow the Iowa Economic Development Authority to authorize a tax credit for a business up to 10% of the business’ qualifying investment in a rural county — an increase from the 5% tax credit currently allowed under the MEGA program for projects representing $1 billion or more in capital investment.

According to analysis from the nonpartisan Legislative Services Agency, the net impact of changes to the MEGA program’s Investment Tax Credit made by the bill would result in estimated revenue decreases to the state’s general fund of $575 million from fiscal year 2029 through 2041 — on top of the $575 million that would come under the current MEGA program structure. The MEGA program’s sales and use tax refunds and withholding tax credits are not changed by the legislation, but under the current program, Mesabi Metallics would be eligible to claim $215 million in tax incentives from FY 2028 through 2041.

IEDA Director Debi Durham said this investment will provide greater benefits for Iowa through later revenue to the state, as well as an expansion of jobs and economic value to the region.

“The state’s portion on the deal that is before you today (is) a 1 to 5.6% return,” Durham said. “So that means for every dollar that we invest as a state, that we get that return back. And when you think of manufacturing, it is the largest part of our gross state product — there is a multiplier of jobs attached to manufacturing, anywhere from three to five jobs will follow. When you happen to talk about a (project) as complicated as this, and as many investments, the investment being made, it is a 5-to-1 job ratio as well, meaning, for every job that they hire, there’s a follow-on job that will occur in our economy.”

Rep. Carter Nordman, R-Adel, floor manager for the bill in the House, said the change is not an increased tax incentive for the MEGA program — created with wide bipartisan support in 2024 — but a way to combine the two 5% MEGA program investment tax credits that IEDA can currently offer. The IEDA has not previously awarded any MEGA program tax incentives.

“The reality is we are not reinventing the wheel here,” Nordman said. “All we are doing is modernizing and combining two existing incentive programs into one, so Iowa is not on the sidelines, but actively competing on the national and global level for large projects. When creating those incentives of packages a couple years ago … this body could never have imagined the possibility of a $15 billion investment landing here.”

Dawson said this was a fundamental misunderstanding of the original intent of MEGA program — a measure Dawson said he helped negotiate when it was approved in 2024.

“To be clear, the intent was never 5% plus 5% equals 10%,” Dawson said. “And that the intent was never that we throw the entire farm into one basket, and it could be a ‘one and done’ proposition. We wanted to see this spread throughout Iowa.”

Durham told lawmakers increasing the tax credit to 10% was necessary for Iowa to bring the steel plant to Iowa.

“We basically do have to be competitive in the marketplace,” Durham said. “So, we look at deals all across the country with this type of industry, and I will say 10% is is a national average of what these businesses are getting.”

Supporters say MEGA program change needed to compete against other states for steel mill

The IEDA director said the states of Arkansas and Kentucky were also competing for the steel mill project, with Arkansas being “our biggest competitor.”

Dawson said Senate Republicans were told Arkansas lawmakers were expected to call their own special session to create an offer providing “cash up front” to the company by modify their state’s recycling tax credit and funding the tax credit change by borrowing against the Arkansas teacher pension fund. He said officials who knew about the Arkansas proposal told him Arkansas officials walked away from these negotiations, “because the companies seemed to lack equity and could never locate where the equity would come from and the paperwork that they provided to the state.”

“While I respect Governor Reynolds’ deep desire to bring a MEGA site to the state of Iowa before her term ends, because she wasn’t willing to walk away from this deal, it’s my belief she negotiated against herself. Because Arkansas, I do not believe, was ever actually at the table seriously. And by negotiating against herself, she negotiated against the Iowa taxpayer.”

Durham also emphasized the bill is written to ensure the state will not provide tax incentives to the Mesabi Metallics if the project is not completed. The measures states the tax credit will not be issued to a business until the business begins operations, or until “a designated portion of the project” has been placed in service, and until at least half of created jobs — which must meet a qualifying wage threshold — associated with the project or a designated portion have been added to the payroll. The legislation also states the 10% tax credit will be remitted over the course of a decade.

Some Democrats had questions about portions of the bill which allow the tax credit to be transferred to another person or entity. During the House subcommittee meeting on the bill, Jacoby shared concerns from a constituent that the state would not be able to claw back tax credits “against the buyer if the project goes wrong” — a statement Durham said was incorrect.

“We will have not only oversight into the transferability, we will have approvals over the transferability, and so that is not correct,” Durham said. “We will be fully protected even with the transferability.”

Opponents express concerns about Mesabi Metallics past

Iowa GOP leaders have praised the planned steel mill, with Reynolds saying, “this opportunity will fundamentally change the economic trajectory of our state and the entire region for decades to come.” But others are cautious about the project, saying there are concerns about Mesabi Metallics’ commitment to finishing and opening the plant given the company’s history as it also seeks to open an iron ore mine in Nashwauk, a city in the Minnesota Iron Range.

The mine has not yet officially started operation. The project began in 2008, under the India-based Essar Group’s company Essar Steel Minnesota, the Des Moines Register reported. The Essar Group was founded by brothers Sashi and Ravi Ruia, and expanded to include the Minnesota company as well as a Essar Steel Algoma in Canada.

Essar Steel Minnesota filed for bankruptcy protection in 2016, blocking the Minnesota governor’s attempt to revoke its mineral lease. Investors took control of the company and rebranded it as Mesabi Metallics in 2017 and came out from bankruptcy protection, before Essar Group took over the project again in 2019 under its new name.

Marshall Singer, a local activist from Des Moines, shared these details about Essar Group during subcommittee meetings on the proposal. Singer also highlighted Essar Group and associated companies had received loans from a VTB, a Russian state owned-bank, according to the Guardian. VTB has been sanctioned by the European Union and other countries following the start of the Russia-Ukraine war in 2022.

“Iowa’s economic incentive law bars the state with providing tax credits and refunds to a business tied to a foreign adversary,” Singer said. He also added, “This will cost every taxpayer $866, and this is irresponsible when we are running a $1.4 billion dollar deficit.”

Joe Broking, president and chief executive officer of Mesabi Metallics, addressed some of the comments by Singer about the Minnesota project and Essar Group. He said “there was a global commodity price collapse that happened in 2015, and there were hundreds of companies globally that went through restructurings,” not just Essar Steel Minnesota.

He also said the delays of the mine construction were in part due to “certain activities by a competitor to try and stop development on the Iron Range.” Broking’s comments referenced allegations that fellow steel company Cleveland-Cliffs committed antitrust violations. Mesabi Metallics sued the company for in 2025 in a pending case.

Additionally, Broking said Mesabi Metallics has “completely rebuilt all of those relationships” with Minnesota public officials, including Gov. Tim Walz, state legislators and the Minnesota Department of Natural Resources. He also added Mesabi Metallics has “invested close to $3 billion to complete this project, and we’re about to start it now.”

“And Essar Group and the Ruia family have been a fantastic partner, an absolutely wonderful partner,” Broking said. “They’ve met that commitment the entire time. They’ve invested $2 billion of their family money to complete this project, and like I said earlier, we are on the precipice of doing this.”

Answering questions from Sen. Tony Bisignano, D-Des Moines, Durham said she believed the company would be able to complete the Iowa project. Durham said based on the company’s “capital stack,” financing from the Export–Import Bank of the United States and what it has been able to accomplish in Minnesota after “missteps,” she felt confident supporting the project.

“When you see where they are today, and when you see what their business plan is, and when you see the people that are coming in and supporting them, I absolutely have no hesitation to say that they will (do) what they say,” Durham said. “And if they don’t, then we’re going to hold them accountable. But I believe that this project is a good project for the state of Iowa, and I do believe that they have the ability to pull it off.”

But several lawmakers said they were not as confident as Durham in the project’s viability. Bisignano criticized how Republican leaders and the company brought about the legislation, saying it was concerning that many state legislators did not know about the proposal — or the steel mill project in general — a week before the special session. As Trump and many state leaders have touted the project as the “biggest thing to come to state of Iowa,” Bisignano said there should be more time for legislators and the public to review the project and MEGA program changes.

“This should be one of those occasions where — if this is the biggest thing to come to the state of Iowa — that we as a group ought rejoice, with no suspicions, with full knowledge, with defendability when we go back home and we’re asked, ‘why are you giving away a billion and a half of my tax earnings,” Bisignano said. “… I would love to embrace a job creation, of 1,700 jobs with good wages and good benefits that’s going to help a small community that’s been struggling. Who wouldn’t? … Again, we failed. We failed to be transparent with the public, and so they also could rejoice in something like this coming to the state of Iowa.”

Timing of special session, budget impacts questioned

Bisignano also questioned the timing of the special session, which came just shy of a month before the Nov. 3, 2026 general election. Iowa is situated to play a key role in deciding control of Congress with several competitive U.S. House races, in addition to contentious elections for U.S. Senate and Iowa governor. This is a major change from previous recent elections where Republicans saw decisive victories. Heading into the midterms, all members of Iowa’s federal delegation are Republicans, and there are GOP majorities in both chambers of the Iowa Legislature.

There were also questions about the Trump administration’s presentation of the steel mill plan. At the White House announcement, U.S. Secretary of Commerce Howard Lutnick said, “I think this deal is done” when a reporter asked if the project was contingent on approval of state or local tax breaks.

Sen. Janet Petersen, D-Des Moines asked Durham “why are we here and putting more of their taxpayer dollars on the line” if the deal was finalized.

“Senator, I was surprised by that comment as well, because this is not a done deal,” Durham said. “As we said, you have to pass legislation. It still has to go through the final negotiation. So, I don’t know why that that was stated. I can’t speak to that.”

Nordman said he believed the comments made in the Oval Office were “more about the Minnesota mine rather than the plant itself.”

While the measure was approved by both the House and Senate Ways and Means committees, the two chambers had differing views of the bill. The House committee approved the measure with bipartisan support — a 20-5 vote — while the Senate committee only narrowly passed the measure with a 10-8 vote as all Democrats, alongside Dawson and Sen. Jason Schultz, R-Schleswig, voted against the measure.

The majority approval from Senate Ways and Means only came after two Senate Republicans — Sens. Jeff Taylor and Dawn Driscoll — were replaced on the committee by Sens. Tim Kraayenbrink and Dan Zumbach, who voted in favor of the bill. Taylor voted against the the measure on the Senate floor.

When the Iowa Senate debated the measure, Senate Democrats introduced two amendments calling for certain protections for labor unions and organizations to be codified in the legislation. Both proposals failed.

Schultz said during debate he was voting against the legislation, saying, “I’m worried about paying for it, I’m worried about our budget, I am worried about the the situation we’ll find ourselves in in January.” He said the Republican trifecta at the Iowa Legislature chose to the state income tax in previous sessions with the understanding “that the key to tax cuts is controlling spending.” 

“As we go through, and I look back on my years in the legislature, for all of this time, tax credits have been counted against revenue as an expenditure,” Schultz said. “As we authorized additional tax credits, they were against the tax plan, as I see it, and puts us in a difficult situation where we are spending — in advance — revenue.”

Iowa Rep. Dave Jacoby, D-Coralville, said the package amounts to a cost of roughly $3,000 per household.

“What I do want Iowans to know is this: Today is not a ribbon cutting,” Jacoby said. “… We do not have men and women in hard hats and carrying lunch buckets, ready to go to work. This truly is a concept plan right now, a concept plan with many questions. … But sadly, this is a concept that is sorely needed in our great state of Iowa.”

Jacoby said he was voting in support of the bill with the hope that “this plan is real.”

The measure goes to Reynolds, who announced she planned to sign the bill Friday night.

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Courtesy of Iowa Capital Dispatch