Iowa Amends MEGA Program for 10% Steel Mill Tax Credit
Iowa lawmakers fast-tracked a law in a special session to offer a 10% tax credit for a $15 billion steel mill project in Lee County.
Iowa Governor Kim Reynolds signed House File 2801 into law on Friday after a special session, amending the state's Major Economic Growth Attraction (MEGA) program to provide up to $1.36 billion in tax incentives for a $15 billion steel mill. The Iowa House approved the bill 75-17 and the Senate passed it 28-19. The law took effect immediately. It modifies the MEGA program to allow one eligible business to receive a transferable tax credit worth up to 10% of its investment in a rural area, remitted over ten years. The special session was convened solely for this legislation. Representative Carter Nordman, the House floor manager, said the change essentially combines two existing 5% MEGA tax credits into one 10% credit.
Mesabi Metallics plans $15 billion low-emissions steel facility
Essar Group-owned Mesabi Metallics will build the steel mill in Lee County, southeast Iowa. The company plans to use direct-reduced iron and electric arc furnace technology to produce low-emissions steel, with an operational goal of 2030. Raw materials will include scrap steel and iron ore from Mesabi's recently opened mine in Nashwauk, Minnesota. The facility is expected to employ at least 1,750 permanent workers once operational. Republican Senator Jeff Reichman, who confirmed the Lee County site, called the project a 'game-changer' for the state. The project was announced by former President Donald Trump last Monday, who said it would be the 'largest steel plant in American history.'
Project promises jobs and faces criticism over process
The project promises 1,750 permanent jobs at an average wage of $48 per hour and 6,000 temporary construction jobs. Governor Kim Reynolds stated, "Today’s special session advances the most consequential economic development ever to come to our state." She also said higher wages attract workforce and strengthen communities. Despite the promised economic boost, the approval process faced significant criticism. Lawmakers convened at 8:30 a.m. Friday and the bill was signed just before 9 p.m. the same day. Critics argued the incentive was rushed through without adequate public scrutiny. Senator Tony Bisignano, a Democrat, said during a committee hearing, "No input, no opportunity for an input." The Sierra Club environmental group said the subsidy was being 'rammed through the legislature.' Senator Dan Dawson, a Republican who voted against the bill, called it the 'largest corporate giveaway in Iowa's history.' Senator Reichman said the deal had been under a non-disclosure agreement since last year and gained momentum in August.
Incentive structure and economic impact outlined
The MEGA program was established in 2024 and had not previously awarded any incentives. The amendment enables the state to join two previously approved program sites for a combined 10% impact. The tax credits will not be issued until operations begin and at least half of the created jobs meet a qualifying wage threshold. Iowa Economic Development Authority Director Debi Durham stated the state's return on investment is 1 to 5.6, citing a manufacturing job multiplier of 3 to 5 ancillary jobs per manufacturing job. The Legislative Services Agency provided the following estimated fiscal impacts:
| Incentive Scenario | Estimated State Revenue Impact (FY 2029-2041) | Notes |
|---|---|---|
| Current MEGA Program | -$575 million | Baseline expectation for the original program structure. |
| Amended MEGA Program (for this project) | -$575 million additional reduction | This is in addition to the baseline $575 million. |
| Project under Original MEGA Rules | -$215 million (FY 2028-2041) | What Mesabi would have been eligible for before the amendment. |
Durham said Arkansas and Kentucky were competing for the project, with Arkansas as the 'biggest competitor.' Senator Dawson claimed Arkansas officials walked away due to concerns about the company's equity and documentation, and were considering a special session to offer 'cash up front.' The facility is expected to begin operations in 2030, at which point tax credits will be issued contingent on meeting job and wage thresholds.
