Iowa Contractor Bond: Registration and License Requirements

Who has to register, and who files the bond

Anyone who contracts to do construction in Iowa and earns $2,000 or more a year is a contractor who must register with DIAL. If you earn less than $2,000 a year, or you only work on your own property, you are not a contractor for this purpose. As conditions of registration, you need an employer account number or special contractor number, and evidence of workers' compensation coverage, of relief from that requirement, or a statement that you are not required to carry it.

An out-of-state contractor — one whose principal place of business is in another state — must either file a $25,000 surety bond with DIAL or provide a letter showing the contractor is prequalified to bid on Iowa Department of Transportation projects under Iowa Code section 314.1. DIAL states that, with few exceptions, each contractor whose principal place of business is outside Iowa must file the $25,000 bond to register. Having a branch office in Iowa does not exempt a contractor from the bonding requirement.

The official sources do not fully agree on whether an in-state contractor with employees also needs the $25,000 bond. The statute and rule place the bond on out-of-state contractors only, while DIAL's contractor page says that if you have employees you are also required to carry a certificate of workers' compensation and a $25,000 bond. Because the sources conflict, confirm what applies to you with DIAL before you register.

Out-of-state subcontractors are not covered by a general contractor's bond; each must register and have its own bond. DIAL has the final word on what your registration or license needs, so confirm the details with the agency before you file.

The DIAL Bond Form, obligee, and term

The $25,000 bond must be issued on the DIAL Bond Form by a surety company licensed to do business in Iowa. On that form, the surety and contractor are bound to the State of Iowa, Department of Inspections, Appeals, and Licensing, in the penal sum of $25,000. The bond covers the taxes, including unemployment compensation contributions, penalties, interest, and related fees that may accrue to the State of Iowa from your work in Iowa.

The sources do not agree on the bond's term. The statute and the form's cancellation clause say the bond is continuous until the surety cancels it with at least 30 days' written notice to the contractor and to DIAL. The same DIAL Bond Form also says the bond runs concurrently with the annual term of the registration and does not exceed the one-year statutory period. Because the two wordings conflict, do not assume how renewal works — confirm with DIAL.

If the bond is forfeited, the amount is the taxes payable or the bond amount, whichever is less, and the director may attach the bond to collect fees and penalties due to the department.

Plumbing and mechanical contractor licenses

If your business provides plumbing, mechanical, HVAC, refrigeration, sheet metal, or hydronic systems services, you need a license from the Iowa Plumbing and Mechanical Systems Board. A Chapter 105 licensee also registers as a contractor under Chapter 91C in one combined application.

To get or renew an active contractor license, you must show public liability insurance and a surety bond in an amount the board sets by rule. The rule sets the surety bond at a minimum of $5,000 and public liability insurance at a minimum of $500,000, both from an entity licensed to do business in Iowa. The bond must require the issuer to give the board 10 days' written notice before cancellation. The $5,000 figure comes from the board's rule (481 IAC chapter 431), not from Iowa Code 105.19 itself, which sets no amount.

Steps

1. Find which requirement applies. Work out whether you are an out-of-state contractor who must register, a plumbing or mechanical licensee, or an electrical contractor, because the bond requirement differs.
2. Register with DIAL. If you earn $2,000 or more a year doing construction in Iowa, register with DIAL as a condition of doing business.
3. Decide bond or DOT letter. If your principal place of business is outside Iowa, either arrange the $25,000 surety bond or get a DOT prequalification letter. If you are based in Iowa and have employees, confirm with DIAL whether the bond applies, since the sources conflict.
4. Use the DIAL Bond Form. Have your surety, licensed in Iowa, place the bond on the DIAL Bond Form, bound to the State of Iowa in the penal sum of $25,000.
5. Add license bonds if you hold a Chapter 105 license. Plumbing and mechanical licensees keep a surety bond of at least $5,000 and public liability insurance of at least $500,000 on file.
6. Keep the bond in force. The statute says the bond is continuous until the surety cancels it on at least 30 days' written notice, but the DIAL Bond Form also ties it to your annual registration term, so confirm renewal terms with DIAL. The bond is not released until you have paid all taxes, contributions, penalties, interest, and fees.

Sources

• Iowa DIAL — Contractors
• DIAL Out-of-State Contractor Bond Form
• Iowa Code Chapter 91C
• Iowa Code 105.19
• Iowa Code Chapter 103
• 481 IAC Chapter 465
• 481 IAC Chapter 431

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