While it's annoying, it's not "double taxation," and there is a logical explanation for why Iowa makes you claim federal refunds as taxable income.
In tax terminology, the phrase “tax benefit rule” refers to whether or not a refund or recovery received in a future year is taxable. For example, whether or not a state income tax refund is taxable on your federal return depends on the “tax benefit rule.”
When a taxpayer receives a refund of state income taxes, and the taxpayer took a deduction on their federal tax return, and some of the payments made to the state were estimated payments that may have been made in a different calendar year ... well, it can require some math to determine the taxable refund and the deductible portion of the estimated payment.
Some people in same-sex marriages received an unpleasant surprise on their 2014 tax returns, because of changes in paycheck withholdings.
For the average taxpayer, there are few if any gray areas to push on a tax return.