June 04, 2023

The Fry Times

House property tax plan adds certainty for taxpayers while also cutting property taxes

Last week, the House Ways and Means Committee passed House File 1 (now House File 718)—property tax reform with a unanimous vote. The bill does four major things to provide all Iowa property tax payers with immediate and direct property tax relief.

Division I of the bill provides an immediate statewide property tax reduction of over $200 million dollars. Iowa Code section 257.3 requires each school district to levy (each year) a foundation property tax equal to $5.40 per $1,000 of assessed valuation on all taxable property in the school district. Division I reduces that requirement by $1.00 so schools will be required to levy a property tax of $4.40. The state would then pay for that reduction so that the schools do not lose revenue.

Division II of the bill puts a limitation on how much a property tax payer’s bill can increase year over year. The division outlines a property tax increase limitation on a per parcel basis for qualified parcels. This is on the actual amount of property taxes paid (not the assessment). This division’s limitation does not limit taxes levied as a result of a voter-approved levy or a debt service levy.

This division provides that a qualified parcel (gets the growth limitation) is a parcel that is NOT:

  • Currently part of a TIF
  • Wind energy conversion property
  • Currently part of an abatement

Additionally, a parcel that has changed ownership since the last assessment will not get the growth limitation (will get a new base with a new owner). New construction will of course get a new base year at full value and full taxation.

If a parcel is a qualified parcel, for property taxes due and payable in fiscal years beginning on or after July 1, 2024—if the amount of property taxes due exceed 103% (Residential, Agricultural) or 108% (Commercial, Industrial) of the prior year, the amount due will be reduced as described below.

If the threshold is exceeded, the amount of property taxes due and payable to each taxing authority that certified to levy in excess of such amount shall be reduced. If the city only levied the same as the prior year, but the county levied 104% on a residential parcel, only the county would have to reduce the amount due. The amount of the reduction shall be proportionately applied among those certified to levy in excess of the limitation. The reductions shall be made by the county auditor prior to delivery of the tax list and statements.

If there were improvements or renovations (not amounting to new construction) on the parcel during that year, the threshold amount of taxes shall be up to 103% or 108% plus the percentage of the parcel’s taxable value attributable to the improvements.

Division III of House File 718 rounds out Iowa’s version of Truth in Taxation and works to get more information in the hands of property tax payers. With this information they will be more informed about how assessments and levies are working together in their area. This division also provides that if all of the information from all taxing jurisdictions is available in a timely manner—everything should be on one notice for the taxpayer.

Finally, Division IV of the bill simply states that all special elections by any political subdivision for bonds or other debt must be on the first Tuesday after the first Monday in November of each even-numbered year. (Bond/Debt elections will be on the same day as the General). Additionally, it provides that the commissioner of elections will send notice of a bond election to eligible voters 10 to 20 days before the election. The notice must contain the full text of the public measure to be voted on.

Regardless of the eventual fate of HF 718 in the Senate, it is obvious that House Republicans have chosen the side of the property taxpayers and not the property tax collectors. Prioritizing certainty and sustainability for property taxpayers over ballooning assessments will continue to be a driving force in the House.