Iowa Property Taxes Reduced for Commercial & Industiral Tax Payers
posted on Wednesday, June 5, 2013 in Blog
The persistence of Iowa commercial and industrial property owners finally paid dividends in a reduction in your property tax burden! After several tries over the last decade, the legislature and Governor came to agreement on the start to property tax reform, and provided modest tax reduction at the same time.
We appreciate those of you who contacted your legislators, encouraging them to finally act on an inequity in the tax system that has persisted – and has been an impediment to economic growth – for far too long.
While not all was achieved that we were looking for – the rate of rollback is much less than the original proposal – it is a start. Beyond this, it may provide the motivation for a reform of the entire system in years to come.
The Greater Cedar Valley Alliance & Chamber, through its Government Relations Committee and our director of governmental relations Steve Firman, collaborated with a coalition that included the Iowa Chamber Alliance, Iowa Association of Business & Industry, Professional Developers of Iowa, and Iowa Taxpayers Association to continually impress upon our elected officials the need for this change.
Conference Committee Report for SF 295 – Property Tax
Division I—Business Property Tax Credit (“Senate Plan” element)
- Creates a Business Property Tax Credit for property taxes due and payable in fiscal year 2015.
- $50 million is appropriated in fiscal year 2015 to the Business Property Tax Credit Fund
- $100 million is appropriated in fiscal year 2016
- $125 million is appropriated in fiscal year 2017
- $125 million every year thereafter
- Each person who wishes to file a claim will obtain a form from the County Assessor.
The form does not have to be filed again until the property is sold or transferred.
- The state will use the money appropriated into the Business Property Tax Credit Fund to reimburse local governments the amount of credits issued.
- When fully phased in, at least $145,000 of property value on every business would be equal to the residential rollback
- Total Fiscal impact to local governments is $16 million when fully phased in.
Division II —Property Tax Assessment Limitation and Replacement (“House Plan” element)
- Assessment growth limitation moves from 4% to 3% on Ag and residential immediately.
- Commercial and Industrial will assessed at 95% of valuation starting January 1, 2013; at 90% starting January 1, 2014; and is frozen at 90% thereafter.
- The State will appropriate money for replacement of the lost revenue. Payments will be made by IDR to county treasurers:
FY 15 $78.8 million (includes multi-residential)
FY 16 $162.8 million (includes multi-residential)
FY 17 $154.1 million (does not include multi-residential and capped at this level
Division III—Multi-residential Property Classification
- Creates a new property classification: Multi-residential
- Multi-residential will include apartments, nursing homes, assisted living facilities , and certain other rental property
- The existing classifications are Residential, Agricultural, Commercial, Industrial
- Multi-residential properties will eventually equal the residential rollback after 10 years.
- Total fiscal impact to local governments is $85.3 million when fully phased in.
Assessment Year 2013 95%
Assessment Year 2014 90%
Assessment Year 2015 86%
Assessment Year 2016 82%
Assessment Year 2017 78%
Assessment Year 2018 75%
Assessment Year 2019 71%
Assessment year 2020 67%
Assessment year 2021 63%
Assessment year 2022 and thereafter: Residential rate
Division IV —Telecommunications Property
- Determining the taxable value of each company stays the same
- Each telephone company will receive a partial exemption from taxation on the value of the company's property. This is phased in, with half in assessment year 2013 (FY 15), and the remainder being added in assessment year 2014 (FY 16)
- Department of Revenue is directed to complete a comprehensive study of the telecommunications industry and report recommendations for change to the General Assembly
Assessed value $0-$20M $20-$55M $55-$500M >$500M
Exemption 40% 35% 25% 20%
Division V – Iowa Taxpayers Trust Fund Tax Credit
- Each year, beginning July 1, 2014, the balance of the Taxpayers Trust Fund exceeds $30 million a tax credit will be issued to Iowa taxpayers
- The tax credit will be issued to Iowans with a tax liability
- $60 million is the maximum amount that can flow into the taxpayer trust fund each year
- $60 million equals a $27 credit per filer. $120 million would equal $54
Division VI -Property Assessment Appeal Board
- Five year sunset – July 1, 2018, lower salaries, adding another appraiser to the board (replacing the finance profession with state and local tax policy experience, allowing for a speedier hearing process.)
Division VII—Earned Income Tax Credit
- Increases the Earned Income Tax Credit from 7% to 14% in tax year 2013; 15% in tax year 2014
- The credit remains refundable.
- The increase is effective retroactively to January 1, 2013.
- Fiscal impact: $30.8 million in FY 14 , increasing to $34.5 in FY 15