Property Tax Reform

Property taxes are an important revenue source for cities and other local governments. The League believes that reform of the current system is needed to improve accountability, equity and stability. League members voted unanimously in September 2006 to include property tax reform as one of four legislative priorities for 2007.

Rollback

In October 2005, the Iowa Department of Revenue issued the annual rollback order. The order decreases percentage of residential property value subject to taxation to 45.9960% for the upcoming year. Historical information about the rollback was included in a November 2002 Q & A in the League’s Cityscape magazine. A primary focus of the League/ISAC joint proposal is eliminating the rollback formula.

Click here to view a graph of the Rollback since 1980.

Property Tax Credits

The Code of Iowa mandates that local governments provide property tax credits to property owners including the homestead credit, military service credit, low-income/elderly credit, and several farm credits. The Code also provides that the state will reimburse local governments for these credits. The state has under funded the credits for the past several years, and did so again for Fiscal Year 2007, but there were no threats to force local governments to absorb the shortfall. The Standing Appropriations bill, HF 2797, contains $159,868,964 in property tax credit reimbursements as follows: $102,945,379 for the homestead property tax credit; $34,610,183 for the agricultural land and family farm tax credits; $2,773,402 for reimbursement for the military tax credit; and $19,540,000 for the elderly and disabled tax credit and reimbursement.

Property Assessment Appeal Board

In the 2005 legislative session, a statewide Property Assessment Appeal Board was established within the Iowa Department of Revenue effective January 1, 2007. The board shall hear protests of decisions reached by the board of review on assessments or application of equalization orders. The taxpayer may elect to bypass the appeal board and proceed directly to district court. The board includes three members appointed for 6 year terms by the Governor and confirmed by the Senate. One must be a certified real estate appraiser or hold a professional appraisal designation; another must be an attorney practicing in the area of state and local taxation or property tax appraisals; and a third must be a professional with experience in the field of accounting or finance, with experience in state and local taxation matters. Initial board members will be:

D. Kevin Burggraaf, M.S., MAI, CAE, Polk County Assessor;

Jacqueline Rypma, Administrative Law Judge with the Department of Corrections at Mitchellville; extensive private practice work with property and real estate liquidation and distribution

Dick Stradley, Property Tax Administrator, Iowa Department of Revenue

A property assessment appeal board review committee shall be established January 1, 2012 to review the activities of the appeal board and file a report with the general assembly by January 15, 2013.

Legislative Property Tax Incentives In Recent Years:

League/ISAC Property Tax Reform Proposal

Bills containing recommendations by the League and the Iowa State Association of Counties (ISAC) for property tax reform bill were filed in 2006 but failed to move in the Senate and House, SSB 3047 and HSB 727. A one-page outline of the bill is available. The most important aspects of the plan involved eliminating the rollback formula, establishing a new inflationary limitation based on the Government Price Index, providing clarity to the tax system and naming an implementation committee to oversee these changes and make other recommendations as needed. The 2006 proposal was streamlined from the original Joint League/ISAC report presented in 2005.

A summary of HF 2771 is available

A "fiscal note" is available. This is an analysis of fiscal impacts from HF 2771 prepared by the nonpartisan Legislative Service Agency.

Trust and Agency Levy

HF 2774 removes a barrier to government service sharing by allowing a city to use the trust and agency levy to pay for public safety services contracted from another government entity and passed in the 2006 session. The primary expected use is for those cities who wish to contract with a county for law enforcement services but lack sufficient general fund revenues to do so. Background information is available.

Recreational Property Classification

In 2006, no movement occurred on HF 2766, a bill establishing a new recreational property classification for golf courses, downhill ski areas and water parks. These properties would be taxed at just 25% of their assessed value. This change would eliminate about $240 million statewide from the property tax base.

Apartment Property Taxes

A bill that would have reduced the taxable value of apartments, mobile home parks and manufactured home communities while establishing a floor to the rollback for all residential properties stalled in the Senate Ways and Means Committee during the last week of the 2006 session. The League opposed SSB 3272 because an appropriation to help offset revenues lost by cities and counties as a result of the apartment classification change was insufficient to cover projected losses, despite the favorable change to the rollback formula. The League also opposed HSB 709 and SSB 3124, bills that would have changed property classifications as outlined in SSB 3272 without the rollback floor. Although no legislative change occurred, the League is watching for results of a court action filed by Timberland Partners XXI, LLP regarding reclassification of apartments as residential property.

State Review of Reform

The state has undertaken several recent efforts to review the property tax system. A Property Taxation Review Committee (PTRC) was created by action of the Legislative Council on June 29, 2004 to continue the work begun by a Property Tax Implementation Committee in 2003. These state committees have now been disbanded.