Section 1. Section 427.1, subsection 1, Code 2003, is amended to read as follows:

1. FEDERAL AND STATE PROPERTY. The property of the United

States and this state, including state university, university

of science and technology, and school lands, except as

otherwise provided in this subsection. The exemption herein

provided shall not include any real property subject to

taxation under any federal statute applicable thereto, but

such exemption shall extend to and include all machinery and

equipment owned exclusively by the United States or any

corporate agency or instrumentality thereof without regard to

the manner of the affixation of such machinery and equipment

to the land or building upon or in which such property is

located, until such time as the Congress of the United States

shall expressly authorize the taxation of such machinery and

equipment.

Sec. 2. Section 427.1, subsection 1, Code 2003, is amended by adding the following new unnumbered paragraph:

NEW UNNUMBERED PARAGRAPH. Property of the state operated

pursuant to section 904.302, 904.705, or 904.706 that is

leased to an entity other than an entity which is exempt from

property taxation under this section shall be subject to

property taxation for the term of the lease. Property taxes

levied against such leased property shall be paid from the

revolving farm fund created in section 904.706. The lessor

shall file a copy of the lease with the county assessor of the

county where the property is located.

Sec. 3. Section 904.302, Code 2003, is amended by adding the following new subsection:

NEW SUBSECTION 7A. Pay property taxes levied against

land leased by the department of corrections or department of

human services as provided in section 427.1, subsection 1.

Sec. 4. Section 904.705, unnumbered paragraph 2, Code 2003, is amended to read as follows:

The director may with the assistance of the department of

natural resources establish and operate forestry nurseries on

state-owned land under the control of the department.

Residents of the adult correctional institutions shall provide

the labor for the operation. Nursery stock shall be sold in

accordance with the rules of the natural resource commission.

The department shall pay the costs of establishing and

operating the forestry nurseries out of the revolving farm

fund created in section 904.706. The department of natural

resources shall pay the costs of transporting, sorting, and

distributing nursery stock to and from or on state-owned land

under the control of the department of natural resources.

Receipts from the sale of nursery stock produced under this

section shall be divided between the department and the

department of natural resources in direct proportion to their

respective costs as a percentage of the total costs. However,

property taxes due and payable on the land shall be deducted

before receipts of sale are divided between the two

departments if land subject to this section is leased to an

entity other than an entity which is exempt from property

taxation under section 427.1. The department shall deposit

its receipts in the revolving farm fund created in section

904.706.

Sec. 5.

APPLICABILITY.

This Act applies to leases entered

into on or after the effective date of this Act.