House File 2428 - Introduced HOUSE FILE 2428 BY SCHUELLER A BILL FOR An Act relating to the valuation of commercial property for 1 purposes of property assessment and taxation, duties of 2 the department of revenue, and including applicability 3 provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 5111HH (4) 83 md/sc

H.F. 2428 Section 1. Section 441.21, subsection 2, Code Supplement 1 2009, is amended to read as follows: 2 2. a. In the event market value of the property being 3 assessed cannot be readily established in the foregoing manner, 4 then the assessor may determine the value of the property using 5 the other uniform and recognized appraisal methods including 6 its productive and earning capacity, if any, industrial 7 conditions, its cost, physical and functional depreciation and 8 obsolescence and replacement cost, and all other factors which 9 would assist in determining the fair and reasonable market 10 value of the property but , except as otherwise provided in 11 paragraphs “b” and “c” , the actual value shall not be determined 12 by use of only one such factor. The following shall not be 13 taken into consideration: Special value or use value of the 14 property to its present owner, and the goodwill or value of 15 a business which uses the property as distinguished from the 16 value of the property as property. 17 b. In assessing and determining the actual value of 18 commercial property, the assessor shall, if feasible, first 19 consider an income approach measuring productive and earning 20 capacity of the property using uniform and recognized appraisal 21 methods and capitalized at a rate determined by the assessor. 22 An income approach to valuation, including a method for 23 determining capitalization rates for the various commercial 24 uses of property, shall be established by rule by the 25 department. The income approach established by the department 26 may take into account the stabilized vacancy rate or stabilized 27 expenses associated with each property. 28 c. However, in In assessing property that is rented or 29 leased to low-income individuals and families as authorized by 30 section 42 of the Internal Revenue Code, as amended, and which 31 section limits the amount that the individual or family pays 32 for the rental or lease of units in the property, the assessor 33 shall use the productive and earning capacity from the actual 34 rents received as a method of appraisal and shall take into 35 -1- LSB 5111HH (4) 83 md/sc 1/ 4

H.F. 2428 account the extent to which that use and limitation reduces 1 the market value of the property. The assessor shall not 2 consider any tax credit equity or other subsidized financing 3 as income provided to the property in determining the assessed 4 value. The property owner shall notify the assessor when 5 property is withdrawn from section 42 eligibility under the 6 Internal Revenue Code. The property shall not be subject to 7 section 42 assessment procedures for the assessment year for 8 which section 42 eligibility is withdrawn. This notification 9 must be provided to the assessor no later than March 1 of the 10 assessment year or the owner will be subject to a penalty of 11 five hundred dollars for that assessment year. The penalty 12 shall be collected at the same time and in the same manner as 13 regular property taxes. 14 d. Upon adoption of uniform rules by the department of 15 revenue or succeeding authority covering assessments and 16 valuations of such properties described in this subsection , the 17 valuation on such properties shall be determined in accordance 18 with such rules and in accordance with forms and guidelines 19 contained in the real property appraisal manual prepared by the 20 department as updated from time to time for assessment purposes 21 to assure uniformity, but such rules, forms, and guidelines 22 shall not be inconsistent with or change the foregoing means of 23 determining the actual, market, taxable , and assessed values. 24 e. When using any uniform and recognized appraisal method 25 to value property, the following shall not be taken into 26 consideration: 27 (1) Special value or use value of the property to its 28 present owner. 29 (2) The goodwill or value of a business which uses the 30 property as distinguished from the value of the property as 31 property. 32 Sec. 2. ADOPTION OF RULES —— CONTINUING EDUCATION PROVIDED 33 BY THE DEPARTMENT OF REVENUE. 34 1. The department of revenue shall adopt the rules required 35 -2- LSB 5111HH (4) 83 md/sc 2/ 4

H.F. 2428 under section 441.21, subsection 2, paragraph “b” , as enacted in 1 this Act, not later than January 1, 2011. 2 2. As part of continuing education programs under section 3 441.8, the director of revenue shall establish, designate, or 4 approve courses, workshops, seminars, or symposiums relating 5 to the income approach established by rule pursuant to section 6 441.21, subsection 2, paragraph “b” , as enacted in this Act. 7 Not less than five such courses, workshops, seminars, or 8 symposiums shall be established, designated, or approved during 9 each of the two assessment years following adoption of the 10 rules. 11 Sec. 3. APPLICABILITY. This Act applies to assessment years 12 beginning on or after January 1, 2012. 13 EXPLANATION 14 This bill requires assessors to, if feasible, first consider 15 an income approach measuring productive and earning capacity of 16 the property using uniform and recognized appraisal methods and 17 capitalized at a rate determined by the assessor when assessing 18 and determining the actual value of commercial property. The 19 bill requires the department of revenue to adopt rules that 20 establish an income approach to valuation, including a method 21 for determining capitalization rates for various commercial 22 uses of property. The income approach established by the 23 department may take into account the stabilized vacancy rate or 24 stabilized expenses associated with each property. 25 The bill requires the department of revenue to adopt the 26 rules relating to the income approach not later than January 27 1, 2011. The bill also requires the director of revenue to 28 establish, designate, or approve courses, workshops, seminars, 29 or symposiums relating to the income approach established by 30 rule. Not less than five such courses, workshops, seminars, or 31 symposiums must be established, designated, or approved during 32 each of the two assessment years following adoption of the 33 rules. 34 This Act applies to assessment years beginning on or after 35 -3- LSB 5111HH (4) 83 md/sc 3/ 4

H.F. 2428 January 1, 2012. 1 -4- LSB 5111HH (4) 83 md/sc 4/ 4