Senate Study Bill 1135 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON BOLKCOM) A BILL FOR An Act establishing a property tax credit for commercial, 1 industrial, and railway property, providing penalties, 2 making appropriations, and including implementation and 3 applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1464XC (2) 85 md/sc
S.F. _____ Section 1. Section 331.512, Code 2013, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 4A. Carry out duties relating to the 3 business property tax credit as provided in chapter 426C. 4 Sec. 2. Section 331.559, Code 2013, is amended by adding the 5 following new subsection: 6 NEW SUBSECTION . 14A. Carry out duties relating to the 7 business property tax credit as provided in chapter 426C. 8 Sec. 3. NEW SECTION . 426C.1 Definitions. 9 For the purposes of this chapter, unless the context 10 otherwise requires: 11 1. “Contiguous parcels” means any of the following: 12 a. Parcels that share a common boundary. 13 b. Parcels within the same building or structure regardless 14 of whether the parcels share a common boundary. 15 c. Permanent improvements to the land that are situated 16 on one or more parcels of land that are assessed and taxed 17 separately from the permanent improvements if the parcels of 18 land upon which the permanent improvements are situated share 19 a common boundary. 20 2. “Department” means the department of revenue. 21 3. “Fund” means the business property tax credit fund 22 created in section 426C.2. 23 4. “Parcel” means as defined in section 445.1. 24 5. “Property unit” means contiguous parcels all of which 25 are located within the same county, with the same property tax 26 classification, are owned by the same person, and are operated 27 by that person for a common use and purpose. 28 Sec. 4. NEW SECTION . 426C.2 Business property tax credit 29 fund —— appropriation. 30 1. A business property tax credit fund is created in the 31 state treasury under the authority of the department. For the 32 fiscal year beginning July 1, 2014, there is appropriated from 33 the general fund of the state to the department to be credited 34 to the fund, the sum of fifty million dollars to be used for 35 -1- LSB 1464XC (2) 85 md/sc 1/ 13
S.F. _____ business property tax credits authorized in this chapter. 1 For the fiscal year beginning July 1, 2015, and each fiscal 2 year thereafter, there is appropriated from the general fund 3 of the state to the department to be credited to the fund an 4 amount equal to the total amount appropriated by the general 5 assembly to the fund, as calculated in this subsection, in the 6 previous fiscal year. In addition, the sum of fifty million 7 dollars shall be added to the appropriation in each fiscal year 8 beginning on or after July 1, 2015, if the revenue estimating 9 conference certifies during its final meeting of the calendar 10 year ending prior to the beginning of the fiscal year that 11 the total amount of general fund revenues collected during 12 the fiscal year ending during such calendar year was at least 13 one hundred four percent of the total amount of general fund 14 revenues collected during the previous fiscal year. However, 15 the total appropriation to the fund shall not exceed two 16 hundred fifty million dollars for any one fiscal year. 17 2. Notwithstanding section 12C.7, subsection 2, interest or 18 earnings on moneys deposited in the fund shall be credited to 19 the fund. Moneys in the fund are not subject to the provisions 20 of section 8.33 and shall not be transferred, used, obligated, 21 appropriated, or otherwise encumbered except as provided in 22 this chapter. 23 Sec. 5. NEW SECTION . 426C.3 Claims for credit. 24 1. Each person who wishes to claim the credit allowed 25 under this chapter shall obtain the appropriate forms from the 26 assessor and file the claim with the assessor. The director 27 of revenue shall prescribe suitable forms and instructions for 28 such claims, and make such forms and instructions available to 29 the assessors. 30 2. a. Claims for the business property tax credit shall be 31 filed not later than March 15 preceding the fiscal year during 32 which the taxes for which the credit is claimed are due and 33 payable. 34 b. A claim for credit filed after the deadline for filing 35 -2- LSB 1464XC (2) 85 md/sc 2/ 13
S.F. _____ claims shall be considered as a claim for the following year. 1 3. Upon the filing of a claim and allowance of the credit, 2 the credit shall be allowed on the parcel or property unit for 3 successive years without further filing as long as the parcel 4 or property unit satisfies the requirements for the credit. If 5 the parcel or property unit ceases to qualify for the credit 6 under this chapter, the owner shall provide written notice 7 to the assessor by the date for filing claims specified in 8 subsection 2 following the date on which the parcel or property 9 unit ceases to qualify for the credit. 10 4. The assessor shall remit the claims for credit to the 11 county auditor with the assessor’s recommendation for allowance 12 or disallowance. If the assessor recommends disallowance 13 of a claim, the assessor shall submit the reasons for the 14 recommendation, in writing, to the county auditor. The county 15 auditor shall forward the claims and recommendations to the 16 board of supervisors. The board shall allow or disallow the 17 claims. 18 5. For each claim and allowance of a credit for a property 19 unit, the county auditor shall calculate the average of all 20 consolidated levy rates applicable to the several parcels 21 within the property unit. All claims for credit which have 22 been allowed by the board of supervisors, the actual value of 23 such parcels and property units applicable to the fiscal year 24 for which the credit is claimed that are subject to assessment 25 and taxation prior to imposition of any applicable assessment 26 limitation, the consolidated levy rates for such parcels and 27 the average consolidated levy rates for such property units 28 applicable to the fiscal year for which the credit is claimed, 29 and the taxing districts in which the parcel or property unit 30 is located, shall be certified on or before June 30, in each 31 year, by the county auditor to the department. 32 6. The assessor shall maintain a permanent file of current 33 business property tax credits. The assessor shall file a 34 notice of transfer of property for which a credit has been 35 -3- LSB 1464XC (2) 85 md/sc 3/ 13
S.F. _____ allowed when notice is received from the office of the county 1 recorder, from the person who sold or transferred the property, 2 or from the personal representative of a deceased property 3 owner. The county recorder shall give notice to the assessor 4 of each transfer of title filed in the recorder’s office. The 5 notice from the county recorder shall describe the property 6 transferred, the name of the person transferring title to the 7 property, and the name of the person to whom title to the 8 property has been transferred. 9 7. When all or a portion of a parcel or property unit that 10 is allowed a credit under this chapter is sold, transferred, 11 or ownership otherwise changes, the buyer, transferee, or 12 new owner who wishes to receive the credit shall refile the 13 claim for credit. In addition, when a portion of a parcel or 14 property unit that is allowed a credit under this chapter is 15 sold, transferred, or ownership otherwise changes, the owner of 16 the portion of the parcel or property unit for which ownership 17 did not change shall refile the claim for credit. 18 Sec. 6. NEW SECTION . 426C.4 Eligibility and amount of 19 credit. 20 1. Each parcel classified and taxed as commercial property, 21 industrial property, or railway property under chapter 434 is 22 eligible for a credit under this chapter. A person may claim 23 and receive one credit under this chapter for each eligible 24 parcel unless the parcel is part of a property unit for which a 25 credit is claimed. A person may claim and receive one credit 26 under this chapter for each property unit. A credit approved 27 for a property unit shall be allocated to the several parcels 28 within the property unit in the proportion that each parcel’s 29 total amount of property taxes due and payable bears to the 30 total amount of property taxes due and payable on the property 31 unit. Only property units comprised of property assessed as 32 commercial property, industrial property, or railway property 33 under chapter 434 are eligible for a credit under this chapter. 34 However, property that is rented or leased to low-income 35 -4- LSB 1464XC (2) 85 md/sc 4/ 13
S.F. _____ individuals and families as authorized by section 42 of the 1 Internal Revenue Code, as amended, and that is subject to 2 assessment procedures relating to section 42 property under 3 section 441.21, subsection 2, for the applicable assessment 4 year, shall not be eligible to receive a credit under this 5 chapter or be part of a property unit that receives a credit 6 under this chapter. 7 2. Using the actual value of each parcel or property unit 8 and the consolidated levy rate for each parcel or the average 9 consolidated levy rate for each property unit, as certified 10 by the county auditor to the department under section 426C.3, 11 subsection 5, the department shall calculate, for each fiscal 12 year, an initial amount of actual value for use in determining 13 the amount of the credit for each such parcel or property 14 unit so as to provide the maximum possible credit according 15 to the credit formula and limitations under subsection 3, 16 and to provide a total dollar amount of credits against the 17 taxes due and payable in the fiscal year equal to ninety-eight 18 percent of the moneys in the fund following the deposit of the 19 appropriation for the fiscal year and including interest or 20 earnings credited to the fund. 21 3. a. The amount of the credit for each parcel or property 22 unit for which a claim for credit under this chapter has been 23 approved shall be calculated under paragraph “b” using the 24 lesser of the initial amount of actual value determined by the 25 department under subsection 2, and the amount of actual value 26 of the parcel or property unit certified by the county auditor 27 under section 426C.3, subsection 5. 28 b. The amount of the credit for each parcel or property 29 unit for which a claim for credit under this chapter has been 30 approved shall be equal to the product of the amount of actual 31 value determined under paragraph “a” times the difference, 32 stated as a percentage, between the assessment limitation 33 percentage applicable to the parcel or property unit under 34 section 441.21, subsection 5, and the assessment limitation 35 -5- LSB 1464XC (2) 85 md/sc 5/ 13
S.F. _____ percentage applicable to residential property under section 1 441.21, subsection 4, divided by one thousand dollars, and 2 then multiplied by the consolidated levy rate or average 3 consolidated levy rate per one thousand dollars of taxable 4 value applicable to the parcel or property unit for the fiscal 5 year for which the credit is claimed as certified by the county 6 auditor under section 426C.3, subsection 5. 7 Sec. 7. NEW SECTION . 426C.5 Payment to counties. 8 1. Annually the department shall certify to the county 9 auditor of each county the amounts of the business property 10 tax credits allowed in the county. Each county auditor shall 11 then enter the credits against the tax levied on each eligible 12 parcel or property unit in the county, designating on the tax 13 lists the credit as being paid from the fund. Each taxing 14 district shall receive its share of the business property tax 15 credit allowed on each eligible parcel or property unit in 16 such taxing district in the proportion that the levy made by 17 such taxing district upon the parcel or property unit bears 18 to the total levy upon the parcel or property unit by all 19 taxing districts. However, the several taxing districts shall 20 not draw the moneys so credited until after the semiannual 21 allocations have been received by the county treasurer, as 22 provided in this section. Each county treasurer shall show on 23 each taxpayer receipt the amount of credit received from the 24 fund. 25 2. The director of revenue shall authorize the department of 26 administrative services to draw warrants on the fund payable to 27 the county treasurers of the several counties of the state in 28 the amounts certified by the department. 29 3. The amount due each county shall be paid in two payments 30 on November 15 and March 15 of each fiscal year, drawn upon 31 warrants payable to the respective county treasurers. The two 32 payments shall be as nearly equal as possible. 33 Sec. 8. NEW SECTION . 426C.6 Appeals. 34 1. If the board of supervisors disallows a claim for credit 35 -6- LSB 1464XC (2) 85 md/sc 6/ 13
S.F. _____ under section 426C.3, subsection 4, the board of supervisors 1 shall send written notice, by mail, to the claimant at the 2 claimant’s last known address. The notice shall state the 3 reasons for disallowing the claim for the credit. The board 4 of supervisors is not required to send notice that a claim for 5 credit is disallowed if the claimant voluntarily withdraws 6 the claim. Any person whose claim is disallowed under the 7 provisions of this chapter may appeal from the action of the 8 board of supervisors to the district court of the county in 9 which the parcel or property unit is located by giving written 10 notice of such appeal to the county auditor within twenty days 11 from the date of mailing of notice of such action by the board 12 of supervisors. 13 2. If a claim for credit is disallowed by the board of 14 supervisors, and such action is subsequently reversed on 15 appeal, the credit shall be allowed on the applicable parcel or 16 property unit, and the director of revenue, the county auditor, 17 and the county treasurer shall provide the credit and change 18 their books and records accordingly. In the event the claimant 19 has paid one or both of the installments of the tax payable 20 in the year or years in question, remittance shall be made to 21 the claimant of the amount of such credit. The amount of such 22 credit awarded on appeal shall be allocated and paid from the 23 balance remaining in the fund. 24 Sec. 9. NEW SECTION . 426C.7 Audit —— recalculation or 25 denial. 26 1. If on the audit of a credit provided under this chapter, 27 the director of revenue determines the amount of the credit 28 to have been incorrectly calculated or that the credit is 29 not allowable, the director shall recalculate the credit and 30 notify the claimant and the county auditor of the recalculation 31 or denial and the reasons for it. The director shall not 32 adjust a credit after three years from October 31 of the year 33 in which the claim for the credit was filed. If the credit 34 has been paid, the director shall give notification to the 35 -7- LSB 1464XC (2) 85 md/sc 7/ 13
S.F. _____ claimant, the county treasurer, and the applicable assessor 1 of the recalculation or denial of the credit and the county 2 treasurer shall proceed to collect the tax owed in the same 3 manner as other property taxes due and payable are collected, 4 if the parcel or property unit for which the credit was allowed 5 is still owned by the claimant. If the parcel or property unit 6 for which the credit was allowed is not owned by the claimant, 7 the amount may be recovered from the claimant by assessment in 8 the same manner that income taxes are assessed under sections 9 422.26 and 422.30. The amount of such erroneous credit, when 10 collected, shall be deposited in the fund. 11 2. The claimant or board of supervisors may appeal any 12 decision of the director of revenue to the state board of tax 13 review pursuant to section 421.1, subsection 5. The claimant, 14 the board of supervisors, or the director of revenue may seek 15 judicial review of the action of the state board of tax review 16 in accordance with chapter 17A. 17 Sec. 10. NEW SECTION . 426C.8 False claim —— penalty. 18 A person who makes a false claim for the purpose of obtaining 19 a credit provided for in this chapter or who knowingly receives 20 the credit without being legally entitled to it is guilty of a 21 fraudulent practice. The claim for a credit of such a person 22 shall be disallowed and if the credit has been paid the amount 23 shall be recovered in the manner provided in section 426C.7. 24 In such cases, the director of revenue shall send a notice of 25 disallowance of the credit. 26 Sec. 11. NEW SECTION . 426C.9 Rules. 27 The director of revenue shall prescribe forms, instructions, 28 and rules as necessary, pursuant to chapter 17A, to carry out 29 and effectuate the purposes of this chapter. 30 Sec. 12. IMPLEMENTATION. Notwithstanding the deadline 31 for filing claims established in section 426C.3, for a credit 32 against property taxes due and payable during the fiscal year 33 beginning July 1, 2014, the claim for the credit shall be filed 34 not later than January 15, 2014. 35 -8- LSB 1464XC (2) 85 md/sc 8/ 13
S.F. _____ Sec. 13. APPLICABILITY. This Act applies to property taxes 1 due and payable in fiscal years beginning on or after July 1, 2 2014. 3 EXPLANATION 4 This bill creates a business property tax credit under new 5 Code chapter 426C for property taxes due and payable in fiscal 6 years beginning on or after July 1, 2014. 7 The bill establishes a business property tax credit 8 fund. For the fiscal year beginning July 1, 2014, the 9 bill appropriates from the general fund of the state to the 10 department of revenue for deposit in the fund, $50 million. 11 For the fiscal year beginning July 1, 2015, and each fiscal 12 year thereafter, the bill appropriates from the general fund 13 of the state to the department of revenue for deposit in the 14 fund an amount equal to the total amount appropriated by the 15 general assembly to the fund in the previous fiscal year. In 16 addition, for fiscal years beginning on or after July 1, 2015, 17 the bill appropriates an additional $50 million to the fund 18 if the revenue estimating conference certifies that the total 19 amount of general fund revenues has grown by at least 4 percent 20 as compared to the previous fiscal year. The bill provides, 21 however, that the total appropriation to the fund shall not 22 exceed $250 million in any one fiscal year. Under the bill, 23 interest or earnings on moneys deposited in the fund are 24 credited to the fund, moneys in the fund are not subject to the 25 provisions of Code section 8.33, and moneys in the fund shall 26 not be transferred, used, obligated, appropriated, or otherwise 27 encumbered except as provided in new Code chapter 426C. 28 The bill provides that each person who wishes to claim a 29 business property tax credit shall obtain the appropriate 30 forms from the assessor and file the claim with the assessor. 31 The director of revenue is required to prescribe suitable 32 forms and instructions for such claims, and make such forms 33 and instructions available to the assessors. The assessor 34 is required to remit the claims for credit to the county 35 -9- LSB 1464XC (2) 85 md/sc 9/ 13
S.F. _____ auditor with the assessor’s recommendation for allowance 1 or disallowance. If the assessor recommends disallowance 2 of a claim, the assessor shall submit the reasons for the 3 recommendation, in writing, to the county auditor. The county 4 auditor then forwards the claims to the board of supervisors. 5 The board is required to allow or disallow the claims. If 6 the board of supervisors disallows a claim for a credit, the 7 board of supervisors is required to send written notice, by 8 mail, to the claimant and the notice must state the reasons 9 for disallowing the claim for the credit. Any person whose 10 claim for credit is disallowed may appeal from the action of 11 the board of supervisors to the district court of the county in 12 which the parcel or property unit is located. 13 Claims for the business property tax credit must be filed 14 not later than March 15 preceding the fiscal year during which 15 the property taxes for which the credit is claimed are due 16 and payable. However, the deadline for filing claims against 17 property taxes due and payable in the fiscal year beginning 18 July 1, 2014, is January 15, 2014. 19 Upon the filing of a claim and allowance of a business 20 property tax credit, the credit is allowed on the parcel or 21 property unit for successive years without further filing as 22 long as the parcel or property unit satisfies the requirements 23 for the credit. The owner is required to provide written 24 notice to the assessor when the parcel or property unit ceases 25 to qualify for the credit. The bill requires the assessor to 26 maintain a permanent file of current credits and also specifies 27 certain requirements for parcel or property unit owners, 28 assessors, and county recorders when all or a portion of such 29 parcels or property units are sold, transferred, or ownership 30 otherwise changes. 31 Under the bill, each parcel classified and taxed as 32 commercial property, industrial property, or railway property 33 under Code chapter 434, is eligible for a business property 34 tax credit. A person may claim and receive one credit for 35 -10- LSB 1464XC (2) 85 md/sc 10/ 13
S.F. _____ each eligible parcel unless the parcel is part of a property 1 unit. The bill defines “property unit” to mean contiguous 2 parcels located within the same county, with the same property 3 tax classification, owned by the same person, and operated by 4 that person for a common use and purpose. A person may only 5 claim and receive one tax credit for each property unit. A 6 credit approved for a property unit is allocated to the several 7 parcels within the property unit in the proportion that each 8 parcel’s property tax liability bears to the total property 9 tax liability for the property unit. Only those property 10 units comprised of commercial property, industrial property, 11 or railway property under Code chapter 434 are eligible for a 12 credit. 13 The bill provides that property that is rented or leased to 14 low-income individuals and families as authorized by section 42 15 of the Internal Revenue Code, and that is subject to section 16 42 assessment procedures for the applicable assessment year is 17 not eligible for a business property tax credit under new Code 18 chapter 426C. 19 The bill provides that all claims for credit which have 20 been allowed, the actual value of the applicable parcels and 21 property units that are subject to assessment and taxation, 22 the consolidated levy rates or average consolidated levy rates 23 for such parcels and property units applicable to the fiscal 24 year for which the credit is claimed, and the taxing districts 25 in which each parcel or property unit is located, shall be 26 certified on or before June 30, in each year, by the county 27 auditor to the department of revenue. 28 The bill provides that using the actual value of each parcel 29 or property unit and the consolidated levy rate for each parcel 30 or average consolidated levy rate for each property unit, as 31 certified by the county auditor, the department is required to 32 calculate, for each fiscal year, an initial amount of actual 33 value for use in determining the amount of the credit for each 34 approved parcel or property unit so as to provide the maximum 35 -11- LSB 1464XC (2) 85 md/sc 11/ 13
S.F. _____ possible credit according to the credit formula and limitations 1 in the bill, and to provide a total dollar amount of credits 2 in the fiscal year equal to 98 percent of the moneys in the 3 business property tax credit fund following the deposit of the 4 appropriation for the fiscal year and moneys credited to the 5 fund. 6 The credit for each parcel or property unit for which a 7 claim for a business property tax credit has been approved is 8 calculated using the lesser of the initial amount of actual 9 value determined by the department for the fiscal year and 10 the actual value of the parcel or property unit as certified 11 to the department of revenue. The amount of the credit for 12 each parcel or property unit is the product of the lesser 13 amount of actual value, so determined, times the difference 14 between the assessment limitation percentage applicable to 15 the parcel or property unit under Code section 441.21(5) 16 (commercial, industrial, and railway property tax rollback) and 17 the assessment limitation percentage applicable to residential 18 property under Code section 441.21(4), divided by $1,000, 19 and then multiplied by the consolidated levy rate or average 20 consolidated levy rate per $1,000 of taxable value applicable 21 to the parcel or property unit for the fiscal year for which 22 the credit is claimed. 23 The bill specifies the procedures for the payment of the 24 amount of the business property tax credits to the county 25 treasurers and the resulting apportionment to the applicable 26 taxing districts. The bill also specifies the requirements and 27 procedures for an appeal if a claim for credit is disallowed, 28 specifies the requirements and procedures for an audit of 29 a business property tax credit, and specifies requirements 30 relating to the collection of property taxes due as the result 31 of an incorrectly calculated or improperly approved credit. 32 The bill provides that a person who makes a false claim for 33 the purpose of obtaining a business property tax credit or who 34 knowingly receives the credit without being legally entitled 35 -12- LSB 1464XC (2) 85 md/sc 12/ 13
S.F. _____ to it is guilty of a fraudulent practice and is subject to a 1 criminal penalty. 2 The bill requires the director of revenue to prescribe 3 forms, instructions, and rules as necessary, pursuant to Code 4 chapter 17A, to carry out and effectuate the purposes of new 5 Code chapter 426C. 6 The bill applies to property taxes due and payable in fiscal 7 years beginning on or after July 1, 2014. 8 -13- LSB 1464XC (2) 85 md/sc 13/ 13