House Study Bill 73 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON STATE GOVERNMENT BILL BY CHAIRPERSON VANDER LINDEN) A BILL FOR An Act providing for the future repeal of the state board of 1 tax review, providing for appeals to the director of revenue 2 for certain tax matters and modifying the powers and duties 3 of the director of revenue, and including effective date and 4 applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 1383YC (4) 86 mm/sc

H.F. _____ DIVISION I 1 FUTURE REPEAL OF 2 STATE BOARD OF TAX REVIEW —— TRANSITION 3 Section 1. Section 421.1, Code 2015, is amended by adding 4 the following new subsection: 5 NEW SUBSECTION . 6. Future repeal. 6 a. Notwithstanding subsection 5 or any other provision of 7 law to the contrary, a party shall not appeal to the state 8 board, nor shall the state board accept for review, any 9 decision, order, directive, or assessment of the director of 10 revenue or the department on or after the effective date of 11 this division of this Act. 12 b. This section is repealed upon the occurrence of one of 13 the following, whichever is earlier: 14 (1) The final disposition by the state board of all cases 15 pending before the board on the effective date of this division 16 of this Act. The chairperson of the board shall notify the 17 Iowa Code editor upon the occurrence of this condition. 18 (2) July 1, 2016. 19 Sec. 2. EFFECTIVE UPON ENACTMENT. This division of this 20 Act, being deemed of immediate importance, takes effect upon 21 enactment. 22 DIVISION II 23 CORRESPONDING CHANGES 24 Sec. 3. Section 68B.35, subsection 2, paragraph e, Code 25 2015, is amended to read as follows: 26 e. Members of the state banking council, the ethics and 27 campaign disclosure board, the credit union review board, the 28 economic development authority, the employment appeal board, 29 the environmental protection commission, the health facilities 30 council, the Iowa finance authority, the Iowa public employees’ 31 retirement system investment board, the board of the Iowa 32 lottery authority, the natural resource commission, the board 33 of parole, the petroleum underground storage tank fund board, 34 the public employment relations board, the state racing and 35 -1- LSB 1383YC (4) 86 mm/sc 1/ 12

H.F. _____ gaming commission, the state board of regents, the tax review 1 board, the transportation commission, the office of consumer 2 advocate, the utilities board, the Iowa telecommunications 3 and technology commission, and any full-time members of other 4 boards and commissions as defined under section 7E.4 who 5 receive an annual salary for their service on the board or 6 commission. The Iowa ethics and campaign disclosure board 7 shall conduct an annual review to determine if members of any 8 other board, commission, or authority should file a statement 9 and shall require the filing of a statement pursuant to rules 10 adopted pursuant to chapter 17A . 11 Sec. 4. Section 421.17, subsection 19, paragraph b, Code 12 2015, is amended to read as follows: 13 b. (1) The provisions of sections 17A.10 to 17A.18A 14 relating to contested cases shall not apply to any matters 15 involving the equalization of valuations of classes of property 16 as authorized by this chapter and chapter 441 . 17 (2) (a) This exemption from the provisions of sections 18 17A.10 to 17A.18A shall not apply to a hearing before the state 19 board of tax review. 20 (b) This subparagraph is repealed July 1, 2016. 21 (3) This exemption from the provisions of sections 17A.10 22 to 17A.18A shall not apply to a hearing before the director as 23 provided in section 441.49, subsection 5. 24 Sec. 5. Section 421.60, subsection 4, paragraph a, 25 unnumbered paragraph 1, Code 2015, is amended to read as 26 follows: 27 A prevailing taxpayer in an administrative hearing or a 28 court proceeding related to the determination, collection, or 29 refund of a tax, penalty, or interest may be awarded reasonable 30 litigation costs by the department , state board of tax review, 31 or a court , that are incurred subsequent to the issuance of 32 the notice of assessment or denial of claim for refund in the 33 proceeding, based upon the following: 34 Sec. 6. Section 425.7, subsection 3, Code 2015, is amended 35 -2- LSB 1383YC (4) 86 mm/sc 2/ 12

H.F. _____ to read as follows: 1 3. a. If the director of revenue determines that a 2 claim for homestead credit has been allowed by the board of 3 supervisors which is not justifiable under the law and not 4 substantiated by proper facts, the director may, at any time 5 within thirty-six months from July 1 of the year in which 6 the claim is allowed, set aside the allowance. Notice of 7 the disallowance shall be given to the county auditor of the 8 county in which the claim has been improperly granted and a 9 written notice of the disallowance shall also be addressed 10 to the claimant at the claimant’s last known address. The 11 claimant or board of supervisors may appeal to the state board 12 of tax review pursuant to section 421.1, subsection 5 director 13 of revenue within thirty days from the date of the notice of 14 disallowance. The director shall grant a hearing and if, upon 15 the hearing, the director determines that the disallowance was 16 incorrect, the director shall set aside the disallowance. The 17 director shall notify the claimant and the board of supervisors 18 of the result of the hearing . The claimant or the board of 19 supervisors may seek judicial review of the action of the state 20 board of tax review director of revenue in accordance with 21 chapter 17A . 22 b. If a claim is disallowed by the director of revenue 23 and not appealed to the state board of tax review director of 24 revenue or appealed to the state board of tax review director 25 of revenue and thereafter upheld upon final resolution, 26 including any judicial review, any amounts of credits allowed 27 and paid from the homestead credit fund including the penalty, 28 if any, become a lien upon the property on which credit was 29 originally granted, if still in the hands of the claimant, 30 and not in the hands of a bona fide purchaser, and any amount 31 so erroneously paid including the penalty, if any, shall be 32 collected by the county treasurer in the same manner as other 33 taxes and the collections shall be returned to the department 34 of revenue and credited to the homestead credit fund. The 35 -3- LSB 1383YC (4) 86 mm/sc 3/ 12

H.F. _____ director of revenue may institute legal proceedings against 1 a homestead credit claimant for the collection of payments 2 made on disallowed credits and the penalty, if any. If a 3 person makes a false claim or affidavit with fraudulent intent 4 to obtain the homestead credit, the person is guilty of a 5 fraudulent practice and the claim shall be disallowed in full. 6 If the credit has been paid, the amount of the credit plus a 7 penalty equal to twenty-five percent of the amount of credit 8 plus interest, at the rate in effect under section 421.7 , 9 from the time of payment shall be collected by the county 10 treasurer in the same manner as other property taxes, penalty, 11 and interest are collected and when collected shall be paid to 12 the director of revenue. If a homestead credit is disallowed 13 and the claimant failed to give written notice to the assessor 14 as required by section 425.2 when the property ceased to be 15 used as a homestead by the claimant, a civil penalty equal to 16 five percent of the amount of the disallowed credit is assessed 17 against the claimant. 18 Sec. 7. Section 425.27, Code 2015, is amended to read as 19 follows: 20 425.27 Audit —— recalculation or denial —— appeals . 21 If on the audit of a claim for credit or reimbursement under 22 this division , the director determines the amount of the claim 23 to have been incorrectly calculated or that the claim is not 24 allowable, the director shall recalculate the claim and notify 25 the claimant of the recalculation or denial and the reasons 26 for it. The recalculation of the claim shall be final unless 27 appealed to the director within thirty days from the date of 28 notice of recalculation or denial. The director shall grant a 29 hearing, and upon hearing determine the correct claim, if any, 30 and notify the claimant of the decision by mail. The director 31 shall not adjust a claim after three years from October 31 32 of the year in which the claim was filed. If the claim for 33 reimbursement has been paid, the amount may be recovered by 34 assessment in the same manner that income taxes are assessed 35 -4- LSB 1383YC (4) 86 mm/sc 4/ 12

H.F. _____ under sections 422.26 and 422.30 . If the claim for credit has 1 been paid, the director shall give notification to the claimant 2 and the county treasurer of the recalculation or denial of the 3 claim and the county treasurer shall proceed to collect the 4 tax owed in the same manner as other property taxes due and 5 payable are collected, if the property on which the credit was 6 granted is still owned by the claimant, and repay the amount 7 to the director upon collection. If the property on which the 8 credit was granted is not owned by the claimant, the amount 9 may be recovered from the claimant by assessment in the same 10 manner that income taxes are assessed under sections 422.26 11 and 422.30 . The recalculation of the claim decision of the 12 director shall be final unless appealed as provided in section 13 425.31 . Section 422.70 is applicable with respect to this 14 division . 15 Sec. 8. Section 425.31, Code 2015, is amended to read as 16 follows: 17 425.31 Appeals. 18 Any person aggrieved by an act or decision of the director 19 of revenue or the department of revenue under this division 20 shall have the same rights of appeal and review as provided 21 in sections 421.1 and section 423.38 and the rules of the 22 department of revenue. 23 Sec. 9. Section 426A.6, Code 2015, is amended to read as 24 follows: 25 426A.6 Setting aside allowance. 26 If the director of revenue determines that a claim for 27 military service tax exemption has been allowed by a board of 28 supervisors which is not justifiable under the law and not 29 substantiated by proper facts, the director may, at any time 30 within thirty-six months from July 1 of the year in which the 31 claim is allowed, set aside the allowance. Notice of the 32 disallowance shall be given to the county auditor of the county 33 in which the claim has been improperly granted and a written 34 notice of the disallowance shall also be addressed to the 35 -5- LSB 1383YC (4) 86 mm/sc 5/ 12

H.F. _____ claimant at the claimant’s last known address. The claimant 1 or the board of supervisors may appeal to the state board of 2 tax review pursuant to section 421.1, subsection 5 director 3 of revenue within thirty days from the date of the notice of 4 disallowance. The director shall grant a hearing and if, upon 5 the hearing, the director determines that the disallowance was 6 incorrect, the director shall set aside the disallowance. The 7 director shall notify the claimant and the board of supervisors 8 of the result of the hearing . The claimant or the board of 9 supervisors may seek judicial review of the action of the 10 state board of tax review director of revenue in accordance 11 with chapter 17A . If a claim is disallowed by the director 12 of revenue and not appealed to the state board of tax review 13 director of revenue or appealed to the state board of tax 14 review director of revenue and thereafter upheld upon final 15 resolution, including judicial review, the credits allowed and 16 paid from the general fund of the state become a lien upon the 17 property on which the credit was originally granted, if still 18 in the hands of the claimant and not in the hands of a bona fide 19 purchaser, the amount so erroneously paid shall be collected 20 by the county treasurer in the same manner as other taxes, and 21 the collections shall be returned to the department of revenue 22 and credited to the general fund of the state. The director 23 of revenue may institute legal proceedings against a military 24 service tax exemption claimant for the collection of payments 25 made on disallowed exemptions. 26 Sec. 10. Section 426C.7, subsection 2, Code 2015, is amended 27 to read as follows: 28 2. The claimant or board of supervisors may appeal any 29 decision of the director of revenue to the state board of tax 30 review pursuant to section 421.1, subsection 5 director of 31 revenue within thirty days from the date of the notice of the 32 recalculation or denial provided to the claimant and county 33 auditor. The director shall grant a hearing, and upon hearing 34 the director shall determine the correct credit, if any, and 35 -6- LSB 1383YC (4) 86 mm/sc 6/ 12

H.F. _____ notify the claimant, board of supervisors, county auditor, and 1 county treasurer of the decision by mail . The claimant , or 2 the board of supervisors , or the director of revenue may seek 3 judicial review of the action of the state board of tax review 4 director of revenue in accordance with chapter 17A . 5 Sec. 11. Section 429.1, Code 2015, is amended to read as 6 follows: 7 429.1 Notice of assessment. 8 The director of revenue shall, at the time of making the 9 assessment of property as provided in chapters 428 , 433 , 434 , 10 437 , and 438 , inform the person assessed, by mail, of the 11 valuation put upon the taxpayer’s property. The notice shall 12 contain a notice of the taxpayer’s right of appeal to the state 13 board of tax review director of revenue as provided in section 14 429.2 . 15 Sec. 12. Section 429.2, Code 2015, is amended to read as 16 follows: 17 429.2 Appeal. 18 1. Notwithstanding the provisions of chapter 17A , the The 19 taxpayer shall have thirty days from the date of the notice of 20 assessment to appeal the assessment to the state board of tax 21 review director of revenue . Thereafter, the proceedings before 22 the state board of tax review director of revenue shall conform 23 to the provisions of subsection 2 , section 421.1, subsection 24 5 , and chapter 17A . 25 2. The following rules shall apply to the appeal proceedings 26 in addition to those stated in section 421.1, subsection 5 , and 27 chapter 17A : 28 a. The department’s assessment shall be presumed correct 29 and the burden of proof shall be on the taxpayer with respect 30 to all issues raised on appeal, including any challenge of the 31 director’s valuation. 32 b. The burden of proof must be carried by a preponderance of 33 the evidence. 34 c. The board director of revenue shall consider all evidence 35 -7- LSB 1383YC (4) 86 mm/sc 7/ 12

H.F. _____ and witnesses offered by the taxpayer and the department , 1 including , but not limited to , evidence relating to the proper 2 valuation of the property involved. 3 d. The board director of revenue shall make an independent 4 determination of the value of the property based solely upon 5 its the director’s review of the evidence presented. 6 e. Upon the request of a party , the board director of 7 revenue shall set the case for hearing within one year of 8 the date of the request, unless for good cause shown, by 9 application and ruling thereon after notice and not ex parte, 10 the hearing date is continued by the board director of revenue . 11 Sec. 13. Section 429.3, Code 2015, is amended to read as 12 follows: 13 429.3 Judicial review. 14 Judicial review of the action of the state board of tax 15 review director of revenue may be sought by the taxpayer or the 16 director of revenue in accordance with the terms of chapter 17 17A . 18 Sec. 14. Section 441.21, subsection 1, paragraph i, 19 subparagraphs (2) and (5), Code 2015, are amended to read as 20 follows: 21 (2) The conference board shall respond to the department 22 within thirty days of receipt of the notice of noncompliance. 23 The conference board may respond to the notice by asserting 24 that the assessor is in compliance with the rules, guidelines, 25 and forms of the department or by informing the department that 26 the conference board intends to submit a plan of action to 27 achieve compliance. If the conference board responds to the 28 notification by asserting that the assessor is in compliance, a 29 hearing before the director of revenue shall be scheduled on 30 the matter. Judicial review of the decision of the director 31 of revenue may be sought by the conference board in accordance 32 with chapter 17A. 33 (5) If the conference board disputes the determination 34 of the department, the chairperson of the conference board 35 -8- LSB 1383YC (4) 86 mm/sc 8/ 12

H.F. _____ may appeal the determination to the state board of tax 1 review director of revenue within thirty days from the date 2 of the notice that the assessor remains in noncompliance. 3 The director of revenue shall grant a hearing, and upon 4 hearing shall determine the correctness of the department’s 5 determination of noncompliance. The director of revenue shall 6 notify the conference board of the decision by mail. Judicial 7 review of the decision of the director of revenue may be sought 8 by the chairperson of the conference board in accordance with 9 chapter 17A . 10 Sec. 15. Section 441.49, subsection 5, Code 2015, is amended 11 to read as follows: 12 5. Not later than ten days after the date the final 13 equalization order is issued, the city or county officials 14 of the affected county or assessing jurisdiction may appeal 15 the final equalization order to the state board of tax 16 review director of revenue . The appeal shall not delay the 17 implementation of the equalization orders. The director shall 18 grant a hearing, and upon hearing the director shall determine 19 the correctness of the final equalization order, and notify 20 city or county officials of the affected county or assessing 21 jurisdiction of the decision by mail. Judicial review of the 22 decision of the director of revenue may be sought by the city 23 or county officials in accordance with chapter 17A. 24 Sec. 16. EFFECTIVE DATES. 25 1. Except as provided in subsection 2, this division of this 26 Act, being deemed of immediate importance, takes effect upon 27 enactment. 28 2. The following provisions of this division of this Act 29 take effect July 1, 2016: 30 a. The section of this Act amending section 68B.35. 31 b. The section of this Act amending section 421.60. 32 EXPLANATION 33 The inclusion of this explanation does not constitute agreement with 34 the explanation’s substance by the members of the general assembly. 35 -9- LSB 1383YC (4) 86 mm/sc 9/ 12

H.F. _____ This bill provides for the future repeal of the state board 1 of tax review, appeals to the director of revenue (director) 2 for certain tax matters, and modifies the powers and duties of 3 the director. 4 DIVISION I —— FUTURE REPEAL OF STATE BOARD OF TAX REVIEW 5 —— TRANSITION. Division I provides for the future repeal of 6 the state board of tax review. The state board of tax review 7 (board) is an independent, bipartisan board consisting of 8 three members appointed by the governor and confirmed by the 9 senate. One of the powers and duties of the board is to review 10 final decisions of the director, including but not limited 11 to final decisions issued by the director in a contested 12 case proceeding. The board also has original jurisdiction 13 to review the director’s assessments of centrally assessed 14 property, which means the taxpayer appeals the assessment of 15 the director directly to the board. An appeal must be made to 16 the board within 30 days of a director’s decision in order to 17 be considered timely. Both the taxpayer and the director have 18 the right to appeal a decision of the board to district court. 19 The division prohibits the board from accepting cases for 20 review, and prohibits a taxpayer from filing an appeal with the 21 board, on or after the effective date of the division. The 22 board is repealed and dissolved on the date that it disposes of 23 all pending cases or on July 1, 2016, whichever occurs earlier. 24 The division takes effect immediately upon enactment. 25 DIVISION II —— CORRESPONDING CHANGES. Division II makes 26 corresponding changes to Code sections that reference the board 27 and provides for appeals to the director for certain actions 28 that are appealed directly to the board under current law. 29 The division removes members of the board from the 30 requirement to file certain financial statements with the 31 ethics and campaign disclosure board. The division also 32 strikes references to the board from the ability of a 33 prevailing taxpayer to be awarded litigation costs in certain 34 proceedings. These provisions take effect July 1, 2016. 35 -10- LSB 1383YC (4) 86 mm/sc 10/ 12

H.F. _____ The division amends the procedures for appealing the 1 director’s disallowance, recalculation, or denial of a 2 homestead property tax credit, property tax credit or rent 3 reimbursement for elderly and disabled, military service 4 property tax exemption, or business property tax credit. 5 Current law provides that these decisions may be appealed to 6 the board. The division provides that these decisions may 7 be appealed to the director within 30 days of the notice of 8 disallowance, recalculation, or denial. If such an appeal is 9 made, the director is required to grant a hearing and determine 10 the correctness of the disallowance, recalculation, or denial. 11 The director’s decisions are subject to judicial review. 12 The division amends procedures and rules for appealing the 13 director’s assessment of telegraph and telephone companies 14 (Code chapter 433), railway companies (Code chapter 434), 15 electric transmission line companies (Code chapter 437), 16 pipeline companies (Code chapter 438), and certain other 17 property assessed by the director (Code chapter 428). Current 18 law provides that these tax assessments shall be appealed 19 directly to the board, and provides for certain additional 20 rules that apply to proceedings before the board. The division 21 provides that these tax assessments shall be appealed to the 22 director and provides that the existing additional rules 23 shall apply to appeal proceedings before the director. The 24 director’s decisions are subject to judicial review. 25 The division specifies that a city or county conference 26 board may seek judicial review of the decision of the director 27 following a hearing to determine a city or county assessor’s 28 noncompliance with the rules for valuation of property. 29 The division also amends the procedures for appealing a 30 determination by the department of revenue that an assessor 31 remains in noncompliance following a plan of action by a 32 conference board to achieve compliance. Current law provides 33 that such a determination may be appealed to the board. The 34 division provides that the decision may be appealed to the 35 -11- LSB 1383YC (4) 86 mm/sc 11/ 12

H.F. _____ director within 30 days of the notice of noncompliance. The 1 director is required to grant a hearing and determine the 2 correctness of the noncompliance determination. Judicial 3 review may be sought by the chairperson of the conference 4 board. 5 The division amends the procedures for appealing a final 6 equalization order of the director. Current law provides 7 that such orders may be appealed to the board. The division 8 provides that these orders may be appealed to the director. 9 The director is required to grant a hearing and determine the 10 correctness of the final equalization order. Judicial review 11 of the director’s decision may be sought by the city or county 12 officials. 13 The division also amends the duties and powers of the 14 director with regard to the appeal of a final equalization 15 order. Current law provides that certain rules relating to 16 contested case proceedings in Code chapter 17A (administrative 17 procedures Act) do not apply to matters involving the 18 equalization of property, except in a hearing before the board. 19 The division provides that the contested case proceeding rules 20 will apply in a hearing before the director from an appeal of a 21 final equalization order, and provides for the future repeal on 22 July 1, 2016, of the reference to the board’s exemption from 23 those rules. 24 Except as otherwise provided in the division, the division 25 takes effect immediately upon enactment. 26 -12- LSB 1383YC (4) 86 mm/sc 12/ 12