House File 626 - Introduced HOUSE FILE 626 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HF 21) A BILL FOR An Act relating to revitalization areas by authorizing cities 1 and counties to provide property tax exemptions for certain 2 owner-occupied residential property located in areas 3 previously subjected to lending discrimination and including 4 applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 1168HV (2) 89 md/jh

H.F. 626 Section 1. Section 404.1, Code 2021, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 6. An area that is a federal targeted area, 3 as defined in section 404.3C. 4 Sec. 2. Section 404.2, subsection 2, paragraphs h and i, 5 Code 2021, are amended to read as follows: 6 h. Any tax exemption schedule authorized in section 404.3, 7 subsection 5 , or section 404.3A, 404.3B, or 404.3C, that shall 8 be used in lieu of the schedule set out in section 404.3, 9 subsection 1, 2, 3, or 4 . In the case of a county, the tax 10 schedules used shall only be applicable to property of the type 11 for which the revitalization area is zoned at the time the 12 county designates the area a revitalization area. 13 i. The Unless inapplicable for an area under section 404.3C, 14 the percent increase in actual value requirements that shall 15 be used in lieu of the fifteen and ten percent requirements 16 specified in section 404.3, subsection 8 and in section 404.5 . 17 This percent increase in actual value requirements shall not be 18 greater than that provided in this chapter and shall , except as 19 provided in section 404.3C, be the same requirements applicable 20 to all existing revitalization areas. 21 Sec. 3. Section 404.3, subsections 5, 8, and 9, Code 2021, 22 are amended to read as follows: 23 5. A city or county may adopt a different tax exemption 24 schedule than those allowed in subsection 1, 2, 3, or 4 . The 25 different schedule adopted shall not allow a greater exemption, 26 but may allow a smaller exemption, in a particular year, 27 than allowed in the schedule specified in the corresponding 28 subsection of this section . A different schedule adopted by a 29 city or county shall apply to every revitalization area within 30 the city or county, unless the qualified property is eligible 31 for an exemption pursuant to section 404.3A , or 404.3B , or 32 404.3C, and except in areas of the city or county which have 33 been designated as both urban renewal and urban revitalization 34 areas. In an area designated for both urban renewal and urban 35 -1- LSB 1168HV (2) 89 md/jh 1/ 6

H.F. 626 revitalization, a city or county may adopt a different schedule 1 than has been adopted for revitalization areas which have not 2 been designated as urban renewal areas. 3 8. “Qualified real estate” as used in this chapter and 4 section 419.17 means real property, other than land, which 5 is located in a designated revitalization area and to which 6 improvements have been added, during the time the area was 7 so designated, which have increased the actual value by at 8 least the percent specified in the plan adopted by the city 9 or county pursuant to section 404.2 or if no percent is 10 specified then by at least fifteen percent, or at least ten 11 percent in the case of real property assessed as residential 12 property or which have, in the case of land upon which is 13 located more than one building and not assessed as residential 14 property, increased the actual value of the buildings to 15 which the improvements have been made by at least fifteen 16 percent. For revitalization areas governed by section 17 404.3C, the percent increase in actual value required to be 18 eligible to receive an exemption shall not apply and instead 19 the improvement cost requirement under section 404.3C shall 20 apply. “Qualified real estate” also means land upon which 21 no structure existed at the start of the new construction, 22 which is located in a designated revitalization area and upon 23 which new construction has been added during the time the area 24 was so designated. “Improvements” as used in this chapter 25 and section 419.17 includes rehabilitation and additions to 26 existing structures as well as new construction on vacant land 27 or on land with existing structures. However, new construction 28 on land assessed as agricultural property shall not qualify as 29 “improvements” for purposes of this chapter and section 419.17 30 unless the governing body of the city or county has presented 31 justification at a public hearing held pursuant to section 32 404.2 for the revitalization of land assessed as agricultural 33 property by means of new construction. Such justification 34 shall demonstrate, in addition to the other requirements of 35 -2- LSB 1168HV (2) 89 md/jh 2/ 6

H.F. 626 this chapter and section 419.17 , that the improvements on 1 land assessed as agricultural land will utilize the minimum 2 amount of agricultural land necessary to accomplish the 3 revitalization of the other classes of property within the 4 urban revitalization area. However, if such construction, 5 rehabilitation or additions were begun prior to January 29, 6 1979, or one year prior to the adoption by the city or county 7 of a plan of urban revitalization pursuant to section 404.2 , 8 whichever occurs later, the value added by such construction, 9 rehabilitation or additions shall not constitute an increase in 10 value for purposes of qualifying for the exemptions listed in 11 this section . “Actual value added by the improvements” as used 12 in this chapter and section 419.17 means the actual value added 13 as of the first year for which the exemption was received. 14 9. The fifteen and ten percent increase in actual value 15 requirements specified in subsection 8 shall apply to every 16 revitalization area within a city or county unless different 17 percent increases in actual value requirements are required by 18 or made inapplicable under this chapter or are adopted in the 19 city or county plan as provided in section 404.2 . However, a 20 city or county shall not adopt different requirements unless 21 every revitalization area within the city or county , other 22 than those areas governed by section 404.3C, has the same 23 requirements and the requirements do not provide for a greater 24 percent increase than specified in subsection 8 . 25 Sec. 4. NEW SECTION . 404.3C Federal targeted area 26 exemption. 27 1. a. Notwithstanding the schedules otherwise provided 28 for in this chapter, a city or county may provide that all 29 qualified real estate that is owner-occupied residential 30 property containing two or fewer dwelling units and located 31 in a revitalization area that is a federal targeted area is 32 eligible to receive an exemption from taxation based on the 33 schedule set forth in subsection 2. 34 b. In lieu of the percent increase in actual value 35 -3- LSB 1168HV (2) 89 md/jh 3/ 6

H.F. 626 requirements otherwise applicable for qualified real estate 1 under this chapter, in order to be qualified real estate for 2 the purposes of this section, the owner of the real property 3 must add improvements to the property the cost of which equals 4 or exceeds thirty percent of the actual value of the property 5 as of the date the area was designated. 6 2. All qualified real estate described in subsection 1 is 7 eligible to receive an exemption from taxation on the total 8 actual value of the qualified real estate. The exemption is 9 for a period of fifteen years. An exception under this section 10 shall be allowed for the authorized exemption period as long as 11 the qualified real estate is legally or equitably owned by the 12 owner who added the improvements to the property or the owner’s 13 spouse and is occupied by the owner or the owner’s spouse. The 14 amount of the exemption is equal to a percent of the actual 15 value of the qualified real estate, determined as follows: 16 a. For the first year, one hundred percent. 17 b. For the second year, ninety-four percent. 18 c. For the third year, eighty-eight percent. 19 d. For the fourth year, eighty-two percent. 20 e. For the fifth year, seventy-six percent. 21 f. For the sixth year, seventy percent. 22 g. For the seventh year, sixty-four percent. 23 h. For the eighth year, fifty-eight percent. 24 i. For the ninth year, fifty-two percent. 25 j. For the tenth year, forty-six percent. 26 k. For the eleventh year, forty percent. 27 l. For the twelfth year, thirty-four percent. 28 m. For the thirteenth year, twenty-eight percent. 29 n. For the fourteenth year, twenty-two percent. 30 o. For the fifteenth year, sixteen percent. 31 3. For purposes of this section, “federal targeted area” 32 means an area that has previously been identified by the 33 home owners’ loan corporation or similar entity as less 34 desirable, declining, hazardous, or risky for mortgage lending 35 -4- LSB 1168HV (2) 89 md/jh 4/ 6

H.F. 626 in accordance with or as the result of implementation of the 1 National Housing Act, Pub. L. No. 73–479, 48 Stat. 1246, the 2 United States Housing Act of 1937, Pub. L. No. 75–412, 50 3 Stat. 888, or a subsequent enactment of Congress or successor 4 provision of law prior to enactment of Title VIII of the Civil 5 Rights Act of 1968, commonly referred to as the Fair Housing 6 Act of 1968. 7 Sec. 5. APPLICABILITY. This Act applies to revitalization 8 areas established on or after July 1, 2021. 9 EXPLANATION 10 The inclusion of this explanation does not constitute agreement with 11 the explanation’s substance by the members of the general assembly. 12 Code chapter 404 authorizes a city to designate an area 13 of the city, or a county to designate an area of the county 14 outside the boundaries of a city, as a revitalization area, 15 if that area meets certain conditions related to the state 16 of the property or is appropriate for public improvements or 17 development. As the result of such designations, qualified 18 real estate within the revitalization area is eligible to 19 receive a property tax exemption for a percentage of the actual 20 value added by improvements to the property. Under Code 21 chapter 404, qualified real estate must meet certain thresholds 22 for the amount of actual value added by the improvements to 23 receive an exemption under one of several exemption schedules 24 with varying durations and percentages of exemption. 25 This bill provides an additional option for a city or county 26 to provide an exemption to a revitalization area established 27 by ordinance that is a “federal targeted area”. The bill 28 defines “federal targeted area” to mean an area that has 29 previously been identified by the home owners’ loan corporation 30 or similar entity as less desirable, declining, hazardous, or 31 risky for mortgage lending in accordance with or as the result 32 of implementation of the National Housing Act (1934), the 33 United States Housing Act of 1937, or a subsequent enactment of 34 Congress or successor provision of law prior to enactment of 35 -5- LSB 1168HV (2) 89 md/jh 5/ 6

H.F. 626 the Fair Housing Act of 1968. 1 All qualified real estate that is owner-occupied residential 2 property containing two or fewer dwelling units and that is 3 in a revitalization area that is a federal targeted area is 4 eligible to receive an exemption from taxation on the total 5 actual value of the qualified real estate. The exemption 6 is for a period of 15 years, beginning at 100 percent and 7 decreasing by 6 percent each year until expiration of the 8 15-year period. 9 In lieu of the percent increase in actual value requirements 10 otherwise applicable for qualified real estate under Code 11 chapter 404, in order to be qualified real estate for the 12 purposes of the bill, the owner of the real property must 13 add improvements to the property the cost of which equals or 14 exceeds 30 percent of the actual value of the property as of 15 the date the area was designated. 16 An exemption under the bill is allowed for the authorized 17 exemption period as long as the qualified real estate 18 is legally or equitably owned by the owner who added the 19 improvements to the property or the owner’s spouse and is 20 occupied by the owner or the owner’s spouse. 21 The bill applies to revitalization areas established on or 22 after July 1, 2021. 23 -6- LSB 1168HV (2) 89 md/jh 6/ 6