House Study Bill 717 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON HEIN) A BILL FOR An Act relating to the liability for recapture taxes imposed 1 on certain property receiving a fruit-tree or forest 2 reservation property tax exemption and including effective 3 date and applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 5108YC (4) 89 md/jh

H.F. _____ Section 1. Section 427C.12, Code 2022, is amended to read 1 as follows: 2 427C.12 Application —— inspection —— continuation of 3 exemption —— recapture of tax. 4 1. It shall be the duty of the assessor to secure the facts 5 relative to fruit-tree and forest reservations by taking the 6 sworn statement, or affirmation, of the owner or owners making 7 application under this chapter ; and to make special report to 8 the county auditor of all reservations made in the county under 9 the provisions of this chapter . 10 2. a. The board of supervisors shall designate the county 11 conservation board or the assessor who shall inspect the area 12 for which an application is filed for a fruit-tree or forest 13 reservation tax exemption before the application is accepted. 14 b. Use of aerial photographs may be substituted for on-site 15 inspection when appropriate. 16 c. The application can only be accepted if it meets the 17 criteria established by the natural resource commission to be a 18 fruit-tree or forest reservation. 19 3. Once the application has been accepted, the area shall 20 continue to receive the tax exemption during each year in which 21 the area is maintained as a fruit-tree or forest reservation 22 without the owner having to refile. 23 4. If the property is sold or transferred, the seller or 24 transferor shall notify the buyer or transferee that all, or 25 part of, the property is in fruit-tree or forest reservation 26 and subject to the recapture tax provisions of this section 27 subsection 5 . If the seller or transferor has actual knowledge 28 that the property is in fruit-tree or forest reservation and 29 fails to notify the buyer or transferee that the property is in 30 fruit-tree or forest reservation and subject to the recapture 31 tax provisions of subsection 5, the buyer or transferee 32 shall not be liable for any recapture tax entered against the 33 property during the applicable period specified in subsection 34 5, paragraph “a” , a lien shall not be entered against the 35 -1- LSB 5108YC (4) 89 md/jh 1/ 3

H.F. _____ property for the recapture tax, and the seller or transferor 1 shall be liable for any such recapture tax. 2 5. a. The tax exemption shall continue to be granted 3 for the remainder of the eight-year period for fruit-tree 4 reservation and for the following years for forest reservation 5 or until the property no longer qualifies as a fruit-tree or 6 forest reservation. 7 b. The area may be inspected each year by the county 8 conservation board or the assessor to determine if the area is 9 maintained as a fruit-tree or forest reservation. 10 6. a. If the area is not maintained or is used for economic 11 gain other than as a fruit-tree reservation during any year of 12 the eight-year exemption period and any year of the following 13 five years or as a forest reservation during any year for which 14 the exemption is granted and any of the five years following 15 those exemption years, the assessor shall assess the property 16 for taxation at its fair market value as of January 1 of that 17 year and in addition the area shall be subject to a recapture 18 tax. However, the area shall not be subject to the recapture 19 tax if the owner, including one possessing under a contract of 20 sale, and the owner’s direct antecedents or descendants have 21 owned the area for more than ten years. 22 b. The tax shall be computed by multiplying the consolidated 23 levy for each of those years, if any, of the five preceding 24 years for which the area received the exemption for fruit-tree 25 or forest reservation times the assessed value of the area that 26 would have been taxed but for the tax exemption. 27 c. This The tax shall be entered against the property on 28 the tax list for the current year and shall constitute a lien 29 against the property in the same manner as a lien for property 30 taxes. The tax when collected shall be apportioned in the 31 manner provided for the apportionment of the property taxes for 32 the applicable tax year. 33 Sec. 2. EFFECTIVE DATE. This Act, being deemed of immediate 34 importance, takes effect upon enactment. 35 -2- LSB 5108YC (4) 89 md/jh 2/ 3

H.F. _____ Sec. 3. APPLICABILITY. This Act applies to sales and 1 transfers occurring on or after the effective date of this Act. 2 EXPLANATION 3 The inclusion of this explanation does not constitute agreement with 4 the explanation’s substance by the members of the general assembly. 5 Under Code section 427C.12 governing fruit-tree reservation 6 and forest reservation property tax exemptions, when a property 7 is part of such a reservation and the property is sold or 8 transferred, the seller is required to notify the buyer 9 that the property is in a fruit-tree or forest reservation 10 and subject to the recapture tax provisions of that Code 11 section. The recapture tax is entered against the property if 12 the property is not maintained or is used for economic gain 13 other than as a fruit-tree reservation during any year of the 14 eight-year exemption period and any year of the following five 15 years or as a forest reservation during any year for which the 16 exemption is granted and any of the five years following those 17 exemption years. 18 This bill provides that if the seller or transferor has 19 actual knowledge that the property is in fruit-tree or forest 20 reservation and fails to notify the buyer or transferee that 21 the property is in fruit-tree or forest reservation and subject 22 to the recapture tax provisions, the buyer or transferee is 23 not liable for any recapture tax entered against the property, 24 a lien shall not be entered against the property for the 25 recapture tax, and the seller or transferor shall be liable for 26 any such recapture tax. 27 The bill takes effect upon enactment and applies to sales and 28 transfers occurring on or after the effective date of the bill. 29 -3- LSB 5108YC (4) 89 md/jh 3/ 3