House File 2223 - Introduced HOUSE FILE 2223 BY JACOBY , B. MEYER , LEVIN , WILBURN , WICHTENDAHL , McBURNEY , BAGNIEWSKI , MATSON , OLSON , GOSA , BROWN-POWERS , EHLERT , COOLING , GAINES , WILSON , KRESSIG , and GJERDE A BILL FOR An Act relating to local and state government finances by 1 modifying provisions relating to homestead property tax 2 credits, providing a residential property tax rebate, 3 modifying provisions relating to retirement systems, making 4 appropriations, and including applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5443YH (10) 91 md/jh

H.F. 2223 DIVISION I 1 ADDITIONAL HOMESTEAD PROPERTY TAX CREDIT 2 Section 1. Section 425.17, subsection 2, paragraph a, Code 3 2026, is amended by adding the following new subparagraph: 4 NEW SUBPARAGRAPH . (4) A person filing a claim for credit 5 under this subchapter who has attained the age of eighteen 6 years on or before December 31 of the base year, is domiciled 7 in this state at the time the claim is filed or at the time 8 of the person’s death in the case of a claim filed by the 9 executor or administrator of the claimant’s estate, and 10 if the homestead’s actual value did not increase for the 11 applicable assessment year as the result of new construction, 12 improvements, or renovations to the property, beyond necessary 13 repairs. 14 Sec. 2. Section 425.23, subsection 1, Code 2026, is amended 15 by adding the following new paragraph: 16 NEW PARAGRAPH . d. The tentative credit for a claimant 17 described in section 425.17, subsection 2, paragraph “a” , 18 subparagraph (4), shall be the difference between the actual 19 amount of property taxes due on the homestead during the 20 fiscal year next following the base year minus one hundred 21 four percent of the actual amount of property taxes due on the 22 homestead during the fiscal year immediately preceding such 23 fiscal year, but not less than zero, if the property taxes due 24 on the homestead for both such fiscal years were calculated on 25 an assessed valuation that was not a partial assessment. 26 Sec. 3. IMPLEMENTATION OF ACT. Section 25B.7 shall not 27 apply to this division of this Act. 28 Sec. 4. APPLICABILITY. This division of this Act applies 29 to property taxes due and payable in fiscal years beginning on 30 or after July 1, 2027. 31 DIVISION II 32 HOMESTEAD CREDIT AMOUNT 33 Sec. 5. Section 425.1, subsection 2, Code 2026, is amended 34 to read as follows: 35 -1- LSB 5443YH (10) 91 md/jh 1/ 12

H.F. 2223 2. The homestead credit fund shall be apportioned each 1 year so as to give a credit against the tax on each eligible 2 homestead in the state in an amount equal to the actual levy on 3 the first four thousand eight hundred fifty fourteen thousand 4 five hundred fifty dollars of actual value for each homestead. 5 Sec. 6. APPLICABILITY. This division of this Act applies 6 to property taxes due and payable in fiscal years beginning on 7 or after July 1, 2027. 8 DIVISION III 9 ELDERLY ADDITIONAL HOMESTEAD PROPERTY TAX CREDIT 10 Sec. 7. Section 25B.7, subsection 2, paragraph b, Code 2026, 11 is amended to read as follows: 12 b. Low-income property tax credit and elderly and disabled 13 property tax credit pursuant to sections 425.16 through 425.40 , 14 subject to the limitation of section 425.39, subsection 1 , 15 paragraph “b” . 16 Sec. 8. Section 425.17, subsection 2, paragraph a, Code 17 2026, is amended to read as follows: 18 a. “Claimant” means any of the following: 19 (1) A person filing a claim for credit under this subchapter 20 who has attained the age of sixty-five years but who has 21 not attained the age of seventy years on or before December 22 31 of the base year, a person filing a claim for credit or 23 reimbursement under this subchapter who is totally disabled 24 and was totally disabled on or before December 31 of the base 25 year, or a person filing a claim for reimbursement under this 26 subchapter who has attained the age of sixty-five years on or 27 before December 31 of the base year and who is domiciled in 28 this state at the time the claim is filed or at the time of the 29 person’s death in the case of a claim filed by the executor or 30 administrator of the claimant’s estate. 31 (2) A person filing a claim for credit or reimbursement 32 under this subchapter who has attained the age of twenty-three 33 years on or before December 31 of the base year or was a head 34 of household on December 31 of the base year, as defined in 35 -2- LSB 5443YH (10) 91 md/jh 2/ 12

H.F. 2223 the Internal Revenue Code, but has not attained the age or 1 disability status described in subparagraph (1) or the age 2 status and eligibility criteria of subparagraph (3), and is 3 domiciled in this state at the time the claim is filed or at the 4 time of the person’s death in the case of a claim filed by the 5 executor or administrator of the claimant’s estate, and was not 6 claimed as a dependent on any other person’s tax return for the 7 base year. 8 (3) A person filing a claim for credit under this subchapter 9 who has attained the age of seventy sixty-five years on or 10 before December 31 of the base year , who has a household income 11 of less than two hundred fifty percent of the federal poverty 12 level, as defined by the most recently revised poverty income 13 guidelines published by the United States department of health 14 and human services, and is domiciled in this state at the time 15 the claim is filed or at the time of the person’s death in the 16 case of a claim filed by the executor or administrator of the 17 claimant’s estate. 18 Sec. 9. Section 425.39, subsection 1, Code 2026, is amended 19 to read as follows: 20 1. a. The elderly and disabled property tax credit fund is 21 created. There is appropriated annually from the general fund 22 of the state to the department of revenue to be credited to the 23 elderly and disabled property tax credit fund, from funds not 24 otherwise appropriated, an amount sufficient to implement this 25 subchapter for credits for property taxes due for claimants 26 described in section 425.17, subsection 2 , paragraph “a” , 27 subparagraphs subparagraph (1) and (3), subject to paragraph 28 “b” . There is appropriated annually from the taxpayer relief 29 fund under section 8.57E to the department of revenue to be 30 credited to the elderly and disabled property tax credit fund, 31 from funds not otherwise appropriated, an amount sufficient 32 to implement this subchapter for credits for property taxes 33 due for claimants described in section 425.17, subsection 2, 34 paragraph “a” , subparagraph (3). 35 -3- LSB 5443YH (10) 91 md/jh 3/ 12

H.F. 2223 b. Regardless of the amount of the credit determined under 1 section 425.23, subsection 1 , paragraph “c” , the amount paid by 2 the director of revenue to each county treasurer for credits 3 for claimants described under section 425.17, subsection 2 , 4 paragraph “a” , subparagraph (3), shall not exceed the amount 5 calculated for the claimant under section 425.23, subsection 1 , 6 paragraph “c” , subparagraph (1), and section 25B.7, subsection 7 1 , shall not apply to the amount of the credit in excess of the 8 amount paid by the director of revenue. 9 Sec. 10. APPLICABILITY. The section of this division 10 of this Act amending section 425.17 applies to claims under 11 chapter 425, subchapter II, filed on or after January 1, 2027. 12 DIVISION IV 13 RESIDENTIAL PROPERTY TAX REBATE 14 Sec. 11. Section 8.57E, subsection 2, paragraph a, Code 15 2026, is amended to read as follows: 16 a. Except as otherwise provided in this section , moneys 17 in the taxpayer relief fund shall only be used pursuant to 18 appropriations or transfers made by the general assembly for 19 tax relief , or reductions in income tax rates , or rebates under 20 section 425B.1 . 21 Sec. 12. NEW SECTION . 425B.1 Residential rebate —— fund 22 —— appropriation. 23 1. As used in this section, “eligibility period” means each 24 fiscal year commencing with the fiscal year beginning July 1, 25 2026, but before the fiscal year beginning July 1, 2028. 26 2. a. A residential rebate fund is created within the 27 state treasury under the control of the department of revenue. 28 For each fiscal year in the eligibility period, there is 29 appropriated from the taxpayer relief fund under section 8.57E 30 to the department of revenue to be credited to the residential 31 rebate fund, an amount sufficient to implement this chapter for 32 the applicable fiscal year. The department of revenue shall 33 determine the annual appropriation amount. 34 b. Moneys in fund are to be used during the eligibility 35 -4- LSB 5443YH (10) 91 md/jh 4/ 12

H.F. 2223 period to provide residential rebate payments annually to 1 qualified persons as described in this section. 2 3. a. A person owning a homestead qualifies to claim 3 a residential rebate in the amount of one thousand dollars 4 for each fiscal year of the eligibility period the person 5 claimed the homestead credit under chapter 425, in the previous 6 fiscal year. Only one rebate may be claimed for a particular 7 homestead per fiscal year. 8 b. The department shall use homestead property tax credit 9 records from county treasurers to identify and pay residential 10 rebates to qualified owners under this subsection. 11 4. a. A person renting a residence qualifies to claim a 12 residential rebate in the amount of five hundred dollars if the 13 residence is the person’s primary residence. Not more than two 14 rebates may be claimed for a particular rented residence per 15 fiscal year and not more than one rebate may be claimed per 16 familial household per fiscal year. 17 b. A person who wishes to qualify for the residential 18 rebate allowed under this chapter as a renter shall obtain the 19 appropriate forms for claiming the rebate from the department 20 of revenue. The person claiming the rebate shall file a claim 21 form, including a verified statement and designation of primary 22 residence, with the department of revenue for the year for 23 which the person is claiming the rebate. The claim shall be 24 filed no later than September 1 following the fiscal year for 25 which the person is claiming the rebate. 26 5. By January 1 following each fiscal year during the 27 eligibility period, the department of revenue shall make the 28 authorized rebate payments to persons who qualify for the 29 rebate under this chapter. 30 DIVISION V 31 RETIREMENT SYSTEMS 32 Sec. 13. Section 97A.1, subsection 10, Code 2026, is amended 33 to read as follows: 34 10. “Earnable compensation” or “compensation earnable” 35 -5- LSB 5443YH (10) 91 md/jh 5/ 12

H.F. 2223 shall mean the regular compensation which a member would 1 earn during one year on the basis of the stated compensation 2 for the member’s rank or position including compensation for 3 longevity , any amount received for overtime compensation, 4 and the daily amount received for meals under section 80.6 , 5 and excluding any amount received for overtime compensation 6 or other special additional compensation, other payments for 7 meal expenses, uniform cleaning allowances, travel expenses, 8 and uniform allowances and excluding any amount received upon 9 termination or retirement in payment for accumulated sick leave 10 or vacation. 11 Sec. 14. Section 97B.11, subsection 1, Code 2026, is amended 12 to read as follows: 13 1. a. Each employer shall deduct from the wages of each 14 member of the retirement system a contribution in the amount of 15 the applicable employee percentage of the covered wages paid by 16 the employer and such additional amount if otherwise required 17 by law, until the member’s termination from employment. The 18 contributions of the employer shall be in the amount of the 19 applicable employer percentage of the covered wages of the 20 member and such additional amount if otherwise required by law. 21 b. Beginning July 1, 2026, the contributions of the 22 employer related to a member that is in special service in a 23 protection occupation as described in section 97B.49C for a 24 county or as a county sheriff or deputy sheriff as described 25 in section 97B.49C, shall be paid by the treasurer of state 26 from the general fund of the state. For the fiscal year 27 beginning July 1, 2026, and for each fiscal year thereafter, 28 there is appropriated from the general fund of the state to 29 the treasurer of state an amount necessary to carry out the 30 provision of this paragraph. 31 Sec. 15. Section 411.1, subsection 10, Code 2026, is amended 32 to read as follows: 33 10. “Earnable compensation” or “compensation earnable” 34 shall mean the annual compensation which a member receives 35 -6- LSB 5443YH (10) 91 md/jh 6/ 12

H.F. 2223 for services rendered as a police officer or fire fighter in 1 the course of employment with a participating city and shall 2 include any amount received as overtime compensation . However, 3 the term “earnable compensation” or “compensation earnable” shall 4 not include amounts received for overtime compensation, meal or 5 travel expenses, uniform allowances, fringe benefits, severance 6 pay, or any amount received upon termination or retirement in 7 payment for accumulated sick leave or vacation. Contributions 8 made by a member from the member’s earnable compensation to a 9 plan of deferred compensation shall be included in earnable 10 compensation. Other contributions made to a plan of deferred 11 compensation shall not be included except to the extent 12 provided in rules adopted by the board of trustees pursuant to 13 section 411.5, subsection 3 . 14 Sec. 16. Section 411.8, subsection 1, paragraphs a, b, c, 15 and d, Code 2026, are amended to read as follows: 16 a. On account of each member there shall be paid annually 17 into the fund by the participating cities or, on or after July 18 1, 2026, by the treasurer of state an amount equal to a certain 19 percentage of the earnable compensation of the member to be 20 known as the “normal contribution”. The rate percent of such 21 contribution shall be fixed on the basis of the liabilities of 22 the retirement system as shown by annual actuarial valuations. 23 Beginning July 1, 2026, that portion of the normal contribution 24 otherwise required to be paid by a participating city into the 25 fund shall be paid by the treasurer of state from the general 26 fund of the state. For the fiscal year beginning July 1, 2026, 27 and for each fiscal year thereafter, there is appropriated from 28 the general fund of the state to the treasurer of state an 29 amount necessary to carry out the provision of this paragraph 30 “a” . 31 b. (1) On the basis of the actuarial methods and 32 assumptions, rate of interest, and of the mortality, 33 interest and other tables adopted by the system, the actuary 34 engaged by the system to make each valuation required by 35 -7- LSB 5443YH (10) 91 md/jh 7/ 12

H.F. 2223 this chapter pursuant to the requirements of section 411.5 , 1 shall immediately after making such valuation, determine 2 the normal contribution rate. Except as otherwise provided 3 in this lettered paragraph, the “normal contribution rate” 4 shall be the rate percent of the earnable compensation of all 5 members equal to the rate required by the system to discharge 6 its liabilities, stated as a percentage of the earnable 7 compensation of all members, and reduced by the employee 8 contribution rate provided in paragraph “f” of this subsection 9 and the contribution rate representing any state appropriation 10 made . However, the normal contribution rate shall not be less 11 than seventeen percent. 12 (2) The normal contribution rate shall be determined by the 13 actuary after each valuation. 14 c. The total amount payable in each year to the fund 15 shall be not less than the rate percent known as the normal 16 contribution rate of the total compensation earnable by all 17 members during the year, but the aggregate payment by the 18 participating cities or treasurer of state, as applicable, must 19 be sufficient when combined with the amount in the fund to 20 provide the pensions and other benefits payable out of the fund 21 during the then current year. 22 d. All lump-sum death benefits on account of death in active 23 service payable from contributions of the said participating 24 cities or the treasurer of state, as applicable, shall be paid 25 from the fund. 26 EXPLANATION 27 The inclusion of this explanation does not constitute agreement with 28 the explanation’s substance by the members of the general assembly. 29 This bill relates to local and state government finances 30 by modifying provisions relating to homestead property tax 31 credits, providing a residential property tax rebate, and 32 modifying provisions relating to the municipal fire and police 33 retirement system. 34 DIVISION I —— ADDITIONAL HOMESTEAD PROPERTY TAX CREDIT. 35 -8- LSB 5443YH (10) 91 md/jh 8/ 12

H.F. 2223 The bill authorizes a homestead property tax credit based 1 on increases in the amount of property taxes due. The bill 2 establishes a category of eligible claimants for an additional 3 homestead credit for persons 18 years of age and older if 4 their homestead’s actual value did not increase as the result 5 of new construction, improvements, or renovations to the 6 property, beyond necessary repairs. The amount of the credit 7 for such a homestead is the difference between the actual 8 amount of property taxes otherwise due on the homestead for the 9 applicable fiscal year minus 104 percent of the actual amount 10 of property taxes due on the homestead during the immediately 11 preceding fiscal year, but not less than zero, if the property 12 taxes due on the homestead for both such fiscal years were 13 calculated on an assessed valuation that was not a partial 14 assessment. 15 Code section 25B.7 provides that for a property tax credit 16 or exemption enacted on or after January 1, 1997, if a state 17 appropriation made to fund the credit or exemption is not 18 sufficient to fully fund the credit or exemption, the political 19 subdivision shall be required to extend to the taxpayer only 20 that portion of the credit or exemption estimated by the 21 department of revenue to be funded by the state appropriation. 22 The bill makes Code section 25B.7 inapplicable to this 23 division. 24 The division applies to property taxes due and payable in 25 fiscal years beginning on or after July 1, 2027. 26 DIVISION II —— HOMESTEAD CREDIT AMOUNT. Current Code 27 section 425.1 provides that the homestead credit fund shall 28 be apportioned each year so as to give a credit against the 29 property tax on each eligible homestead in the state in an 30 amount equal to the actual levy on the first $4,850 of actual 31 value for each homestead. The bill increases the amount of 32 credit so as to give a credit in an amount equal to the actual 33 levy on the first $14,550 of actual value for each homestead. 34 This division applies to property taxes due and payable in 35 -9- LSB 5443YH (10) 91 md/jh 9/ 12

H.F. 2223 fiscal years beginning on or after July 1, 2027. 1 DIVISION III —— ELDERLY ADDITIONAL HOMESTEAD PROPERTY 2 TAX CREDIT. The bill modifies the eligibility for and the 3 calculation of the amount of the additional homestead property 4 tax credit under Code chapter 425, subchapter II, for certain 5 claimants. 6 Under current law, a person filing a claim for the property 7 tax credit who is at least 65 years of age, meets certain 8 income requirements, and does not meet other age and income 9 eligibility criteria, is eligible for a credit based on income 10 equal to specified percentages of property taxes due under 11 the schedule in Code section 425.23(1)(a), but not to exceed 12 $1,000. However, if the person filing a claim for the property 13 tax credit is at least 70 years of age and has a household 14 income of less than 250 percent of the federal poverty level, 15 the tentative credit amount is equal to the greater of the 16 following: (1) the amount of the credit as calculated under 17 the schedule of credit amounts specified in Code section 18 425.23(1)(a) as if the claimant were an eligible claimant for 19 a credit under that provision; and (2) the difference between 20 the actual amount of property taxes due on the homestead during 21 the applicable fiscal year minus the actual amount of property 22 taxes due on the homestead based on a full assessment during 23 the first fiscal year for which the claimant filed for a credit 24 calculated under the Code chapter and if the claimant has filed 25 for the credit for each of the subsequent fiscal years after 26 the first credit claimed. 27 The bill modifies the eligibility for the credit under 28 current law available to claimants who have reached the age 29 of 70 with a household income of less than 250 percent of the 30 federal poverty level to include claimants who have reached the 31 age of 65 regardless of income level. 32 Under current law, an amount sufficient to implement the 33 elderly and disabled property tax credit is appropriated 34 annually from the state general fund to the elderly and 35 -10- LSB 5443YH (10) 91 md/jh 10/ 12

H.F. 2223 disabled property tax credit fund. The bill instead 1 appropriates annually an amount sufficient to implement the 2 elderly and disabled property tax credit, as amended in the 3 bill, for claimants 65 years of age or older from the taxpayer 4 relief fund to the elderly and disabled property tax credit 5 fund. 6 The section of the division of the bill amending Code section 7 425.17 applies to claims under Code chapter 425, subchapter II, 8 filed on or after January 1, 2027. 9 DIVISION IV —— RESIDENTIAL PROPERTY TAX REBATE. The bill 10 creates a residential rebate program for residential owners and 11 renters. 12 The bill creates a residential rebate fund (fund) under the 13 control of the department of revenue (DOR). For each fiscal 14 year specified in the eligibility period, there is appropriated 15 from the taxpayer relief fund to the DOR to be credited to the 16 fund, an amount sufficient to implement this division of the 17 bill. 18 The bill defines “eligibility period” to mean each fiscal 19 year commencing with the fiscal year beginning July 1, 2026, 20 but before the fiscal year beginning July 1, 2028. 21 The bill specifies a person owning a homestead qualifies to 22 claim a residential rebate in the amount of $1,000 for each 23 fiscal year of the eligibility period the person claimed the 24 homestead credit under Code chapter 425. Only one rebate may 25 be claimed for a particular homestead per fiscal year. 26 The bill specifies a person renting a residence qualifies 27 to claim an annual residential rebate in the amount of $500 28 if the residence is the person’s primary residence during a 29 fiscal year during the eligibility period. The bill creates a 30 process for persons renting to submit the application for the 31 residential rebate. Not more than two rebates may be claimed 32 for a particular rented residence per fiscal year and not more 33 than one rebate may be claimed per familial household per 34 fiscal year. 35 -11- LSB 5443YH (10) 91 md/jh 11/ 12

H.F. 2223 By January 1 following each fiscal year during the 1 eligibility period, DOR shall make the authorized payment 2 amount of $1,000 or $500, as applicable, to persons who qualify 3 for the rebate. 4 DIVISION V —— RETIREMENT SYSTEMS. Code chapter 411 5 establishes a municipal police officer and fire fighter 6 retirement system, funded through a combination of 7 contributions from participating cities and such officers and 8 fire fighters who are members of the system. The bill provides 9 that beginning July 1, 2026, that portion of the normal 10 contribution otherwise required to be paid by a participating 11 city employer into the fund shall be paid by the treasurer 12 of state from the general fund of the state. The bill 13 appropriates for the fiscal year beginning July 1, 2026, and 14 for each fiscal year thereafter, from the general fund of the 15 state to the treasurer of state an amount necessary to make all 16 such applicable employer contributions. The bill makes similar 17 changes and appropriations in Code section 97B.11 governing 18 the contributions of the employer on or after July 1, 2026, 19 under the Iowa public employees’ retirement system related to a 20 member that is in special service in a protection occupation as 21 described in Code section 97B.49C for a county or as a county 22 sheriff or deputy sheriff as described in Code section 97B.49C. 23 The bill relates to the definition of “earnable 24 compensation” under the Iowa department of public safety peace 25 officers’ retirement, accident, and disability system (Code 26 chapter 97A) and the statewide fire and police retirement 27 system (Code chapter 411) by including any amount received 28 as overtime compensation in the definition of “earnable 29 compensation”. 30 -12- LSB 5443YH (10) 91 md/jh 12/ 12