HSB 303 (LSB 2947YC (2) 91)

HOUSE FILE _____ 

BY  (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON KAUFMANN)

A BILL FOR

An Act creating the foundation property tax reduction fund, and making appropriations and related transfers to the fund.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 8.55, subsection 4, Code 2025, is amended to read as follows:
   4.  Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys deposited in the Iowa economic emergency fund shall be credited to the rebuild Iowa infrastructure fund foundation property tax reduction fund created in section 257.3A.
    Sec. 2.  Section 8.56, subsection 1, Code 2025, is amended to read as follows:
   1.  A cash reserve fund is created in the state treasury. The cash reserve fund shall be separate from the general fund of the state and shall not be considered part of the general fund of the state. The moneys in the cash reserve fund are not subject to section 8.33 and shall not be transferred, used, obligated, appropriated, or otherwise encumbered except as provided in this section. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys deposited in the cash reserve fund shall be credited to the rebuild Iowa infrastructure fund created in section 8.57 foundation property tax reduction fund created in section 257.3A. Moneys in the cash reserve fund may be used for cash flow purposes during a fiscal year provided that any moneys so allocated are returned to the cash reserve fund by the end of that fiscal year.
    Sec. 3.  Section 8.57E, subsection 4, Code 2025, is amended to read as follows:
   4.  Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys deposited in the taxpayer relief fund shall be credited to the foundation property tax reduction fund created in section 257.3A.
    Sec. 4.  Section 12C.7, Code 2025, is amended by adding the following new subsection:
   NEW SUBSECTION.  3.  Commencing with the fiscal year beginning July 1, 2025, and every fiscal year thereafter, the amount of interest or earnings deposited into the general fund of the state during the fiscal year shall be deposited into the foundation property tax reduction fund created in section 257.3A.
    Sec. 5.  Section 257.3, subsection 1, Code 2025, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  e.  The amount paid to each school district from the foundation property tax reduction fund shall be regarded as property taxes.
    Sec. 6.  NEW SECTION.  257.3A  Foundation property tax reduction fund.
   1.  A foundation property tax reduction fund is created in the state treasury under the authority of the department of management. The fund shall be separate from the general fund of the state and shall not be considered part of the general fund of the state except in determining the cash position of the state for payment of state obligations.
   2.  The fund shall consist of all moneys appropriated to the fund, and moneys transferred from other funds including transfers of interest or earnings from the Iowa economic emergency fund, the cash reserve fund, the taxpayer relief fund, and the general fund of the state.
   3.  Commencing with the fiscal year beginning July 1, 2026, and each fiscal year thereafter, the balance of the fund on July 1 is appropriated to and shall be used by the department of management to lower the foundation property tax levy rate under section 257.3, subsection 1, paragraph “a”, for the school budget year beginning July 1 by making payments to each school district to supplant funds that would have been collected under section 257.3, subsection 1, paragraph “a”.
   4.  The moneys in the fund are not subject to the provisions of section 8.33 and shall not be transferred, used, obligated, appropriated, or otherwise encumbered except as provided in this section. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys deposited in the cash reserve fund shall be credited to the fund.
   5.  Moneys in the fund may be used for cash flow purposes, provided that any moneys so allocated are returned to the fund by the end of each fiscal year.
    Sec. 7.  Section 425A.3, subsection 1, Code 2025, is amended to read as follows:
   1.  The family farm tax credit fund shall be apportioned each year in the manner provided in this chapter so as to give a credit against the tax on each eligible tract of agricultural land within the several school districts of the state in which the levy for the general school fund exceeds five dollars and forty cents per thousand dollars of assessed value the levy rate under section 257.3, subsection 1, paragraph “a”. The amount of the credit on each eligible tract of agricultural land shall be the amount the tax levied for the general school fund exceeds the amount of tax which would be levied on each eligible tract of agricultural land were the levy for the general school fund five dollars and forty cents per thousand dollars of assessed value the levy rate under section 257.3, subsection 1, paragraph “a”, for the previous year. However, in the case of a deficiency in the family farm tax credit fund to pay the credits in full, the credit on each eligible tract of agricultural land in the state shall be proportionate and applied as provided in this chapter.
    Sec. 8.  Section 425A.5, Code 2025, is amended to read as follows:
   425A.5  Computation by county auditor.
   The family farm tax credit allowed each year shall be computed as follows:  On or before April 1, the county auditor shall list by school districts all tracts of agricultural land which are entitled to credit, the taxable value for the previous year, the budget from each school district for the previous year, and the tax rate determined for the general fund of the school district in the manner prescribed in section 444.3 for the previous year, and if the tax rate is in excess of five dollars and forty cents per thousand dollars of assessed value the levy rate under section 257.3, subsection 1, paragraph “a”, the auditor shall multiply the tax levy which is in excess of five dollars and forty cents per thousand dollars of assessed value the levy rate under section 257.3, subsection 1, paragraph “a”, by the total taxable value of the agricultural land entitled to credit in the school district, and on or before April 1, certify the total amount of credit and the total number of acres entitled to the credit to the department of revenue.
    Sec. 9.  Section 426.3, Code 2025, is amended to read as follows:
   426.3  Where credit given.
   The agricultural land credit fund shall be apportioned each year in the manner hereinafter provided so as to give a credit against the tax on each tract of agricultural lands within the several school districts of the state in which the levy for the general school fund exceeds five dollars and forty cents per thousand dollars of assessed value the levy rate under section 257.3, subsection 1, paragraph “a”; the amount of such credit on each tract of such lands shall be the amount the tax levied for the general school fund exceeds the amount of tax which would be levied on said tract of such lands were the levy for the general school fund five dollars and forty cents per thousand dollars of assessed value the levy rate under section 257.3, subsection 1, paragraph “a”, for the previous year, except in the case of a deficiency in the agricultural land credit fund to pay said credits in full, in which case the credit on each eligible tract of such lands in the state shall be proportionate and shall be applied as hereinafter provided.
    Sec. 10.  Section 426.6, subsection 1, Code 2025, is amended to read as follows:
   1.  The agricultural land tax credit allowed each year shall be computed as follows:  On or before April 1, the county auditor shall list by school districts all tracts of agricultural lands which are entitled to credit, together with the taxable value for the previous year, together with the budget from each school district for the previous year, and the tax rate determined for the general fund of the district in the manner prescribed in section 444.3 for the previous year, and if such tax rate is in excess of five dollars and forty cents per thousand dollars of assessed value the levy rate under section 257.3, subsection 1, paragraph “a”, the auditor shall multiply the tax levy which is in excess of five dollars and forty cents per thousand dollars of assessed value the levy rate under section 257.3, subsection 1, paragraph “a”, by the total taxable value of the agricultural lands entitled to credit in the district, and on or before April 1, certify the amount to the department of revenue.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill creates a foundation property tax reduction fund (fund) in the state treasury under the authority of the department of management (DOM). The fund shall consist of any appropriations made to the fund, and moneys transferred from other funds including transfers of interest or earnings from the Iowa economic emergency fund, the cash reserve fund, the taxpayer relief fund, and the general fund of the state.
   Commencing with the fiscal year beginning July 1, 2026, and each fiscal year thereafter, the balance of the fund on July 1 shall be appropriated to DOM to lower the foundation property tax levy rate under Code section 257.3(1)(a) for the school budget year beginning July 1 through payments to each school district to supplant funds that would have been collected as property taxes under Code section 257.3(1)(a).
   In Code chapters 425A (family farm tax credit) and 426 (agricultural land tax credit), the bill replaces references to the school foundation property tax levy rate ($5.40) with citations to the appropriate provision of the Code section establishing the foundation property tax rate.
   The bill specifies the fund shall be separate from the general fund of the state and shall not be considered part of the general fund of the state except in determining the cash position of the state for payment of state obligations. The moneys in the fund at the close of the fiscal year do not revert and remain available for the purpose described in the bill. Interest or earnings on investments in the fund also do not revert to the general fund. Moneys in the fund may be used for cash flow purposes, provided that any moneys are returned to the fund by the end of each fiscal year.