HSB 304 (LSB 2949YC (4) 91)

HOUSE FILE _____ 

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

A BILL FOR

An Act modifying property tax calculations, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 443.2, subsection 1, Code 2025, is amended to read as follows:
   1.  Before the first day of July in each year, the county auditor shall transcribe the assessments of the townships and cities into a book or record, to be known as the tax list, properly ruled and headed, with separate columns, in which shall be entered the names of the taxpayers, descriptions of lands, number of acres and value, numbers of city lots and value, and each description of tax, with a column for polls and one for payments, and shall complete it by entering the amount due on each installment, separately, and carrying out the total of both installments. The total of all columns of each page of each book or other record shall balance with the tax totals. After computing the amount of tax due and payable on each property, the county auditor shall round the total amount of tax due and payable on the property to the nearest even whole dollar and, if applicable, reduce the amounts due and payable as required under section 444.25.
    Sec. 2.  Section 444.1, Code 2025, is amended to read as follows:
   444.1  Basis for amount of tax.
   In all taxing districts in the state, including townships, school districts, cities, and counties, when by law then existing the people are authorized to determine by vote, or officers are authorized to estimate or determine, a rate of taxation required for any public purpose, such rate shall in all cases be estimated and based upon the adjusted taxable valuation of such taxing district for the preceding calendar year and subject to the limitation of section 444.25.
    Sec. 3.  Section 444.2, Code 2025, is amended to read as follows:
   444.2  Amounts certified in dollars.
   When an authorized tax rate within a taxing district, including townships, school districts, cities, and counties, has been thus determined as provided by law, the officer or officers charged with the duty of certifying the authorized rate to the county auditor or board of supervisors shall, before certifying the rate, compute upon the adjusted taxable valuation of the taxing district for the preceding fiscal year, the amount of tax the rate will raise, stated in dollars, subject to the limitation of section 444.25, and shall certify the computed amount in dollars and not by rate, to the county auditor and board of supervisors.
    Sec. 4.  Section 444.3, Code 2025, is amended to read as follows:
   444.3  Computation of rate.
   When the valuations for the several taxing districts shall have been adjusted by the several boards for the current year, the county auditor shall thereupon apply such a rate, not exceeding the rate authorized by law, as will raise the amount required for such taxing district, and no larger amount, subject to the limitation under section 444.25. For purposes of computing the rate under this section, the adjusted taxable valuation of the property of a taxing district does not include the valuation of property of a railway corporation or its trustee which corporation has been declared bankrupt or is in bankruptcy proceedings. Nothing in the preceding sentence exempts the property of such railway corporation or its trustee from taxation and the rate computed under this section shall be levied on the taxable property of such railway corporation or its trustee.
    Sec. 5.  Section 444.22, Code 2025, is amended to read as follows:
   444.22  Annual levy.
   In each year the director of revenue shall fix the rate in percentage to be levied upon the assessed valuation of the taxable property of the state necessary to raise the amount for general state purposes as shall be designated by the department of management, subject to the limitation under section 444.25.
    Sec. 6.  NEW SECTION.  444.25  Property tax amount limitation —— reduction.
   1.  For purposes of this section:
   a.  “Base year” means the assessment year preceding the assessment year used to calculate property taxes due and payable in the applicable fiscal year.
   b.  “Local taxing authority” means a city, county, community college, school district, or other governmental subdivision located in this state and authorized to certify a levy on property located within such authority.
   c.  “New construction” means buildings, structures, or improvements constructed or relocated on or made to the parcel.
   d.  “Parcel” means each separate item shown on the tax list, manufactured or mobile home tax list, schedule of assessment, or schedule of rate or charge.
   e.  “Property taxes” means annual ad valorem taxes imposed on the parcel which are collectable by the county treasurer following application of all applicable exemptions and credits, and shall not include special assessments, amounts levied under chapter 468, or taxes under chapter 435. “Property taxes” also do not include taxes levied as the result of a property tax levy approved at election or that portion of any property tax levy imposed that is for the payment of principal and interest on bonds or other indebtedness the issuance of which was approved at election, including refunding bonds issued for the repayment of bonds that were approved at election.
   f.  “Qualified parcel” means a parcel that is not located in an urban renewal area under chapter 403 or an urban revitalization area under chapter 404, is not wind energy conversion property as defined in section 427B.26, and for which none of the following apply:
   (1)  The parcel changed ownership during the base year.
   (2)  New construction occurred on the parcel during the base year.
   (3)  The parcel’s assessment for the base year was a partial assessment as the result of incomplete new construction or improvements.
   (4)  The parcel was omitted from assessment or fraudulently withheld from assessment in the base year.
   (5)  The parcel’s property taxes were suspended or abated under sections 427.8, 427.9, and 427.10.
   (6)  The parcel’s classification is different from the base year.
   2.  a.  For property taxes due and payable in fiscal years beginning on or after July 1, 2026, if the amount of property taxes otherwise calculated to be due and payable on a qualified parcel of residential property or agricultural property exceeds one hundred three percent of the actual amount of property taxes due and payable on the parcel in the immediately preceding fiscal year, such amount shall be reduced as provided in subsection 3. If, however, improvements or renovations, not amounting to new construction, occurs on the property during the base year, the threshold amount of property taxes shall be one hundred three percent plus the percentage of the parcel’s taxable value attributable to the improvements or renovations. Improvements or renovations do not include normal and necessary repairs to an existing building or improvement, not amounting to structural replacements or modifications.
   b.  For property taxes due and payable in fiscal years beginning on or after July 1, 2026, if the amount of property taxes otherwise calculated to be due and payable on a qualified parcel of commercial property or industrial property exceeds one hundred eight percent of the actual amount of property taxes due and payable on the parcel in the immediately preceding fiscal year, such amount shall be reduced as provided in subsection 3. If, however, improvements or renovations, not amounting to new construction, occurs on the property during the base year, the threshold amount of property taxes shall be one hundred eight percent plus the percentage of the parcel’s taxable value attributable to the improvements or renovations. Improvements or renovations do not include normal and necessary repairs to an existing building or improvement, not amounting to structural replacements or modifications.
   c.  Property taxes levied by a political subdivision that did not exist for the immediately preceding fiscal year shall not be included in the calculation of the property tax to be due and payable for the fiscal year and shall not be reduced under subsection 3.
   3.  a.  If the total amount of property taxes due and payable on the parcel exceeds the applicable threshold for the parcel under subsection 2, the amount of property taxes due and payable to each taxing authority that certified for levy property taxes on the parcel in excess of the applicable threshold percentage of such amount levied by that taxing authority on the parcel in the immediately preceding fiscal year shall be reduced by the amount by which the parcel’s total amount of property taxes due and payable for all taxing authorities exceeds the applicable threshold for the parcel under subsection 2.
   b.  The amount of the reduction shall be proportionately applied among the various levies for property taxes, or portions thereof, of those taxing authorities that certified for levy property taxes on the parcel in excess of the applicable threshold percentage of such amount levied by that taxing authority on the parcel in the immediately preceding fiscal year.
   c.  The reductions shall be made by the county auditor prior to delivery of the tax list prescribed in chapter 443 to ensure accurate statement of taxes under section 445.5.
   4.  The director of the department of revenue shall adopt rules pursuant to chapter 17A to administer and interpret this section.
    Sec. 7.  Section 445.5, subsection 1, paragraphs e, f, g, and h, Code 2025, are amended to read as follows:
   e.  The complete name of all taxing authorities receiving a tax distribution, the amount of the distribution, the amount of any reduction resulting from section 444.25, and the percentage distribution for each named authority, listed from the highest to the lowest distribution percentage.
   f.  The consolidated levy rate for one thousand dollars of taxable valuation multiplied by the taxable valuation to produce the gross taxes levied before application of credits against levied taxes for the previous and current fiscal years and before any reduction resulting from section 444.25.
   g.  The itemized credits against levied taxes deducted from the gross taxes levied in order to produce the net taxes owed for the previous and current fiscal years and the amount of any reductions under section 444.25 for previous and current fiscal years.
   h.  The total amount of taxes levied by each taxing authority in the previous fiscal year and the current fiscal year and the difference between the two amounts, expressed as a percentage increase or decrease, and the amount of any reduction to a taxing authority resulting from section 444.25.
    Sec. 8.  Section 445.57, subsection 1, Code 2025, is amended to read as follows:
   1.  On or before the tenth day of each month, the county treasurer shall apportion all taxes collected during the preceding month, except partial payment amounts collected pursuant to section 445.36A, subsection 1, partial payments collected and not yet designated by the county treasurer for apportionment pursuant to section 445.36A, subsection 2, partial payments collected pursuant to section 435.24, subsection 6, paragraph “a”, and partial payments collected and not yet designated by the county treasurer for apportionment pursuant to section 435.24, subsection 6, paragraph “b”, among the several funds to which they belong according to the amount levied for each fund, as adjusted under section 444.25, if applicable, and shall apportion the interest, fees, and costs on the taxes to the general fund, and shall enter those amounts upon the treasurer’s cash account, and report the amounts to the county auditor.
    Sec. 9.  IMPLEMENTATION OF ACT.
   1.  Section 25B.2, subsection 3, shall not apply to this Act.
   2.  Section 25B.7 shall not apply to this Act.
    Sec. 10.  APPLICABILITY.  This Act applies to property taxes due and payable in fiscal years beginning on or after July 1, 2026.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill provides that for property taxes due and payable in fiscal years beginning on or after July 1, 2026, if the amount of property taxes otherwise calculated to be due and payable on a qualified parcel of residential property or agricultural property exceeds 103 percent of the actual amount of property taxes due and payable on the parcel in the immediately preceding fiscal year, such amount due shall be reduced. Similarly, if the amount of property taxes otherwise calculated to be due and payable for such fiscal years on a qualified parcel of commercial property or industrial property exceeds 108 percent of the actual amount of property taxes due and payable on the parcel in the immediately preceding fiscal year, such amount shall be reduced. If, however, improvements or renovations, not amounting to new construction, occur on the property during the base year, as defined in the bill, the threshold amount of property taxes shall be 108 percent plus the percentage of the parcel’s taxable value attributable to the improvements or renovations. Improvements or renovations do not include normal and necessary repairs to an existing building or improvement, not amounting to structural replacements or modifications. 
   Under the bill, “property taxes” means annual ad valorem taxes imposed on the parcel which are collectable by the county treasurer following application of all applicable exemptions and credits, and shall not include special assessments, amounts levied under Code chapter 468, or taxes under Code chapter 435. “Property taxes” also do not include taxes levied as the result of a property tax levy approved at election or that portion of any property tax levy imposed that is for the payment of principal and interest on bonds or other indebtedness the issuance of which was approved at election, including refunding bonds issued for the repayment of bonds that were approved at election.
   The limitations established in the bill apply to qualified parcels. “Qualified parcel” means a parcel that is not located in an urban renewal area under Code chapter 403 or an urban revitalization area under Code chapter 404, is not wind energy conversion property, and for which none of the following apply: (1) the parcel changed ownership during the base year; (2) new construction occurred on the parcel during the base year; (3) the parcel’s assessment for the base year was a partial assessment as the result of incomplete new construction or improvements; (4) the parcel was omitted from assessment or fraudulently withheld from assessment in the base year; (5) the parcel’s property taxes were suspended or abated under Code sections 427.8, 427.9, and 427.10; or (6) the parcel’s classification is different from the base year.
   If the total amount of property taxes due and payable on the parcel exceeds the applicable threshold for the parcel under the bill, the amount of property taxes due and payable to each taxing authority that certified for levy property taxes on the parcel in excess of the applicable threshold percentage of such amount levied by that taxing authority on the parcel in the immediately preceding fiscal year shall be reduced by the amount by which the parcel’s total amount of property taxes due and payable for all taxing authorities exceeds the applicable threshold for the parcel. The amount of the reduction is proportionately applied among the various levies for property taxes, or portions thereof, of those taxing authorities that certified for levy property taxes on the parcel in excess of the applicable threshold percentage of such amount levied by that taxing authority on the parcel in the immediately preceding fiscal year. The reductions are to be made by the county auditor prior to delivery of the tax list prescribed in Code chapter 443 to ensure accurate statement of taxes under Code section 445.5.
   The bill makes corresponding changes to various other provisions of the Code relating to the calculation and collection of property tax amounts. 
   The bill may include a state mandate as defined in Code section 25B.3. The bill makes inapplicable Code section 25B.2(3), which would relieve a political subdivision from complying with a state mandate if funding for the cost of the state mandate is not provided or specified. Therefore, political subdivisions are required to comply with any state mandate included in the bill.
   The bill makes inapplicable Code section 25B.7. Code section 25B.7 provides that for a property tax credit or exemption enacted on or after January 1, 1997, if a state appropriation made to fund the credit or exemption is not sufficient to fully fund the credit or exemption, the political subdivision shall be required to extend to the taxpayer only that portion of the credit or exemption estimated by the department of revenue to be funded by the state appropriation.