Bill > SF651

Introduced Session

This bill relates to local government property taxes, financial authority, and budgets. DIVISION I —— COUNTY PROPERTY TAXES AND BUDGETS. Code section 331.423 establishes a levy rate limitation for the general county services levy and a limitation for the rural county services levy. The bill modifies the general county services levy rate limitation for the fiscal year beginning July 1, 2026, to be a levy rate not to exceed the greater of: (1) a levy rate per $1,000 of assessed value equal to 1,000 multiplied by the quotient of 102 percent of the current fiscal year’s (immediately preceding fiscal year) actual property tax dollars certified for levy for general county services divided by the remainder of the total assessed value used to calculate such taxes for the budget year minus value attributable to new valuation, as defined in the bill; and (2) a levy rate per $1,000 of assessed value that results in an amount of actual property tax dollars certified for levy for general county services equal to 100.5 percent of the actual property tax dollars certified for such levy for the current fiscal year. For each fiscal year beginning on or after July 1, 2027, the maximum levy rate is the levy rate imposed by the county for the current fiscal year unless the total assessed value, excluding new valuation, used to calculate taxes for general county services for the budget year is equal to or exceeds 102 percent of the total assessed value used to calculate taxes for general county services for the current fiscal year, and for the budget year beginning July 1, 2027, only, not less than a levy rate per $1,000 of assessed value that results in an amount of actual property tax dollars certified for levy equal to 100.5 percent of the actual property tax dollars certified for levy for the current fiscal year. If the total assessed value, excluding value attributable to new valuation, used to calculate taxes for general county services for the budget year is equal to or exceeds 102 percent of the total assessed value used to calculate taxes for general county services for the current fiscal year, the levy rate imposed shall not exceed a levy rate per $1,000 of assessed value that is equal to 1,000 multiplied by the quotient obtained by dividing the product of the budget adjustment factor, as defined in the bill and which ranges from 102 percent to 105 percent depending upon the amount of annual increase in the consumer price index, multiplied by the current fiscal year’s actual property tax dollars certified for levy by the remainder of the total assessed value used to calculate such taxes for the budget year minus value attributable to new valuation. The bill similarly modifies the maximum levy rate for rural county services for fiscal years beginning on or after July 1, 2026. The division takes effect January 1, 2026, and applies to county taxes and budgets for fiscal years beginning on or after July 1, 2026. DIVISION II —— CITY PROPERTY TAXES AND BUDGETS. Code section 384.1 establishes the city general fund levy and limits on the levy rate. The bill modifies the general fund levy rate limitation for the fiscal year beginning July 1, 2026, to be a levy rate not to exceed the greater of: (1) a levy rate per $1,000 of assessed value equal to 1,000 multiplied by the quotient of 102 percent of the current fiscal year’s (immediately preceding fiscal year) actual property tax dollars certified for levy divided by the remainder of the total assessed value used to calculate such taxes for the budget year minus value attributable to new valuation, as defined in the bill; and (2) a levy rate per $1,000 of assessed value that results in an amount of actual property tax dollars certified for levy equal to 100.5 percent of the actual property tax dollars certified for such levy for the current fiscal year. For each fiscal year beginning on or after July 1, 2027, the maximum levy rate is the levy rate imposed by the city for the current fiscal year unless the total assessed value, excluding new valuation, used to calculate taxes for the budget year is equal to or exceeds 102 percent of the total assessed value used to calculate taxes for the current fiscal year, and for the budget year beginning July 1, 2027, only, not less than a levy rate per $1,000 of assessed value that results in an amount of actual property tax dollars certified for levy equal to 100.5 percent of the actual property tax dollars certified for levy for the current fiscal year. If the total assessed value, excluding value attributable to new valuation, used to calculate taxes for the city general fund for the budget year is equal to or exceeds 102 percent of the total assessed value used to calculate taxes for the current fiscal year, the levy rate imposed shall not exceed a levy rate per $1,000 of assessed value that is equal to 1,000 multiplied by the quotient obtained by dividing the product of the budget adjustment factor, as defined in the bill and which ranges from 102 percent to 105 percent depending upon the amount of annual increase in the consumer price index, multiplied by the current fiscal year’s actual property tax dollars certified for levy by the remainder of the total assessed value used to calculate such taxes for the budget year minus value attributable to new valuation. The bill also establishes a methodology to determine a maximum levy rate for a city that is not imposing a general fund levy in the current fiscal year. The division takes effect January 1, 2026, and applies to property taxes and budgets for fiscal years beginning on or after July 1, 2026. DIVISION III —— SCHOOL TAXES AND BUDGETS. As part of the state school foundation program, for school budget years beginning on or after July 1, 2022, Code section 257.1 establishes the regular program foundation base to be 88.4 percent of the regular program state cost per pupil. Beginning with the budget year beginning July 1, 2026, the bill increases that percentage to 100 percent. Similarly, the bill increases the special education support services foundation base percentage from 79 percent to 100 percent. Code section 257.3 requires school districts to levy a foundation property tax of $5.40 per $1,000 of assessed value on all taxable property in the school district. The bill reduces the foundation property tax levy rate to $4.48662 per $1,000 of assessed value for budget years beginning on or after July 1, 2026. Code section 257.3 provides an exception to the foundation property tax levy rate of $5.40 for those school districts that have recently been reorganized. Such districts are provided reduced foundation property tax levy rates for three years following the reorganization. The bill adjusts those reduced rates for reorganizations that take effect on or after July 1, 2026, to reflect the reduction made in the bill to the foundation property tax levy imposed by school districts that are not subject to a reorganization and eliminates certain supplemental aid related to such reorganized school district rates for budget years beginning on or after July 1, 2026. The bill eliminates certain property tax adjustment aid under Code section 257.15(2) and (3) for fiscal years beginning on or after July 1, 2026. The bill eliminates the $24 million general fund appropriation for adjusted additional property tax levy aid under Code section 257.15(4) for fiscal years beginning on or after July 1, 2026. The bill also eliminates the annual appropriation of the balance of the property tax equity and relief fund under Code section 257.16A for purposes designated under Code section 257.15(4) and requires remaining moneys at the end of a specified fiscal year to be transferred back to the funds from which they were received. The bill eliminates the payment of school district property tax replacement payments for fiscal years beginning on or after July 1, 2026. The bill eliminates the annual appropriation of moneys in the foundation base supplement fund for fiscal years beginning on or after July 1, 2026, and requires the remaining moneys at the end of a specified fiscal year to be transferred for deposit in the secure an advanced vision for education fund. The bill eliminates transfers from the secure an advanced vision for education fund to the property tax equity and relief fund and the foundation base supplement fund for fiscal years beginning on or after July 1, 2026, and instead provides that such amounts shall be credited to the state general fund to be used for increased foundation aid resulting from the increase in the regular program foundation base per pupil to 100 percent of the regular program state cost per pupil. 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 requires each school district with an unexpended fund balance in the district’s management levy fund under Code section 298A.3 at the conclusion of the fiscal year beginning July 1, 2024, that exceeds an amount equal to the total expenditures from the district’s management fund for the fiscal year beginning July 1, 2024, to certify such unexpended fund balance and expenditure amounts, including any reserved or designated amounts in the fund and the purposes therefor, to the school budget review committee by November 15, 2025. The committee is then required to conduct a review of the unexpended fund balances and expenditures of school district management levy funds certified under the bill. By February 1, 2026, the committee shall make recommendations to the general assembly for establishing district management levy fund unexpended fund balance limitations for fiscal years beginning on or after July 1, 2027, including recommendations for limitations based on a percentage of the district’s management levy fund expenditures and recommendations for management levy limitations and expenditure requirements for excess funds. The bill amends several provisions relating to the state school foundation program funding formula to include funding for the media services funding and educational services funding under Code section 257.37 to be included and funded as part of foundation aid paid by the state instead of funding through a school district’s additional property tax under Code section 257.4 for school budget years beginning on or after July 1, 2026. The bill reduces by approximately 70 percent the maximum levy rates for the regular and voter-approved physical plant and equipment levy under Code section 298.2 and the school district bond tax under Code section 298.18. The bill also repeals an obsolete provision relating to levy adjustments authorized to occur before June 30, 2007, in Code section 298.18A. The bill also amends Code section 298.4 by providing that for fiscal years beginning on or after July 1, 2027, if a school district’s unexpended fund balance of the district’s management levy fund is equal to or exceeds a specified percentage of the average annual expenditures from the district’s management levy fund for the three consecutive fiscal years immediately preceding the base year, the board of directors may not certify a district management levy for the fiscal year. Additionally, if a school district is not prohibited from certifying a levy under the bill, the maximum amount that the board of directors may certify for levy under the district management levy shall be an amount equal to the remainder of a specified percentage of the average annual expenditures from the district’s management levy fund for the three consecutive fiscal years immediately preceding the base year minus the district’s management levy fund unexpended fund balance for the fiscal year preceding the base year. Except for the section of the division amending Code section 257.31, which relates to the school budget review committee, this division of the bill takes effect January 1, 2026, and applies to fiscal years and school budget years beginning on or after July 1, 2026. DIVISION IV —— PROPERTY VALUATIONS AND ASSESSMENT LIMITATIONS. Code section 441.21 provides that the actual value of agricultural property shall be determined on the basis of productivity and net earning capacity and that any formula or method employed to determine productivity and net earning capacity of property shall be adopted in full by rule of the department of revenue. The bill amends that provision by specifying that for assessment years beginning on or after January 1, 2026, structures on agricultural land constructed on or after January 1, 2026, that are not agricultural dwellings shall not be included in determination of productivity and net earning capacity of agricultural property and shall not be allocated any portion of the total county productivity value so determined. Such agricultural structures shall instead be valued according to the structure’s replacement cost less depreciation and obsolescence and the structure’s assessed value subject to taxation prior to application of any assessment limitation shall be equal to the product of the structure’s value multiplied by the agricultural factor, as determined in 701 IAC 102.3(2) or succeeding rule of the department. The bill also provides that such structures shall be treated similarly to agricultural structures constructed before January 1, 2026, when applying any equalization order of the department of revenue. The bill modifies the list of examples of abnormal property transactions that are to be excluded from consideration or adjusted to eliminate distortions of market value when valuing property to include built-to-suit construction, sale-leaseback transactions, leased fee sales, and instead of sales to immediate family, sales between related parties. Code section 441.21(4) establishes the calculation for assessment limitations (rollback) for residential property and agricultural property. The bill strikes the calculation of the residential property assessment limitation for assessment years beginning on or after January 1, 2025, and strikes the provision within the agricultural property assessment limitation calculation that limits growth of residential or agricultural property to the growth in the other classification (ag-residential tie). The bill provides that residential property is assessed at 75 percent of the property’s actual value for assessment years beginning January 1, 2025, and January 1, 2026. The bill then increases the percentage of actual value at which residential property is assessed by 2.5 percent each assessment year until the percentage reaches 100 percent for assessment years beginning on or after January 1, 2036. By operation of law and through changes in the bill, all other classifications of property, except for agricultural property, residential property, and multiresidential property, are assessed at 100 percent of actual value for assessment years beginning on or after January 1, 2025. The bill modifies provisions governing the calculation of payments made to local governments under Code section 441.21(5)(e) that are made to replace property taxes due to the application of the residential property assessment limitation to certain portions of commercial and industrial property valuations and eliminates the appropriation for such payments for fiscal years beginning on or after July 1, 2026, due to elimination of the assessment limitations. The bill also reestablishes a multiresidential property classification for assessment years beginning on or after January 1, 2026, that includes types of property that were classified as multiresidential property for assessment years beginning before January 1, 2022. Such property is included within the residential property classification under current law. Under the bill, for purposes of equalization under Code sections 441.47 through 441.49, multiresidential property shall be considered residential property. The bill provides that multiresidential property is assessed at 75 percent of actual value for the assessment year beginning January 1, 2026. The bill then increases the percentage of actual value at which multiresidential property is assessed by 2.5 percent each assessment year until the percentage reaches 100 percent for assessment years beginning on or after January 1, 2036. Except for provisions relating to the reestablishment of the multiresidential property classification, this division of the bill applies retroactively to assessment years beginning on or after January 1, 2025. DIVISION V —— DISABLED VETERAN AND HOMESTEAD CREDITS AND EXEMPTIONS. Starting with the assessment year beginning January 1, 2025, the bill replaces the homestead property tax credit, other than the portion of the credit provided to certain disabled veterans, with a homestead property tax exemption. For assessment years beginning on or after January 1, 2025, the exemption amount is 25 percent of taxable value, not to exceed $125,000 in taxable value. The bill specifies that the elderly homestead exemption of $6,500 in taxable value applies in addition to the homestead exemption established in the bill. The bill moves the disabled veteran homestead credit from Code section 425.15 to Code section 425.1, and makes changes to the scope of the disabled veteran homestead credit for new applicants. Currently, a disabled veteran with a 100 percent permanent and total disability rating receives a homestead credit on the entire amount of tax levied on the homestead. The bill specifies that a separate application form is required to claim the disabled veteran homestead credit. The bill does not change the homestead credit for an eligible disabled veteran who makes an application for the homestead credit before July 1, 2025. For a disabled veteran who makes an application for the homestead credit on or after July 1, 2025, the bill changes the definition of “homestead” to exclude appurtenances and limits the size of the homestead credit to property on one-half acre. The state continues to reimburse local governments for the homestead credit, which for assessment years beginning on or after January 1, 2025, includes only the disabled veterans homestead credit, but does not reimburse local governments for the homestead exemption under current law and in the bill. The bill provides that homestead owners who have filed for or who are receiving homestead credits or exemptions before the effective date of this division of the bill shall continue to receive such credits and exemptions for which the owner is eligible for assessment years beginning on or after January 1, 2025, without refiling, and, if the owner is eligible, shall receive the exemption under Code section 425.1A(1A), as enacted in this division of the bill, without filing for such exemption. This division of the bill applies retroactively to assessment years beginning on or after January 1, 2025. DIVISION VI —— MILITARY SERVICE PROPERTY TAX EXEMPTION. Under current law, a veteran receives a property tax exemption of $4,000 in taxable value on property owned by the veteran. The bill increases the veterans property tax exemption from $4,000 to the following exemption amounts: for the assessment year beginning January 1, 2025, $5,000; for the assessment year beginning January 1, 2026, $6,000; and for assessment years beginning on or after January 1, 2027, $7,000. The division applies retroactively to assessment years beginning on or after January 1, 2025. DIVISION VII —— HOSPITAL AND EMERGENCY MEDICAL SERVICES PROPERTY TAX LEVIES. The bill provides that for fiscal years beginning on or after July 1, 2026, any property tax levy imposed for a county hospital under Code chapter 347 that is limited by law to a specific property tax levy rate per $1,000 of assessed value shall not exceed a levy rate per $1,000 of assessed value that is equal to 1,000 multiplied by the quotient obtained by dividing the product of the budget adjustment factor multiplied by the current fiscal year’s actual property tax dollars certified for such levy by the remainder of the total assessed value used to calculate such taxes for the budget year minus value attributable to new valuation. The bill defines “budget adjustment factor”, “budget year”, “current fiscal year”, and “new valuation” to mean the same as defined in Code section 331.423, as amended in the bill. The bill establishes similar limitations for levies imposed under Code chapters 347A (county hospitals payable from revenue), 357F (emergency medical services districts), 357G (city emergency medical services districts), and 422D (optional taxes for emergency medical services) that are limited by law to a specific property tax levy rate per $1,000 of assessed value. DIVISION VIII —— PROPERTY TAX LEVY RATES. The bill establishes a reduction for rate-limited property tax levies. The bill defines “rate-limited property tax levy” to be any ad valorem property tax levy limited by law to a specific property tax levy rate per $1,000 of assessed value used to calculate taxes, but does not include the school district foundation levy under Code section 257.3, the county general services levy under Code section 331.423(1), the county rural services levy under Code section 331.423(2), the city general fund levy under Code section 384.1(3), the physical plant and equipment levies under Code section 298.2, the school district bond tax under Code section 298.18, any levy under Code chapter 28M, a levy under Code section 384.12(1)(b) levied for operation and maintenance of a regional transit district, a levy for the office of the assessor under Code section 441.16, any levy under Code chapter 386, any levy under Code chapter 347 or 347A, and any levy under Code chapter 357F, 357G, or 422D. In addition, “rate-limited property tax levy” does not include levy rates used in the calculations under Code section 312.2(5)(a). For the fiscal year beginning July 1, 2026, each rate-limited property tax levy may only be imposed if the governmental entity imposed such levy for the fiscal year beginning July 1, 2025, and shall, by operation of the bill, be limited to a levy rate that is equal to 1,000 multiplied by the quotient of 102 percent of the current fiscal year’s actual property tax dollars certified for such levy divided by the total assessed value used to calculate such taxes for the budget year, but not less than a levy rate per $1,000 of assessed value that results in an amount of actual property tax dollars certified for levy for such levy equal to 100.5 percent of the actual property tax dollars certified for such levy for the fiscal year beginning July 1, 2025. For the fiscal year beginning July 1, 2027, and each fiscal year thereafter, rate-limited property tax levies may be imposed by any governmental entity otherwise authorized by law, regardless of whether the governmental entity imposed the levy for the fiscal year beginning July 1, 2025, at rates not to exceed those established by the general assembly by statute following receipt and consideration of the report submitted by the legislative interim committee requested to be established by the legislative council in this division of the bill. The bill also provides that, on or after July 1, 2025, a city or county shall not issue bonds or other indebtedness payable from an ad valorem property tax levy for the purpose of funding the general operations of the city or general operations of the county, as applicable, or otherwise use proceeds from the sale of bonds or issuance of other indebtedness to fund general operations. The bill defines “general operations” to mean services or activities generally funded from the governmental entity’s general fund, which are necessary for the operation of the governmental entity, including salaries and benefits, or which are for the health and welfare of the governmental entity’s citizens or primarily intended to benefit all residents of the governmental entity, but excluding services financed by statutory funds other than a debt service fund. The city finance committee is required to adopt rules under Code chapter 17A for cities to implement the new Code section governing funding of general operations. The county finance committee is required to adopt rules under Code chapter 17A for counties to implement the new Code section governing funding of general operations. The bill updates the calculation methodologies for agricultural extension levies under Code section 176A.10 and reduces levy rates used to make certain calculations related to the secondary road fund allocations under Code section 312.2. The bill requests the legislative council to establish a legislative study committee during the 2025 legislative interim and the 2026 legislative interim to examine appropriate rates of property taxation imposed by governmental entities following enactment of the bill, determine an alternative methodology and period of time to increase the percentage of actual value at which residential and multiresidential property are subject to tax from 75 percent to 100 percent, and examine the imposition and administration of replacement taxes under Code chapters 437A and 437B. The study committee shall consist of six voting members of the general assembly. Two members shall be appointed by the majority leader of the senate, one member appointed by the minority member of the senate, two members appointed by the speaker of the house of representatives, and one member appointed by the minority leader of the house of representatives. The study committee is required to make recommendations to the general assembly by January 15, 2027. DIVISION IX —— ELDERLY PROPERTY TAXES —— LOW INCOME. The bill modifies the eligibility for the property tax credit for persons ages 70 and older under Code chapter 425, subchapter II. Currently, a person filing a claim for the property tax credit who is at least 70 years of age and who has a household income of less than 250 percent of the federal poverty level is eligible to receive a specified credit amount against property taxes due on the claimant’s homestead. The bill increases the household income threshold for eligibility from less than 250 percent of the federal poverty level to less than 300 percent of the federal poverty level. The division takes effect upon enactment and applies retroactively to assessment years beginning on or after January 1, 2025. DIVISION X —— BRUCELLOSIS AND TUBERCULOSIS ERADICATION FUND —— LEVY. Code section 165.18 authorizes the secretary of agriculture to direct the board of supervisors of each county to levy an amount sufficient to pay the expenses estimated to be incurred from the brucellosis and tuberculosis eradication fund for the following fiscal year, subject to a maximum levy of 33.75 cents per $1,000. The bill strikes the authority to levy such a tax beginning with property taxes due and payable in fiscal years beginning July 1, 2025. The division takes effect upon enactment. DIVISION XI —— OFFICE OF THE ASSESSOR —— BUDGET AND LEVY. Code section 441.16(5) authorizes a $0.675 per $1,000 of assessed value property tax levy for the maintenance of the office of the assessor and other assessment procedure. The bill provides that for fiscal years beginning on or after July 1, 2026, expenses of the office of the assessor, the examining board, and the board of review related to duties or expenses authorized to be paid using funds levied under Code sections 97B.9 and 97C.10, and insurance expenses, tort claims, and judgments of such offices and boards shall not be paid from the levy under Code section 441.16(5). The bill also provides that the levy under Code section 441.16(5) for the fiscal year beginning July 1, 2026, shall not exceed a rate per $1,000 of assessed value that is equal to 1,000 multiplied by the quotient of 102 percent of the current fiscal year’s actual property tax dollars certified for such levy, excluding amounts attributable to specified types of expenses under Code sections 97B.9 and 97C.10 and insurance expenses, tort claims, and judgments, divided by the total assessed value used to calculate such taxes for the budget year. The bill then provides that for each fiscal year beginning on or after July 1, 2027, any tax for the maintenance of the office of assessor and other assessment procedure shall be levied only upon the property in the area assessed by the assessor, and such tax levy shall not exceed a rate per $1,000 of assessed value in the assessing area that is equal to 1,000 multiplied by the quotient of 102 percent of the current fiscal year’s actual property tax dollars certified for such levy divided by the total assessed value used to calculate such taxes for the budget year. The division takes effect January 1, 2026, and applies to property taxes due and payable in fiscal years beginning on or after July 1, 2026. DIVISION XII —— REGIONAL TRANSIT DISTRICT LEVY. Code section 28M.5 authorizes a regional transit district to levy a property tax not to exceed $0.95 per $1,000 of assessed value. The bill lowers that levy to $0.80 per $1,000 of assessed value and makes corresponding changes to other provisions of law governing the levy rates for municipal transit systems and regional transit districts. In addition, the bill establishes an annual limitation on the total amount of property taxes that a regional transit district may receive. For each fiscal year beginning on or after July 1, 2026, the total amount of property taxes for support of a regional transit district shall not exceed 102 percent of the total amount of property taxes for support of the regional transit district for the immediately preceding fiscal year. The division takes effect January 1, 2026, and applies to property taxes due and payable in fiscal years beginning on or after July 1, 2026.

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Other Sponsors (1)

Committee report, approving bill. S.J. 946. (on 05/08/2025)

Official Document