Bill > HSB563

Introduced Session

This bill relates to state and local government taxes, budgets, and authority, by modifying provisions relating to the assessment and taxation of property, funding from the secure an advanced vision for education fund, the election of certain county officers, urban renewal areas and urban revitalization areas, and establishing a program for certain first-time homebuyers. DIVISION I —— PROPERTY TAX REVENUE LIMITATIONS —— BOND REVENUE USE LIMITATIONS. Under the bill, new Code section 24.35 provides that for governmental entity budgets certified for budget years beginning on or after July 1, 2027, proposed unassigned reserve funds identified within a governmental entity’s general fund shall not exceed an amount equal to 10 percent of the budgeted expenditures from the governmental entity’s general fund for the prior fiscal year before any budgeted transfers from such general fund. If the governmental entity’s budget does not comply with the requirement, the department of management shall not certify the governmental entity’s taxes back to the county auditor under Code section 24.17 and the governmental entity shall remedy the violation and recertify the budget. For purposes of this provision, the bill defines “governmental entity” to mean any unit of government or other public body or public corporation, including any intergovernmental entity, that has the power to impose or certify a property tax levy, but excludes school districts. The bill strikes a provision in Code section 176A.8 relating to unexpended funds of county agricultural extensions. As part of conducting an audit of a governmental subdivision under Code chapter 11 for fiscal years beginning on or after July 1, 2027, an examination of the governmental subdivision’s compliance with new Code section 24.35 shall be performed, including verification of the circumstances resulting in actual reserve funds exceeding the specified limits. The bill enacts new Code section 444.25, which establishes a S.F. _____ H.F. _____ maximum aggregate amount of property tax dollars that may be certified for levy among all property tax levies imposed by a governmental entity other than a school district, excluding debt service levies. For the budget year beginning July 1, 2027, and each budget year thereafter, the maximum aggregate amount of property tax dollars that may be certified for levy among all property tax levies imposed by a governmental entity shall not exceed an amount equal to the sum of 102 percent of the aggregate amount of property tax dollars certified for levy by the governmental entity among all property tax levies imposed by the governmental entity for the preceding fiscal year plus the sum of the new valuation growth amount, as calculated under the bill, for each of the governmental entity’s property tax levies for the budget year. If the budget year includes a voter-approved property tax levy that was not approved for imposition in the preceding fiscal year, the maximum aggregate amount of property tax dollars for the governmental entity for the budget year is increased by the amount of the voter-approved property tax levy approved at election for the budget year. If a governmental entity certifies a budget that violates new Code section 444.25, the department of management shall reduce each of the applicable governmental entity’s property tax levies on a pro rata basis so that the governmental entity is in compliance. New Code section 444.25 does not remove or otherwise affect property tax limitations, including levy rate and use limitations, otherwise provided by law for any property tax levy of the governmental entity. The authority of the state appeal board under Code section 24.48 to suspend property tax levy limitations does not apply to the limitations of new Code section 444.25, except under conditions of natural disasters or other emergencies or if there are unusual problems relating to major new functions required by state law. The bill also enacts new Code section 444.26, which provides that, on or after July 1, 2026, a governmental S.F. _____ H.F. _____ entity, as defined in the bill, 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 governmental entity 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 department of management, following consultation with the city finance committee and the county finance committee, may adopt rules under Code chapter 17A to implement the new Code section governing funding of general operations. DIVISION II —— COMMERCIAL AND INDUSTRIAL PROPERTY ASSESSMENT LIMITATIONS. Current Code section 441.21 imposes an assessment limitation (rollback) on commercial property, industrial property, and property valued by the department of revenue under Code chapter 434 (railway company property). For valuations established for the assessment year beginning January 1, 2022, and each assessment year thereafter, the portion of actual value at which each property unit of commercial property shall be assessed shall be the sum of the following: (1) an amount equal to the product of the assessment limitation percentage applicable to residential property multiplied by the actual value of the property that exceeds $0 but does not exceed $150,000; and (2) an amount equal to 90 percent of the actual value of the property for that assessment year that exceeds $150,000. The limitation, by operation of law, applies to the assessed value of railway company property. The bill increases the amount of value subject to the residential assessment limitation rates from S.F. _____ H.F. _____ $150,000 to $250,000 for each property unit. The sections of the division of the bill amending Code section 441.21(5)(b)(2) and 441.21(5)(c)(2) apply retroactively to assessment years beginning on or after January 1, 2026. For fiscal years beginning on or after July 1, 2027, the bill eliminates the $125 million annual appropriation used under Code section 441.21(5)(e) for payments to replace property taxes due to the application of the residential property assessment limitation to certain portions of commercial and industrial property valuations. DIVISION III —— PROPERTY TAX EXEMPTIONS AND CREDITS. Current Code chapter 425, subchapter I, provides a homestead credit against the tax on each eligible homestead in the state in an amount equal to the actual levy on the first $4,850 of actual value for each homestead, funded by an annual appropriation from the general fund of the state. The bill changes the homestead credit to an exemption in the amount of $4,850 of taxable value and eliminates the state general fund appropriation. The bill also changes the homestead credit for certain disabled veterans, which is for the full amount of taxes due, to an exemption of the full taxable value of the homestead. Under the bill, homestead credit claims approved under Code chapter 425, subchapter I, Code 2026, prior to and valid on the effective date of this division of the bill shall result in a homestead exemption under the bill without further filing by the claimant if the claimant meets the criteria for the exemption and the assessor has appropriate information to verify such eligibility. The bill makes corresponding changes to various other provisions of law to reflect the change from a homestead credit to a homestead exemption. The bill repeals Code section 425.1A, which provides a property tax exemption of $6,500 of taxable value on the homestead of owners that have attained the age of 65. The bill amends, strikes, and repeals various provisions of Code chapter 425, subchapter II, that govern the additional S.F. _____ H.F. _____ homestead credit for property taxes due and the reimbursement of rent constituting property taxes paid for certain eligible claimants based on age, disability, and income. The bill eliminates the reimbursement of rent constituting property taxes paid and amends the additional tax credit for property taxes due by eliminating eligibility based on income or disability status, except for certain disabled claimants under the previous program, and modifies the remaining claimant eligibility as a “property tax growth credit”. The property tax growth credit is allowed in addition to the homestead tax exemption created in the bill and available to claimants who own their homestead that has a qualifying actual value. The bill also limits the amount of land that is included as part of the homestead for purposes of the credit to not more than one-half acre. Eligible claimants must be either: (1) A person who has attained the age of 65 years; or (2) a person who is totally disabled, but only if the person received a credit for property taxes due for the homestead under the schedule specified in Code section 425.23(1)(a), Code 2026, for property taxes due and payable in the fiscal year beginning July 1, 2026, and if the person has filed for the credit established under the bill for each of the subsequent years, if any. Under the bill, “qualifying actual value” means one of the following: (1) an actual value of $350,000 or less for the applicable assessment year; or (2) an actual value that exceeds $350,000 for the applicable assessment year and the actual value of the homestead was equal to or less than $350,000 for the first year for which the owner claimed the credit, and the increase in the homestead’s actual value since the first-year claim was not the result of improvements, structural replacements, or modifications to the homestead beyond necessary repairs, and the owner has claimed the credit for each subsequent year since the first-year claim. A claimant must annually claim the credit and is limited to one credit per household. The amount of the credit shall S.F. _____ H.F. _____ be the difference between the actual amount of property taxes due on the homestead during the fiscal year next following the base year minus the lesser of the following: (1) the actual amount of property taxes due on the homestead during the first fiscal year for which the claimant filed a claim for a credit calculated under the bill and for which the property taxes due on the homestead were calculated on an assessed valuation that was not a partial assessment and if the claimant has filed for the credit calculated under the bill for each of the subsequent fiscal years after the first credit claimed; (2) the actual amount of property taxes due on the homestead during a fiscal year following the first fiscal year for which the claimant filed a claim for a credit calculated under the bill and for which the property taxes due on the homestead were calculated on an assessed valuation that was not a partial assessment and if the claimant has filed for the credit calculated under the bill for each of the subsequent fiscal years after the first credit claimed; and (3) the actual amount of property taxes due on the homestead during the first fiscal year for which the claimant filed a claim for a credit calculated under Code section 425.23(1)(c)(2), Code 2026, and for which the property taxes due on the homestead were calculated on an assessed valuation that was not a partial assessment and if the claimant has filed for the credit calculated under Code section 425.23(1)(c)(2), Code 2026, or the bill for each of the subsequent fiscal years after the first credit claimed. The bill makes corresponding changes to various other provisions of law to reflect the changes to Code chapter 425, subchapter II. The bill strikes Code section 435.22(4), which establishes and appropriates money to fund claims for credit for manufactured or mobile home tax due. The bill requires the department of health and human services to establish and administer a program for the reimbursement of rent constituting property taxes paid, as defined in Code section 425.17(9), Code 2026, for rents S.F. _____ H.F. _____ paid by eligible claimants in calendar years beginning on or after January 1, 2027. The department shall administer the program under the provisions of Code chapter 425, subchapter II, Code 2026, including determinations of eligibility and calculations of reimbursement amounts, as if the program under that subchapter and any rules adopted to implement or administer the program were in effect. The bill appropriates for fiscal years beginning on or after July 1, 2026, from the general fund of the state to the department of health and human services, an amount necessary to establish and administer the rent reimbursement program. The bill directs the department of revenue to review other provisions of law to determine if additional changes are necessary to implement this division of the bill and, if necessary, submit legislation to the ways and means committees of the senate and house of representatives not later than January 1, 2027. This division of the bill does not affect the operation of, or prohibit the application of, prior provisions of the Code sections amended by the division, or rules to administer such prior provisions, for assessment years beginning before January 1, 2026, for property taxes due and payable in fiscal years beginning before July 1, 2027, or for reimbursement of rent constituting property taxes paid for amounts paid by the claimant in calendar years beginning before January 1, 2027, including appropriations made therefor. This division of the bill applies retroactively to assessment years beginning on or after January 1, 2026, for property taxes due and payable in fiscal years beginning July 1, 2027. DIVISION IV —— SECURE AN ADVANCED VISION FOR EDUCATION FUND —— EQUITY TRANSFER PERCENTAGE. Prior to allocation of moneys available in the secure an advanced vision for education fund to school districts on a per-pupil basis, certain amounts are calculated and allocated to other funds. S.F. _____ H.F. _____ Code section 423F.2 establishes a calculation for an equity transfer percentage that is used, in part, to determine amounts distributed and credited to the foundation base supplement fund and the property tax equity and relief fund. For fiscal years beginning on or after July 1, 2026, the bill eliminates the calculation of the equity transfer percentage based on increases in the amount in the secure an advanced vision for education fund and instead specifies that the equity transfer percentage for the fiscal year beginning July 1, 2026, is 15 percent; for the fiscal year beginning July 1, 2027, is 20 percent; for the fiscal year beginning July 1, 2028, is 25 percent; and for the fiscal year beginning July 1, 2029, and each fiscal year thereafter, is 30 percent. The bill provides that for amounts allocated under Code section 423F.2 for fiscal years beginning on or after July 1, 2026, the department of management shall adjust or reconcile actual amounts to be received by school districts in the fiscal year immediately following the fiscal year during which the revenues were collected. DIVISION V —— PROPERTY PARCEL INFORMATION. The bill requires each county auditor to submit an annual report not later than January 1 to the department of management containing parcel-level property data, including parcel identification information, location, size, valuation, classification, types of structures and improvements, exemptions, credits, and whether the parcel is subject to a division of revenue. The bill authorizes the department of management to require the report to include additional parcel-level data deemed necessary by the director of the department of management. The bill requires the department of management to prescribe the form and manner of submitting such annual report. DIVISION VI —— URBAN RENEWAL AND URBAN REVITALIZATION. The bill strikes and replaces Code section 403.2, which specifies general policy of Iowa’s “Urban Renewal Law” by generally stating that the powers conferred by Code chapter 403 are for S.F. _____ H.F. _____ public uses and public purposes. The bill also amends Code section 403.3 describing the general scope of a municipality’s program under Iowa’s urban renewal law. The bill amends the definition of “urban renewal project” under current Code section 403.17(25) to apply to urban renewal projects approved before the effective date of this division of the bill. The bill also establishes a definition of “urban renewal project” for projects approved on or after the effective date of the division of the bill, which includes only the following undertakings and activities: (1) acquisition of a portion of a property slum area, blighted area, or economic development area to be used for the installation, construction, or reconstruction of utilities or streets that directly serve the area if the utilities or streets are necessary for furtherance of the urban renewal plan; (2) demolition and removal of buildings and improvements located on the portion of such property; and (3) sale of public property within the urban renewal area for uses in accordance with the urban renewal plan. The bill provides that moneys from any source deposited into the municipality’s urban renewal special fund shall not be expended for or otherwise used in connection with an urban renewal project approved on or after the effective date of the division of the bill that does not meet the new definition of “urban renewal project”. The bill enacts new Code section 403.18A, which provides that an ordinance providing for a division of revenue under Code section 403.19 adopted before the effective date of the division of the bill and that is not limited in duration under Code section 403.17(10) or Code section 403.22(5) shall be subject to the duration limitation established in the new Code section. Such a division of revenue ordinance described may continue in effect until such time that the urban renewal area is dissolved by the municipality, the ordinance is repealed by the municipality, or the ordinance terminates following the retirement or payment of all indebtedness payable from such S.F. _____ H.F. _____ division of revenue in existence on the effective date of the division of the bill, whichever occurs first. Under new Code section 403.18A, a municipality shall not incur additional indebtedness payable using revenue resulting from such an ordinance on or after the effective date of the division of the bill. The bill prohibits such an ordinance or the applicable urban renewal area from being amended to include territory that is not subject to the ordinance on the effective date of the division of the bill. The bill amends Code section 403.19(3) to provide that costs of an urban renewal project, including bonds, loans, advances, or other indebtedness incurred on or after the effective date of the division of the bill and payable from the municipality’s urban renewal special fund shall only be paid from the portion of incremental taxes resulting from that portion of the urban renewal area governed by the ordinance where the urban renewal project is located. Under the bill, an ordinance providing for a division of revenue under Code section 403.19 that is adopted on or after the effective date of the division of the bill shall be limited to 20 years from the calendar year following the calendar year in which the municipality first certifies to the county auditor the amount of any loans, advances, indebtedness, or bonds that qualify for payment from the division of revenue. As a result of the changes to a municipality’s urban renewal powers and the definition of urban renewal project, the bill eliminates the applicability of the low and moderate income housing requirements of Code section 403.22 for urban renewal areas established on or after the effective date of the division of the bill. Code section 404.3D provides that for revitalization areas established on or after July 1, 2024, and for first-year exemption applications for property located in a revitalization area in existence on July 1, 2024, filed on or after July 1, 2024, an exemption authorized under Code chapter 404 for S.F. _____ H.F. _____ property that is residential property shall not apply to property tax levies imposed by a school district. The bill amends that Code section to provide that in addition to the inapplicability of the exemption to school district property tax levies, for property taxes due and payable in fiscal years beginning on or after July 1, 2027, if such a property receiving an exemption is located in both a revitalization area and an urban renewal area, the school district property taxes on the property shall not be subject to the division of revenue under Code section 403.19 and when collected shall be paid to the school district. This division of the bill takes effect upon enactment. DIVISION VII —— ASSESSMENT FREQUENCY AND PROCEDURES. Under current law, all property in an assessing jurisdiction is generally reassessed to determine the property’s actual value every two years, unless the property is new or has been improved or changed. The bill provides that beginning with the assessment year 2025, property shall be reassessed every three years and that the department of revenue’s equalization process shall occur in the assessment year immediately preceding each reassessment year. The bill amends Code section 441.21(3) by providing that for assessment years beginning on or after January 1, 2027, if the taxpayer’s property has increased in actual value by 15 percent or more from the immediately preceding reassessment year or the most recent assessment year following such reassessment year if the property was revalued or reassessed in that assessment year, the assessor shall provide the taxpayer with a statement of the reasons for the increase in actual value, information specifying the portion of actual value increase attributable to a change in classification, revaluation, new construction, improvements, or renovations to the property, and all information in any formula or method used to determine the actual value. Under current Code section 441.21(3), the burden of proof S.F. _____ H.F. _____ is upon any complainant attacking a property valuation as excessive, inadequate, inequitable, or capricious. However, when the complainant offers competent evidence that the market value of the property is different than the market value determined by the assessor, the burden of proof thereafter is upon the officials or persons seeking to uphold such valuation to be assessed. The bill modifies the burden of proof in certain circumstances. For assessment years beginning on or after January 1, 2027, if the taxpayer’s property actual value increased by 15 percent or more from the immediately preceding reassessment year or the most recent assessment year following such reassessment year if the property was revalued or reassessed in that assessment year, including an increase as the result of an equalization order, and the property did not change classification or primary use and the increase in actual value is not the result of new construction, improvements, or renovations to the property, the actual value so determined by the assessor is not presumed to be the actual value and in any protest or appeal the assessor shall have the burden of proof that the valuation is not excessive, inadequate, inequitable, or capricious. The bill amends Code section 441.33 to provide that ex parte communications with board of review members are prohibited in protests before the board. The bill directs the department of revenue to review other provisions of law to determine if additional changes are necessary to implement the change in timing of periodic assessments enacted in this division of the bill and, if necessary, submit legislation to the ways and means committees of the senate and house of representatives not later than January 1, 2027. DIVISION VIII —— LOCAL GOVERNMENT SHARED-SERVICES GRANT PROGRAM. The bill establishes a local government shared-services grant fund program and fund. For purposes of the program, “local government” means a county, city, township, S.F. _____ H.F. _____ or any special-purpose district or authority. The bill appropriates moneys in the fund to the economic development authority to provide grants to local governments to assist in efforts to consolidate government positions and pursue agreements with other local governments to share services and reduce the use of property tax revenues for such shared services. Grant funds may be used by the local government for costs to implement service-sharing or service-consolidation initiatives and transitional or temporary costs of eliminating services. The bill requires the economic development authority to adopt rules to establish and administer the grant program to provide for the allocation of moneys in the fund in the form of competitive grants to local governments. DIVISION IX —— FIRSTHOME IOWA ACCOUNTS. The bill establishes a FirstHome Iowa program, which allows citizens of the state to invest money in a public trust for future application to the payment of qualified homebuyer expenses. A FirstHome Iowa program trust is created and the treasurer of state is the trustee of the trust. The bill grants to the treasurer of state all powers necessary to carry out and effectuate the purposes and objectives of the trust, including the power to make and enter into contracts, accept any moneys for purposes of the program, carry out studies and projections to advise participants regarding present and estimated future qualified homebuyer expenses, procure insurance against any loss in connection with the trust, enter into participation agreements with participants, make payments to or on behalf of beneficiaries for qualified homebuyer expenses, and invest moneys from the program fund in any investments which are determined by the treasurer of state to be appropriate. The trust may enter into participation agreements with participants on behalf of beneficiaries. The participant contributes moneys into an account for a beneficiary, who is an individual to benefit from advance payments of qualified homebuyer expenses on behalf of the beneficiary. Moneys S.F. _____ H.F. _____ accrued by participants in an account may be used for payments to or on behalf of a beneficiary for qualified homebuyer expenses. The bill defines “qualified homebuyer expenses” to mean any of the following: (1) a down payment or closing costs for the qualified purchase of a single-family residence in Iowa that is the principal residence of the beneficiary if such beneficiary is a first-time homebuyer with respect to such purchase; (2) a cost, fee, tax, or payment incurred by, or charged or assigned to, a beneficiary as part of the purchase; or (3) any United States veterans administration funding fee incurred by the beneficiary in connection with a veterans administration home loan guaranty program. The bill defines “first-time homebuyer” to mean an individual who is a resident of Iowa and who does not own, either individually or jointly, a single-family or multifamily residence, and who has not owned or purchased, either individually or jointly, a single-family or multifamily residence for a period of three years prior to the date of the qualified purchase for which the eligible home costs are paid or reimbursed from an account. Under the bill, “qualified purchase” means the purchase of a single-family residence in Iowa by the account’s beneficiary 90 or more days after the date the participant first opened the account. The bill establishes an Iowa income tax deduction for the participant in an agreement for amounts contributed to an account by the participant during the applicable tax year, not to exceed $5,500 per beneficiary per year adjusted annually to reflect increases in the consumer price index. Additionally, income from interest and earnings received from the FirstHome Iowa program trust created in new Code chapter 12L is deducted from income. Distributions or transfers from an account are considered income for Iowa income tax purposes, to the extent such amount was previously deducted as a contribution to the trust, if the amount is used for purposes other than the payment of qualified homebuyer expenses. The bill allows a beneficiary under an agreement to be S.F. _____ H.F. _____ changed and allows agreements to be amended in order to enable participants to increase or decrease the level of participation, change the designation of successors, and carry out similar matters as authorized by rule. The bill requires the treasurer of state to segregate moneys received by the trust into two funds: (1) the FirstHome Iowa program fund, which includes moneys paid into accounts by participants; and (2) the administrative fund to be used for administration of the program, which includes administrative fees collected. The bill establishes procedures for the cancellation of agreements or termination of the program, requirements for ownership of payments made under an agreement, requirements related to income derived from investments, and establishes audit and reporting requirements for the program. The bill amends the Iowa first-time homebuyer savings account Act under Code chapter 541B to allow for the withdrawal and deposit of account balances under Code chapter 541B to accounts within the FirstHome Iowa program trust without penalty or taxation in this state if such withdrawal is deposited in an account within the FirstHome Iowa program trust within 30 days of the withdrawal. The bill also authorizes the treasurer of state to, by rule, provide for the direct transfer of moneys within an account under Code chapter 541B to a FirstHome Iowa program trust account without penalty or taxation in this state. The bill prohibits new accounts under Code chapter 541B from being established on or after July 1, 2026. DIVISION X —— PROPERTY ASSESSMENT SYSTEM TASK FORCE. By January 1, 2027, the department of revenue is required to prepare and submit a report, including any recommended changes, to the general assembly regarding the assessment of property in this state for taxation purposes, including but not limited to review of all of the following: (1) assessor qualifications and education; (2) assessor selection and retention; (3) S.F. _____ H.F. _____ functions of conference boards and examining boards; (4) property assessment procedures, frequency, and timelines; and (5) property tax assessment protest and appeal procedures and burdens of proof. The department may convene a task force of local and state officials and technical experts to assist in the review of such topics. DIVISION XI —— COUNTY OFFICERS —— APPOINTMENT IN LIEU OF ELECTION. Code section 39.17 provides, in part, for the election of a county auditor, a county treasurer, and a county recorder. This division of the bill eliminates those county officers from being elected and provides that each of those positions will be appointed by the county board of supervisors and be subject to removal under Code section 331.321, similar to other appointed county positions. The bill makes corresponding changes to other provisions of law to reflect that the county auditor, a county treasurer, and a county recorder will no longer be elected county officials. The term of office of each county auditor, county treasurer, and county recorder holding such office on the effective date of this division of the bill shall continue until expiration of the current elective term. After expiration of such term or vacancy in such office occurring prior to expiration, such office shall be filled by appointment by the county board of supervisors. The bill requires the secretary of state to determine if additional legislative changes are necessary to implement the changes in this division of the bill and, if necessary, submit legislation to the local government committees of the senate and house of representatives not later than January 1, 2027.

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Other Sponsors (1)

Subcommittee recommends passage. (on 01/29/2026)

Official Document