Bill > HF2745

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, urban renewal areas, establishing a program for certain first-time homebuyers, and establishing a local government efficiency grant fund. 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 35 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 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 against property that is not new valuation, as defined in the bill, 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 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. The bill also enacts new Code section 444.26, which provides that, on or after July 1, 2026, a governmental 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 $150,000 to $350,000 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 —— HOMESTEAD PROPERTY TAX EXEMPTION. The bill establishes a property tax exemption for residential property that is receiving a homestead property tax credit. For assessment years beginning on or after January 1, 2026, a property tax exemption is allowed on each such property in addition to any exemption or credit for such property under any other provision of law. The exemption is 10 percent of the taxable value of the property or $25,000 in taxable value, whichever is less. However, the exemption shall not apply to a property tax imposed by a school district. 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. The bill makes Code section 25B.7 inapplicable to the exemption established in this division. DIVISION IV —— SECURE AN ADVANCED VISION FOR EDUCATION FUND —— EQUITY TRANSFER PERCENTAGE —— FUTURE REPEAL. 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. 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 10 percent; for the fiscal year beginning July 1, 2027, is 12.5 percent; for the fiscal year beginning July 1, 2028, is 15 percent; for the fiscal year beginning July 1, 2029, is 17.5 percent; for the fiscal year beginning July 1, 2030, is 20 percent; for the fiscal year beginning July 1, 2031, is 22.5 percent; for the fiscal year beginning July 1, 2032, is 25 percent; for the fiscal year beginning July 1, 2033, is 27.5 percent; and for the fiscal year beginning July 1, 2034, 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. Current law repeals Code chapter 423F that establishes the secure an advanced vision for education fund and lowers the state sales and use tax rate from 6 percent to 5 percent on January 1, 2051. The bill extends that repeal and reduction date to January 1, 2071. 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. The bill amends the definition of “economic development” for purposes of Code chapter 15 to also include the provision of workforce housing. The bill adds development policies that advance the development of workforce housing to the list of factors required to be considered by the public body before public funds are used for grants, loans, tax incentives, or other financial assistance to private persons or on behalf of private persons for economic development under Code chapter 15. The bill also defines “low and moderate income family housing” for Code chapter 403 to mean housing for low and moderate income families and housing that meets the requirements of Code section 15.353 (workforce housing). The bill also modifies the defined term “low or moderate income families” in Code chapter 403 to “low and moderate income families” to align with the terminology usage within the Code chapter. The bill excludes the school district foundation property tax imposed under Code section 257.3 from the division of revenue under Code section 403.19 (tax increment financing) if levied against property located in an incorporated area upon which new construction or renovations begin on or after the effective date of this division of the bill, unless such construction or renovations were approved and subject to an agreement adopted before January 1, 2026. The bill also excludes taxes for emergency medical services imposed pursuant to Code chapter 357F, 357G, or 422D from the division of revenue. The bill prohibits such taxes from being divided and paid into the municipality’s special fund for the payment of urban renewal indebtedness but instead requires the tax to be levied, collected, and paid to the school district, emergency medical services district, city emergency medical services district, or county in the same manner as all other property taxes. The exclusions in the bill apply to property taxes due and payable in fiscal years beginning on or after July 1, 2027. Under the bill, for urban renewal areas for which an ordinance providing for a division of revenue is not limited in duration under Code section 403.17(10) (20 years) or Code section 403.22(5) (10 years), after 20 years following the effective date of this division of the bill or after 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 which qualify for payment from the division of revenue, whichever is later, the amount of taxes that is authorized to be paid into the municipality’s urban renewal special fund shall not exceed 60 percent of the amount otherwise authorized, but for the bill, and such excess amounts shall be allocated and paid to the respective taxing districts in the same manner as other taxes. The municipality may exceed this limitation to the extent necessary for the payment of bonds or other indebtedness incurred before the effective date of this division of the bill and this limitation does not apply to divisions of revenue established by community colleges under Code chapter 260E or by rural improvement zones under Code chapter 357H. The bill provides that, unless otherwise limited in duration under Code section 403.17(10) (20 years), an ordinance providing for a division of revenue adopted on or after the effective date of this division of the bill shall be limited to 23 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. The ordinance shall terminate and be of no further force and effect following the 23-year period. The 23-year limitation does not apply to divisions of revenue established by community colleges under Code chapter 260E or rural improvement zones under Code chapter 357H. Under current law, any urban renewal area established upon the determination that the area is an economic development area, a division of revenue (tax increment financing) shall not be allowed for the purpose of providing or aiding in the provision of public improvements related to housing and residential development, unless the municipality assures that the project will include assistance for low and moderate income family housing, subject to certain municipality population thresholds. The bill modifies such assistance requirements and the population thresholds. Current law provides that for municipalities with a population of 5,000 or less, the municipality need not provide any low or moderate income family housing assistance if a housing needs assessment shows there is no need. The bill eliminates the housing needs assessment requirement. The bill combines the two population threshold categories for municipalities over 5,000 in population and provides that the amount of assistance for low and moderate income family housing shall be equal to or greater than the percentage of the original project cost that is equal to the percentage of low and moderate income residents for the county in which the urban renewal area is located as determined by the United States department of housing and urban development using section 8 guidelines. The bill, however, establishes a maximum amount of assistance that is the lesser of 20 percent of the original project cost, or $350,000 if the municipality is a city or $300,000 if the municipality is a county. These changes apply to existing and newly established urban renewal areas. The bill also eliminates the 10-year limitation on the division of revenue for certain projects relating to housing and residential development in urban renewal areas that are economic development areas for ordinances adopted on or after the effective date of this division of the bill. Such ordinances adopted on or after the effective date of this division of the bill are subject to the 20-year limitation for economic development areas. This division of the bill takes effect upon enactment. DIVISION VII —— ASSESSMENT PROCEDURES. 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 10 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 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 10 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. DIVISION VIII —— LOCAL GOVERNMENT EFFICIENCY GRANT PROGRAM. The bill establishes a local government efficiency grant fund program and fund. The bill appropriates $10 million to the fund. For purposes of the program, “local government” means a county, city, township, or any special-purpose district or authority. The bill appropriates moneys in the fund to Iowa state university to provide, following approval by a commission provided for in the bill, grants to local governments to assist in efforts to increase government efficiency. The bill requires the commission 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 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 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 —— VALUATIONS —— ABNORMAL TRANSACTIONS —— REAL ESTATE TRANSFER TAX FORMS. The bill amends Code section 428A.7 governing real estate transfer tax forms for the declaration of value prescribed by the department of revenue by specifying examples of the types of special facts and circumstances that may distort market value. 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. This division of the bill applies retroactively to assessment years beginning on or after January 1, 2026. DIVISION XI —— LOCAL GOVERNMENT BUDGET STATEMENTS. Code section 24.2A requires the county auditor to mail statements containing certain county, city, and school district budget and property tax information to each property owner or taxpayer. For budgets for fiscal years beginning on or after July 1, 2027, the bill authorizes those statements to be to be posted on the political subdivision’s internet site by March 15 in lieu of mailing individual statements. Additionally, if the political subdivision maintains a social media account on one or more social media applications, the statement or an electronic link to the statement shall be posted on each such account on a date no later than March 15. Code section 24.2A, in part, requires the county auditor to provide by mail individual statements to property taxpayers that includes various pieces of information relating to the property tax dollars and levies of cities, counties, and school districts. The bill provides that such statements will also include information for all other certifying boards that are not a city, county, or school; however, all such entities shall be considered a single political subdivision and identified under a designation of “special taxing districts” on each statement. The bill also strikes the current list of items that must be included on each individual statement and establishes the minimum contents for the statement. The bill requires that the statements be clear, concise, and written in plain language, and provides that the information in the individual statements may be presented using tables, written narrative, and graphic representations, and shall contain the internet site, mailing address, and a telephone number for each political subdivision that owners and taxpayers may call if they have questions related to the statement. The bill requires the department of management to consult with the Iowa league of cities and the Iowa state association of counties prior to prescribing the form for the statements. This division of 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 this division of the bill. This division of the bill applies to political subdivision budgets for fiscal years beginning on or after July 1, 2027. DIVISION XII —— DIVISION OF REVENUE —— DATA CENTERS. The bill excludes the school district foundation property tax imposed under Code section 257.3 from the division of revenue under Code section 403.19 (tax increment financing) for taxes levied against a qualified data center. The bill defines “qualified data center” to be a data center, as defined in Code section 423.3(95), for which site preparation activities, as defined in Code section 423.3(95), began on or after the effective date of the division of the bill, which is effective upon enactment. The bill prohibits such foundation property tax from being divided and paid into the municipality’s special fund for the payment of urban renewal indebtedness but instead requires the tax to be levied, collected, and paid to the school district in the same manner as all other property taxes. The exclusion in the bill applies to property taxes due and payable in fiscal years beginning on or after July 1, 2027. DIVISION XIII —— ELECTION DATES —— BONDS. Current Code section 39.2(4)(d) specifies the special election date for political subdivisions if the election is in whole or in part for the question of issuing bonds or other indebtedness is the first Tuesday after the first Monday in November. The bill adds the first Tuesday after the first Monday in June as a date for such an election. The bill, however, provides that a political subdivision shall not hold an election on the question of issuing bonds or other indebtedness on two such consecutive election dates authorized under that provision. DIVISION XIV —— EMERGENCY MEDICAL SERVICES LEVY. Code chapter 422D authorizes a $0.75 per $1,000 of assessed value county property tax levy for emergency medical services if approved at election. For fiscal years beginning on or after July 1, 2027, the bill increases the maximum authorized levy rate to $1.50 per $1,000 of assessed value if such increased rate is approved at an election held on or after July 1, 2026. DIVISION XV —— UTILITY REPLACEMENT TAX TASK FORCE. Code section 437A.15(7) establishes a utility replacement tax task force. The bill modifies the duties of the task force to study the accuracy of the taxes imposed under Code chapters 437A and 437B, ways to modernize the administration of such taxes, methods of simplifying administration of the replacement taxes, elimination of property taxes imposed under Code chapter 437A or 437B, simplification of thresholds for replacement tax rate adjustments while retaining tax stability, and the effects of such taxes on local taxing authorities, local taxing districts, consumers, and taxpayers through December 31, 2026, including ways to maintain continuity for local taxing districts and consumers and ways to provide a competitive and equitable tax environment for taxpayers. If the task force recommends modifications to the replacement taxes, the department of management shall transmit those recommendations to the general assembly. This division of the bill takes effect upon enactment. DIVISION XVI —— SCHOOL DISTRICT UNSPENT BALANCES —— ON-TIME FUNDING AND MODIFIED SUPPLEMENTAL AMOUNTS. Code section 257.7 determines the authorized expenditures of a school district for a budget year, which in part includes the addition of the actual unspent balance from the preceding year. The bill limits such additional amount to an amount equal to 35 percent of the school district’s authorized expenditures for the budget year immediately preceding the base year unless a greater amount is authorized by the school budget review committee based on one or more grounds authorized for the approval of a modified supplemental amount under Code section 257.31. Code section 257.13 authorizes an on-time funding budget adjustment for school districts when the district’s actual enrollment for the budget year is greater than the district’s budget enrollment for the budget year and the school budget review committee is required to establish a modified supplemental amount for such a school district if the district adopts a resolution to receive the adjustment and notifies the school budget review committee. Under the bill, for school budget years beginning on or after July 1, 2026, the school budget review committee may establish a modified supplemental amount if the district has adopted a resolution and notifies the school budget review committee on or before a date established by the committee. The bill also requires the board of directors of each school district to establish a policy that defines a targeted range and maximum amount of unspent balance of authorized expenditures, determined by a percent of authorized expenditures under Code section 257.7 or other methodology specified in the policy. The policy shall also state the date the policy was adopted and the date the policy was most recently reviewed or revised. The targeted range and maximum amount established in the policy shall be made with the intent to equalize educational opportunity, provide a good education for all the children of the school district, provide property tax relief, decrease the percentage of school costs paid from property taxes, and to provide reasonable control of school costs. Targeted ranges and maximum amounts defined in the policy shall be reviewed annually by the board of directors and such review shall be entered in the minutes of the board and approved revisions shall be made to the policy. This division of the bill takes effect upon enactment.

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Amendment H-8374 filed. H.J. 933. (on 04/16/2026)

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