Iowa businesses see first property tax relief in three decades

By Rod Boshart, Gazette Des Moines Bureau

DES MOINES - Business property owners in Iowa received $127.3 million in tax relief this month, thanks to landmark legislation enacted by the split-control Legislature in 2013.

The relief was delivered via a five percent rollback on commercial and industrial property tax rates normally taxed at 100 percent of assessed value, and a new tax credit sought by applicants for 70,444 business property units for taxes on the 2013 property assessment that are due and payable this month and next March, according to the state Department of Revenue.

'I think business owners, particularly smaller ones, really saw a difference this year,” said Jeff Robinson, a tax analyst with the Legislative Services Agency. 'I mean they really had to notice when they got their bill this that it was less than it was the year before.”

Qualifying businesses divided $49 million in relief provided by the state, while counties were reimbursed nearly $78.336 million in state money to cover the cost of applying the 5 percent rollback directly to commercial and industrial property tax rates, according to revenue department data obtained by The Gazette.

The state reimbursement amounted to more than $6.6 million for Linn County and nearly $4.77 million for Johnson County.

Lucas Beeken, public policy specialist for the Iowa State Association of Counties (ISAC), said the figures came in very close to the projections made when the legislation was approved, marking the first reduction in business property taxes in more than three decades.

'People are delighted,” Branstad said on Friday. 'This is really significant, and it's really appreciated. We've gotten very positive feedback about it.”

The relief was part of a wide-ranging bill that provided tax relief to all classes of Iowa property - agricultural, residential, commercial and industrial - as well as breaks to Iowa income taxpayers.

Senate File 295, which was approved in 2013 by a 43-6 vote in the Democratic-controlled Senate and an 84-13 margin in the Republican-controlled House, was projected to provide $4.4 billion in property tax relief over 10 years as well as $90 million a year in income tax savings.

The compromise called for commercial and Industrial properties to be assessed at 95 percent of valuation retroactive to Jan. 1, 2013, then at 90 percent starting on Jan. 1, 2014, and each year thereafter. Previously, those properties were taxed at 100 percent of valuation.

The legislation also dropped the tax assessment growth limitation for residential and agricultural properties from 4 percent to 3 percent under the property tax rollback. Under the state's 'rollback” calculation, residential and agricultural properties have been subject to property taxes equating to about 60 percent of their assessed values. Backers of the 2013 legislation said the intent was to gradually close the gap among property classes.

In Iowa, an owner's property-tax bill has three ingredients: the property's value as determined by the local assessor; the tax rate set by local governments and school districts; and the rollback or percentage of value subject to tax. Property taxes are a major source of revenue for local governments.

A standing state appropriations was established to fund the new tax credit, with $50 million set aside for the current 2015 fiscal year, $100 million for fiscal 2016 and $125 million for fiscal 2017 and each subsequent fiscal year.