Commercial property owners will see some relief in their property tax bills starting with taxes due next fall.
Legislative action during 2013 spawned the largest property tax reform bill in the history of Iowa.
Senate File 295 changes the amount of taxes business owners will pay against their 2013 assessment year. The 2013 assessment year affects taxes payable in September of 2014 (1st half) and March of 2015 (2nd half).
A new credit known as the Business Property Tax Credit (BPTC) has been created to reduce the amount of taxes owed by qualifying businesses. Senate File 295 allocates $50,000,000 to the BPTC fund for assessment year 2013, $100,000,000 for assessment year 2014, and is capped at $125,000,000 for assessment year 2015. The amount each business unit will receive as a credit is dependent on how many units statewide that have their application for credit approved. The Legislative Services Agency has estimated that the maximum first year credit amount will be approximately $523. Credit amounts will increase as more money is allocated to the BPTC fund until it reaches the capped $125,000,000 for the 2015 assessment year and beyond.
The BPTC credit does not apply to residential or agriculturally classified property. One credit is available for each qualified property unit. A property unit consists of contiguous parcels of the same classification that are owned by the same person and operated by that person for a common use and purpose.
The Winneshiek County assessor's office has assigned unit numbers to all qualified parcels. Pre-filled applications with return envelopes have been mailed to qualified businesses in order to make the signing for this credit as easy as possible. Simply sign your application (s) and return them in the enclosed self-addressed envelope. Sign-up for the BPTC is a one-time sign-up unless there is a change in ownership or the use of the property in which case new applications must be filed. The deadline for the 2013 assessment year is Jan. 15, 2014. March 15th is the deadline for future years. Postmark does not constitute a timely filing. All applications must be received in the assessor's office by the deadlines mentioned above.
Senate file 295 also establishes a 95-percent rollback for the 2013 commercial, industrial, and railroad valuations, then a 90-percent rollback for following years. For 2013 valuations, a commercial, industrial, or railroad property valued at $100,000 will pay taxes on $95,000 for 2013, then $90,000 for 2014 as compared to 100 percent of their assessed value in past years.
Properties currently classed as commercial that are excluded from receiving the BPTC are properties primarily used or intended for human habitation containing three or more separate dwelling units. This would include apartment buildings, mobile home parks, assisted living facilities and section 42 properties. Senate file 295 provides that beginning on the 2015 assessment year these properties will have a new classification known as "multi-residential."
Multi-residential classed properties will see a gradual decrease in their rollback percentage between 2015 and 2022. Assessed values will be reduced to 86.25 percent for 2015 with additional drops of 3.75 percent per year until year 2022. Multi-residential properties will then have the same rollback percentage as regular residential classed properties. The current residential rollback is about 52 percent.
The last element of Senate File 295 is a change in the allowable statewide growth between residential and agricultural classed properties. Statewide allowable growth between these two classes of property has been reduced from 4 percent to 3 percent.
Senate file 295 is mandated by state law and provides that the state reimburse counties for lost revenue. However, the state will not reimburse revenue loss caused by the new multi-residential class and the allowable growth rate changes.
Information contained in this article is meant to inform our local taxpayers of changes in the property tax system. This article does not include all the details of Senate File 295.
For more specific details, visit the Iowa Department of Revenue's website at iowa.gov/tax/locgov/13PTReform.html.