As Iowa’s legislature pushes toward adjournment, the focus is on finalizing the state budget and negotiations over property tax relief. The budget appears close to resolution, but property taxes remain the major sticking point.

Property Tax Reform’s Path Through the Legislature

The Iowa Senate approved an amended property tax reform bill (SF 2472) 41–4 on April 8. This week, the House took up the Senate’s bill, replaced it with its own language, and passed the amended version on a bipartisan 64-23 vote (with three Democrats joining Republicans).

Key provisions passed by the House include:

• 2% property tax cap: Excludes debt service and school districts. (starts in FY 2028)
• Eliminates the standing General Fund appropriation of $125 million (Business Property Tax Credit) backfill to localities starting in FY 2028.
• Starting in FY 2028, reduces the school foundation levy from $5.40 to $5.00 per $1,000 of assessed valuation.
• 25% of SAVE directed toward property tax relief by FY 2031.
• Limits all urban renewal revenues to 20 or 23 years for TIFS characterized as slums or blighted areas.
• TIF districts created without an end date are restricted to collect only 60% of available revenue for 20 years. (Does not apply to community colleges)
• Requires the assessor to include additional information in the taxpayer’s statement to justify an increase if that increase is 10% or more, starting in FY 2027.
• Requires an assessor to defend a property’s assessed value through protest and or appeal if the valuation is 10% or higher and not attributable to equalization, improvements, or renovations.
• Establishes a $10 million Local Government Efficiency Grant Fund under the direction of Iowa Economic Development Authority to encourage local government efficiency and innovation.
• Updates the layout and content of property tax statements. Allows property tax statements to be accessible on a website in lieu of mailing starting FY 2028
• First Home Iowa Accounts.
• Prohibits two bond elections in the same year.
• Prohibits EMS levy above $0.75 per $1,000 for counties that do not have a levy and allows counties that already have a levy to increase it to $1.50 per $1,000 starting in FY 2028.
• Limits unspent balances for cities and school districts to 35%.
• Replaces the Homestead Credit with a new Homestead Exemption of $15,000.
• Veterans and Seniors: Leaves current law in place.
• Agricultural extension levy shall not exceed 2% of the amount levied in the immediately preceding fiscal year, plus new valuation.

The bill has now returned to the Senate, which has indicated they will insist on their original plan.

Core Principle: Limit Spending for Real Tax Relief

Property taxes are driven by local government spending, not by rising property assessments.

• Stronger spending caps deliver more relief because they directly restrain how much local governments can spend.
• Weaker caps in other states (Texas, Kansas) have proven less effective due to exemptions and inflation.

House Ways and Means Chairman Rep. Carter Nordman correctly said, “For too long, the property tax system has put certainty for government budgets over the certainty of family budgets, and with this proposal, we are flipping the script.”

Taxpayer needs must come first; government spending should not automatically take priority.

Why Assessments Aren’t the Real Problem

Critics often blame high assessments for rising tax bills, but that is incorrect.

• Local governments can always lower levy rates to offset assessment growth.
• The real issue is an insatiable need to grow government.
• The argument that the cap “won’t cut taxes” while also claiming it will “cut services” is contradictory. Some belt-tightening is exactly the point.

Multi-Residential Properties (Renters and Retirement Communities)

A major point of contention is how the Senate bill treats apartment buildings (four or more units).

• In 2012, Iowa began taxing multi-residential properties at the lower residential rate.
• The Senate version would reverse this, bringing their tax treatment more in line with commercial properties.
• At a public hearing, developers warned that this would increase rents for tenants. Increased costs are passed along through higher rent, reduced maintenance, or slower new development.
• The change would also hit retirement communities and senior living facilities, many of which already operate on thin margins.

What’s Next?

Negotiations continue, but SF 2472 remains the main vehicle for any final agreement. The Senate has the next move, and it appears they are insistent on their version of the bill, so stay tuned for updates.

Listen to the ITR Live for a more detailed summary and opinion.