House File 418 - Introduced HOUSE FILE 418 BY GOLDING A BILL FOR An Act relating to property taxes by modifying the methodology 1 for determining actual value of residential property, 2 certain levy rates, and assessment limitations of certain 3 classes of property, and including retroactive applicability 4 provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 2284YH (6) 91 jm/md
H.F. 418 DIVISION I 1 RESIDENTIAL PROPERTY ACTUAL VALUATION LIMITATION 2 Section 1. Section 441.21, subsection 1, paragraph a, Code 3 2025, is amended to read as follows: 4 a. (1) All property subject to taxation shall be valued 5 at its actual value which shall be entered opposite each item, 6 and, except as otherwise provided in this section , shall be 7 assessed at one hundred percent of its actual value, and the 8 value so assessed shall be taken and considered as the assessed 9 value and taxable value of the property upon which the levy 10 shall be made. 11 (2) For assessment years beginning on or after January 12 1, 2026, and notwithstanding any provision of law to the 13 contrary, the actual value of each individual residential 14 property, including after adjustments to actual values 15 made as the result of equalization, shall not exceed one 16 hundred percent of the actual value of the property for the 17 immediately preceding assessment year unless the property was 18 not assessed in the immediately preceding assessment year, 19 the propertys boundaries change, there is a change to the 20 propertys classification, or new construction, additions, 21 or improvements have been made to the property other than 22 normal and necessary maintenance or repairs, not amounting to 23 structural replacements or modification. 24 Sec. 2. Section 441.21, subsection 1, paragraph b, 25 subparagraph (1), Code 2025, is amended to read as follows: 26 (1) The Subject to the limitation under paragraph a , 27 subparagraph (2), the actual value of all property subject 28 to assessment and taxation shall be the fair and reasonable 29 market value of such property except as otherwise provided 30 in this section . Market value is defined as the fair and 31 reasonable exchange in the year in which the property is listed 32 and valued between a willing buyer and a willing seller, 33 neither being under any compulsion to buy or sell and each 34 being familiar with all the facts relating to the particular 35 -1- LSB 2284YH (6) 91 jm/md 1/ 12
H.F. 418 property. Sale prices of the property or comparable property 1 in normal transactions reflecting market value, and the 2 probable availability or unavailability of persons interested 3 in purchasing the property, shall be taken into consideration 4 in arriving at its market value. In arriving at market value, 5 sale prices of property in abnormal transactions not reflecting 6 market value shall not be taken into account, or shall be 7 adjusted to eliminate the effect of factors which distort 8 market value, including but not limited to sales to immediate 9 family of the seller, foreclosure or other forced sales, 10 contract sales, discounted purchase transactions or purchase of 11 adjoining land or other land to be operated as a unit. 12 Sec. 3. Section 441.21, subsection 1, paragraph g, Code 13 2025, is amended to read as follows: 14 g. Notwithstanding any other provision of this section , 15 the actual value of any property shall not exceed its fair and 16 reasonable market value, subject to paragraph a , subparagraph 17 (2), except agricultural property which shall be valued 18 exclusively as provided in paragraph e and paragraph a , 19 subparagraph (2), of this subsection . 20 Sec. 4. Section 441.21, subsection 2, Code 2025, is amended 21 to read as follows: 22 2. In the event market value of the property being assessed 23 cannot be readily established in the foregoing manner, then 24 the assessor may , subject to the limitation under subsection 25 1, paragraph a , subparagraph (2), determine the value of 26 the property using the other uniform and recognized appraisal 27 methods including its productive and earning capacity, if 28 any, industrial conditions, its cost, physical and functional 29 depreciation and obsolescence and replacement cost, and all 30 other factors which would assist in determining the fair and 31 reasonable market value of the property but the actual value 32 shall not be determined by use of only one such factor. The 33 following shall not be taken into consideration: Special value 34 or use value of the property to its present owner, and the 35 -2- LSB 2284YH (6) 91 jm/md 2/ 12
H.F. 418 goodwill or value of a business which uses the property as 1 distinguished from the value of the property as property. In 2 addition, for assessment years beginning on or after January 3 1, 2018, and unless otherwise required for property valued 4 by the department of revenue pursuant to chapters 428 , 437 , 5 and 438 , the assessor shall not take into consideration and 6 shall not request from any person sales or receipts data, 7 expense data, balance sheets, bank account information, or 8 other data related to the financial condition of a business 9 operating in whole or in part on the property if the property 10 is both classified as commercial or industrial property and 11 owned and used by the owner of the business. However, in 12 assessing property that is rented or leased to low-income 13 individuals and families as authorized by section 42 of the 14 Internal Revenue Code, as amended, and which section limits 15 the amount that the individual or family pays for the rental 16 or lease of units in the property, the assessor shall, unless 17 the owner elects to withdraw the property from the assessment 18 procedures for section 42 property, use the productive and 19 earning capacity from the actual rents received as a method 20 of appraisal and shall take into account the extent to which 21 that use and limitation reduces the market value of the 22 property. The assessor shall not consider any tax credit 23 equity or other subsidized financing as income provided to 24 the property in determining the assessed value. The property 25 owner shall notify the assessor when property is withdrawn 26 from section 42 eligibility under the Internal Revenue Code 27 or if the owner elects to withdraw the property from the 28 assessment procedures for section 42 property under this 29 subsection . The property shall not be subject to section 42 30 assessment procedures for the assessment year for which section 31 42 eligibility is withdrawn or an election is made. This 32 notification must be provided to the assessor no later than 33 March 1 of the assessment year or the owner will be subject to a 34 penalty of five hundred dollars for that assessment year. The 35 -3- LSB 2284YH (6) 91 jm/md 3/ 12
H.F. 418 penalty shall be collected at the same time and in the same 1 manner as regular property taxes. An election to withdraw 2 from the assessment procedures for section 42 property is 3 irrevocable. Property that is withdrawn from the assessment 4 procedures for section 42 property shall be classified and 5 assessed as residential property unless the property otherwise 6 fails to meet the requirements of subsection 14 . Upon 7 adoption of uniform rules by the department of revenue or 8 succeeding authority covering assessments and valuations of 9 such properties, the valuation on such properties shall be 10 determined in accordance with such rules and in accordance with 11 forms and guidelines contained in the real property appraisal 12 manual prepared by the department as updated from time to time 13 for assessment purposes to assure uniformity, but such rules, 14 forms, and guidelines shall not be inconsistent with or change 15 the foregoing means of determining the actual, market, taxable, 16 and assessed values. 17 DIVISION II 18 MODIFICATION OF ASSESSMENT LIMITATIONS 19 Sec. 5. Section 441.21, subsection 4, Code 2025, is amended 20 to read as follows: 21 4. For valuations established as of January 1, 1979 2025 , 22 the percentage of actual value at which agricultural and 23 residential property shall be assessed shall be the quotient of 24 the dividend and divisor as defined in this section determined 25 under this subsection . 26 a. (1) The percentage of actual value at which agricultural 27 property shall be assessed shall be the quotient of the 28 dividend and divisor as defined in this paragraph. The 29 dividend for each class of property shall be the dividend 30 as determined for each class of agricultural property for 31 valuations established as of January 1, 1978 2024 , adjusted by 32 the product obtained by multiplying the percentage determined 33 for that year by the amount of any additions or deletions to 34 actual value, excluding those resulting from the revaluation 35 -4- LSB 2284YH (6) 91 jm/md 4/ 12
H.F. 418 of existing properties, as reported by the assessors on the 1 abstracts of assessment for 1978 2024 , plus six three percent 2 of the amount so determined. 3 (2) However, if the difference between the dividend so 4 determined for either class of property and the dividend for 5 that class of property for valuations established as of January 6 1, 1978, adjusted by the product obtained by multiplying 7 the percentage determined for that year by the amount of 8 any additions or deletions to actual value, excluding those 9 resulting from the revaluation of existing properties, as 10 reported by the assessors on the abstracts of assessment for 11 1978, is less than six percent, the 1979 dividend for the other 12 class of property shall be the dividend as determined for that 13 class of property for valuations established as of January 14 1, 1978, adjusted by the product obtained by multiplying 15 the percentage determined for that year by the amount of 16 any additions or deletions to actual value, excluding those 17 resulting from the revaluation of existing properties, as 18 reported by the assessors on the abstracts of assessment for 19 1978, plus a percentage of the amount so determined which is 20 equal to the percentage by which the dividend as determined 21 for the other class of property for valuations established 22 as of January 1, 1978, adjusted by the product obtained by 23 multiplying the percentage determined for that year by the 24 amount of any additions or deletions to actual value, excluding 25 those resulting from the revaluation of existing properties, as 26 reported by the assessors on the abstracts of assessment for 27 1978, is increased in arriving at the 1979 dividend for the 28 other class of property. 29 (3) For valuations established for assessment years 30 beginning on or after January 1, 2022, the calculation of the 31 dividend for residential property under this subsection shall 32 exclude the value of all property described in subsection 14 , 33 paragraph a , subparagraphs (2), (3), (4), (5), and (6), 34 and the property described in subsection 14 , paragraph a , 35 -5- LSB 2284YH (6) 91 jm/md 5/ 12
H.F. 418 subparagraph (7), that contains three or more separate dwelling 1 units. 2 b. (1) The divisor for each class of property shall be 3 the total actual value of all such agricultural property in 4 the state in the preceding year, as reported by the assessors 5 on the abstracts of assessment submitted for 1978 2024 , plus 6 the amount of value added to said total actual value by the 7 revaluation of existing properties in 1979 2025 as equalized 8 by the director of revenue pursuant to section 441.49 . The 9 director shall utilize information reported on abstracts of 10 assessment submitted pursuant to section 441.45 in determining 11 such percentage. For valuations established as of January 12 1, 2026, and each assessment year thereafter, the percentage 13 of actual value as equalized by the department of revenue as 14 provided in section 441.49 at which agricultural property shall 15 be assessed shall be calculated in accordance with the methods 16 provided in this paragraph. 17 (2) For valuations established for assessment years 18 beginning on or after January 1, 2022, the calculation of the 19 divisor for residential property under this subsection shall 20 exclude the value of all property described in subsection 14 , 21 paragraph a , subparagraphs (2), (3), (4), (5), and (6), 22 and the property described in subsection 14 , paragraph a , 23 subparagraph (7), that contains three or more separate dwelling 24 units. 25 c. (1) For valuations established as of January 1, 1980, 26 and each assessment year thereafter beginning before January 27 1, 2013, the percentage of actual value as equalized by the 28 director of revenue as provided in section 441.49 at which 29 agricultural and residential property shall be assessed shall 30 be calculated in accordance with the methods provided in 31 this subsection , including the limitation of increases in 32 agricultural and residential assessed values to the percentage 33 increase of the other class of property if the other class 34 increases less than the allowable limit adjusted to include 35 -6- LSB 2284YH (6) 91 jm/md 6/ 12
H.F. 418 the applicable and current values as equalized by the director 1 of revenue, except that any references to six percent in this 2 subsection shall be four percent. 3 (2) For valuations established as of January 1, 2013, and 4 each assessment year thereafter, the percentage of actual 5 value as equalized by the department of revenue as provided in 6 section 441.49 at which agricultural and residential property 7 shall be assessed shall be calculated in accordance with the 8 methods provided in this subsection , including the limitation 9 of increases in agricultural and residential assessed values to 10 the percentage increase of the other class of property if the 11 other class increases less than the allowable limit adjusted 12 to include the applicable and current values as equalized by 13 the department of revenue, except that any references to six 14 percent in this subsection shall be three percent. 15 b. (1) For valuations established for the assessment year 16 beginning January 1, 2025, the percentage of actual value as 17 equalized by the department of revenue as provided in section 18 441.49 at which residential property shall be assessed shall 19 be fifty-five percent. 20 (2) For valuations established for the assessment year 21 beginning January 1, 2026, the percentage of actual value as 22 equalized by the department of revenue as provided in section 23 441.49 at which residential property shall be assessed shall 24 be sixty percent. 25 (3) For valuations established for the assessment year 26 beginning January 1, 2027, the percentage of actual value as 27 equalized by the department of revenue as provided in section 28 441.49 at which residential property shall be assessed shall 29 be sixty-five percent. 30 (4) For valuations established for the assessment year 31 beginning January 1, 2028, the percentage of actual value as 32 equalized by the department of revenue as provided in section 33 441.49 at which residential property shall be assessed shall 34 be seventy percent. 35 -7- LSB 2284YH (6) 91 jm/md 7/ 12
H.F. 418 (5) For valuations established for the assessment year 1 beginning January 1, 2029, the percentage of actual value as 2 equalized by the department of revenue as provided in section 3 441.49 at which residential property shall be assessed shall 4 be seventy-five percent. 5 (6) For valuations established for the assessment year 6 beginning January 1, 2030, the percentage of actual value as 7 equalized by the department of revenue as provided in section 8 441.49 at which residential property shall be assessed shall 9 be eighty percent. 10 (7) For valuations established for the assessment year 11 beginning January 1, 2031, the percentage of actual value as 12 equalized by the department of revenue as provided in section 13 441.49 at which residential property shall be assessed shall 14 be eighty-five percent. 15 (8) For valuations established for the assessment year 16 beginning January 1, 2032, the percentage of actual value as 17 equalized by the department of revenue as provided in section 18 441.49 at which residential property shall be assessed shall 19 be ninety percent. 20 (9) For valuations established for the assessment year 21 beginning January 1, 2033, the percentage of actual value as 22 equalized by the department of revenue as provided in section 23 441.49 at which residential property shall be assessed shall 24 be ninety-five percent. 25 (10) For valuations established for the assessment year 26 beginning January 1, 2034, and each assessment year thereafter, 27 the percentage of actual value as equalized by the department 28 of revenue as provided in section 441.49 at which residential 29 property shall be assessed shall be one hundred percent. 30 Sec. 6. RETROACTIVE APPLICABILITY. This division of this 31 Act applies retroactively to January 1, 2025, for assessment 32 years beginning on or after that date. 33 DIVISION III 34 PROPERTY TAX LEVY RATES 35 -8- LSB 2284YH (6) 91 jm/md 8/ 12
H.F. 418 Sec. 7. NEW SECTION . 444.25 Maximum property tax levy rates 1 adjustments. 2 1. For purposes of this section: 3 a. Base year total taxable value is the statewide total 4 assessed value for all property tax classifications used to 5 calculate taxes for the fiscal year beginning July 1, 2025. 6 b. Budget year total taxable value is the statewide 7 total assessed value for all property classifications used to 8 calculate taxes due and payable in the fiscal year beginning 9 during the calendar year in which a budget is certified, 10 excluding value attributable to new construction. 11 c. Rate-limited property tax levy includes any ad valorem 12 property tax levy limited by law to a specific maximum property 13 tax levy rate per one thousand dollars of assessed value used 14 to calculate taxes. 15 2. For each fiscal year beginning on or after July 1, 2026, 16 each rate-limited property tax levy shall, by operation of 17 this section, be limited to a levy rate that is equal to a 18 percentage of the maximum specified levy rate or the actual 19 maximum levy approved at election, whichever is less and if 20 applicable, as follows: 21 a. For the property taxes due and payable in the fiscal 22 year beginning July 1, 2026, and each fiscal year thereafter 23 beginning before July 1, 2036, a percentage equal to the 24 quotient, expressed as a percentage, of the base year total 25 taxable value divided by the budget year total taxable value. 26 b. For the property taxes due and payable in fiscal years 27 beginning on or after July 1, 2036, a percentage equal to the 28 percentage applicable for the fiscal year beginning July 1, 29 2035. 30 EXPLANATION 31 The inclusion of this explanation does not constitute agreement with 32 the explanations substance by the members of the general assembly. 33 This bill relates to property taxation by modifying the 34 methodology for determining actual value of residential 35 -9- LSB 2284YH (6) 91 jm/md 9/ 12
H.F. 418 property, assessment limitations of certain classes of 1 property, and certain levy rate limitations. 2 DIVISION I RESIDENTIAL PROPERTY ACTUAL VALUE LIMITATION. 3 Under Code section 441.21, all property subject to taxation 4 shall be valued at its actual value and, except as otherwise 5 provided by law, shall be assessed at 100 percent of its actual 6 value, and the value so assessed shall be taken and considered 7 as the assessed value and taxable value of the property upon 8 which the levy shall be made. Actual value is generally 9 required to be the fair and reasonable market value. Market 10 value is defined as the fair and reasonable exchange in the 11 year in which the property is listed and valued between a 12 willing buyer and a willing seller, neither being under any 13 compulsion to buy or sell and each being familiar with all 14 the facts relating to the particular property, but excluding 15 certain abnormal sales. 16 The bill provides that for assessment years beginning 17 on or after January 1, 2026, the actual value of each 18 individual property, including after adjustments to actual 19 values made as the result of equalization, shall not exceed 20 100 percent of the actual value of the property for the 21 immediately preceding assessment year unless the property was 22 not assessed in the immediately preceding assessment year, 23 the propertys boundaries change, there is a change to the 24 propertys classification, or new construction, additions, 25 or improvements have been made to the property other than 26 normal and necessary maintenance or repairs, not amounting to 27 structural replacements or modification. 28 The bill also makes conforming changes to other provisions 29 of law relating to the valuation of property. 30 DIVISION II MODIFICATION OF ASSESSMENT LIMITATIONS. 31 Code section 441.21(4) establishes the calculation for 32 assessment limitations (rollback) for residential property and 33 agricultural property. The bill strikes the calculation of 34 the residential property assessment limitation for assessment 35 -10- LSB 2284YH (6) 91 jm/md 10/ 12
H.F. 418 years beginning on or after January 1, 2025, and strikes 1 the provision within the agricultural property assessment 2 limitation calculation that limits growth of residential or 3 agricultural property to the growth in the other classification 4 (ag-residential tie). The bill establishes a schedule of 5 assessment limitations for residential property that increases 6 each assessment year from the assessment year beginning January 7 1, 2025, until the assessment limitation reaches one hundred 8 percent for assessment years beginning on or after January 9 1, 2034. By operation of the scheduled increases to the 10 residential property assessment limitation, the assessment 11 limitation applicable to that portion of commercial, and 12 industrial property that is equal to or less than $150,000 is 13 also increased. 14 This division of the bill applies retroactively to 15 assessment years beginning on or after January 1, 2025. 16 DIVISION III PROPERTY TAX LEVY RATES. The bill 17 establishes a reduction for rate-limited property tax levies 18 that corresponds with the increase of assessment limitations 19 under the bill. The bill defines rate-limited property tax 20 levy to be any ad valorem property tax levy limited by law to 21 a specific property tax levy rate per $1,000 of assessed value 22 used to calculate taxes. 23 For each fiscal year beginning on or after July 1, 2026, 24 each rate-limited property tax levy shall, by operation of the 25 bill, be limited to a levy rate that is equal to a percentage 26 of the maximum specified levy rate or the actual maximum levy 27 approved at election, whichever is less and if applicable, 28 as follows: (1) for the property taxes due and payable in 29 the fiscal year beginning July 1, 2026, and each fiscal year 30 thereafter beginning before July 1, 2036, a percentage equal 31 to the quotient, expressed as a percentage, of the base year 32 total taxable value divided by the budget year total taxable 33 value; and (2) for the property taxes due and payable in fiscal 34 years beginning on or after July 1, 2036, a percentage equal to 35 -11- LSB 2284YH (6) 91 jm/md 11/ 12
H.F. 418 the percentage applicable for the fiscal year beginning July 1 1, 2035. 2 The bill defines base year total taxable value as 3 the statewide total assessed value for all property tax 4 classifications used to calculate taxes for the fiscal 5 year beginning July 1, 2025, and budget year total taxable 6 value as the statewide total assessed value for all property 7 classifications used to calculate taxes due and payable in 8 the fiscal year beginning during the calendar year in which 9 a budget is certified, excluding value attributable to new 10 construction. 11 -12- LSB 2284YH (6) 91 jm/md 12/ 12