As assessed values soar, House committee advances amended property tax bill

As Iowa property owners see higher assessed home and property values, House lawmakers are moving forward with a bill to cap annual property tax increases and reduce the school foundation property tax levy.

Republicans amended the bill, House File 1, on Thursday with some changes that the Ways and Means Committee chair Rep. Bobby Kaufmann, R-Wilton, said will help Iowans who saw a massive spike in their property assessments earlier in April. Home values jumped an average of 22% statewide, KCRG reported.

“This is centered around the increase for your actual bill, which is designed to give the taxpayers not only predictability, but also stop the bleeding for continually increasing property tax bills,” Kaufmann told reporters.

The new proposal would cap property tax increases on Iowans’ homes and farms at 3% per parcel, per year, and put an 8% cap per parcel on increases for commercial and industrial properties. The bill would also lower the school foundation property tax rate of $5.40 for every $1,000 of taxable valuation to $4.40, with the state taking over the $204 million loss of revenue caused by the levy reduction.

The committee unanimously passed the amended legislation. While Rep. David Jacoby, D-Coralville, said he had concerns about specific pieces of the bill — an amendment he brought forward to freeze property taxes for Iowa seniors failed — but said Democrats “support the concept of this bill.”

“I hope we do look at freezing property taxes for seniors, but this amendment does offer certainty,” Jacoby said. “And that’s why I will be supporting it today.”

While many Iowans faced sticker shock when they received the massive increase in their property’s assessed value in April, Lucas Beenken with the Iowa State Association of Counties said it’s important to keep in mind that Iowa already has a statewide growth limitation of 3% in place, which means that a home’s taxable value will not necessarily reflect the major increase in the assessed value.

Local governments are aware of the stress that rising costs create for Iowa families and property owners, Beenken said, but he added that local governments are facing those same problems as the result of inflation. Services Iowans depend on and expect from their local governments — such as a county repairing a bridge, or resurfacing a road — are more expensive now than in previous years because of the rising cost of labor and materials, he said.

“In the same way that families and small businesses are trying to reduce costs, counties, I think, are trying to do that as well,” Beenken said. “And then it comes to, you know, that conversation about we can’t simply just have property tax relief (alone), because that’s when the services that people depend on and desire would falter a little bit.”

The amendment addresses some of the issues raised by advocates for local government in connection with the previous version of the bill, which put a limit on assessed values. While the “per parcel” limitation will create administrative difficulties for local governments, Beenken said the new proposal will not impact the ability of assessors to determine the real value of property.

Roughly 70% of taxable value of Iowa properties, according to Iowa State Association of Counties data, fall into the 3% property tax increase category as residential or agricultural properties. Commercial properties make up about 15% of properties in the state, and industrial properties roughly 5% — and those categories fall into the 8% cap on property tax increases.

House Democrats said they are likely to be supportive of the current House property tax proposal, barring a floor amendment. However, the bill’s chances in the Senate are uncertain. Senate Republicans have moved Senate File 356 through their chamber’s committee process, and that bill contains different proposals on levy rates and assessment valuations.

Republican leaders in both chambers said they are in communication about property taxes, and plan to pass property tax legislation this session.