(Iowa Capital Dispatch Story written by Robin Opsahl)
(Des Moines) Iowa Republican lawmakers and the governor reached an agreement on property tax legislation Sunday, sending a measure to Gov. Kim Reynolds’ desk to cap local revenue growth, change how multi-residential properties are taxed and make other changes aimed at lowering property tax costs for Iowans.
Senate File 2472, amended with the compromise language, passed 41-1 in the Senate and 61-22 in the House. The amendment incorporates portions of all the proposals released by House and Senate Republicans, as well as the governor, during various points during the legislative session.
Sen. Dan Dawson, R-Council Bluffs, said the amendment “represents how Iowa is going to move from the one of the 10th highest property tax states in the nation to something lower.”
The final proposal limits local government revenue growth with a 2% cap. The provision falls in a middle ground between the “soft” cap proposed by the Senate that would have allowed for adjustments based on inflation, and the “hard” cap proposed by the House and governor that would not have allowed for any inflation. The proposal has a “hard” cap on most general levies, but contains a 3% increase for the Des Moines Area Regional Transit and Iowa Emergency Management Association with no new growth, and a 4% cap for county hospitals. Several specified funding streams, such as debt servicing, school funding, county supplemental, city special revenue levies and community college variable levies are all exempt from the cap.
Additionally, local governments’ general fund reserves are limited to 35% of their budgeted expenditures each year, with new auditing requirements.
The language also includes changes to multi-residential property classifications as included in the Senate bill. Earlier Senate proposals would have made an immediate reversal to the 2013 law making major cuts to multi-residential property taxes by reclassifying these buildings as residential properties in tax code. The new version of the bill still separates multi-residential from residential properties, but takes a slower process for increasing the higher property tax rate, ratcheting up to 6% higher over three years.
It also includes some of the components of the most recent House language to provide property tax relief by speeding up an equity transfer of revenue generated through the Secure an Advanced Vision for Education (SAVE) funding, currently dedicated to school infrastructure, to go toward property tax relief. It also would lower the state $5.40 uniform levy set for school foundation property taxes using state aid, as generated from eliminating the homestead tax credit and replacing it with a homestead property tax exemption.
While the homestead tax credit would change to an exemption, the bill increases the tax credit for elderly and disabled homeowners from $1,000 to $1,500. This was a compromise component introduced by House Republicans, who advocated for a larger push to provide exemptions for homeowners of all ages while Senate Republicans and the governor proposed bigger changes to aid older Iowa homeowners specifically.
It also makes multiple changes to limit Tax Increment Financing (TIF) districts, areas where property tax revenues within a specified area go to designated projects within the area. The bill would restrict future TIF districts to a period of 23 years. It would also limit the full usage of increment financing in an existing TIF district to a period of 20 years, after which the limit would drop to 60%, not allowing new debt past that threshold.
The measure did not include the Senate’s proposal to add an inflation index to the state’s gas tax. It also does not make larger changes to the state’s “rollback” system for calculating property taxes as discussed in earlier versions of the legislation.
The measure passed with bipartisan support in the Senate, with only Sen. Herman Quirmbach, D-Ames, voting against the measure. He criticized the revenue cap as well as the fact that the final version of the legislation being voted on was released earlier Sunday with no fiscal report.
But several Democrats praised the compromise bill, as well as Dawson’s efforts during the session to collaborate with Democrats and other stakeholders to reach an agreement. Sen. Cindy Winckler, D-Davenport, said she was “apprehensive” about changes to school funding streams made through the legislation but said overall, she believed it was better than other property tax plans passed in earlier sessions as it does not take effect until fiscal year 2027.
“We still might have an opportunity if there are huge problems to fix it because of the implementation date, and that is very important,” Winckler said. “Cities, counties, school districts will have time.”
Sen. Bill Dotzler, D-Waterloo, who is not seeking reelection to the Senate but running for the Black Hawk County Board of Supervisors, said he is expecting to look at how to manage the impacts of these property tax changes from the local government perspective in the future.
“I know that I’m going to catch some (flak voting) for this, but again, we got some time to work things out,” Dotzler said. “I think in the long run … sometimes you got rough spots, it’s going to take a while to get it to where we want to go. And I agree with Sen. Quirmbach, it’s unfortunate we couldn’t get this done (earlier), but it wasn’t because you weren’t trying.”
Dotzler said, after “trying to really hardcore negotiate in the last few days, I think we came out pretty good.”
Democrats in the House were less positive about the final property tax package. Rep. Aime Wichtendahl, D-Hiawatha, said the bill fails to meet the goals laid out by the majority party at the beginning of 2026.
“This bill fails because it fails the majority’s own goal,” Wichtendahl said. “Recall those goals here that were stated at the beginning of the session: One, to provide sustained relief to taxpayers. Two, to not play a shell game by moving money sources around, robbing Peter to pay Paul. And three, and most critically, this bill does nothing to address the actual singular cause of increasing property taxes, which is rising valuations.”
She said lawmakers should have considered House Democrats’ plan on property tax relief introduced early in session that would have provided two years of rebates of $1,000 for homeowners and $500 for renters for “immediate relief,” alongside making limitations to annual property tax growth and freezing property taxes for people age 65 and older.
Rep. Carter Nordman, R-Adel, called the Democrats’ proposal “a handout that looks nice on paper — that is it.” He also disputed criticisms that the amended bill was a “last minute” proposal he and other Republican leaders in both chambers spent hours working on each day throughout session, and said the measure was the result of a negotiation process he was “very proud of.”
“I firmly believe this legislation puts the Iowa property taxpayer first,” Nordman said. “According to the Department of Management, this bill will save approximately $350 million just next year, and over $4 billion over the next six years. This is significant reform that delivers real, tangible relief and certainty for the Iowa taxpayer. House Republicans are proud to pass this bill and will continue to build on this bill in the future.”
The legislation now moves to the governor for final approval.
