(Des Moines) An overhaul of Iowa’s property tax system would begin sooner and allow local governments to collect more revenue in times of high inflation under updated legislation released Wednesday by the Republican chairmen of the Legislature’s tax-writing committees.
Senate Study Bill 1227, and its companion House Study Bill 328, make changes to House Study Bill 313 and Senate Study Bill 1208, the companion bills introduced in early March by Rep. Bobby Kaufmann, R-Wilton and Sen. Dan Dawson, R-Council Bluffs, the chairs of the Ways and Means committees in the House and Senate.
The original legislation, as well as the updated version, would repeal Iowa’s “rollback” system for calculating property taxes, in which only a portion of residential property taxes are taxable. The taxable portion is a percentage of the property’s market value, calculated each year growth of statewide taxable properties and limited by an aggregate value growth of 3%.
The legislation replaces the rollback with a “revenue-restricted” system by allowing taxation of the full assessed value of a property, but limiting the amount of new tax revenues local governments can collect. Most property tax levy rates could increase each year by no more than 2% under the bill, with exceptions for new construction.
While the initial proposal phased out the rollback system over five years, the new bill proposes eliminating this system of calculation immediately, in fiscal year 2027. The new version of the legislation also allows local governments to exceed the 2% limit — allowing up to 5% increases for most property tax levy rates — during times of high inflation, as determined by increases in the consumer price index (CPI).
In a news release, Dawson and Kaufmann stated the property tax proposal includes a “minimum budget guarantee to provide small communities certainty in their budgeting process.” The measure also includes an increase to the homestead property tax exemption benefit from a proposed $25,000 in the initial bill to $50,000.
Some of these changes — like allowing for greater levy rate increases during inflationary periods — were brought up during subcommittee meetings on the legislation by advocates representing local governments. Dawson said the new version of the legislation came out of discussions and suggestions on the original bill.
“When we filed our original bill, we were looking to get it out to the public so we could start receiving feedback and input, and the bill filed today is a result of that feedback,” Dawson said in the release. “… These updated proposals continue our goal of rebuilding the property tax system to bring relief, and bring more predictability and transparency to taxpayers, local governments and businesses.”
Concerns about other portions of the proposal raised by local government representatives, like changes to tax increment financing (TIF) revenues and the shift of $426 million in K-12 schools from property taxes to the state, were not addressed by the amendment, remaining the same in the new legislation.
The new property tax bill has not been scheduled for a subcommittee as of Wednesday. In interviews with reporters and at meetings, Kaufmann has repeatedly stated that his goal is for the measure to pass during the 2025 legislative session, while giving time for feedback and alterations as needed. Republican leaders have echoed this sentiment, while saying that they want to ensure the bill will have its intended impact of lowering property taxes while allowing local governments to continue providing needed services.
Senate President Amy Sinclair told reporters earlier in August that “we want it done right, rather than fast.”
“For me, it’s a priority to get done this session,” Sinclair said. “But if it doesn’t get done this session, it’s because … we didn’t have all the details in place to get it done right.
Kaufmann said in a statement on the updated property tax bill that the measure will provide needed relief from rising property tax costs.
“With assessment letters coming out, Iowans have been louder than ever with their concerns about property taxes,” Kaufmann said. “Iowans have expressed their concern, rage, and fear about unpredictable increases and their ability to afford staying in their homes. We are working to provide real relief to Iowans and their families, make Iowa a competitive state to live, and deliver a property tax overhaul that focuses on property taxpayers.”
