Latest version of property tax relief legislation unveiled by Iowa lawmakers

DES MOINES — After adjusting the method for eliminating the rollback system and providing a partial exemption for all residential properties, Republican state lawmakers on Wednesday unveiled the latest version of legislation designed to address Iowa homeowners’ property taxes.

At least one key lawmaker believes the bill still has a chance to pass into law before legislators complete their work for the year, which could happen soon.

This is the third iteration of property tax legislation produced by state Sen. Dan Dawson of Council Bluffs and Rep. Bobby Kaufmann of Wilton, both Republicans who chair their respective chamber’s Ways and Means Committee on tax policy.

Dawson and Kaufmann have been working on the legislation to address what many state lawmakers say is the No. 1 issue raised by their constituents: rapidly rising property taxes.

The latest version of Dawson’s and Kaufmann’s bill — Senate Study Bill 1227 — slows the elimination of the state’s property tax rollback system and alters the method in which home values would be taxed.

Previous versions of the bill phased out over five years the rollback system, which limits the amount of property taxes Iowans pay to a percentage of what their property is assessed. Created in the 1970s, Iowa’s rollback system keeps statewide growth in check but permits large swings in individual counties.

The bill also previously proposed a property tax exemption for every Iowa household: $25,000 initially then $50,000 in the second version of the bill.

The latest version of the legislation, which was considered Wednesday by a five-member Senate subcommittee panel, would slow the elimination of the rollback to a 10-year gradual phaseout. And instead of a fixed, $25,000 or $50,000 exemption, the latest version of the bill would create a 25 percent exemption — up to $125,000 — of a home’s assessed value.

Dawson said the change was made to the exemption after receiving feedback from smaller communities with a large portion of housing valued at roughly $50,000. Those communities said the $50,000 exemption would have effectively wiped out their property tax revenue.

The legislation still would cap property growth at a 2 percent increase over the previous year’s property tax revenues or guarantee a 0.5 percent increase, whichever is greater; and would shift roughly $426 million in funding for K-12 schools from local property taxes to the state.

“I think that this is darn near close to threading that needle between small communities, large communities, property poor, property rich, not having a one-size-fits-all approach to this … which I think really is going to help us drive and reform the system in the end,” Dawson said during Wednesday’s legislative hearing.

The legislation and the topic are complex — as proven by the three different versions of the bill introduced for consideration in recent weeks. And Iowa state lawmakers may soon begin their final push to adjourning for the 2025 legislative session.

Still, Dawson said he believes the property tax bill will move forward and make it to Gov. Kim Reynolds’ desk this year.

“I would say this: there is no pipeline that runs through the property tax endeavor here in the Iowa Legislature,” Dawson said, referring to the hazardous liquid pipeline and eminent domain-related legislation that has divided Senate Republicans and could hold up the state budget process in the Iowa Senate. “Whatever else is going on the building, we know this (property tax reform) is something that we need to deliver for Iowans.”

Business lobbyists praise changes while schools express concern

During Wednesday’s legislative hearing, lobbyists from taxpayer relief and business advocacy organizations praised the changes to the bill and the process by which Dawson and Kaufmann have constructed the bill and then implemented stakeholders’ feedback.

Some concerns were expressed by lobbyists for schools.

Iowa Sen. Janet Petersen, a Democrat from Des Moines who serves as the top Democrat on the Senate’s Ways and Means Committee, also expressed concern with the bills’ impact on local schools and thanked Dawson for altering the proposal after similar concerns were brought forth by stakeholders.

“We know this is an issue Iowans care about, and we want to make sure that as we move forward that we’re really focusing on making sure homeowners see relief,” Petersen said during the hearing. “I appreciate the feedback that you’re (Dawson) taking from Iowans so that no matter where you live in the state, what your Zip code is, how your community is made up, that we want to make sure that you’re benefiting from a reform package.”

Senate Study Bill 1227 is now eligible for consideration by the full Senate Ways and Means Committee. The Senate bill has a companion bill in the Iowa House: House Study Bill 328. The House has not yet conducted a legislative hearing on the proposed legislation.

Tom Barton of The Gazette Des Moines Bureau contributed to this report.

Comments: (515) 355-1300, erin.murphy@thegazette.com

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