Relief for business grows to $260 million

DES MOINES - Iowa's business property owners are reaping benefits topping a quarter of a billion dollars from landmark tax relief in 2013 that grew to a 10 percent tax reduction this year.

Qualifying businesses that applied with their counties for a commercial property tax credit divided nearly $99 million in relief provided by the state, while counties were reimbursed nearly $161.1 million in state money to cover the cost of applying the 10 percent rollback directly to commercial and industrial property tax rates, according to the state Department of Revenue.

'The governor and lieutenant governor are always interested in looking at ways to reduce Iowans' tax burden,” said Jimmy Centers, spokesman for Gov. Terry Branstad. 'The governor and lieutenant governor are pleased that the largest tax cut in Iowa history allowed for the state to return over $260 million of taxpayer dollars to the citizens of Iowa.”

This year's total was up from $127.3 million in tax relief provided during the first year of implementation.

The relief was delivered through a second 5 percent yearly rollback on commercial and industrial property tax rates, and through a new tax credit sought by applicants for 74,315 business property units for taxes on the 2014 property assessment that are due and payable this month and next March, according to the state revenue agency.

Under legislation passed by the Legislature and signed into law by Branstad two years ago, business property taxes were reduced by 5 percent in each of the first two years. So commercial and industrial properties are now assessed at 90 percent of the valuation.

Previously, those properties were taxed at 100 percent of valuation, while agricultural and residential properties were rolled back to less than 65 percent of their assessed values.

The tax reduction package included a new state appropriation to replace lower local government revenues that result from the forced rollback for commercial and industrial property.

The largest state reimbursements to counties this year totaled $36.7 million for Polk; $13.45 million for Linn; $10.4 million for Scott; $9.66 million for Johnson; $6.99 million for Black Hawk; $6.43 million for Pottawattamie; $5.66 million for Dallas; $5.6 million for Woodbury; $5.37 million for Dubuque; $4.5 million for Story; $2.56 million for Clinton; $2.29 million for Cerro Gordo; and $2.3 million for Muscatine.

Jeff Robinson, senior tax analyst for the Legislative Services Agency, said the figures after two years of implementation came very close to projections made when the legislation was approved.

Alan Kemp, executive director of the Iowa League of Cities, said there has not been a detectable negative impact on local governments, but the real test likely will come in year three when a new property tax classification for apartments, nursing homes and assisted living facilities takes effect. That phase will decrease that multiuse property to the same tax rate as residential property.

'Heading into year three, I'm going to speculate that some cities will begin to see a loss of valuation and therefore a loss of some revenue because of that multifamily beginning to get phased in,” he said.

Kemp said his organization plans to closely monitor developments to see if a gap develops between what the state 'back fills” in lost revenue and the actual revenue collections that occur through a complex and evolving assessment, valuation and inflationary process.

'It's a little too early to tell” how it all will play out over the plan's eight-year implementation, Kemp said.

'It probably won't be a big gap this year, but over time it likely will grow,” Kemp said. 'You don't necessarily have a cliff, you have a hill.

'You still get to the bottom,” he added. 'It's just that you don't fall completely off.”

The relief was part of a 2013 measure that provided tax relief to all classes of Iowa property - agricultural, residential, commercial and industrial - as well as breaks to Iowa income taxpayers. The legislation was projected to provide $4.4 billion in property tax relief over 10 years as well as $90 million a year in income tax savings.

The deal called for commercial and industrial properties to be assessed at 95 percent of valuation retroactive to Jan. 1, 2013, then at 90 percent starting on Jan. 1, 2014, and each year after. The legislation also dropped the annual tax assessment growth limitation for residential and agricultural properties from 4 percent to 3 percent under the property tax rollback.

In Iowa, an owner's property-tax bill has three ingredients: the property's value as determined by the local assessor; the tax rate set by local governments and school districts; and the rollback or percentage of value subject to tax. Property taxes are a major source of revenue for local governments.