Senate passes property tax relief bill

DES MOINES – The Iowa Senate approved a commercial property tax relief plan Wednesday that could grow to $200 million over four years with Republicans calling it a welcome but small start – even “wimpy” by one measure – in addressing a major impediment to business growth and job creation.

Senators voted 46-4 to provide a tax cut of about $600 for each eligible commercial parcel in the first year of the plan that would take effect July 1, 2012. The $50 million in yearly relief would be achieved by taxing the first $30,000 of assessed value for commercial and industrial property at the same rate as residential homes – a reduction of nearly half. The program to grow incrementally by $50 million annually for four years with a proviso that yearly state revenue would have to grow by at least 4 percent to trigger the relief.

“This grows as we can afford it,” said Sen. Joe Bolkcom, D-Iowa City, floor manager of Senate File 520. “It's a responsible, right-sized commercial property tax reduction and we fully fund it in its entirety.”

Four GOP senators – Mark Chelgren of Ottumwa, Bill Dix of Shell Rock, Kent Sorenson of Indianola and Jack Whitver of Ankeny – voted against the bill that likely will not be the final word on commercial property tax relief this session given that majority House Republicans and GOP Gov. Terry Branstad have offered strikingly more expansive approaches that would provide more relief than majority Senate Democrats' version.

“It probably has the shelf life of a mourning dove,” said Sen. Steve Kettering, R-Lake View.

During floor debate, Whitver said the relief envisioned in S.F. 520 would not benefit all small businesses because those located in strip malls or contiguous Main Street buildings may only see a fraction of relief that already would be limited to $600 per parcel.

“This is by far the weakest of the three plans offered this session,” he said. “Why not pass a bill with some bite? I don't think it'll be the stimulus that Iowa needs.”

Sens. Randy Feenstra, R-Hull, and Dix attempted to amend the bill to roll back the rates for commercial and industrial classes of property by 24 percent over four years and to freeze revenue that cities and counties could collect with a safety valve for certain circumstances, but the amendment was ruled out of order and not eligible for consideration. Feenstra also tried unsuccessfully to strike the 4 percent yearly state revenue threshold that must be met to trigger the relief.

“Ladies and gentlemen, it's a good start but it's hardly a start at all,” said Senate GOP Leader Paul McKinley of Chariton. “We had better get serious about creating jobs rather than headlines.”

Sen. Merlin Bartz, R-Grafton, said he shared the Senate Democrats' plan with a north Iowa chamber of commerce executive director who called the proposal “just plain wimpy.”

“We're not raising all ships with the bill,” Bartz said. “We're picking winners and losers.”

Bolkcom conceded the legislation may not hold much benefit for corporations like Walmart or Best Buy because it was targeted to help independent small businesses in every Iowa community. Unlike Branstad's plan, he said the Senate version doesn't shift tax burdens to other property classes or hurt local governments.

“One of the greatest virtues of this bill is that we don't make promises we can't keep,” said Sen. Herman Quirmbach, D-Ames.

Branstad has proposed establishing a commercial property tax rate at about 60 percent of the current level for new business startups and expansion, and gradually phasing down the commercial property tax rate for existing businesses over a period of five years to get to a like amount. The governor also proposed to lower and cap the tax rate for agricultural and residential property classes.

House Republicans have approved a different approach that would eventually have the state paying 100 percent of the state school aid formula and would equalize commercial property tax rates with agricultural and residential classifications.

“This is a weak, poorly written bill,” Chelgren said. “It's unfortunate that's all we can muster here in the Senate.”

Also Wednesday, the Senate voted 46-3 to approve a refundable tax credit effective Jan. 1, 2012, to assist businesses and individuals who want to install electricity and compressed natural gas fueling stations.

Senate File 520 would create an electric or natural gas facility tax credit for persons who construct, install, and place in service a facility that stores, dispenses, dries, and meters electricity and compressed natural gas. The amount of the tax credit is 30 percent of the cost of purchasing and of installing the facility.

The tax credit would apply to tax years beginning on and after Jan. 1, 2012. The taxpayer must place the facility in service before Jan. 1, 2015, but may claim the tax credit for a previous installation after that date. The bill's provisions are repealed on Jan. 1, 2019.

Sen. Rob Hogg, D-Cedar Rapids, the bill's floor manager, called it an exciting first-ever tax credit to incent energy alternatives for transportation fuels for motor vehicles that are registered for use on the road.

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