At the close of a legislative session that went into overtime and ended with more than thirty consecutive hours of debate, Iowa lawmakers reached a property tax compromise.
The comprehensive bill being sent to Governor Reynolds for her signature includes a 2% growth cap on various city and county levies, an idea rooted in Iowans for Tax Relief’s longstanding call for such protection. Lawmakers also included reforms to school funding and Tax Increment Financing (TIF), along with changes to the taxation of multiresidential properties, among other provisions.
“The goal, as has been stated many times, is to try and put Iowa taxpayers first and make sure that their budgets come first over government budgets. If governments can spend less over time, then that benefits taxpayers,” said Chris Hagenow, Iowans for Tax Relief President.
What the reform will do:
Impose a 2% growth cap on various city and county levies to bend the long-term cost curve of property taxes.
Reduce the school foundation property tax levy rate from $5.40 to $4.90 per $1,000 valuation.
The state General Fund will provide additional funding to schools.
The amount of SAVE revenue directed to property tax relief will gradually increase, reaching 25% by Fiscal Year 2031.
Establish a 23-year sunset on all future TIF districts and begin limiting usage on existing perpetual districts after 20 years.
Rollback changes:
Gradually increase the taxable share of multiresidential properties to 6% higher than single-family homes.
Eliminate the equalization process before applying the rollback factor.
Restrict ending fund balances for cities, counties, and school districts to no more than 35% of expenditures.
Replace the Homestead Credit with a Homestead Exemption.
The exemption will be equal to 10% of the property valuation (minimum $5,500, maximum $20,000, adjusted for inflation).
The current Homestead Credit will be phased out over three years.
Existing Senior and Veteran Exemptions remain unchanged.
The $150,000 Business Property Tax Credit will not be treated as an exemption.
The $125 million backfill previously paid from the General Fund to local governments will be eliminated, with those dollars instead transferred into the Taxpayer Relief Fund.
Require clearer property tax statements with proposed budgets, estimated tax bill increases, and public hearing details using a redesigned format.
Require the Department of Management to maintain a website with parcel-level taxation data.
Place the burden of proof on county assessors for property assessment increases of 10% or more.
Creates the Governor’s First-Time Homebuyers program.
What the reform will not do:
Include an increase in the gas tax or local option sales tax.
Deliver a hard across-the-board cap originally envisioned by ITR. The 2% cap will not apply to:
Revenue from new construction.
The Debt Service levy.
The Unified law enforcement levy.
The Insurance levy.
The Employee Benefits levy.
Ability to levy for elections.
Overhaul the rollback system.
Go as far as some earlier TIF reform proposals.
Even with exceptions and areas needing vigilance, this legislation makes Iowa a more taxpayer-friendly state through meaningful protections and reforms. Our team will continue monitoring implementation closely across every city and county. Continued vigilance remains essential to close loopholes, protect families and businesses, and ensure government spending never outpaces the ability to pay. We view this legislation as an important step forward while recognizing more work lies ahead.