Bills › 90th General Assembly
Relating to property taxation for commercial child care centers and facilities and including effective date, applicability, and retroactive applicability provisions
Sponsored by the House Ways and Means Committee
Topics:Families & human servicesTaxesChild careProperty taxes
Same legislation: HSB 224
Where it is now
- Done: IntroducedMarch 3, 2023
- Done: SubcommitteeMarch 3, 2023
- Done: House committeeMarch 14, 2023
- Done: Passes the HouseMarch 21, 202392–2
- Stopped: Senate committeeDied when the General Assembly ended
- Next: Passes the Senate
- Next: To the Governor
- Next: Signed into law
Died when the session ended The 2024 session adjourned on April 19, 2024, the General Assembly’s last regular session. Bills that didn’t pass both chambers died. What’s a funnel?
What’s in it
AI summary Commercial child care centers can apply for a special way to calculate their property taxes. Instead of using the standard rules for commercial buildings, these facilities would pay taxes based on the same lower rates used for homes. This change applies to properties that primarily serve as child care centers and have been approved through a new application process.1
Read the official explanation
This bill relates to property taxation for commercial child care centers and facilities.21(5) determines the amount of actual value of commercial property that is subject to property tax. The amount is the sum of the residential assessment limitation to the portion of the property’s value that does not exceed $150,000 plus percent of the property’s value in excess of $150,000. The bill excludes property primarily used as a child care center or child care facility from that determination and instead specifies that for assessment years beginning on or after January 1, 2023, the amount of actual value of such properties that is subject to property tax and for which an application has been allowed is equal to the product of the assessment limitation percentage applicable to residential property multiplied by the actual value of the property. 21(5)(e).21(5)(e) for fiscal years beginning on or after July 1, 2024.
Senate subcommittee
Named March 28, 2023. It hasn’t reported yet.
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
AI summary This bill changes how child care facilities are taxed by applying a residential tax rate to their entire value instead of a commercial rate. This change is estimated to reduce property taxes for facility owners by $8.8 million starting in fiscal year 2025. This will result in an estimated $1.3 million increase in State General Fund appropriations for school aid and an estimated $7.5 million decrease in local government property tax revenue.3
Read the fiscal note
Description
House File 668 lowers the percentage of commercial child care facility assessed value that is subject to property taxation (taxable) by applying the residential rollback percentage to the entire value of the center or facility that is used for child care. The change takes effect upon enactment and applies to property taxes due in the fall of 2024 and the spring of 2025 (FY 2025).
Background
Under current law, the residential rollback (54.6501% for FY 2024) is applied to the initial $150,000 of taxed value of a commercial child care facility and the commercial rollback (90.0000% for FY 2024) is applied to any value above $150,000.
Iowa Code section 237A.1 defines “child care facility”, “child care center”, and “child development home” as follows:
- Child Care Facility — A child care center, preschool, or a registered child development home.
- Child Care Center — A facility providing child care or preschool services for seven or more children, except when the facility is registered as a child development home.
- Child Development Home — A person or program registered under Iowa Code section 237A.3A that may provide child care to seven or more children at any one time.
Assumptions
- The Department of Revenue (Department) estimates that there are 1,500 commercial child care facilities in the State currently subject to property tax. Fifteen percent of the 1,500 (225 facilities) are assumed to already be classified and taxed as residential properties.
- Through a review of property records, the Department estimates that the average assessed value of commercial child care facilities that are not currently classified as residential property is $675,000 for FY 2024.
- The mix of property values within the assumed $675,000 average is not known. For this estimate, it is assumed that all child care facilities are valued over $150,000.
- The FY 2024 average commercial child care property value is assumed to increase each year by the statewide average revaluation of commercial properties from assessment year 2017 through assessment year 2022 (2.3%).
- The 54.6501% FY 2024 residential rollback is assumed for FY 2025 and after.
- The statewide average commercial property tax rate for FY 2023 is $36.30 per $1,000 of taxed value. That rate is assumed for future years. The average rate includes the basic school levy of $5.40. Law changes that lower the taxable value of property by operation of the State school aid formula automatically increase the State General Fund appropriation for State school aid by $5.40 per $1,000 of value exempted.
- The State General Fund appropriation to local governments that backfills a portion of the rollback for commercial, industrial, and railroad property is not impacted by this Bill.
Fiscal Impact
The changes to the taxable value of child care facilities will reduce the property taxes owed by facility owners beginning with FY 2025. The reduction is estimated to be $8.8 million. The property tax reduction will result in an estimated increase of $1.3 million in the State General Fund appropriation for school aid and an estimated decrease in local government property tax revenue of $7.5 million. The appropriation increase and property tax revenue decrease will continue in future fiscal years, inflating by an estimated 3.0% per year.
Sources
- Department of Revenue
- Department of Management property tax value and rate files
- Legislative Services Agency analysis
- Child Care Facilities, Property Tax · March 21, 2023
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90th General Assembly