Bills › 90th General Assembly
Relating to the assessment and valuation of property rented or leased to certain low-income individuals and families and including effective date and retroactive applicability provisions
Sponsored by the House Ways and Means Committee
Topics:Housing & propertyTaxes
Same legislation: HSB 61
Where it is now
- Done: IntroducedJanuary 20, 2023
- Done: SubcommitteeJanuary 20, 2023
- Done: House committeeApril 13, 2023
- Done: Passes the HouseApril 19, 202395–0
- 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 Property owners who rent to low-income families can now have their buildings classified as residential property even if they haven't gone through a specific withdrawal process. This change applies to buildings that are used for living and have two or fewer homes inside. The new rule will apply to property assessments starting from January 1, 2023.1
Read the official explanation
21(2), in assessing property that is rented or leased to low-income individuals and families as authorized by section of the Internal Revenue Code, unless the owner elects to withdraw the property from the assessment procedures for section property, the assessor shall use the productive and earning capacity from the actual rents received as a method of appraisal and shall take into account the extent to which that use and limitation reduces the market value of the property.21(14) excludes such property if it has not been withdrawn from section assessment procedures. This bill allows for section property to be classified as residential property even if it has not been withdrawn from section assessment procedures if the property is primarily used or intended for human habitation containing two or fewer dwelling units. The bill takes effect upon enactment and applies retroactively to assessment years beginning on or after January 1, 2023.
Senate subcommittee
Named April 20, 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
Cost: up to $175,000 Compare with other bills
AI summary This bill changes the property classification for certain low-income housing with one or two units from commercial to residential. It is projected to reduce property taxes for these owners by $175,000 per year beginning in fiscal year 2025. Of that amount, $28,000 will be replaced by a State General Fund appropriation for school aid, and the remaining $147,000 is a projected decrease in annual local government property tax revenue.3
Read the fiscal note
Description
House File 717 relates to the taxable valuation of property that is rented or leased to low-income individuals and families as authorized by Section 42 of the Internal Revenue Code. The Bill allows Section 42 housing property that is composed of one or two dwelling units to be classified as residential property. Under Iowa Code section 441.21(14)(c), Section 42 property is classified as commercial property. The Bill takes effect upon enactment, and applies retroactively to assessment year (AY) 2023 and after.
Background
Section 42 refers to that section of the federal Internal Revenue Service tax code, which provides tax credits to investors who build qualified housing. Investors receive a reduction in their federal tax liability for a period of 10 years in return for providing housing to persons with lower incomes.
Under current law, effective with AY 2022, Section 42 housing may not be classified as residential property and is classed as commercial property. Also, under current law, the assessed value of commercial property up to $150,000 is subject to an assessment limitation factor (rollback) equivalent to that of residential property and values above this threshold are subject to the commercial rollback.
Under the Bill, Section 42 property containing two or fewer dwelling units would be classified as residential and subject to the residential rollback for the entire assessed value of the property. Such property includes single-family dwellings, duplexes, and condominium property. The Bill would allow certain Section 42 property to be classified as residential property, when such property would otherwise be classified as commercial.
Assumptions
- The Department of Revenue reports that the total assessed value of Section 42 housing in Iowa that is composed of one or two dwelling units is $105.3 million. The Department estimates that this value represents 604 properties statewide.
- As commercial property, the first $150,000 of assessed value is subject to the residential rollback (54.6501% for AY 2022) and the remaining assessed value is subject to the 90.0000% commercial rollback. As residential property, the entire assessed value will be subject to the residential rollback.
- The FY 2023 statewide average residential property tax rate is $33.65 per $1,000 of taxed value, and the school finance basic levy comprises $5.40 of that rate.
Fiscal Impact
Changing the property classification for one- and two-dwelling unit Section 42 housing is projected to reduce property taxes owed by Section 42 property owners by $175,000 per year beginning in FY 2025. Of that amount, $28,000 will be replaced by the State General Fund appropriation for school aid and the remaining $147,000 is a projected decrease in annual local government property tax revenue.
Source
- Department of Revenue
- Property Tax, Section 42 Property · April 19, 2023 · $175,000
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90th General Assembly