Bills › 90th General Assembly
Where it is now
- Done: IntroducedJanuary 20, 2023
- Done: SubcommitteeJanuary 20, 2023
- Done: House committeeApril 13, 2023
- Skipped: Passes the HouseContinued as HF 717
- Next: Senate committee
- Next: Passes the Senate
- Next: To the Governor
- Next: Signed into law
Became HF 717 → Its progress continues under the new number. Go to HF 717 What’s a funnel?
What’s in it
AI summary When valuing property rented to low-income families, assessors must look at the actual rent collected to determine its worth. This change ensures that rent collected in years before the property was officially classified as low-income housing is treated as if it were regular residential rent. These new rules apply to property assessments starting from January 1, 2022.1
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. _____ was residential property. The bill also makes corresponding changes to other provisions relating to property subject to such assessment procedures. The bill takes effect upon enactment and applies retroactively to assessment years beginning on or after January 1, 2022.
House subcommittee
Named January 20, 2023. On March 22, 2023 it recommended passage. Vote Total: 3-0.
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 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