Relating to the assessment and taxation of certain sanitary sewage and storm water drainage property and including applicability provisions

Topics:Taxes

Same legislation: HSB 64, HF 207

Write your legislators about itWhat changed before it passed

Official bill page Lobbyist declarations One-pager to print

Where it is now

Done: IntroducedJanuary 25, 2023
Done: SubcommitteeJanuary 31, 2023
Done: Senate committeeApril 18, 2024
Done: Passes the SenateApril 19, 202446–0
Skipped: House committeeSkipped
Done: Passes the HouseFebruary 15, 202399–0
Done: To the GovernorApril 29, 2024
Done: Signed into lawMay 1, 2024

HF 207 became law → The same legislation passed as HF 207, so this version was set aside. Go to HF 207 What’s a funnel?

What’s in it

AI summary Public utilities that provide sewage or storm water drainage services through pipes would no longer have to pay property taxes on that equipment. This change affects companies that charge the public to manage wastewater and drainage systems.¹

Read the official explanation

This bill amends Code section 427.1 to establish a property tax exemption for property owned or operated by a public utility that is directly and primarily used for furnishing sanitary sewage or storm water drainage disposal by piped collection system to the public for compensation. Under the bill, “public utility” means the same as defined in Code section 476.1. Under Code section 421.17, the director of revenue has the authority to issue rules as are necessary to provide for the uniform application of the exemptions provided in Code section 427.1 in all assessor jurisdictions in the state. The bill applies to assessment years beginning on or after January 1, 2024.

Changed since by amendment S-5198; see Amendments.

Full bill text · What changed before it passed²

Senate subcommittee

Named January 31, 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 $68,000 Compare with other bills

AI summary This bill creates a new property tax exemption for property owned or operated by a public utility that provides sanitary or storm water drainage. This exemption is estimated to reduce annual property taxes by $68,000 beginning in fiscal year 2026. This change will increase the state's General Fund appropriation for school aid by an estimated $11,000 and reduce local government property tax revenue by an estimated $57,000.³

Read the fiscal note

Description

House File 207 establishes a new property tax exemption for property owned or operated by a public utility as defined in Iowa Code section 476.1 where the property is used to provide sanitary or storm water drainage for compensation through a piped collection system. The Bill makes Iowa Code section 25B.7 (State funding of property tax credits and exemptions) inapplicable to the new property tax exemption.

The Bill takes effect upon enactment and applies retroactively to assessment year 2024 and after.

Background

The Department of Revenue reports that a private, rate-regulated water utility company recently purchased an existing municipal wastewater system. As a municipal system, the property involved was exempt from property tax. As a system owned by a private company, the property is subject to property tax. With acquisition occurring after January 1, 2022, but before January 1, 2023, the system would first become taxable for assessment year 2023 under existing law.

Assumptions

The wastewater system situation described above is assumed to be the only property fitting the exemption requirements specified in the Bill at this time.
The assessed value of the wastewater property is not known. The purchase price of the property was $2.0 million. This purchase price is used as the assessed value for property tax fiscal impact calculations.
Property taxes owed for assessment year 2024 are due in the fall of 2025 and the spring of 2026 (FY 2026).
The consolidated property tax rate for the particular property is assumed to equal $33.85 per $1,000 of taxed value. The State basic school levy equals $5.40 of the $33.85 consolidated rate.

Fiscal Impact

Creating a new property tax exemption for a privately-owned wastewater system will reduce the annual property taxes owed by an estimated $68,000, beginning with FY 2026. The reduction in taxes owed will increase the State standing General Fund appropriation for school aid by an estimated $11,000 and reduce local government property tax revenue by an estimated $57,000. The property tax exemption will also apply to any future purchases of existing wastewater facilities by privately owned public wastewater utility companies.