Relating to state and local government taxes, fees, financial authority, and budgets, by modifying property assessment provisions, divisions of revenue, and funding from the secure an advanced vision for education fund, establishing a program for first-time homebuyers, modifying and making appropriations, and including effective date, applicability, and retroactive applicability provisions

Note on Fiscal Estimates

Due to the complexity and interdependence of this Act’s provisions, including multiple changes to the property tax base and levy structure, division-level estimates are modeled independently of the other divisions.

The Department of Management (DOM) estimates $130,000 in information technology (IT) costs to implement all Division changes in this Act.

Note on Property Taxes

All property tax rates used in this document are reflected as rates that are applied per $1,000 of taxed property value. Taxed property value is the value determined through the assessment process, adjusted (reduced) for any rollback for the property class, and after property tax exemptions have been applied.

Property taxes are assessed on a calendar-year basis and are due and payable in the Fiscal Year (FY) two years after the Assessment Year (AY). For example, changes applicable to AY 2027 will generally impact property taxes due and payable in FY 2029.

Summary

Senate File 2472 is composed of 26 divisions that are related to property tax assessments, rates, credits, exemptions, State General Fund appropriations, and budget processes and other related programs that do the following:

• Division I modifies county general and rural services levy limitations by establishing a revenue-based growth cap tied to prior-year property tax dollars, with adjustments for new valuation and inflation, beginning in FY 2028.
• Division II modifies city general fund levy limitations by establishing a revenue-based growth cap tied to prior-year property tax dollars, with adjustments for new valuation and inflation, beginning in FY 2028.
• Division III establishes revenue-based limitations for most rate-limited property tax levies, restricts the use of debt for general operations, and imposes restrictions on levies not imposed prior to FY 2028.
• Division IV creates the FirstHome Iowa Program and a related fund to assist with first-time homeownership.
• Division V maintains the uniform levy (also known as foundation property tax levy) rate for FY 2027 and FY 2028, decreases the uniform levy rate for FY 2029 and succeeding fiscal years, makes changes to school district reorganization incentives, conforms the Family Farm Tax Credit, and conforms the Agricultural Land Credit. This Division is applicable to FY 2028.
• Division VI modifies the Secure an Advanced Vision for Education (SAVE) Fund Equity Transfer percentage; extends the Fund’s repeal from January 1, 2051, to January 1, 2071; and provides a reconciliation schedule by Department of Management (DOM) for SAVE funds received by school districts.
• Division VII increases the Elderly and Disabled Property Tax Credit maximum benefit from $1,000 to $1,500.
• Division VIII reestablishes a multiresidential property class beginning in AY 2027 and establishes a set assessment limitation 3.0% above the residential class for FY 2027 and 6.0% in FY 2028.
• Division IX establishes a voter-approved emergency medical services (EMS) levy above the current maximum levy rate.
• Division X establishes an unspent balance cap, allows schools to request a one-time budget adjustment, and requires school districts to establish policies related to unspent balances. This Division is effective upon enactment.
• Division XI establishes a 35.0% cap on local government unobligated funds beginning in FY 2028.
• Division XII requires county auditors to submit an annual report that includes parcel identification information.
• Division XIII modifies provisions related to urban renewal areas and tax increment financing (TIF), including exempting certain levies, and setting fixed durations to TIF Districts.
• Division XIV modifies provisions related to property assessment procedures.
• Division XV modifies provisions related to distorted market valuations.
• Division XVI limits the growth of agriculture extension levies for local governments to 102.0% of the prior year’s budget.
• Division XVII excludes school district property tax levies for property located in urban renewal revitalization areas beginning in FY 2028.
• Division XVIII modifies the duties of the Utility Replacement Tax Task Force.
• Division XIX establishes a task force to study payments in lieu of property taxes and report recommendations to the General Assembly.
• Division XX replaces the homestead credit with a phased-in homestead exemption and adjusts General Fund reimbursements beginning in AY 2026.
• Division XXI makes changes to local government property tax statements and procedures.
• Division XXII establishes revenue-based growth limitations for county hospital levies beginning in FY 2028.
• Division XXIII limits property tax levy growth for regional transit districts (RTD) to 103.0% of prior-year revenue beginning in FY 2028.
• Division XXIV eliminates the ongoing General Fund standing appropriation supporting the commercial and industrial property tax replacement beginning in FY 2028.
• Division XXV reduces the FY 2028 State General Fund expenditure limitation by $125.0 million and redirects certain excess Iowa Economic Emergency Fund balances to the Taxpayer Relief Fund (TPRF) in FY 2029.
• Division XXVI limits the growth of local emergency management levies for local governments to 103.0% of the prior year’s budget.

Division I — County Property Taxes and Budgets

Description

Division I of the Act makes the following changes related to county property taxes and budgets:

• Modifies the current-law county general services levy and rural services levy growth limitation provisions, including the $3.50 and $3.95 levy thresholds, by shortening the applicability period from FY 2028 to FY 2027.
• Limits the county general services and rural services levy rates, for FY 2028 through FY 2030, to a rate calculated as 102.0% of the prior-year actual property tax dollars divided by assessed value excluding new valuation.
• Limits the county general services and rural services levy rates beginning in FY 2031 to the lesser of:
• 102.0% of the prior-year revenue, plus revenue generated from new valuation; or
• $3.50 per $1,000 assessed value for county general services and $3.95 per $1,000 for county rural levies.
• Defines “new valuation” as the increase from the current fiscal year to the budget year in taxable valuation due to new construction, additions or improvements to existing structures, and net boundary adjustments. This new valuation is excluded from the levy-growth limitation calculation.
• Requires property tax replacement taxes under Iowa Code chapters 437A (Taxes on Electricity and Natural Gas Providers) and 437B (Taxes on Rate-Regulated Water Utilities) to be included in property tax calculations.

Division I of the Act takes effect January 1, 2027, and applies to property taxes and budgets for fiscal years beginning on or after July 1, 2027 (FY 2028).

Background

Under current law, the general county services levy and rural county services levy rates are limited based on growth in county-taxed value, which fell into three categories established first under 2023 Iowa Acts, chapter 71 (Property Tax, Assessments, and Bond Elections Act), and then changed to four categories in 2024 Iowa Acts, chapter 1094 (Individual Income Tax Rate Act), as displayed in Figure 1.

Under Iowa Code section 331.423, county general services and rural services levy authority is determined using a levy growth mechanism tied to taxable valuation growth. Depending on valuation growth, counties may levy the greater of the prior year’s adjusted levy authority or statutory levy thresholds of $3.50 for general services and $3.95 for rural services. Counties generally use the greater of last year’s levy rate or the default levy rate based on their growth. As a result, some counties currently levy rates above the statutory thresholds of $3.50 and $3.95.

Figure 1 — County Growth Mechanism1.02 x Prior Year Property Tax Dollars

Assessed Value - New Valuation

Levy Rate =Tax Base Growth Maximum Levy Rate Adjustment Less than 2.75% No adjustment 2.75% but less than 4.00% -1.00% 4.00% but less than 6.00% -2.00% 6.00% or greater -3.00%

Assumptions

• The estimate projects county-level taxable valuation growth using a 12-year average of historical odd-year and even-year growth rates by property class, beginning with AY 2024 values, used to account for large shifts in odd years during equalization. To moderate volatility in growth across property classes, projected growth rates were bounded between the 15th and 80th percentiles.
• For the purposes of current law estimates, county general services and rural services levy rates are assumed to continue under the existing levy growth structure in Iowa Code section 331.423. Projected levy rates are based on FY 2026 levy rates and projected taxable valuation growth.
• In FY 2028 through FY 2030, allowable growth for included property tax revenue is 102.0% of prior-year revenue, plus revenue generated from new valuation.
• In FY 2031, allowable growth equals the lesser of:
• 102.0% of prior-year revenue, plus revenue generated from new valuation; or
• $3.50 per $1,000 of assessed value for the general county services levy and $3.95 per $1,000 of assessed value for the county rural services levy.
• Counties projected to exceed the statutory levy ceilings in FY 2031 are assumed to remain at the applicable statutory levy ceiling unless the 102.0% growth limitation produces a lower allowable levy rate.
• New valuation is estimated by taking the district-level county data for AY 2024 and calculating the new valuation as a proportion of the county-wide valuation. The estimated portion is applied by county to all future years, and the resulting taxable valuation is not subject to the growth restrictions of this Division. The valuation is reincorporated into the property tax base in the following fiscal year, at which time it is subject to the rate-limited growth factor.
• All other county levies not directly subject to the limitations established in Division I are assumed to remain constant for purposes of this estimate.

Fiscal Impact

The analysis of this Division estimates the fiscal impact of this Division in isolation and does not account for interactions or combined effects with other Divisions of the Act. Figure 2 displays the estimated reduction in property tax revenue to counties.

Figure 2 — Division I Estimated County Property Tax Revenue Reduction (in Millions) Division II — City Property Taxes and Budgets

Description

Division II of the Act makes the following changes related to city property taxes and budgets:

• Modifies the city general fund levy (CGFL) growth limitation provisions, including the $8.10 per $1,000 in assessed value levy threshold, by shortening the applicability period from FY 2028 to FY 2027.
• Beginning in FY 2028 through FY 2030, limits the CGFL rate to a rate calculated as 102.0% of the prior-year actual property tax dollars divided by taxable value excluding new valuation.FY 2027 FY 2028 FY 2029 FY 2030 FY 2031

Current Law 1,635.2$ 1,682.2$ 1,737.0$ 1,786.8$ 1,845.0$ SF 2472 Div I 1,635.2 1,674.5 1,716.5 1,759.2 1,783.7 Net Impact 0.0$ -7.7$ -20.4$ -27.6$ -61.4$

• In FY 2031 and all fiscal years thereafter, CGFL allowable growth equals the lesser of:
• 102.0% of the prior-year revenue, plus revenue generated from new valuation; or
• $8.10 per $1,000 assessed.
• Cities projected to exceed the statutory levy ceilings in FY 2031 are assumed to remain at the applicable statutory levy ceiling unless the 102.0% growth limitation produces a lower allowable levy rate.
• Defines “new valuation” as the increase from the current fiscal year to the budget year in taxable valuation due to new construction, additions or improvements to existing structures, and net boundary adjustments. This new valuation is excluded from the levy-growth limitation calculation.
• Requires property tax replacement taxes under Iowa Code chapters 437A and 437B to be included in property tax dollar calculations.

Division II of the Act takes effect January 1, 2027, and applies to property taxes and budgets for fiscal years beginning on or after July 1, 2027 (FY 2028).

Background

Under current law, CGFL rates are limited based on growth in city property tax valuation, which fell into three categories established first under 2023 Iowa Acts, chapter 71 (Property Tax, Assessments, and Bond Elections Act), and then changed to four categories under 2024 Iowa Acts, Senate File 2442 (Individual Income Tax Rate Act), as seen in Figure 3. Under Iowa Code section 384.1, CFGL authority is determined using a levy growth mechanism tied to taxable valuation growth. Depending on valuation growth, cities may levy the greater of the prior year’s adjusted levy authority or the statutory levy threshold of $8.10 for the city general fund levy. Cities generally use the greater of the prior year’s adjusted levy rate or the applicable statutory levy threshold based on their growth. As a result, some cities currently levy rates above the statutory threshold of $8.10.

Figure 3 — City Growth Mechanism

Assumptions

• The estimate projects city-level taxable valuation growth using a 12-year average of historical odd and even-year growth rates by property class, beginning with AY 2024 values, used to account for large shifts in odd years during equalization. To moderate volatility in growth across property classes, projected growth rates were bounded between the 15th and 80th percentiles.
• For the purposes of current law estimates, CGFL rates are assumed to continue under the existing levy growth structure in Iowa Code section 331.423. Projected levy rates are based on FY 2026 levy rates and projected taxable valuation growth.1.02 x Prior Year Property Tax Dollars

Assessed Value - New Valuation

Levy Rate =Tax Base Growth Maximum Levy Rate Adjustment Less than 2.75% No adjustment 2.75% but less than 4.00% -1.00% 4.00% but less than 6.00% -2.00% 6.00% or greater -3.00%

• In FY 2028 through FY 2030, allowable growth in included property tax revenue is 102.0% of prior-year revenue, plus revenue generated from new valuation.
• In FY 2031 and all fiscal years thereafter, CGFL allowable growth equals the lesser of:
• 102.0% of prior-year revenue, plus revenue generated from new valuation; or
• $8.10 per $1,000 of assessed value for the city general fund levy.
• Cities projected to exceed the statutory levy ceilings in FY 2031 are assumed to remain at the applicable statutory levy ceiling for all subsequent fiscal years.
• New valuation is estimated by taking the district-level county data for AY 2024 and calculating the new valuation as a proportion of the county-wide valuation. The estimated portion is applied by county to all future years, and the resulting taxable valuation is not subject to the growth restrictions of this Division. The valuation is reincorporated into the property tax base in the following fiscal year, at which time it is subject to the rate-limited growth factor.
• All other city levies not directly subject to the limitations established in Division II are assumed to remain constant for purposes of this estimate.

Fiscal Impact

The analysis of this Division estimates the fiscal impact of this Division in isolation and does not account for interactions or combined effects with other Divisions of the Act. Figure 4 displays the estimated reduction in property tax revenue to cities.

Figure 4 — Division II Estimated City Property Tax Revenue Reduction (in Millions) Division III — Rate-Limited Property Tax Levy Rates

Description

Division III of the Act changes property tax levy rates and includes the following:

• Reduces matching county and rural contributions to the county Secondary Road Fund (SRF) in Iowa Code sections 331.429 and 312.2 required to receive the full State funding match from 75.0% to 51.0% of the sum of the following:
• $0.16875 per $1,000 of assessed value under current law, decreased to $0.118125 per $1,000 from the general fund of the county.
• $3.375 per $1,000 of assessed value under current law, decreased to $2.102625 per $1,000 from the rural services fund of the county.
• Establishes maximum levy rate adjustments for rate-limited property tax levies beginning in FY 2028. For FY 2028 and each fiscal year thereafter, a rate-limited property tax levy is limited to 102.0% of the prior year's actual property tax dollars divided by taxable value. Property tax replacement taxes under Iowa Code chapters 437A and 437B are included in that calculation. The Act also limits the reimposition of rate-limited levies that were not imposed in the immediately preceding fiscal year.
• Provides that the new rate limitations do not apply to the following levies:
• School district foundation levy under Iowa Code section 257.3.
• County general services and rural services levies under Iowa Code section 331.423(1) and 331.423(2).
• City general fund levy under Iowa Code section 384.1(3).FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Current Law 1,884.1$ 1,938.2$ 2,001.3$ 2,058.8$ 2,125.8$

SF 2472 Div II 1,884.1 1,930.1 1,979.6 2,029.9 2,080.8 Net Impact 0.0$ -8.1$ -21.7$ -28.8$ -45.1$

• Physical plant and equipment levies under Iowa Code section 298.2.
• School district bond tax under Iowa Code section 298.18.
• County hospital levies under Iowa Code chapters 347 and 347A.
• Regional transit district levies under Iowa Code section 384.12(1) and chapter 28M.
• Levy rates used in the calculation in Iowa Code section 312.2(5)(a).
• Self-supported municipal improvement districts under Iowa Code chapter 386.
• Prohibits cities and counties from issuing bonds or incurring other indebtedness payable from property taxes for general operations beginning July 1, 2026 (FY 2027).
• Permits the DOM, following consultation with the City Finance Committee and County Finance Committee, to adopt administrative rules for government entities to implement the requirements of Division III.

Section 19 of the Act amends Iowa Code section 312.2 in Division III to take effect January 1, 2027, and is applicable to fiscal years beginning on or after July 1, 2027 (FY 2028).

Background

Iowa Code section 331.426 gives counties the authority to levy a maximum of $3.50 for general county services and $3.95 for rural county services. Iowa Code section 331.429 gives counties the authority to transfer $0.16875 from the funds collected for general county services and $3.00375 from the funds collected for rural county services to the SRF. Counties also receive 24.5% of the Road Use Tax Fund (RUTF) pursuant to Iowa Code section 312.2; however, counties are required to transfer at least 75.0% of their RUTF allocation from property taxes levied to their SRF.

If an individual county fails to transfer the minimum 75.0%, its RUTF distribution is reduced by the same amount it is short. In FY 2025, only one county failed to meet the 75.0% transfer threshold.

The Act also makes changes to the County Agricultural Extension Education Tax in Iowa Code section 176A.10, which helps to fund a network of county-based educational programs led by Iowa State University Extension and Outreach.

Rate-limited tax levies impacted by this Division include:

• $0.0675 for the County Pioneer Cemetery levy under Iowa Code section 331.325.
• $0.27 for the City Aviation Authority levy under Iowa Code chapter 330A.
• $1.50 for the Unified Law Enforcement levy under Iowa Code section 28E.22.
• $3.00375 for the City Agricultural Land levy under Iowa Code chapter 24.
• $0.675 for the City Capitol Improvement levy under Iowa Code section 384.7.
• Variable rates based on population for County Agricultural Extension levy under Iowa Code section 176A.10.
• $0.54 for the Sanitary Sewer District General levy under Iowa Code chapter 358.
• $1.96 for the Sanitary Sewer District Debt Service levy under Iowa Code chapter 358.
• $0.405 for the Benefitted Fire District General levy under Iowa Code section 357B.9.
• $0.81 for the Benefitted Water District General levy under Iowa Code chapter 357.
• $0.54 for the Street Lighting District General levy under Iowa Code chapter 357C.
• $0.2025 for the Community College General levy under Iowa Code chapter 260.
• $0.09 for the Community College Equipment Replacement levy under Iowa Code Section 260C.28.
• $0.2025 for the Community College Plant Funds levy under Iowa Code section 260C.22.