DAVE KUBIKDUBUQUE COUNTY

ASSESSOR

Senate File 295Property Tax

Changes

Halloween 2013

East Central Iowa Clerk’s Association Fall 2013 Meeting

 Thursday, November 21, 2013

Common Definitions

Assessed value: the market value estimated by the assessor’s office. Set each year on January 1st. This typically changes each odd numbered year.

Rollback: A Multiplier applied to the assessed value to calculate the taxable value. It calculated by the state annually.

Taxable value: Assessed value times the rollback for that classification.

Classification: Assigned by the assessor and based upon the primary use of the property. (Agricultural, Residential, Commercial, Industrial) It is not connected to the assigned zoning on a parcel.

Sample Real Estate Tax Timing

Assessment date: 1/1/2013Ownership period: 7/1/2013 – 6/30/2014First payment due: September 2014Second payment due: March 2015Budget Fiscal year : July 1 2014 though

June 30 2015 - referred to as FY 2014/2015 or FYE2015

SF 295 has 6 sections

Division 1 – Business Property Tax CreditDivision 2 – Changed the Rollback calculationsDivision 3 – Created the Multi-Residential classDivision 4 – Telecommunication exemptionDivision 5 – Iowa Taxpayer Trust FundDivision 6 – Changes to assessment dates,

procedures, and the Property Assessment Appeal Board

Division 7 – Earned Income Tax Credit

Division 5 & 7–Taxpayer Trust Fund & Earned Income Tax Credit

Division 5 - Not an issue for cities or counties as this only created an income tax credit – “The Iowa Taxpayers Trust Fund Tax Credit”.

Division 7 – Not an issue for cities or counties as this only extended the Earned Income Tax Credit for low income individuals.

Division 6 – Changes to assessment dates, procedures, and the Property Assessment Appeal Board

Changed date to notify taxpayers of assessed value to April 1 (from April 15) .

Changed the dates property owners can appeal value to April 7 –May 5 (from April 16 – May 5).

Created an informal appeal time to the assessor from April 1 to May 4. (Details are still being worked on)

Made numerous changes to the Property Assessment Appeal Board, as well as opened up new appeal grounds in even numbered years.

Division 3 – New Multi-Residential Classification

Starts on the 1/1/2015 assessmentsFor apartment buildings, nursing homes,

assisted living facilities, mobile home parks, & RV campgrounds.

Apartment areas in otherwise commercial structures will be “split out” to the new classification too. (Details are still being worked out)

The Roll back on this classification will be reduced each of the next 10 years until it is the same as residential

The reduction in taxable value will not be backfilled by the state.

Multi-Residential Classificationrollback schedule

1/1/2013- .95 (as commercial)

1/1/2014- .90 (as commercial)

1/1/2015- .8625 (as Multi-Res)

1/1/2016 - .8251/1/2017- .78751/1/2018 - .751/1/2019 - .71251/1/2020 - .6751/1/2021 - .63751/1/2022 – Same as Residential

Division 2 – Change in the Residential Rollback

Previously each class of property was allowed to have the taxable value grow at 4% per year.

SF295 changes that to 3%.Rollback calculations are done on the

statewide valuations, not county by county.Changes in the rollback along with

inflationary assessed value changes can cause large tax increases for residential property.

The reduced increase in taxable value growth is not being backfilled by the state.

Change in the Residential Rollback

2012 Residential Rollback = .5281662013 Residential Rollback = .544002

Using the 3% growth figure

2013 Residential Rollback using the old 4% growth figure would have been .549283

Division 2 – Change in the Commercial and Industrial Rollback

Historically these classifications of property have been taxed at 100% of the assessed value.

For the 2013 assessments, they will have a .95 rollback multiplier (5% reduction from the 2012 year)

For the 2014 assessments, they will have a .90 rollback multiplier (10% reduction from the 2012 year)

This reduction in taxable value & corresponding taxes is fully backfilled to cities, counties and schools by the state.

Division 2 – Change in the Commercial and Industrial Rollback

How much reimbursement?Appropriation covers all claims for 2013 &

2014 assessmentAppropriation covers all claims capped at

total amount for 2014 assessmentAmount will be prorated if claims exceed

2014 assessment appropriationClaims will be paid in September and March

of each fiscal year

Division 1 – Business Property Tax Credit

Must be classified Commercial, Industrial or Railroad.

Does not include any parcels that would be primarily Multi-Residential (apartments, etc) even though they are currently assessed as commercial property.

For the 2013 assessment, $50 million will be divided among those that sign up. The fund will have $100M the following year and $125M in the 3rd year.

This credit is fully backfilled to cities, counties and schools by the state.

Division 1 – Business Property Tax Credit

Sign up in the assessor’s office. Some assessors mailed preprinted forms Some assessors require in-person application Some assessors email the form and allow electronic

filing after talking with the property owner.Sign up by January 15, 2014 to have the

credit applied in the 2013 assessment (payable in Sept. 2014 and March 2015)

One time sign-up for property owners. The credit will be carried forward each year unless the property (or part of it) is sold or no longer qualifies.

Division 1 – Business Property Tax Credit

The qualifications to be a “unit”: Within the same county Same classification Same ownership Separate tax parcel Operated by that “person” for common use and purpose

Qualifications can be complex on some parcels and require discussion between the taxpayer and the assessor.

Some assessors are also using this opportunity to discover all parcels that will be partially Multi-Residential for the 2015 assessments.

Division 4 – Telecommunication exemption

Telecommunication companies are assessed by the Iowa Department of Revenue, who report the assessed value back to county auditors based upon the “line miles” in each tax district.

The exemption is tiered by value and is calculated for each telecommunication company.

Creates a legislative study committee to study the assessment of telecommunication companies and to recommend changes in a report by August 2015

There is no reimbursement by the state for the tax reduction telecommunication companies will receive with this exemption.

Division 4 – Telecommunication exemption amounts

1/1/2013 assessments: First 20 million: 20% exemption 20M to 55M 17.5% exemption 55M to 500M 12.5% exemption Over 500 Million 10% exemption

1/1/2014 assessments: First 20 million: 40% exemption 20M to 55M 35% exemption 55M to 500M 24% exemption Over 500 Million 20% exemption

What’s the fiscal impact of SF 295 to local government?

Very difficult to measure at this point. None of the changes in this bill have an assessed

value change factored in. Example – a 2% inflationary increase in the local

assessed value of a residential area, plus a 3% increase in the rollback amount will show up as a 5% increase in this class of property even though nothing new was built. Maintaining the current levy rate with this type of value change will cause taxes to increase by 5%.

What’s the fiscal impact of SF 295 to local government?

Telecommunication assessments – loss in taxable value, particularly in the 2013 and 2014 assessment years. Difficult to determine the loss because exemptions are based on overall company by company assessed value.

Commercial /Industrial rollback – no true loss in taxable value. Taxable values will be reduced, but the loss in taxable value will be reimbursed by the state for the 2013 & 2014 assessments. 2015 is an assessment year and if assessed values increase, local government will see a prorating of the prior year amount, instead full reimbursement for the value increase.

What’s the fiscal impact of SF 295 to local government?

Residential /Agricultural rollback– The change in the amount of growth allowed (from 4% to 3%) will not result in an actual “loss” in taxable value, but will result in taxable values that are lower than what they would have been without SF295. While not immediately problematic , if inflation is higher than 3%, levy rate increases or spending/service reductions may be needed to comply with levy limitations.

What’s the fiscal impact of SF 295 to local government?

Multi-Residential classification – First implemented with the 2015 assessments, local government will see a reduction in the taxable value for the next 8 years. It is difficult to predict the amount of value loss because assessors have not had to sub-classify which structures or parts of structures are used for human habitation. The positive side of this change is that few, if any, apartments buildings will now be converted to condominiums to get the favorable residential rollback.

What’s the fiscal impact of SF 295 to local government?

Business Property Tax Credit: This new credit has no negative impact on local government. It is fully backfilled by the state, and will function much like the Homestead Credit that currently exists.

Very Important!!!! Local Government should closely monitor the funding of these backfill accounts during upcoming legislative sessions. Past history shows that promised funding does not always equal actual budgeted amounts.

From a presentation given by the Legislative Service Agency:

Impact on local government revenue (assumes NONE of the revenue is recovered

through tax rates)

Local Government Revenue Reductions * FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024City $12.6 $21.9 $38.1 $52.1 $68.1 $84.6 $103.2 $122.6 $142.9 $169.8County Urban 5.9 10.4 18.1 25.0 32.9 41.2 50.5 60.3 70.7 84.4County Rural 4.1 11.6 18.0 24.2 31.0 38.1 45.9 54.0 62.8 72.8School 2.5 5.3 8.8 11.8 15.0 18.6 22.5 26.7 31.5 37.1Other Authorities 2.8 5.9 11.4 16.5 21.7 27.1 33.3 39.8 46.7 55.5Total All Prop Tax $ $27.9 $55.1 $94.4 $129.6 $168.7 $209.6 $255.4 $303.4 $354.6 $419.6

* Revenue reductions equal property tax reductions minus State reimbursements.

Dollars in millionsStatewide Revenue Reduction by Local Government Category

Early indications are that an erosion of property tax revenue is coming. This might be offset by increased assessed values if the economy continues to improve.

Questions?

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Thank you!