Democrats Offer $250 Million in Property Tax Relief

By Rod Boshart, Reporter

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By Ellen Kurt

DES MOINES, Iowa – Senate Democrats on Thursday offered a $250 million, five-year plan to reduce commercial property taxes for most Iowa businesses via an annual state tax credit.

If approved, Sen. Matt McCoy, Des Moines, said a $50 million yearly state appropriation would be placed into a new Business Property Tax Relief Fund beginning July 1, 2014. The permanent, ongoing appropriation would grow by $50 million each year that the state’s revenue increases by at least 4 percent until the fund reaches a maximum $250 million at the end of the fifth year, he said.

The Democratic property tax relief plan is targeted to help small and Main Street businesses, McCoy told a Statehouse news conference. When fully phased in, four out of five Iowa commercial properties – those valued at $324,000 or less -- will be taxed at the same rate as residential properties, a tax cut of 43 percent. The remaining businesses will also be taxed at the residential rate on the first $324,000 of value and then at the existing commercial rate for the remaining value.

The proposed tax relief will be fully funded with state dollars, McCoy added. There is no shift to Iowa’s residential property taxpayers or negative effect on local schools and governments, he noted.

“This is a tax cut that makes sense for all Iowans,” McCoy said. “The Main Street tax cut does not increasing taxes on residential property owners or harm local schools and public services. State dollars will replace every property tax dollar that used to go to schools, local governments and community colleges.”

Commercial property owners currently pay taxes on 100 percent of the assessed value of their property, while the state’s tax system rolls back rates on residential and agricultural properties by more than 40 percent.

During his Condition of the State address in January, Branstad proposed to permanently reduce commercial and industrial property tax values by 20 percent over a four-year period. He also called for fully funding local property tax credits and cutting by half the current 4 percent cap on property tax growth for residential and agricultural classes.

Senate Majority Leader Mike Grontal, D-Council Bluffs, said Democrats have raised their proposal by $50 million to get closer to the governor’s $320 million in relief and targeted their plan to favor small businesses rather than sending a share of the relief to large, out-of-state corporations.

House Speaker Kraig Paulsen, R-Hiawatha, withheld judgment until he had an opportunity to review details of the commercial property tax relief plan unveiled Thursday by Senate Democrats. However, he did note that “the Legislature has a terrible history” of not fully funding local property tax credit commitments.

“I appreciate that they’re putting that on the table,” Paulsen told reporters. “I don’t want to throw anything overboard.”

McCoy said he expects to hold subcommittee meetings over the next two weeks on the measure that seeks to establish the business property tax credit fund. The bill would create an ongoing state appropriation of $50 million per year, beginning with fiscal year 2014.

The annual state general-fund appropriation would grow by an additional $50 million in each of the next four fiscal years if the state Revenue Estimating Conference certifies that general fund revenue grew by at least 4 percent compared to the previous fiscal year. If state tax receipts fail to grow by 4 percent during a fiscal year, the yearly $50 million appropriation to the general fund would not occur.

Qualifying businesses wishing to claim the new business property tax credit would obtain forms from their county assessors and file the claims at their assessor’s offices. Counties will submit lists of properties that are eligible for the credit, and the state Department of Revenue will determine the amount of value of the property that will be subject to the credit -- an amount that then would be subject to a rollback equal to the residential rollback in that year.

The proposed legislation will require each county treasurer to show on each property tax receipt the amount of credit that was received via the business property tax credit fund. Counties will be paid twice a year from the state fund to cover the lost revenue.

House Speaker Kraig Paulsen, R-Hiawatha, withheld judgment until he had an opportunity to review details of the commercial property tax relief plan unveiled Thursday by Senate Democrats. However, he did note that “the Legislature has a terrible history” of not fully funding local property tax credit commitments.

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