Will the property tax reform bill reduce your taxes?

Iowa's recent property tax reform bill, signed into law by Governor Kim Reynolds, aims to tackle the issue of unchecked local government spending leading to property tax increases. While it is too early to determine the full impact of these reforms, they represent an important first step toward adding transparency to Iowa's complex property tax system.

"As an accountant, I see the Iowa property tax reform bill as a positive step toward bringing transparency and control to the complex property tax system,” commented Carson Messenger, CPA and manager at MHCS CPA.

Key Measures

The bill introduces several key measures to address the root causes of property tax increases.

Recalculates Levy Rates

The bill recalculates levy rates based on budget growth. Cities and counties will be categorized into three groups based on their tax base's growth, and a formula will reduce the increase in their budget year maximum property tax revenue dollars. This will help control the growth in property tax revenue and potentially lower the amount of property taxes paid.

Direct Notifications

The bill includes direct notification of tax bill increases, ensuring that property owners receive parcel-specific notices of proposed tax bill increases and the details of public budget hearings, which is crucial in controlling property tax growth.

Consolidation of Smaller Levies

Another provision of the bill is the consolidation of some smaller levies into the city and county general levy. While not impacting all levies, this consolidation increases transparency and helps control the cost of local government.

Restricts Bond Issues

Additionally, the bill restricts bond issue elections to November, which is a time when voter participation is typically higher. This may make it more difficult for bond issues that raise property tax bills to pass, giving voters more say in such decisions.

Eliminates PERL

The reform bill also eliminates the Public Education and Recreation Levy (PERL) and expands property tax credits for seniors and veterans. These measures provide relief for eligible individuals by decreasing the taxable valuation of their properties.

Not Included

It is important to note that the bill does not include a shift in education funding from property taxes to the state's General Fund, which is seen as a positive aspect. Such a shift could have unintended consequences, including potential budget shortfalls.

While these reforms are a positive step, they do not guarantee that property tax bills will not increase.

Overall, the Iowa property tax reform bill represents an important beginning to a multi-year process. Continued vigilance and active involvement from taxpayers and lawmakers will be essential in ensuring further progress in property tax reform and relief for Iowa residents.

If you have questions about how this new bill could impact your taxes, please give us a call.