$200 million in small business-friendly commercial property tax relief

Des Moines: Senate Democrats today released a small business-friendly plan to reduce commercial property taxes by $200 million.

“The Senate Democratic proposal for commercial property tax relief is a significant, straightforward plan that favors small businesses,” said Senator Joe Bolkcom, chair of the Senate Ways and Means Committee. “If approved, it will help encourage small business growth and job creation throughout Iowa.”

Under the plan, the newly created Business Property Tax Relief Fund will reduce property taxes by at least $50 million annually beginning July 1, 2012. During the first year, it is estimated the business property tax credit would be worth approximately $600 for property valued at $30,000 and higher. The permanent, on-going appropriation to the fund will grow by $50 million each year that the state’s revenue increases by at least 4 percent, until the $200 million goal is reached.

Jeff Merrill is a small business owner and employer and a member of the board of the State Center Development Association. He owns Remarkable Rose Floral and Gifts in State Center and three commercial buildings on Main Street.

“I especially like the way this proposal helps level the playing field for small businesses,” Merrill said. “As a commercial property owner, I pay property tax on 100% of the value of my properties. That’s more than any other class of property owner and it hurts our community’s efforts to expand and bring new businesses to Iowa.”

“Senate Democrats are working closely with local business leaders to create jobs and economic growth. They told us that reducing Iowa’s high commercial property tax rates is essential,” said Bolkcom. “We’ve responded with a proposal to provide $200 million in desperately needed business and commercial property tax relief, and we do it without hurting local government or local schools.”

The Senate could consider the proposal as early as next week.

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Iowa Senate Democrats
$200 Million Business Property Tax Relief Proposal

Senate Study Bill 1205 is small business-friendly, permanent property tax relief worth $200 million when fully funded. There is no financial impact on local governments, schools, community colleges, and other institutions which rely on property taxes.

Targeting help towards small businesses
The bill favors small businesses. For example, it is estimated that during the first year of operation, the property tax credit would be worth approximately $600 for all property valued at $30,000 AND HIGHER, providing the biggest impact to small businesses.

The tax credit begins with property taxes due and payable in fiscal years beginning on or after July 1, 2012. The credit will be available for commercial, industrial and railway properties with permanent construction (i.e., no vacant lots).

$50 million in FY 2013; Becomes $200 million in annual, permanent relief
The Senate Democratic proposal creates a Business Property Tax Relief Fund, with an on-going General Fund appropriation of $50 million beginning in fiscal year 2013. This appropriation will grow over time until it equals $200 million annually and is then maintained at $200 million per year.

To reach the permanent level of $200 million per year, the annual appropriation for the fiscal years after 2013 will grow by an additional $50 million every year that the Revenue Estimating Conference certifies that general fund revenues have grown by at least 4 percent compared to the previous fiscal year.

Once the annual appropriation has increased, it does not decline. In other words, a decrease in state revenue will not affect this appropriation.

Straightforward administration

The Business Property Tax Credit would be similar to the Homestead Tax exemption. Property owners would file once for an on-going credit at their county assessor’s office.

The Iowa Department of Revenue will determine the amount of value of the property subject to the credit. That amount will then be subject to a rollback equal to the Residential Rollback in that fiscal year.

Counties will be paid twice a year from the fund to cover the lost revenue due to the credit. As a result, there will be no financial impact on local governments, schools, community colleges, and other institutions which rely on property taxes.