Ways & Means Committee – Week 13, 2021

COMMITTEE ACTION:

SF 589 – Adult adoptees obtaining copies of original birth certificates

SF 589 provides a process for those who were adopted to obtain a non-certified copy of their original birth certificate after they turn 18. If the adopted person is deceased, their spouse or any relative within the second degree of consanguinity may request a non-certified copy of their birth certificate. Current Iowa law prohibits those who were adopted from obtaining a copy of their original birth certificate.

The State Registrar of Vital Statistics st the Department of Public Health will develop a contact preference form on which a birth parent may state a preference regarding contact by the person who was adopted or their relative. In addition, the Registrar is to develop a medical history form on which a birth parent may provide family medical history. If a birth parent fills out these forms, the Registrar will attach them to the original birth certificate and the adoption decree, and the forms will be provided to the adult adoptee or relative who applies for and receives a copy of the original birth certificate and adoption decree. A birth parent may fill out a contact form and a medical form indicating that they do not wish to be contacted and require that any personally identifiable information on the copy of the original birth certificate, the contact form or medical form be redacted.
[4/1: Short form (Absent: Sweeney)]

SF 590 – Community land banks

SF 590 creates a new section in Iowa Code to establish local government land banks. Land banks are a tool to rehabilitate blighted, vacant and abandoned properties into productive use. Ultimately, the bill will create a strong funding base for affordable housing and community economic development. The land banks can be used by a community or a group of communities as a way to address and rehabilitate dilapidate and under-developed neighborhoods. This legislation is supported by local governments, councils of governments, housing advocates and developers as another tool for communities to use to redevelop properties that private developers have been reluctant to invest in.
[4/1: Short form (Absent: Sweeney)]

SF 591 – Disabled veteran property tax credit, filing dates and approval

SF 591 would allow a veteran who receives a qualified service connected disability rating to apply for and immediately receive the existing property tax exemption on their home. Currently, the exemption must be applied for by July 1 of the given year, and the exemption is applied to property taxes assessed during the year the application is approved. Because of the nature of how property taxes are assessed and when they are paid, the exemption will not be available to the veteran for more than a year after the application is made.

The bill allows an Iowa homeowner who meets the requirements for and has filed a claim under the Iowa disabled veterans homestead property tax exemption and is liable for payment of taxes levied as a result of a prior assessment (late filing), to file a petition with the board of supervisors, requesting abatement of all property taxes. The board of supervisors may order the county treasurer to abate the taxes levied for any such assessment year for which they are liable.
[4/1: Short form (Absent: Sweeney)]

SF 593 – Documents for the State Public Defender

SF 593 is a bill that requires an agency to furnish copies of any document in its possession that it can duplicate at a cost not to exceed $10 per document at request of the Public Defender or a public defender contract attorney if the software license of the agency permits. The documents must relate to a charge or charges in a trial information.

The agencies required to produce the documents at this cost include the Judicial Branch, any state department or agency, county attorneys, any criminal or juvenile justice agency, or a political subdivision of the state.

Documents include police reports, photographs, audiotapes, videotapes, audio or video files on storage systems, including disk, tape, optical and other repositories for storing digital information, and reports prepared by the Department of Human Services.
[4/1: Short form (Absent: Sweeney)]

HF 683 – Iowa Utilities Board Omnibus

HF 683 is a departmental recommendation by the Iowa Utilities Board (IUB). It makes technical changes to current Code; authorizes the IUB to again have an administrative law judge on staff to assist with ensuring compliance with legal requirements; codifies current practices on advanced estimated assessments; allows the IUB to assess and bill interstate pipeline companies in the same manner as intrastate pipeline companies; aligns civil penalties with federal levels regarding pipeline and hazardous waste safety to eliminate the need for IUB to continually file legislation to match the U.S. Department of Transportation Pipeline and Hazard Materials Safety Administration dollar amounts for fines; and allows the Board to identify when payments will be remitted to the Dual Party Relay Fund.

There is one difference between this bill and the version passed by Senate Commerce, SF 347. HF 683 contains language promoted by the Iowa Communications Alliance related to the method of computing year-end assessments for telecommunication providers that are registered with the IUB.
[4/1: Short form (Absent: Sweeney)]

FLOOR ACTION:

SF 587 – Mental health funding and levy/commercial backfill elimination

SF 587 is a wide-ranging bill that covers many areas, including:

The Senate adopted an amendment on the floor that made a number of changes to the bill:

Division I – Mental Health and Disability Services

MHDS Levy. The bill eliminates the MHDS property tax levy over a two-year period, with all county levies reduced to no more than $21.14 per capita for FY22 and reduced to $0 beginning in FY23.

The bill provides a state appropriation of $60 million in FY22; $50 million goes directly to the regions on a per-capita basis and $10 million goes to a mental health risk pool fund.

In FY23, the bill provides an additional $65.4 million state General Fund appropriation for a total of $125.4 million. The mental health property tax levy is completely eliminated in FY23. A total of $120.3 million will be distributed to the regions and an additional $5.1 million will go to the risk pool.

State funds will be distributed to the Regions quarterly starting July 1, 2021.

Per Capita State Appropriations. The bill provides these per-capita General Fund appropriations:

  • $15.86 for FY22
  • $38 for FY23
  • $40 for FY24
  • $42 for FY25
  • Beginning in FY26 and beyond, the previous year’s appropriation is multiplied by a growth factor indexed to sales tax growth for the preceding fiscal year, not to exceed 1.5%.

Fund Balances. The bill amends provisions related to county fund balances by requiring all county fund balances to be pooled by the region. Regional fund balances are limited to 40% of the proposed gross expenditures for the fiscal year beginning in FY22. In FY23, fund balances are limited to 20% and in FY24 and beyond, fund balances are limited to zero.

Beginning in FY22, State per capita appropriations to a MHDS region are reduced if the MHDS region has a fund balance in excess of the fund balance cap specified above. The reduction doesn’t begin until the second half of the year, once fund balances are certified on December 1. The MHDS Regions also must pay back any funds received in the first two quarters of the fiscal year if fund balances exceeded the cap. Any funds that are paid back or withheld are appropriated to MHDS the Risk Pool.

Risk Pool. The bill creates a MHDS Risk Pool in the Property Tax Relief Fund to provide additional funding to the MHDS regions. If the combination of taxes levied, reserve fund moneys used and per capita state funds distributed still leaves the region short of its budget, and it has spent their reserve funds to required levels, it will can apply to the Risk Pool Board for additional funds.

The bill establishes the composition of the Risk Pool Board and the criteria for the Board to distribute funding. It also makes a General Fund appropriation of $10 million to the MHDS Risk Pool for FY22 and $5.2 million for FY23. Beginning in FY26, any funds in the risk pool will be multiplied by a Risk Pool growth factor equal to the sales tax growth rate for the preceding fiscal year, minus 1.5%.

The Risk Pool Board members are appointed by the Governor and confirmed by the Senate and include these 10 members:

Division II – Elimination of Commercial and Industrial Property Tax replacement payments

The bill eliminates the commercial and industrial property tax replacement payments (the backfill) to most local governments over a four- to six-year period as the state increases its share of funding for the MHDS system.

School districts will stop receiving replacement payments in one step, which is replaced and accounted for by increasing total state aid to schools. Schools currently get $60 million ($59.7 million exactly) from C&I repayments.

The backfill was created as part of the bipartisan compromise to reduce property taxes on businesses. The backfill was designed to provide funding to local governments to replace the lost revenue from the 10% rollback on business property taxes. Without the backfill, local governments would likely have had to increase property taxes on residential and agricultural property, which would have resulted in a tax shift from businesses onto homeowners and farmers.

The backfill provides more than $152 million to local governments to protect taxpayers and provide critical services. Eliminating this backfill will put more demand for funding for those services back on property taxes.

Division III – Increases the school aid foundation level from 87.5% to 88.4%.

Schools would get an additional $65.4 million in state aid. This increase in state aid is an effort to offset the loss of C&I payments for the uniform levy and additional levy (the school aid formula levy parts or the school levy).

This increase in school foundation aid doesn’t help the other portions of the school levies (above). Many school districts are levying at their maximum rate now, so the loss of backfill payments will result in less funding generated by those levies. Where that isn’t the case, the loss of the backfill payments will likely cause property taxes to increase.

Division IV – Eliminates the Public Educational and Recreational Levy (PERL).

This is a voter-approved levy with a rate of $0.135/$1,000 of taxable valuation. These funds can be used for community tennis courts, swimming pools, other community recreational items and community education purposes.

Division V – Elderly Property tax credit

This division creates an additional property tax credit for individuals aged 70 and above with incomes below 250% of the federal poverty level who live in the state. Under this “new program,” individuals will qualify for an expanded tax credit in which they will get the greater of:

This proposal would have the potential to freeze property taxes for qualified individuals 70 and above. This new provision is not reimbursed by the state, so the cost of the credit is borne by local governments through revenue reductions or shifting costs to other taxpayers in the jurisdiction.

Division VI – Removal of “triggers” for the contingent income tax system

This division would remove the “triggers” that must be met to move to the contingent individual income tax system that was established as part of SF 2417 in 2018 and make the new system effective for Tax Year 2023. This provision was included in SF 576, which passed the Senate unanimously on March 17.

Under SF 2417, the contingent tax system only goes into effect after TY23 when two conditions are met: General Fund net receipts for FY22 (or after) exceed $8.31 billion, and net General Fund receipts for that year must grow at least 4% above the year prior (equal to or more than 104% of previous year’s net receipts).

Under the contingent tax system, the basis for determining Iowa taxable income will be calculated on federal taxable income. This will incorporate all federal tax deductions into the Iowa tax code and will eliminate many of the Iowa specific adjustments to taxable income. The bill removes the state standard deduction but will bring federal standard or itemized deductions into the Iowa tax code by using federal taxable income as the base. One of the largest changes under the contingent tax system is the removal of the Iowa deduction for federal taxes paid, which is known as “federal deductibility.” This massive deduction has the impact of making Iowa’s income tax rates artificially high and appear less competitive with other states.

Division VII – Repeal of the charitable conservation contribution income tax credit

This division would repeal the current charitable conservation contribution tax credit. This tax credit allows landowners to make a charitable conservation of the value of an easement they place on the property. The easement places restrictions on the use of the property in perpetuity for conservation purposes. The tax credit is a maximum of 50% of the fair market value of the property associated with the easement.

Division VIII – Forest and Fruit Tree reservations

This division of the bill creates a number of requirements for properties that apply for and receive the property tax exemption under the forest and fruit tree preservation program. The bill would require the DNR to establish management standards for properties that apply for the forest and fruit tree reservation exemption. Properties receiving the exemption must meet the management standards to receive the exemption.

The division also makes the exemption last for a five-year period. The property owner must re-apply after five years and meet the management requirements to be eligible to receive another five-year exemption.

This division also removes one acre from the fruit tree reserve property tax exemption if there is a building located on the property.
[4/6: 30-17, Party line (Absent: Hogg, Nunn, Schultz)]