HF 2552 - BPTC Law Changes and Implementation of Two-Tier Assessment Limitations

House File 2552, Division 11 passed in the 2022 legislative session and signed by the Governor on May 2, 2022 repeals the Business Property Tax Credit (BPTC). In lieu of the BPTC, beginning with assessment year 2022, all commercial, industrial, and railroad properties will receive a property assessment limitation on the first $150,000 of value of the property unit equal to the assessment limitation for residential property. The value of the property unit that exceeds $150,000 receives the same ninety percent assessment limitation it has in the past.

The $125 million fund will continue to be appropriated each year for reimbursements to counties. County auditors will file a claim for the first tier of the assessment limitations in September. Assessors will continue to provide the unit configuration for auditors as these definitions remained the same. Taxpayers are not required to file an application to receive the first $150,000 of assessed value at the residential assessment limitation rate.

This change is effective with the fiscal year beginning July 1, 2023 (FY2024, AY2022) which means the county auditor will still follow the existing process for the fiscal year beginning July 1, 2022 (FY2023, AY2021) and upload the data elements file by June 30, 2022. The last BPTC process will be for AY2021 with the final BPTC payment in March, 2023. All BPTC corrections will be required to be completed prior to March 1, 2023 as no corrections will be funded after this date.

Here is the timeline for phase out of the existing BPTC ending with the final payment in March 2023. (localgovexchange.iowa.gov/)

  1. Last day for city/county assessor to receive BPTC applications July 1, 2021.
  2. Last day for Unit ID generators June 24, 2022.
  3. Last day for Data Elements file June 30, 2022.
  4. Last time to download BPTC credit files July, 2022.
  5. Last day to submit Replacement claim file September 1, 2022. Replacement claim payments will no longer be based on this submission, but the file is still needed to verify the consolidated levy rate used for BPTC. (This is mandatory under Iowa Administrative Code rule 701--80.49(2)(b)).
  6. Last day for ALL BPTC corrections is March 1, 2023.
  7. Final BPTC payment March 15, 2023.

Here is the timeline for the new two-tiered assessment limitation for commercial and industrial property that replaces BPTC beginning FY2024 (AY2022) and for each fiscal year thereafter:

  1. Legislature appropriates $125 million into the fund for Fiscal Year beginning July 1, 2023.
  2. Assessors continue to provide the final assessment roll to the auditors in the same manner as in the past. Assessors also continue to provide unit identification for auditors to use in taxable value calculations as they depend upon the unit configuration; the 2022 assessment unit identification should be provided to the auditors after the 2022 assessment roll is completed and transferred to the auditors.
  3. The auditor receives the actual value of all railroad property from the Department each year that is subject to the new two-tiered assessment limitation for each property unit.
  4. On or before September 1, 2023, and each year following, the county auditor submits statement (claim) to IDR that includes the following by tax district:
    1. Assessment Year
    2. Portion of actual value commercial, industrial and railroad subject to Tier One (1) assessment limitation
    3. Consolidated Levy Rate
    4. Claim amount
  5. IDR calculates payment.
    1. If the total for all claims is more than the appropriated amounts, the claims will be prorated and IDR will notify the county auditors of prorated percentage by September 30
  6. IDR makes payments in equal installments in September and March.
    1. Any corrections must be submitted prior to the March payment.
    2. No corrections will be allowed for prior years or after the March payment.
  • The new two-tier assessment limitation applies to property units. “Property unit” means a parcel or contiguous parcels all of which are located within the same county, with the same property tax classification, are owned by the same person, and are operated by that person for a common use and purpose. Iowa Code section 441.21(5)(f)(3)). The assessor shall determine which parcels comprise a property unit. Refer to House File 2552 for the complete definition of a property unit. This definition has not changed from the previous language.

    The assessor shall report the actual value of commercial and industrial property units subject to Tier One (1) assessment limitation to the auditor.

  • The first tier consists of an amount equal to the product of the assessment limitation percentage applicable to residential property under Iowa Code section 441.21(4) for that assessment year multiplied by the actual value of the property that exceeds zero dollars but does not exceed one hundred fifty thousand dollars (441.21(5)(c)(2)(a)).

    Note: the second tier is an amount equal to ninety percent of the actual value of the property for that assessment year that exceeds one hundred fifty thousand dollars (441.21(5)(b)(2)(b) or 441.21(5)(b)(2)(b)). This Tier Two (2) amount is not used to calculate the claim amount.

  • Claim amount steps:

    1. Determine the amount of value by tax district subject to the Tier One (1) assessment limitation under Iowa Code section 441.21(5)(b)(2)(a) or 441.21(5)(c)(2)(a).
    2. Calculate the difference between ninety percent (0.90) and the assessment limitation percentage applicable to residential property by tax district.
    3. Multiply that by the amount of value from Step 1.
    4. Multiply that calculated value by the consolidated levy rate and divide by 1,000.

    Example of calculating the claim: The aggregated sum of actual value by property unit subject to the Tier One (1) assessment limitation in the tax district is $1,000,000. The residential assessment limitation percentage is 0.56, the consolidated levy rate is 33.00000.

    $1,000,000 X (0.90 - 0.56) X (33/1000) = $11,220

    The claim would include all tax districts with commercial, industrial and railroad property units.