House File 627 Geothermal Property Tax Exemption1

HOUSE REPUBLICAN STAFF ANALYSIS Bill: Committee: Floor Manager: Date: Staff: House File 627 Ways and Means Rep. Hein Fi...

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HOUSE REPUBLICAN STAFF ANALYSIS Bill: Committee: Floor Manager: Date: Staff:

House File 627 Ways and Means Rep. Hein Final Kristi L. Kious (2-5290)

House Ways and Means: House Floor: Senate Floor: Governor:

PASSED on April 7 (20-3) PASSED on June 2 (76-14)

Property Tax Exemption for Geothermal  This bill expands the current property tax exemption on the value added by a geothermal system to include installations on multi-residential, commercial, industrial, or agricultural property. It also removes the 10 year limitation on the exemption.  Fiscal Note – FY 18: $7,000 general fund appropriation increase; $36,000 local government revenue decrease; $43,000 property tax reduction. FY 19: $22,000 general fund appropriation increase; $110,000 local government revenue decrease; $132,000 property tax reduction.

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Section by Section Analysis Section 1 – Property Tax Exemptions Current law provides for a property tax exemption on the value added by any new or refitted construction or installation of a geothermal heating or cooling system on or after July 1, 2012 on a residential property. That exemption is allowed for 10 consecutive years. This section expands that exemption for the same systems on property that is classified as multi-residential, commercial, industrial, or agricultural. This section also removes the 10 year limitation (making it unlimited). Sections 2 – Implementation This section provides that Iowa Code 25B.7 does not apply to the property tax exemption in the bill. Code section 25B.7 states that the cost of providing a property tax credit or property tax exemption which is enacted by the general assembly on or after January 1, 1997, shall be fully funded by the state. If a state appropriation made to fund such a credit or exemption is not sufficient to fully fund the credit or exemption, the local governments are required to extend to the taxpayer only that portion of the credit or exemption funded by the state appropriation. This section provides that section 25B.7 does not apply to the bill and effectively means that the exemption is to be provided by the local governments regardless of providing a state appropriation to fund it. Section 3 – Applicability This section provides the legislation applies to assessment years beginning on or after January 1, 2016.

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