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HOUSE
APPROVES
TAXPAYER-FRIENDLY BONUS DEPRECIATION CORRECTION
This week the Iowa House passed House
File 102 on a 99-0 vote. HF 102 allows a taxpayer to elect to
take the additional first-year (bonus) depreciation allowance in
computing the individual, corporate, and franchise taxes and
specifies the adjustments to be made in determining net or
taxable income, if such election is not made. This provision is
retroactive to tax years ending after May 5, 2003.
The bill allows a taxpayer that was eligible, under the
individual or corporate income tax, for the additional
first-year (bonus) depreciation allowance or the increased
expensing allowance for a tax year for which an income tax
return for that tax year was filed prior to the effective date
of the provision of the bill, to elect, in lieu of filing an
amended return, to take the bonus depreciation allowance or
increased expensing allowance in the taxpayer’s subsequent tax
year.
HF 102 is now awaiting action in the Senate Ways and Means
Committee.
50-STATE PROPERTY TAX COMPARISON STUDY
RELEASED
The Iowa Taxpayers Association (ITA) released a
nationwide property tax study this week.
It seems that calls for reform and simplification of Iowa’s
property tax system are an annual occurrence, and this year is
no exception. As proposals are being presented to the Iowa
General Assembly for their consideration, a property tax study
has been released shedding light on how Iowa ranks nationally in
various classifications. ITA extends its appreciation to the
Minnesota Taxpayers Association for their research and
distribution of this information; and to the other participating
associations of the National Taxpayers Conference of which the
Iowa Taxpayers Association (ITA) is a member.
Property taxes in this study were calculated for those payable
during year 2004 using a contact-verification approach in which
state and local tax experts were asked to provide information.
Data was also collected directly from information available
through various state and local websites.
Effective property tax rates were compared for the largest city
and typical rural town of each state (In Iowa, these were Des
Moines and Grinnell, respectively) and the District of Columbia.
The study assumes that the “true market value” of property is
the same in all locations reviewed. Because the actual “assessed
value” of property varies, sometimes significantly, from state
to state, the tax calculations necessarily account for the
effects of local assessment practices as well as statutory tax
provisions. Each hypothetical property includes assumptions
about personal property as well as real property. Effective
property tax rates are calculated by dividing total tax by total
value.
This study is most useful when used in connection with other
information about state and local tax structures. Some states
have relatively high property tax levies because their local
governments are more “own-source” revenue dependent. Other
states have higher income and sales taxes in part to finance a
greater share of the cost of local government. Likewise, the
property tax on a selected class of property may be relatively
high or low due to policies designed to redistribute the
property tax burdens across the classes of property through
exemptions, differential assessment rates, or other
classification schemes.
So where does Iowa rank?
The 2004 ranking for a $150,000 urban homestead property in Iowa
is the only ranking in this category to have slightly dropped
since the 2002 property tax study from 14th to 16th. This is the
lowest ranking for urban homesteads. Conversely urban commercial
and industrial property rankings have risen. Generally, our
state continues to rank consistently in the top twenty --- top
ten for commercial and apartment properties --- with the highest
effective tax rates for all urban property classifications.
Iowa’s rural properties did not rank much better. Our best rural
ranking is 19th nationally for higher-end industrial property.
All the rural property classifications found their way into the
top twenty.
Not one property classification ---- urban or rural --- was
below the national average.
Summary
of Findings:
Homesteads
Urban
In Des Moines, the property tax on a $70,000 home ranks 16th
highest at $1,178 which is 29% above the U.S. average for the 55
cities surveyed. The effective tax rate (ETR), expressed as a
percentage of total real property value, is 1.683%.
The tax on a $150,000 home in Des Moines ranks 16th highest at
$2,778, which is 30% above the U.S. average. The effective tax
rate is 1.852%.
The property tax on a $300,000 home ranks 15th highest at
$5,777, which is 30% above the U.S. average for the 55 cities
surveyed. The effective tax rate is 1.926%.
Because home values vary dramatically from one part of the
country to another, property taxes on median home values for the
metropolitan areas encompassing the largest city in each state
were also calculated and ranked. In this analysis, Des Moines
ranks 24th in total tax, at $2,614, and 16th in effective tax
rate, at 1.843%, based on a median home value of $141,800.
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Rural
In Grinnell, the property tax on the $70,000 home ranks 16th highest
at $1,002 which is 18% above the U.S. average for the 50 rural
cities. The ETR is 1.432%. The property tax on a $150,000 home in
Grinnell also ranks 16th at $2,341, which is 20% above the U.S.
average. The ETR is 1.561 %. The tax on a $300,000 home in Grinnell
ranks 16th highest, as well, at $4,851, or 20% above the U.S.
average. The ETR is 1.617%. No ranking for this value home was done
for 2002. No median home values were available for the rural cities.
Commercial Property
Urban
Iowa’s $100,000 commercial parcel ranks 3rd highest with a tax of
$4,255 which is 76% higher than the U.S. average. This tax amount
results in an effective tax rate of 3.546% on the total value of
real and personal property. The ranking for the $1 million and $25
million parcels are also 3rd with effective tax rates of 3.546%. The
taxes are $42,546 (73% higher than the U.S. average) on the $1
million parcel and $1,063,651 (72% higher than the U.S. average) on
the $25 million parcel.
Rural
Iowa’s $100,000 rural commercial property ranks 4th highest at
$3,114, which is 60% above the national average. That yields an
effective tax rate of 2.595% for real and personal. The $1 million
and $25 million Grinnell properties also ranks 4th highest with
effective tax rates of 2.595%. The taxes are $31,136 (58% above the
U.S. average) on the $1 million property and $778,405 (57% above the
U.S. average) on the $25 million property.
Industrial Property
In our past studies, we have assumed that industrial parcels have
equal proportions of real and personal property. Recent research
corroborates that assumption, but there was evidence of enough
variability among the states that a second example has been added to
the body of our report that assumes 40% real property and 60%
personal property for industrial parcels.
Urban--50-50 Real vs. Personal Mix
For the $100,000 industrial property with an equal proportion of
real and personal property, Iowa’s tax ranks 11th at $4,286, 35%
above the U.S. average. The effective tax rate is 2.143%.
Iowa’s tax ranks 12th for both the $1 million and $25 million
industrial properties. The tax on a $1 million industrial property
is $42,865, 31% above the U.S. average of $32,722, for an ETR of
2.143% overall. Iowa’s tax on a $25 million industrial property is
$1,071,613, which is 30% above the national average for an ETR of
2.143% overall.
Urban—40-60 Real vs. Personal Mix
For the $100,000 industrial property with 40% real and 60% personal
property, Des Moines ranks 18th at $4,286 and is 15% above the
national average. The result is an effective tax rate of 1.715%
overall. For the $1 million and $25 million industrial properties:
Des Moines ranks 20th at $42,865 and $1,071,614 respectively, which
is 12% above the U.S. average, for an ETR of 1.715% overall. There
were no 40-60 examples in previous studies.
Rural—50-50 Real vs. Personal Mix
For Iowa’s $100,000 rural industrial property with equal proportions
of real and personal property, Grinnell ranks 12th at $3,137, and is
23% above the national average. The result is an effective tax rate
of 1.568% overall. For the $1 million industrial property, Grinnell
ranks 14th at $31,369, which is 20% above the U.S. average, for an
ETR of 1.568% overall. And for the $25 million industrial property,
Grinnell ranks 14th at $784,232, which is 20% above the U.S.
average, for an ETR of 1.568% overall.
Rural—40-60 Real vs. Personal Mix
For the $100,000 industrial property with 40% real and 60% personal
property, Grinnell ranks 19th at $3,137, and is 5% above the
national average. The result is an effective tax rate of 1.255%
overall. For the $1 million and $25 million industrial properties:
Grinnell ranks 19th at $31,369 and $784,232 respectively, which is
3% above the U.S. average, for an ETR of 1.255% overall. There were
no 40-60 examples in previous studies.
Apartments
Urban
In this study, we calculated the property tax on a 20-unit, $600,000
unfurnished apartment building with $30,000 of personal property.
Des Moines’ apartment tax for such a building ranks 3rd at $25,528,
which is 121% above the U.S. average, for an effective tax rate of
4.052% overall.
Rural
Iowa’s tax ranking for a rural apartment is 3rd. The tax on the
Grinnell apartment is $17,402, which is 78% above the U.S. average,
for an ETR of 2.762% overall.
Ways
& Means Update
Bills introduced in committee this week:
House Study Bill 35- An Act updating the Code references to the Internal
Revenue Code and including retroactive applicability and effective
date provisions.
Bills passed out of
committee this week:
No bills passed committee
this week. |
Week
in Review Archives