By attorneys Nathan Overberg and Jenna Sabroske
On May 18, 2026, Governor Reynolds signed Senate File 2472, the Iowa Legislature’s property tax bill passed during the 2026 legislative session. The bill includes multiple changes for Iowa’s Urban Renewal Act (Iowa Code Chapter 403) and Iowa’s Urban Revitalization Act (Iowa Code Chapter 404), most of which took effect as of the bill’s signing on May 18, 2026 (the “Effective Date”).
CHANGES TO URBAN RENEWAL AND TAX INCREMENT FINANCING
The changes made by Senate File 2472 to the Urban Renewal Act and the use of Tax Increment Financing (“TIF”) under Iowa Code Section 403.19 include:
1. Limitations on the duration of TIF under new TIF ordinances adopted within an urban renewal area
2. Limitations on the amount of tax revenues collected through TIF under existing TIF ordinances that were not previously subject to a “TIF sunset” time limit
3. Recognition of workforce housing as “economic development” and as an appropriate objective for urban renewal projects, and defining low and moderate income housing as including workforce housing
4. Removal of Iowa Code Section 403.22, which imposed unique limitations for market-rate residential projects
5. Exclusion of school foundation tax levies from TIF under some circumstances
6. Exclusion of school district tax levies from TIF with respect to residential projects that are receiving a tax exemption under the Urban Revitalization Act.
These changes to the Urban Renewal Act and the use of TIF are described further below.
TIF Ordinances Adopted After Effective Date – New 23-Year TIF Sunset
All new TIF ordinances adopted after the Effective Date, regardless of the designation of the underlying urban renewal area (slum area, blighted area, or economic development area), will be limited to twenty-three (23) years from the calendar year following the calendar year in which the municipality first certifies indebtedness to the county auditor to be paid from the division of revenue. The TIF ordinance shall automatically terminate following the 23-year period.
Notably, all urban renewal areas established after the Effective Date as an “economic development area,” including areas established for the development of market-rate housing, will be subject to the 23-year TIF sunset.
Existing TIF Ordinances Not Previously Subject to a TIF Sunset Limit – 60% TIF Collection Limitation
Under the new law, existing urban renewal areas with adopted TIF ordinances that were not previously subject to a TIF sunset (referred to herein as “Extended TIF Ordinances”) are granted a twenty (20) year “status quo” period, during which no changes are made to the use TIF. The 20-year “status quo” period will end on the later of: (i) 20 years from the Effective Date, or (ii) 20 years from the calendar year following the calendar year in which the municipality first certified debt to be financed using TIF to the County Auditor for the particular urban renewal area.
Following the end of the 20-year “status quo” period, the municipality will be limited to collecting 60% of the tax increment revenues otherwise available under the Extended TIF Ordinance. Once the 60% TIF collection limitation is imposed, the municipality will no longer be able to collect school foundation tax levies through TIF under the Extended TIF Ordinance. A municipality may exceed the 60% TIF collection limitation to the extent necessary to pay off existing indebtedness incurred before the Effective Date, but the municipality cannot incur new indebtedness while the 60% cap is being exceeded.
Affordable Housing Provisions – Workforce Housing and Removal of Section 403.22
For the first time, the Urban Renewal Act will include a definition of “low and moderate income family housing,” which expressly includes housing that meets the requirements of Workforce Housing under Iowa Code Section 15.353. Relatedly, the provision of workforce housing is expressly recognized as “economic development” under Iowa Code Chapter 15A, expressly allowing a municipality to support the development of workforce housing with public funds.
Additionally, Iowa Code Section 403.22 is repealed. Section 403.22 applied shortened TIF sunsets to market-rate residential development projects and required these projects to fund assistance for LMI housing (often funded through “LMI set-aside”). Existing TIF ordinances in market-rate residential urban renewal areas that previously had a shortened TIF sunset under Section 403.22 will now be treated the same as existing TIF ordinances in other “economic development” designated urban renewal areas, and will be subject to a 20-fiscal-year time limit on TIF collections. TIF ordinances adopted after the Effective Date in market-rate residential urban renewal areas will be subject to the 23- fiscal-year time limit on TIF discussed above.
Exclusion of School District Foundation Tax Levies from TIF
The school foundation tax levy will be excluded from TIF under the following circumstances.
New Ordinances Adopted January 1, 2027 or Later in Incorporated Areas
For new TIF ordinances approved on or after January 1, 2027, with respect to property located in an incorporated area (i.e., within a city), the school foundation tax levy will be excluded from TIF. However, for fiscal years beginning on or after July 1, 2027, a municipality may request that the impacted school contribute its foundation levy if the levy is not otherwise available for TIF. The School Board can, by resolution, make the contribution to the TIF fund for one or more fiscal years.
Existing Ordinances That Become Subject to 60% TIF Collection Limitation
For an Extended TIF Ordinance (as defined above), the school foundation tax levy will be excluded from TIF once the Extended TIF Ordinance becomes subject to the 60% TIF collection limitation described above.
For TIF ordinances that are not impacted by one of the above-described exclusions of the school foundation tax levy, the property tax bill’s changes to the school foundation tax levy rate are expected to reduce the amount of funds available through TIF in future fiscal years, as the school foundation tax levy rate will be reduced from the current $5.40 to $5.10 in FY 29, and to $4.90 in FY 30.
Exclusion of School District Tax Levies from TIF – Residential Projects Receiving Urban Revitalization Tax Exemption
School district tax levies were recently excluded from tax exemptions applied to residential property under the Urban Revitalization Act. For fiscal years beginning on or after July 1, 2027, when a residential property is receiving an urban revitalization tax exemption and is also located within an urban renewal area, the school district taxes generated by that residential property are excluded from TIF.
Exclusion of EMS Levies from TIF
Relatedly, a separate act (Senate File 2496) that was signed into law on May 2, 2026 excludes emergency medical services tax levies from TIF for all urban renewal areas, starting in fiscal year 2027. Similar to the other exclusions of certain tax levies from the division of tax revenues under Iowa Code Section 403.19 through the TIF process, this is expected to reduce the amount of funds available through TIF.
CHANGES TO URBAN REVITALIZATION
Senate File 2472 re-establishes the “multiresidential” assessment category (which had been removed, by legislation adopted in 2021, from Iowa’s property assessment classification framework for assessments beginning January 1, 2022). Accordingly, references to the multiresidential assessment category will be added back into Iowa Code Chapter 404 as of January 1, 2027.
Additionally, the new limitation excluding school district tax levies from TIF with respect to residential projects that are receiving a tax exemption under the Urban Revitalization Act—discussed above—has been added to Iowa Code Section 404.3D in the Urban Revitalization Act.
This article is only a summary of the changes implemented by the property tax bill SF 2472. We encourage you to consult with legal counsel if you have specific questions about the impact of the bill.
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