By Attorney Jenna Bishop
During the 2021 legislative session, the Iowa Department of Revenue proposed legislation to remove the multiresidential property tax assessment classification (which was only recently created as of January 1, 2015). The proposed legislation was passed as House File 418, was signed into law by Governor Reynolds on March 8, 2021, and will go into effect for property assessments beginning January 1, 2022. The Iowa Department of Revenue proposed this legislation, in part, because the multiresidential property and residential property rollbacks were equalizing as of January 1, 2022.
Multiresidential Property Becomes “Residential”
House File 418 removes the multiresidential property classification by reclassifying those properties as a subdivision of “residential” property. The properties classified as multiresidential that will be reclassified as residential for assessments beginning January 1, 2022 include:
- Mobile home parks
- Manufactured home communities
- Land-leased communities
- Assisted living communities
- A parcel primarily used for human habitation containing three or more separate dwelling units (except any portion of the parcel assigned a commercial/industrial property assessment category)
- That portion of a property primarily used as commercial or industrial property that contains dwelling units
Impact on SSMID Tax Levies and Urban Revitalization Tax Abatement
Prior to this change in assessment category, multiresidential property has received different treatment than residential properties under Iowa Code Chapter 386, Self-Supported Municipal Improvement Districts (SSMIDs), and Iowa Code Chapter 404, Urban Revitalization Tax Exemptions, as follows:
- Unless located in a historic designated SSMID, residential properties are exempt from SSMID tax levies, while multiresidential properties are subject to SSMID tax levies.
- Unless the revitalization area is designated as slum, blight, or historical, residential properties are limited to a 5-year, 100% exemption only on the first $75,000 of value added by improvements, while multiresidential properties with three or more separate living quarters have been eligible to receive up to a 10-year, 100% exemption on value added by improvements.
House File 418 protects this differential treatment for those multiresidential properties that will be classified as “residential” under the new Iowa Code Section 441.21(14)(a)(6): “A parcel primarily used or intended for human habitation containing three or more separate dwelling units.”
Accordingly, primarily residential properties with three or more separate dwelling units will remain subject to applicable SSMID taxes.
Further, primarily residential properties with three or more separate dwelling units will remain eligible for an up to 10-year, 100% tax exemption on value added by improvements to the property—if the applicable urban revitalization plan provides that exemption schedule for properties assessed as residential under Iowa Code Section 441.21(14)(a)(6). Cities and counties with an urban revitalization plan providing a tax exemption schedule for “multiresidential” properties may want to consider amending the urban revitalization plan to provide a new tax exemption schedule for “properties assessed as residential under Iowa Code Section 441.21(14)(a)(6).” Without providing a specific tax exemption schedule for the residential properties under Iowa Code Section 441.21(14)(a)(6), such properties—being assessed as residential after January 1, 2022—will be eligible for the standard residential property exemption schedule in the applicable urban revitalization plan, if one exists.