The future of property tax reform legislation at the Iowa Capitol remained unclear after a Senate subcommittee held a public hearing Wednesday, allowing it to move forward to the next phase.

But with lawmakers already working past the date when they get paid and with a dispute over property rights potentially holding up a vote on the budget in the House, it’s unclear whether time is running out for property tax reform to gain enough traction for approval yet this session.

The Senate Ways and Means Subcommittee held a public hearing at 8 a.m. Wednesday, where most of those who spoke said they were still studying the amended bill’s impact but appreciated the work lawmakers were doing to be transparent and get feedback during the process.

Subcommittees in the House and Senate advanced companion bills reforming the state’s property tax system in late March, but a couple of weeks later, amended bills were introduced that addressed some of the early concerns that were expressed.

The changes contained in SSB 1227 and HSB 328 include:

• Increasing the homestead exemption benefit to $50,000, up from $25,000 in the earlier version.
• Immediately removing the rollback for all classifications except agriculture, effective for the fiscal year 2027 budget. In the previous bill, the rollback would have been phased in gradually over five years.
• Implementing a consumer price index adjustment alongside the 2% revenue restriction to help local entities manage high inflation. The previous bill didn’t contain a provision to address inflation for local governments.
• Providing a minimum budget guarantee for small communities, providing certainty in their budgeting process, something not included in the earlier version.

The changes were designed, in part, to address concerns about the shift of property tax burden toward residential, and how the changes would affect cities’ economic development efforts and their ability to continue providing basic services, including public safety.

Local government leaders have expressed concern about changes to Iowa’s property tax system that were approved in 2023. A key feature of the legislation, which was tweaked in the 2024 session, limits how much money in the form of property taxes cities and counties can take in annually. Any excess money must be used to lower property taxes.

Supporters of the legislation believe the changes will provide tax relief to Iowans by limiting how much revenue local governments can generate from property taxes and restricting revenue growth based on tax base. Lawmakers in 2023 estimated the law would save taxpayers $100 million.

Sen. Dan Dawson, R-Council Bluffs, the subcommittee’s chairman, said lawmakers are trying to reform the property tax system to make it more equitable for all Iowans.

“We are trying to break this system apart and make this something that’s more workable for all Iowans,” he said toward the end of the meeting.

Dawson also said changing the property tax structure is an important step in making Iowa more competitive in attracting and retaining businesses.

“Come to Council Bluffs and look at the property tax dollars being assessed in Council Bluffs and right across the river in Omaha, Neb., particularly on the commercial and industrial,” he said. “In a western Iowa community, a business who pays commercial and industrial gets shellacked from across the river. Competitiveness is real life for every day Iowans trying to grow their  business here.”

Dawson emphasized what he believed is an urgency to do something to reform Iowa’s property tax system.

“If the alternative proposal is to do nothing, and the whole system continues to go off the rails and get worse, and then we come back,  I don’t know if there is ever a coming back,” Dawson said. “We have a duty to start acting for Iowans to start to reform this whole system.”

As of Wednesday afternoon, a committee hearing had not been scheduled in the Senate, and the House bill hadn’t been scheduled for a subcommittee hearing.

The per diem for the 2025 session ran out on May 2 and lawmakers are working unpaid to wrap up this year’s session.

After the hearing, Joe Murphy, president of the Iowa Business Council, said that while it’s possible that action could still happen this year, “I don’t think they’re going to waste time at this juncture if they don’t have an agreement with the House.”

When asked if lawmakers would extend the session to push property tax reform through this year, he said: “That’s the million dollar question.”

The Iowa Business Council is a nonpartisan, nonprofit organization whose 22 members are the chief decision-makers of the state’s largest employers.

Dustin Miller, executive director of the Iowa Chamber Alliance, also questioned whether property tax reform can be done this year.

“I think we’re running out of time,” he said. “It’s not just time in total hours. It’s also just people not being together in the building to kind of socialize the issues.”

Murphy and Miller said property tax reform is a critical piece of the state’s ability to become more competitive.

“It’s a hugely important factor,” Murphy said. “We’ve gone in a much more competitive direction in our income tax policy over the last several years and reforming the property tax system [2023] to make Iowa more competitive. It’s very important for businesses as they look to make further investment in Iowa and then to attract new businesses to Iowa.”

Miller, who also is a founding member of CWL Group and represents other organizations at the Statehouse, said when a company is looking at a “holistic tax climate, one of the things you’re going to factor in is property taxes.”

“There is clearly a perception that residential and commercial property taxes are high compared to others,” he said. “I don’t think what Sen. Dawson is trying to do isn’t necessarily property tax relief. It’s reform so that people see the benefits down the road but at the same time not causing any damaging impacts in the short term.”