Fiscal Note
Fiscal Services Division
HF 668 – Child Care Facilities, Property Tax (LSB2193HV)
Staff Contact: Jeff Robinson (515.281.4614) jeff.robinson@legis.iowa.gov
Fiscal Note Version – New
Description
House File 668 lowers the percentage of commercial child care facility assessed value that is
subject to property taxation (taxable) by applying the residential rollback percentage to the
entire value of the center or facility that is used for child care. The change takes effect upon
enactment and applies to property taxes due in the fall of 2024 and the spring of 2025
(FY 2025).
Background
Under current law, the residential rollback (54.6501% for FY 2024) is applied to the initial
$150,000 of taxed value of a commercial child care facility and the commercial rollback
(90.0000% for FY 2024) is applied to any value above $150,000.
Iowa Code section 237A.1 defines “child care facility”, “child care center”, and “child
development home” as follows:
• Child Care Facility — A child care center, preschool, or a registered child development
home.
• Child Care Center — A facility providing child care or preschool services for seven or more
children, except when the facility is registered as a child development home.
• Child Development Home — A person or program registered under Iowa Code section
237A.3A that may provide child care to seven or more children at any one time.
Assumptions
• The Department of Revenue (Department) estimates that there are 1,500 commercial child
care facilities in the State currently subject to property tax. Fifteen percent of the 1,500 (225
facilities) are assumed to already be classified and taxed as residential properties.
• Through a review of property records, the Department estimates that the average assessed
value of commercial child care facilities that are not currently classified as residential
property is $675,000 for FY 2024.
• The mix of property values within the assumed $675,000 average is not known. For this
estimate, it is assumed that all child care facilities are valued over $150,000.
• The FY 2024 average commercial child care property value is assumed to increase each
year by the statewide average revaluation of commercial properties from assessment year
2017 through assessment year 2022 (2.3%).
• The 54.6501% FY 2024 residential rollback is assumed for FY 2025 and after.
• The statewide average commercial property tax rate for FY 2023 is $36.30 per $1,000 of
taxed value. That rate is assumed for future years. The average rate includes the basic
school levy of $5.40. Law changes that lower the taxable value of property by operation of
the State school aid formula automatically increase the State General Fund appropriation for
State school aid by $5.40 per $1,000 of value exempted.
• The State General Fund appropriation to local governments that backfills a portion of the
rollback for commercial, industrial, and railroad property is not impacted by this Bill.
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Fiscal Impact
The changes to the taxable value of child care facilities will reduce the property taxes owed by
facility owners beginning with FY 2025. The reduction is estimated to be $8.8 million. The
property tax reduction will result in an estimated increase of $1.3 million in the State General
Fund appropriation for school aid and an estimated decrease in local government property tax
revenue of $7.5 million. The appropriation increase and property tax revenue decrease will
continue in future fiscal years, inflating by an estimated 3.0% per year.
Sources
Department of Revenue
Department of Management property tax value and rate files
Legislative Services Agency analysis
/s/ Jennifer Acton
March 21, 2023
Doc ID 1371046
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in
developing this fiscal note is available from the Fiscal Services Division of the Legislative Services
Agency upon request.
www.legis.iowa.gov
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Statutes affected:
Introduced: 441.21, 237A.1