Fiscal Note
Fiscal Services Division
SF 352 – Forest Reserve Property Tax (LSB1985SV)
Staff Contact: Jeff Robinson (515.281.4614) jeff.robinson@legis.iowa.gov
Fiscal Note Version – New
Description
Senate File 352 places new restrictions on an existing property tax exemption available for
qualified forest and fruit tree reservation land. Current law allows for a 100.0% tax exemption
for qualified forest land parcels of 2.0 acres or larger. This Bill raises the minimum required
parcel size to 10.0 acres and reduces the property tax exemption to 75.0%. Additionally, the Bill
limits the exemption to five assessment years. Under current law, the exemption duration is
unlimited. The changes are effective beginning assessment year (AY) 2022 (FY 2024).
Background
For AY 2020, there are 803,000 acres with a combined assessed value (market or productivity
value, prior to the applicable rollback to taxable value) of $733.0 million benefiting from the
existing tax exemption for forest and fruit tree reservations. Figure 1 applies the most recent
property tax rollback percentages (AY 2020) and most recent relevant Statewide average
property tax rates by property class (FY 2021), to calculate the amount of taxable value within
forest and fruit tree reservations and the total value of the property tax exemption under current
law ($15.1 million).
Figure 1
Forest and Fruit Tree Reservation Property Tax Exemption
Dollars in Millions
Average Value of
Assessed Taxable Tax Prop. Tax
Value Rollback Value Rate Exemption
Agricultural $ 448.0 84.0305% $ 376.5 $ 25.03 $ 9.4
Residential 273.1 56.4094% 154.1 34.44 5.3
Commercial 10.1 90.0000% 9.1 37.21 0.3
Industrial 0.6 90.0000% 0.5 31.24 0.0
Multiresidential 1.2 67.5000% 0.8 37.84 0.0
Total All Classes $ 733.0 $ 541.0 $ 27.94 $ 15.1
When a property tax exemption is reduced or eliminated, the taxpayer owes the consolidated
property tax on the taxed property value that is no longer exempt (a property tax increase), the
State General Fund appropriation for schools is reduced by $5.40 per $1,000 of taxed valuation
by action of the State school aid formula (the property owner is now paying the $5.40 basic levy
instead of the State), and local property tax revenue increases by the applicable consolidated
property tax rate (in this case an average of $27.94 per $1,000 of taxed value). The net
increase in local government income increases by the sum of the increase in property tax
revenue minus the decrease in State school aid.
1
Assumptions
• As presented in Figure 1, the value of the property tax exemption for existing forest and fruit
tree reserves is calculated to be $15.1 million for FY 2022.
• For the three years between AY 2017 and AY 2020, the number of acres subject to the
forest and fruit tree property tax exemption increased at an average annual rate of 0.9%.
This rate of growth is assumed to continue in both the current law and proposed law
projections for FY 2023 and after.
• To simplify the calculations, the rollback percentages and average property tax rates for
each class of property are assumed to remain constant for all years.
• Based on a 2003 Forestry Reserve Study reported by the Department of Natural Resources,
70.0% of forest reserve owners who responded to the survey indicated that they owned 10.0
acres or more of forest reserve property. Based on this survey, the value of the existing
property tax exemption for FY 2024 and after is reduced to 70.0% of the current law
projection to adjust for the proposed 10.0-acre minimum.
• Existing forest reserve property is assumed to continue to receive the benefit of the
exemption for FY 2024 through FY 2028 (five years), while new property is assumed to
receive the benefit of the exemption for five years after being added to the reserve.
Fiscal Impact
The proposed limits on the existing forest and fruit tree reserve property tax exemption are
projected to reduce the State General Fund appropriation to school aid by the amounts
presented in the final column of Figure 2. The projected appropriation reduction continues at
the $3.0 million level in years beyond FY 2029.
The projected revenue increase for local governments is also presented in Figure 2. The
projected total impact on local government finances is the combination of the property tax
increase and the school aid appropriation decrease.
Figure 2
Property Tax Exemption Change Impact Calculation
In Millions
Exemption Exemption Increase Local
Value Value In Government School Aid
Current Proposed Property Revenue Appropriation
Law Law Taxes Increase Decrease
AY 2021 FY 2023 $ 15.3 $ 15.3 $ 0.0 $ 0.0 $ 0.0
AY 2022 FY 2024 15.4 8.2 7.2 5.8 -1.4
AY 2023 FY 2025 15.5 8.3 7.2 5.8 -1.4
AY 2024 FY 2026 15.7 8.4 7.2 5.8 -1.4
AY 2025 FY 2027 15.8 8.6 7.2 5.8 -1.4
AY 2026 FY 2028 15.9 8.7 7.2 5.8 -1.4
AY 2027 FY 2029 16.1 0.4 15.6 12.6 -3.0
2
Sources
Iowa Department of Revenue
Iowa Department of Natural Resources Iowa Forest Reserve Law Fact Sheet
(link downloads the Fact Sheet)
Department of Management (average property tax rates by property class)
/s/ Holly M. Lyons
February 16, 2021
Doc ID 1212787
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
3


Statutes affected:
Introduced: 427C.1, 427C.2, 427C.3, 427C.7, 427C.12