What Historic Property Tax Legislation Means To ITA Members
There was much rejoicing in the industry last week in the final legislation passed in the Iowa House as the General Assembly adjourned for 2013. In case you missed it, both the Senate and House approved a conference committee report on SF 295, a bill for comprehensive commercial property tax reform that included relief for telco providers.
Let's review the components of this historic telco property tax legislation that will impact future assessments on ITA member companies:
- Telcos receive a 40 percent exemption on overall valuation up to $20 million phased in over 2013 and 2014. There is a tiered percentage of exemption for companies with values over $20 million up to $500 million.
- A 20 percent exemption will be effective in the Jan. 1, 2013 assessment year. A 40 percent exemption will be effective during the Jan. 1, 2014 assessment year.
Kiesling's Todd Thorson has worked diligently with ITA's Property Tax Task Force over the past three years and beyond compiling data and estimates of impact based on various models proposed to legislators. He offered the following analysis on the potential impact of the legislation that passed last week for our members:
The property tax legislation recently passed in Iowa has some tax savings included for local telephone companies. The bill includes a 40 percent exemption on taxable value, up to $20 million, once fully phased-in during 2014. The exemption is 20 percent for the 2013 assessment year. Large telephone companies with values greater than $500 million will be limited to a 20 percent exemption with graduated exemptions applied for overall values between $20 million and $500 million. An average small rural telephone company has an assessed value of $1.7 million. The assessed value exemption would be $340,000 in year 1 and $680,000 thereafter. A typical tax rate is approximately 3.0 percent of assessed value. So, actual cash savings to an average company will be $10,000 for year 1 and $20,000 thereafter. The timing of the tax payments based on the assessed year can be a little more confusing. The January 1, 2013 assessment year, for which the 20 percent exemption applies, is based on December 31, 2012 financial statements. These were submitted to the Department of Revenue on May 1 for which you will receive a final assessment notice in October of this year. The first of two payments, based on this October 2013 assessment notice, will be paid in September of 2014, with the second payment made in March of 2015. For the average company, a $5,000 cash savings will be recognized in 2014. In 2015, the company will see a $15,000 cash savings consisting of $5,000 in March and $10,000 in September. The full savings will not be seen until 2016.
This information is based on Thorson's initial analysis of the legislation. Obviously, varying factors will affect companies differently, but Thorson's analysis provides some direction as to what companies can expect in future assessments.
Governor Signs E911 Equalization Legislation
On Friday, May 24, Governor Branstad signed HF 644, the E911 equalization legislation passed in both the Senate and House earlier this month.
The Iowa Department of Homeland Security and Emergency Management (HSEMD) provided an overview this week of the changes the legislation makes to Code Section 34A that addresses E911 communications:
- Increases the wireless surcharge from $0.65 to $1
- Increases wireline surcharge to $1 for all counties
- Removes the $2.50 alternative surcharge, eliminating local referendums for this wireline surcharge
- Reinstates cost recovery for wireless carriers for three years
- E911 Communications Council and Auditor of the State shall establish a methodology for collecting PSAP cost and expense data each year and provides a penalty for not submitting this data
- HSEMD shall conduct a study to identify efficiencies of operations and expenses that could be achieved at both the state and local level (due July 1, 2014)
- HSEMD shall conduct a study to review the administration and expenditures associated with maintaining and operating both systems (January 1, 2016)
HSMED will be communicating with ALL providers regarding these changes and will be updating the Administrative Rules as well. At HSMED's request, ITA's will assist in reviewing the drafts of communication to providers to help eliminate any confusion.