Iowa legislative season ends with compromises on annual budget and property tax reforms

Iowa’s 91st General Assembly completed its work last weekend, reaching compromises on a $9.6 billion annual budget and property tax reform before adjourning. Governor Kim Reynolds now has 30 days after receiving bills from the 2026 session to sign or veto them.

Below is a list of bills that passed or did not pass, and the Chamber's position.

Passed 

Property Tax Reform – Neutral 

Strengthening Iowa’s property tax competitiveness was a key priority this legislative session, with proposals advanced by Governor Reynolds and House and Senate leadership. A late‑session compromise produced a comprehensive package of reforms. Key elements of the new system are outlined below:

• Local government revenue growth is capped at 2 percent except for county hospitals which are capped at 4 and transit levies which are capped at 3 percent. Several special funding streams, such as debt service and school funding, are exempt from the cap. Additionally, local governments’ general fund reserves are limited to 35 percent of their budgeted expenditure each year.  
• Multiple changes were made to Tax Increment Financing (TIF) districts. The bill adds workforce housing to the definition of economic development and excludes school aid and EMS levies beginning January 2027. The bill limits full usage of an existing TIF to a 20-year period, after which the limit drops to 60 percent, not allowing new debt past that threshold. All new TIF districts are capped at 23 years. Low to middle income (LMI) requirements are completely removed and there are now limitations on urban renewal and urban revitalization. 
• The language phases out the homestead credit and creates a new homestead exemption. It also reclassifies multi-residential property (3 or more units) from other residential property under the tax code and will increase the property tax rate by 6 percent over 2 years.  
• The bill also modifies the Secure an Advanced Vision for Education (SAVE) Fund Equity transfer percentage to go from school infrastructure toward property tax relief and extends the fund through January 1, 2071. It reduces the $5.40 uniform levy to $5.10 per $1,000 starting in FY29, and $4.90 per thousand in FY30, and includes corresponding reductions for reorganized school districts.  

IEDA Omnibus Bill – Neutral

The Omnibus Bill for the Iowa Economic Development Authority includes a directive to commission Iowa State University load forecasting and the Iowa Industrial New Jobs Training Program (260E)  

This bill directs IEDA to commission Iowa State University to produce a report forecasting the likely future growth of electricity use within the state and the Midwest. State-supported workforce training has been a cornerstone of the Iowa Quad Cities’ recent economic success, so allowing the 260E program to sunset without a suitable replacement would risk undermining Iowa’s competitiveness. 

Subacute Mental Health – Supported 

Approved unanimously in both chambers and signed into law by Governor Reynolds on May 2, this new law removes limitations that can prevent individuals with extreme and long-term mental health needs from receiving appropriate care. It provides answers to many of the issues with the subacute mental health system by: 

• Eliminating the 10-day limit for subacute mental health care 
• Allowing existing facilities to add beds 
• Allowing new facilities to be built and for existing facilities to expand 

Bills that did not pass 

Midwest Interstate Passenger Rail Compact – Supported  

This bill would have authorized the State to join the Midwest Interstate Passenger Rail Commission and allowed Iowa to participate in planning and strategy conversations around the deployment and expansion of rail across the Midwest. This bill passed the House during the last session but failed to pass the Senate.  

Workforce Housing Tax Credit Increase – Supported 

The workforce housing tax credit is a successful program that has helped to develop workforce-oriented housing across Iowa. The program has been so successful that it is oversubscribed. This legislation would have increased funding to allow for more projects to be funded. This will continue to be a conversation. 

City Self-Supported Tourism Districts - Supported 

This bill allows local governments to establish self-supported tourism improvement districts for the purpose of making improvements and promotion. The bill did not make it out of committee, but is a topic that may come up again.