A. Questions for determination of qualification as a "unit" for the Business Property Tax Credit (BPTC)
- Updated answers to questions posted 8/13/14
- Revised response added regarding eligibility of Mineral Rights and Railroad Bridges across the Mississippi and Missouri Rivers effective 4/25/14 - see this document for more details.
A. Questions for determination of qualification as a "unit" for the Business Property Tax Credit (BPTC):
NOTE: Consider these nine questions in the following order:
A1. The parcels must be within the same county to qualify.
a. City/County jurisdictions must coordinate the applications for credit for qualifying contiguous parcels between city and county boundaries.
A2. The property must be classified and taxed as commercial, industrial or railroad to qualify for the credit.
a. The following do not qualify for the credit:
i. Section 42 housing: Section 42 housing that is valued based on the special valuation procedures does not qualify for the multi-residential classification and remains classed as commercial property. SF 2466 2014 legislation allows for a property owner that has Section 42 housing to elect to withdraw the property from the special valuation procedures for Section 42 housing. If a property does this election, it may qualify for classification as multi-residential.
ii. Mobile home park
iii. Manufactured home communities
iv. Land-leased communities
v. Assisted living facilities
vi. Primarily used or intended for use for human habitation containing three or more separate dwelling units.
A3. Hotels, motels, inns or other buildings where rooms or dwelling units are typically rented for less than one month are not considered primarily used for human habitation, and therefore, do qualify for the credit. However, if the rooms are typically rented for more than 30 days, the assumption is that they are "primarily used for human habitation" and will not qualify for the credit.
A4. Iowa Code 441.21 Subdivision 11 discusses multiple housing cooperatives organized under chapter 499A and includes land and buildings used primarily for human habitation which land and buildings are owned and operated by organizations that have received tax-exempt status under section 501(c)(3) of the Internal Revenue code and rental income from the property is not taxed as unrelated business income under section 422.33, subsection1A that continue to be residential and do not qualify for the multi-residential classification. Nursing homes classed under this provision remain classed as residential.
A5. A "person" is defined in Iowa Code section 4.1 to include the following:
c. Limited liability company
e. Governmental subdivision or agency
f. Business trust
i. Partnership or association
j. Or any other legal entity
A6. To be eligible for the credit, the land or improvements for which the credit is applied must be classified and taxed as commercial, industrial or railroad property. If the land or improvements are not subject to a property tax it will not be eligible for the credit.
a. Share a common boundary
b. Within the same building regardless of boundary
c. If property is owned to the middle of the road in fee simple title the parcels are considered contiguous. Rivers, alleys, or railroads may be considered in the same context as roads.
d. If a third party, including a public body, owns the road, alley or railroad in fee simple title it is not contiguous.
e. Changed October 23: Cable TV property if connected by cable lines is considered contiguous is amended and replaced with: Underground or overhead cables do not create contiguity.
f. Cell Towers in the same ownership name and classed as either commercial or industrial sharing a common boundary are considered contiguous. NEW added October 23: Underground or overhead cables do not create contiguity.
g. Wind turbines that are taxed as buildings on leased land and all parcels are classed as commercial or all parcels are classed industrial and in the same ownership are considered a unit as long as the land upon which they sit is contiguous, regardless of the ownership of the land parcels. NEW Added October 23: The electrical grid is considered in the same context as Cable TV underground or overhead wire-line connections, and does not constitute sharing a common boundary.
A8. If the parcels are buildings on leased land what is their common boundary?
a. As long as the buildings on leased land parcels sit on land that shares a common boundary they are considered contiguous. The ownership of the land that the parcels sit on does not matter.
A9. If the parcels meet all of the taxation, classification, ownership and contiguous requirements, then determination of if the multiple parcels are operated by that "person" for a common use and purpose is the next consideration.
a. Owner occupied businesses that are similar in nature or type comprise a common use and purpose. As an example an owner occupied bicycle shop and a contiguous owner occupied bicycle repair shop would be considered a common use and purpose and therefore comprise one unit. If the owner occupied businesses were not similar in nature or type they would not be considered one unit. An example would be an owner occupied bicycle shop and a contiguous owner occupied restaurant.
b. Leased property comprises a landlord common use and purpose.
A10: Cable TV in one ownership, would they get a credit for each tower or would that be one credit since they are all connected through fiber optic cable or other?
Response: See the response to A7(e).
A11: Do nursing homes classified as commercial qualify for the credit?
Response: Nursing homes do not qualify for the business property tax credit because they are primarily used for human habitation as defined as a dwelling in 441.21 subsection 13e.
A12: In reading the Auditors Fall School presentation file, I saw slide 7 that says:
426C.1 & 426C.4 Business Property Tax Credit
Units must be contiguous
• Cable TV underground wires
• Cell Towers
• Wind Turbines
Are these examples of contiguous items that are considered one property unit? Or are they examples of land features that cannot be used to break up property units?
a. Response: If property is owned to the middle of the road in fee simple title the parcels are considered contiguous. Rivers, alleys, or railroads may be considered in the same context as roads.
b. If a third party, including a public body, owns the road, alley or railroad in fee simple title it is not contiguous.
c. Land Features example, a road may run through two parcels of land on each side of the road a business owns and gets tax bills for, but that does not mean there are not two property units but they are instead one property unitt? Response: see a. or b. above.
A13: One of our subsidiaries operates a short-line railroad that runs through 4 counties.
Without hearing the presentation, are railroad lines/easements that hold the tracks automatically considered a contiguous unit and only considered separate property units if the cross county lines?
Response: Yes, if the railroad lines are one continuous track they are considered contiguous and only create a new unit as the lines cross county boundaries.
B1. When are the applications due?
a. January 15th, 2014 for the 2013 Assessment
b. After the 1st year deadline, applications are due March 15th of each year for the prior year assessment.
B2. Changes in ownership or other changes that would affect the requirements for the credit, requires reapplication for the credit.
B3. Parcels that continue to qualify do not need to reapply for the credit unless something changes with the parcel or ownership or it ceases to qualify.
B4. Assessors recommend approval of the application for credit for qualifying units which is submitted to the County Supervisors by the Auditor for final approval.
B5. The estimated valuations for the initial amount of value to be used in calculation of the Business Property Tax Credit by the Legislative Services Agengy (LSA) are either the assessed value or the initial value whichever is less:
a. 2013 Assessment Taxes due and payable 2014/15 - $33,000 projected initial amount with an estimated credit of $513 per unit.
b. 2014 Assessment Taxes due and payable 2015/16 - $105,000 projected initial amount with an estimated credit of $1,385 per unit.
c. 2015 Assessment Taxes due and payable 2016/17 - $144,000 projected initial amount with an estimated credit of $1,930 per unit.
d. 2016 Assessment Taxes due and payable 2017/2018 - $154,000 projected initial amount with an estimated credit of $1,989.
B6. The credit application may be completed by a person who wishes to claim the credit allowed under 426C.3. A person may submit the application via mail, fax or e-mail.
B7. Parcels of vacant land should be classed based on the primary use of any parcel the vacant land is being used in conjunction with.