HomeMy WebLinkAboutA003 - City Attorney letter to Council - questions about proposed ordinance, March 15, 1985 I A. lima
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March 15 , 1985
MAR i 5 1985
Honorable F . Paul Goodland, Mayor -�--
CITY CLERK
and Members of the City Council CITY OFAMES, IOWA
of the City of Ames , Iowa
In re : Industrial Property Tax Exemption Ordinance
Dear Mayor Goodland and Council Members :
The city manager has asked that I write to you on two questions
pertaining to local option property tax exemption for "industrial"
property as follows :
Q. Could the ordinance have the effect of conferring an
exemption on property that was constructed or acquired
before the ordinance was enacted?
A. Yes , for that which comes between the last assessment
before and the first assessment after the ordinance
is enacted.
Q. Could such an ordinance diminish the power of the Council
with respect to planning and regulating the location of
industrial development in Ames?
A. No , but it cannot be used to augment Council ' s powers
either.
In March of 1980 , at the request of then State Senator Murray
of Ames , the Iowa Attorney General opined that the law gives
cities a local option for partial tax exemption for all , not
merely some , of the industrial property of the types eligible ;
and, that the local ordinance : " . . . cannot enlarge , modify ,
or restrict the exemption. . . " . The opinion specifically
ruled out limiting the availability of the exemption to only
those projects meeting certain criteria, or those in certain
areas , or those which have prior approval . A copy of that
opinion is available from my office .
Respectfully submitted,
-John R. Klaus
City Attorney
JRK/bw
IAC 8/15/84 Revenue[730J Ch 80,p.7
730-80.6(427B) industrial property lax exemption.
80.6(1) Authorily of city council and hoard of supervisors. A partial exemption ordinance
enacted pursuant to Iowa code section 4276.1 shall be available to all qualifying property.
A city council or county board of supervisors does not have the authority to enact an ordinance
granting a partial exemption to only certain qualifying properties(1980 O.A.G.639). As used
in this rule, the term "qualifying property" means property classified and assessed as real es-
tate pursuant to subrule 71.1(6)and warehouses and distribution centers. Warehouse means
a building or structure used as a public warehouse for the storage of goods pursuant to Iowa
Code sections 554.7101 to 554.7603,except that it does not mean a building or structure used
primarily to store raw agricultural products or from which goods are sold at retail. Distribu-
tion center means a building or structure used primarily for the storage of goods which are
intended for subsequent shipment to retail outlets. Distribution center does not mean a build-
ing or structure used primarily to store raw agricultural products,used primarily by a manufac-
turer to store goods to be used in the manufacturing process, used primarily for the storage
of petroleum products, or used for the retail sale of goods.
80.6(2) Prior approval. Only upon enactment of a partial property tax exemption ordinance
in accordance with Iowa Code section 427B.1 may a city council or board of supervisors enact
a prior approval ordinance for pending individual projects in accordance with Iowa Code sec-
tion 42713.4. To obtain prior approval for a project, a property owner's proposal must be
approved by a specific ordinance addressing the proposal and passed by the city council or
board of supervisors. The original ordinance providing for the partial exemption does not
constitute the granting of prior approval for a project. Also, prior approval for a project
can only be granted by ordinance of the city council or board of supervisors; an official or
representative of a city or county does not have the independent authority to grant prior ap-
proval for a project. If a taxpayer has obtained a prior approval ordinance from a city coun-
cil or board of supervisors, the partial exemption cannot be obtained until the year in which
all value added for the project is first assessed. (1980 O.A.G. 639).
80.6(3) Repeal of ordinance. A new construction project having received prior approval
for exemption in accordance with subrule 80.6(2),shall be granted such exemption upon com-
pletion of the project even if the city council or board of supervisors subsequently repeals the
ordinance passed in accordance with Iowa Code section 427B.1. (1980 O.A.G. 639).
80.6(4) Annexation of properly previously granted exemption. A partial property tax ex-
emption which has been granted and is in existence shall not be discontinued or disallowed
in the event that the property upon which such exemption has been previously granted is lo-
cated in an area which is subsequently annexed by a city or becomes subject to the jurisdiction
of a county in which an ordinance has not been passed by the city council or county board
of supervisors allowing such exemptions within that jurisdiction. The existing exemption shall
continue until its expiration.
80.6(5) Eligibility for exemption.
a. The value added by new construction or reconstruction and first assessed prior to Janu-
ary 1 of the calendar year in which an ordinance authorizing a partial property tax exemption
becomes effective,and new machinery and equipment assessed as real estate acquired and uti-
lized prior to January I of the calendar year in which the ordinance or resolution becomes
effective is not eligible for exemption. However,the value added as of January 1 of the calen-
dar year in which the ordinance becomes effective is eligible for exemption if the ordinance
is in effect prior to February i of that calendar year and if all other eligibility and application
requirements are satisfied.
EXAMPLE 1: A$1,000,000 new construction project on qualifying property is begun in July
1984. $500,000 in value of the partially completed project is completed in 1984 and first as-
sessed as of January 1, 1985. The project is completed in 1985 adding an additional value
of $500,000 which is first assessed as of January 1, 1986, bringing the total assessed value
of the completed project to $1,000,000 as of the January 1, 1986 assessment.
A city ordinance authorizing the partial exemption program is passed and becomes effec-
tive January 15, 1987. This project is not eligible for a property tax exemption for any value
added as a result of the new construction project.
Ch 80,p.8 Revenue[7301 IAC 8/15/84
EXAMPLE 2: Assuming the same factual situation as in Example 1,except that the ordinance
authorizing the partial exemption program becomes effective on .January 15, 1986, the$500,000
in assessed value added as of the January I, 1986 assessment is eligible for the partial exemp-
tion if an application is filed with the assessor between January 1 and February 1,inclusive, 1986.
EXAMPLE 3: Assuming the same factual situation as in Example I, except that the ordinance
authorizing the partial exemption program becomes effective on February 15, 1986. Since
the statutory application filing deadline is February 1, no value added and first assessed as
of January 1, 1986 is eligible for a partial exemption. The project in this example would receive
no exemption for any value added as a result of the new construction.
This subrule does not apply to new construction projects having received prior approval
in accordance with subrule 80.6(2).
b. New machinery and equipment assessed as real estate shall he eligible for partial exemp-
tion only if used primarily in the manufacturing process. For example, computer equipment
used primarily to maintain payroll records would not be eligible for exemption, whereas com-
puter equipment utilized primarily to control or monitor actual product assembly would be
eligible.
c. If any other property tax exemption is granted for the same assessment year for all or
any party of the property which has been granted a partial exemption, the partial property
tax exemption shall be disallowed for the year in which the other exemption is actually received.
d. Only qualifying property is eligible to receive the partial property tax exemption(O.A.G.
#81-2-18).
e. A taxpayer cannot receive the partial property tax exemption for industrial machinery
or equipment if the machinery or equipment was previously assessed in the state of Iowa. In-
dustrial machinery and equipment previously used in another state may qualify for the partial
exemption if all criteria for receiving the partial exemption are satisfied. '
f. Industrial machinery and equipment is eligible to receive the partial property tax exemp-
tion if it changes the existing operational status other than by merely maintaining or expand-
ing the existing operational status. This rule applies whether the machinery and equipment
is placed in a new building,an existing building,or a reconstructed building. If new machinery
is used to produce an existing product more efficiently or to produce merely a more advanced
version of the existing product, the existing operational status would only be maintained or
expanded and the machinery would not be eligible for the exemption. However, if the new
machinery produces a product distinctly different from that currently produced,the existing
operational status has been changed.
80.6(6) Application for exemption.
a. An eligible property owner shall file an application for exemption with the assessor
between January 1 and February 1, inclusive, of the year for which the value added is first
assessed for tax purposes. An application cannot be filed if a valid ordinance has not been
enacted in accordance with Iowa Code section 42713.1 (O.A.G. #82-3-5). If an application is
not filed by February 1 of the year for which the value added is first assessed, the taxpayer
cannot receive in subsequent years the partial exemption for that value added (O.A.G.
1#82-1-17). However, if a taxpayer has received prior approval in accordance with Iowa Code
section 427.13.4 and subrule 80.6(2), the application is to be filed by not later than February I
of the year for which the total value added is first assessed as the approved completed project.
b. In the event that February 1 falls on either a Saturday or Sunday, applications for the in-
dustrial property tax exemption may be filed the following Monday.
c. Applications submitted by mail shall be accepted if postmarked on or before February 1,
or in the event that February 1 falls on either a Saturday or Sunday, a postmark date of the
following Monday shall be accepted.
80.6(7) Change in use of properly. if property ceases to be used as qualifying property,
no partial exemption shall be allowed as of January I of the year following the calendar year
in which the change in use takes place or for subsequent years. If property under construc-
tion ceases to be constructed for use as qualifying property, no partial exemption shall be al-
lowed as of January 1 of the year following the calendar year in which this cessation occurs.
IAC 8/29/84 Revenue[7301 Ch 80, p.9
However, such a change in the use of the property does not affect the validity of any partial
exemption received for the property while it was used or under construction as qualifying
property.
This rule is intended to implement Iowa Code sections 42713.1 to 42713.6, as amended by
1984 Iowa Acts, Senate File 2043.
IAC 8/29/84 Revenue[7301 Ch 71, p.2
71.1(5) Commercial real estate. Commercial real estate shall include all lands and
improvements and structures located thereon which are primarily used or intended as a place
of business where goods, wares, services or merchandise are stored or offered for sale at
wholesale or retail. Commercial realty shall also include hotels, motels, rest homes, structures
consisting of three or more separate living quarters and any other buildings for human habita-
tion that are used as a commercial venture; except, however, that one- and two-family
dwellings shall be classified as residential real estate. Commercial real estate shall also include
data processing equipment as defined in Iowa Code section 427A.1, except data processing
equipment used in the manufacturing process.
71.1(6) Industrial real estate. Industrial real estate shall include all lands and improve-
ments and structures located thereon primarily used or intended to be used for any form of
manufacturing as defined in Iowa Code section 428.20. Industrial real estate shall also include
machinery and equipment as defined in Iowa Code section 427A.1(1)"e".
71.1(7) Rescinded, effective 10/3/84.
This rule is intended to implement Iowa Code sections 428.4, 441.21 and 441.22.
730-71.2(421,428,441) Assessment and valuation of real estate.
71.20) Responsibility of assessor. The valuation of real estate as established by city and
county assessors shall be the actual value of the real estate as of January I of the year in which
the assessment is made. New parcels of real estate created by the division of existing parcels of
real estate shall be assessed separately as of January 1 of the year following the division of the
existing parcel of real estate.
71.2(2) Responsibility of other assessing officials. Whenever local boards of review,
county auditors, and county treasurers exercise assessment functions allowed or required by
law, they shall follow the provisions of subrule 71.2(I) and rules 71.3(421,428,441) to
71.7(421,427A,428,441).
This rule is intended to implement Iowa Code sections 421.17, 428.4 and 441.21.
730-71.3(421,428,441) Valuation of agricultural real estate. Agricultural real estate shall
be assessed at its actual value as defined in Iowa Code section 441.21 by giving exclusive con-
sideration to its productivity and net earning capacity. In determining the actual value of agri-
cultural real estate, city and county assessors shall use the Iowa Real Property Appraisal
Manual and any other guidelines issued by the department of revenue pursuant to Iowa Code
section 421.17(18).
In determining the productivity and net earning capacity of agricultural real estate the
assessor shall also use available data from Iowa State University,the Iowa Crop and Livestock
Reporting Service, the Department of Revenue, or other reliable sources. The assessor shall
also consider the results of a modern soil survey, if completed.
2381 :° t36b LISTING IN GI
Arict for the transaction of busi- � 428.18 Warehouse operator to file list. 428.23 Manufacturer to list.
ie in the assessment district where .t;$ A warehouse operator as specified in section 428.16 Corporations organized under the
located. ' shall, upon request, file with the assessor a written for pecuniary profit and engaged in
, 27, 31, 35, 39, §6967;C46,50,54, statement showing all property in the operator's pos- defined in section 428.20 shall list
5, 77, 79, 81, 428.12
§ session belonging to another subject to taxation, and personal property not hereinbefort
the name and address of the person,firm,corporation, moneys and credits in the same man
essment made. or estate to which it belongs. of individuals.
,ads in such district shall be con-
deduction made in determining '
[C24 27 31 35 39 §6973• C46 50 54 58 62 66 (C97, §1319;C24, 27, 31, 35, 39, §+
71,73, 75, 77, 79, 81, 428.18
§ 58, 62, 71, 73, 75, 77, 79, 81, 42
to §4
y of such person or firm,Or Share! Referred to in 1420.207 Referred to in§42b207 §
�poration, at its principal place of wi
u 428.19 Warehouse operator deemed owner. 428.24 Public utility plants.
27, 31, 35, 39, §6968;C46,50,54, If said warehouse operator fails to furnish such The lands, buildings,machinery,a
5, 77, 79, 81, §428.131 statement all property in the possession of the opera- ing to individuals or corporations
on for payment, for belonging to another subject to taxation, shall be works or gasworks or pipelines; the
for the payment of obligations deemed to be owned by the operator for the purpose machinery, tracks, poles,and wires I
,usiness of such agency,in another `c of taxation,and the operator shall be liable for taxes viduals, corporations or electric po
thereon. nishin g ace where such agency is located, g electric light or power;
Where the property or credits of [C24, 27, 31, 35, 39, §6974; C46, 50, 54, 58, 62, 66, buildings,machinery,poles,wires,o,
,e taxed. 71,73, 75, 77, 79, 81, §428.191 Lion, tracks, cables, conduits, and f
27, 31, 35, 39, §6969;C46,50,54, Referred to in§420.207
to individuals or corporations oper,
5, 77, 79, 81, §428.141 428.20 "Manufacturer"defined-duty to list. cable or electricity, or operating ele
An person, firm, or corporation who ways; shall I listed and assessed b;
y p p purchases, of revenue. In the making of asses
)f a partnership is liable for the *, receives,or holds personal property of any description works plants,the value of any inters
firm. for the purpose of adding to the value thereof by any
§717; C73, §806; C97, §1317; C24, process of manufacturing,refining,purifying,combin- assessed,of the municipal nether ti
);C46,50, 54,58,62,66,71,73,75, ing of different materials,or by the packing of meats, ated, shall be deducted, whether tl
with a view to selling the same for gain or profit,shall dented by stock, bonds, contracts, c
be deemed a manufacturer for the purposes of this [C97, §1343; C24, 27,31, 35, 39, §1,5862,66,71,73,75,77,79,81,§428.'
nt"defined. title,and shall list such property for taxation. 58,
, or corporation owning or having [C51, §469; R60, §724; C73, §816; C97, §1319; C24,
der control within the state with 27,31.35 39 §6975•C46 50 54 58 62 66 71 73 75 83 Acts, ch 101, §88
same,any personal property pur- 77,79, 81, §428.201 Referred to in§427.H351,427A.1,427B.10,428.1
o its being sold,or which has been Referred to in 1420.207,427.109),425.23
-son,firm,or corporation from any 428.25 Property in different dist
ate to be sold within the same, or 428.21 Assessment-how made. Where any such property except
shipped by the person, firm, or Such personal property, whether in a finished or situated partly within and partly I
or without this state, except a c unfinished state,shall be assessed at the same ratio as of a city, such portions of the said
as defined in chapter 554, article provided in section 441.21 of its average value esti- sessed separately,and the portion w
eld to be a merchant for the pur- mated upon those materials only which enter into the shall be assessed as above provided
combination, manufacture, or pack, such average to Without the said city shall be appor
§723; C73, §815; C97, §1318; C24, be ascertained as in section 428.17. partment of revenue to the distri,
C46,50,54,58,62,66, 71,73,75, [C51, §469; R60, §724; C73, §816; C97, §1319; C241 which it is located.
27,31,35,39,§6976;C46 50 54,58 62 66 71,73 75 [C97, §1343; C24, 27, 31, 35, 39, §1
,27.111s�,a2a.1e 58, 62, 66, 71, 73, 75, 77, 79, 81, 42
77, err to §428.07, Referred to in§427.11351,427A.1,427B.10,§2a.:
Referred to in§420.207,427.16
f merchandise. see§441.21
stocks of merchandise, the asses- 428.26 Personal property.
production of the last inventory 428.22 Locker plants. All the personal property of suet
thereof in the assessment roll. If, For purposes of valuing and assessing property for corporations used or purchased by t
the assessor, the inventory is not tax purposes, locker plants shall be valued and as- poses of such gas or waterworks, ele
taken at such time as to render it ` sessed as commercial property. For purposes of this electric or cable railways, elevated
amount or value of such merchan- section,"locker plants"means any property used pri- street railways operated by animal
hall assess the same by personal marily for any or all of the following purposes: the rolling stock of such railways an
assessment shall be made at the 1. To provide,as a part of its business operations, and the animals belonging to such si
gage value of the stock during the locker facilities which are rented at retail to consum- erated by animal power, shall be lis
the time of assessment, is pro- ers to be used for the storage of frozen meats, fish,or by the department of revenue. In tl
1.21, and if the merchantt has not fowl owned by the person renting the locker. such assessment of waterworks pla
siness for one year, then at like 2. To custom slaughter livestock under contract any interest in the property so assess
e value during such time ass the for a natural person and to process the carcass for the
'e been so engaged, and if eom• p p pal corporation wherein the same is
y 1, then at the same ratio of the Y_ natural person by cutting,wrapping,and freezing the deducted, whether such interest
meat. stock, bonds, contracts, or otherwise
3. To process an animal carcass to offer at retail
§723; C73, §815; C97, §1318; C24, .,� p [C97, §1343;C24, 27, 31, 35, 39, §I
C46,5Q 54, 15; C9 , § 71, ; 75, processed meat products to a natural person after the 58, 62, 669 71, 73, 75, 77, 79, 81, §42
facility has purchased the livestock or carcass. Referred to in§427.1(35),427A.1,427B.10,437.1
127.16,428.21 [C81, §428.221
Referred to in§420.207 428.27 Capital stock listed and 1