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Article 11/12/2018

Changes to Iowa Property Taxes for Telecommunications Companies

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Telecommunications

Through a new law enacted in the 2018 legislative session, property taxes on transmission property used for telecommunications, cable television or internet service will be exempted. This ultimately results in the value for these companies being assessed as land and buildings only. This transition will take place from 2019 to 2021, with the full exemption being realized for the 2022 assessment year. Telecommunications companies will continue to file the TR1-3 annual report with the Iowa Department of Revenue for 2019, 2020 and 2021. The Department will calculate an assessed value for each of those years using its methodology historically applied before those years. A 25, 50 and 75 percent exemption will be applied, respectively, for each of those years after the 40 percent exemption that is already in place and was implemented through previous legislation beginning in 2013.

Starting with 2022, the TR1-3 central assessment process will be discontinued and Iowa Code 2018, Chapter 433, which governs the assessment of telecommunications companies, will be repealed. The responsibility for assessing land and buildings used by telecommunications will be transferred to the local county assessors, to be performed through the commercial appraisal process. It should be noted the value of land and buildings could be more than 25 percent of the current assessed value. Property tax values could increase for some companies, compared to the 25 percent floor, starting with the 2022 year if that is the case. The timing for the payments based on these assessed years is 21 months. The first payment affected by this legislation will be September 2021, assessed from the year ending December 31, 2019.

The exemption for broadband installation in targeted service areas commenced after July 1, 2015, will be retained until the legislation above is fully implemented in 2022. At that point the broadband exemption will no longer be applicable as all fiber facilities will then be exempt.

A second benefit resulting from the repeal of Chapter 433 is additional sales tax exemptions not previously given to telecommunications companies due to a specific carveout for those assessed under Chapter 433. The sales price from the sale or rental of computers, machinery, equipment, replacement parts and supplies if such items are used in the storage of data or information will be eligible for exemption once the repeal is effective. Chapter 433 is repealed effective July 1, 2024.

Contact Todd or your trusted BKD advisor if you have questions.