2026 Government Relations Legislative Update - Week 15

By: Matthew H. McKinney & R.G. Schwarm

Capitol Update

The 100th day of the 2026 legislative session has come and gone, and lawmakers have now entered “overtime.” As a reminder, Iowa does not have a statutory or constitutional adjournment deadline. Instead, the legislature operates under a target adjournment date, after which lawmakers no longer receive per diem payments for lodging and travel. It remains unclear how much longer the session will continue, as lawmakers work to reach agreement on the state budget and key policy priorities.

Property Tax Activity Continues

The Legislature continues to advance property tax reform, with the House moving its package forward this week. House Republicans adopted a strike-after amendment to replace the Senate’s proposal with their own version. The amended bill establishes a 2% “hard” cap on local government revenue growth, reduces Iowa’s uniform levy for school foundation property taxes to $5.00, and reallocates funding from the SAVE (Secure an Advanced Vision for Education) fund toward property tax relief, reaching 25% by 2030, among other items. Senate File 2472 also incorporates elements of Governor Kim Reynolds’ proposal, including the creation of FirstHome Iowa Accounts modeled after the Iowa 529 plan, as well as a $10 million grant program to support local government consolidation and shared service agreements. Additional details are outlined in the chart provided below originally published in this week’s Capitol Report. A new Fiscal Note on the amended bill can be found HERE.

Following subcommittee consideration, a public hearing was held where stakeholders offered testimony on the proposal. Much of the discussion focused on a potential gas tax increase and possible changes to multi-residential property classifications. Later that day, the amended bill advanced out of the House Ways & Means Committee on an 18–6 vote before passing the full House 64–23. The bill now returns to the Senate for further negotiations. Lawmakers in both chambers have expressed optimism that a compromise can be reached to deliver meaningful property tax relief for Iowans.

The House Amendment (strike-after) can be found in the table below.

Revenue Limit

2% + new construction revenue cap (growth realized as it comes online)

Excludes debt service and school funding

Keeps HF 718

School Funding

SAVE transfer as from projected 7.1% in FY27 to:

FY2026-27 12.5%
FY2027-28 15%
FY2028-29 17.5%
FY2029-30, 22.5%
FY2031-31 and thereafter 25%
Adds unspent balance limits to 35 percent unless authorized by SBRC
Allows SBRC to deny one-time funding request
Requires districts to set up a policy relating to defining a target range and maximum amount of unspent balance
$30 million goes to keep schools whole
Eliminate state backfill and transfer the $125 million to TRF

20 year extension on SAVE

Two election dates on bonding (pick one/year either June or November)

School Board Review Committee:

Residential Property Relief

Converts homestead credit to exemption (equates to a $4,850 exemption)

Leaves in place current military and senior exemptions

Triples homestead exemption to $15,000

Funds from homestead credit (state pays $175 million/year) goes to buying down the $5.40 levy

Assessment & Valuation

Shifts burden of proof to assessors if assessment increases more than 10 percent over two years

Definition of abnormal transaction

Updated DOR forms

Keep current Business Property Tax Credit (really an exemption) at $150,000

Transparency & Data

Creates a statewide property tax dashboard and requires parcel-level reporting

New taxpayer statement

Allows online posting of tax notices

Revises real estate transfer reporting

Bonding & Debt

Restricts use of debt service funds for operating expenses

Caps local government reserve balances to 35%

Creates new restricted fund account for money budgeted/saved for infrastructure uses (public safety equipment, firetrucks, etc)

Local Government Structure

IEDA sets up local government efficiency commission to assist in streamlining services and promote shared

resources

$10 million grant program to implement

Vape Tax & Pediatric Cancer Research Funding

On Wednesday, the Senate unanimously passed Senate File 2480, which establishes a new tax on alternative nicotine products, including nicotine pouches and vape devices. The bill imposes a 5-cent tax on containers with 20 or fewer nicotine pouches, with a proportional increase for larger quantities. It also applies a tax of 5 cents per milliliter of nicotine in vape products, covering both cartridges and disposable devices.

Revenue generated from the tax will be deposited into Iowa’s Health Care Trust Fund, a Medicaid appropriation program. From there, funds will be directed to the Iowa Board of Regents and ultimately allocated to the University of Iowa Stead Family Children’s Hospital. The first $3 million in revenue will be dedicated to the University of Iowa system, with any additional funds remaining in the Medicaid funding pool.