Adventures with LOST (Local Option Sales Tax) (Statistical Reports State wide)

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1 Iowa League of Cities Annual Conference & Exhibit Adventures with LOST (Local Option Sales Tax) (Statistical Reports State wide) Department of Revenue, Property Tax Division -- Joel Gabrielson Research and Analysis Division -- Joel Phipps Handouts and presentations are available online at

2 Distribution of Local Option Taxes, and Appropriated Tax Credit funds to Local Governments -Property Tax Division Joel Gabrielson, Local Government Services - Research and Analysis Division Joel Phipps, Local Government Statistics

3 Local Option Tax Information Local Option Sales and Services Tax (LOST) Sales Tax TIFs Local option estimated effects Franchise Fee Local option estimated affects Flood Mitigation Districts Requested funding Reinvestment Districts Requested funding Hotel-Motel Tax Economic Trends and Data Sources

4 Iowa Department of Revenue 4

5 Program Information and Code Local Option time line on the following slide with calculation procedures shown on the next two slides. Local Option Sales and Services Tax (Iowa Code Chapter 423B) Local Hotel Motel Tax (Iowa Code, Chapter 423A) Local Option Distributions are affected by the following programs on slides (9,10,11,12,13) Sales tax Increment Financing, (TIF) (Iowa Code Chapter 423B.10 ) Franchise Fee, (Iowa Code Chapter 384.3A) The following programs are funded by application Flood Mitigation District, (Iowa Code Chapter 418.8) Reinvestment District, Legislation request funding The following program is a Transfer Tax: Monies & Credits-Transfer Funds (Iowa Code Chapter )

6 Distribution Timeline for LOST/SAVE Estimates August - Tax Research develops an estimate of LOST and SAVE distributions by County. August 15 Local Government Services notifies cities, counties, and school districts of the planned 95% monthly distributions. August 31 - The Department issues the first monthly estimate payments, which are released before the last day of each month. April - Tax Research reviews receipts, and adjusts total estimates for the Fiscal Year. Local Government Services applies distribution adjustments as needed in May, June and July, assuring 95% funding of estimated payments issued by July 31. July 31 - The Department issues the last scheduled estimate payment for the fiscal year. October 15 - Compliance Services reviews and clears filed returns, including June quarter sales tax returns from the processing system. November 10 - Reconcile actual revenue to estimated distributions. Funds are issued to counties that have been underpaid. Funds are recouped from counties that have been overpaid.

7 Local Option Tax Calculation for Estimated Payments LOST Distribution Formula Jurisdiction Share is based on (0.25 x Property Valuation) + (0.75 x Population) (Property valuation from July 1, 1982 through June 30, 1985) Monthly Distribution Estimate X 95% X Prorated Jurisdiction Share (%) = Monthly Payment

8 Calculation of Estimated Payments for Local Option Tax Each year an estimate is calculated by Tax Research for the Local Option Sales Tax to be distributed to each county. The estimated amount is disbursed in monthly payments for each jurisdiction. The Code specifies that 95% of the total estimated payment must be sent to each jurisdiction during the fiscal year. Funds are held during accruals to reconcile the remaining 5% which is paid by Nov. 10 of the following fiscal year.

9 Sales Tax Increment Financing (TIF) The following three slides explain procedures applying Sales Tax TIF increment effects on active county jurisdiction distributions. Your Local Option Distribution for the county is reduced by the increment of growth based on the Sales Tax TIF area permit holders.

10 IOWA LOCAL OPTION SALES TAX TIF A city may, by ordinance of the city council, create a tax increment financing (TIF) district for the purpose of funding projects located within the city s urban renewal area. If located within a county that imposes a Local Option sales and services tax (LOST) If it has an Urban Renewal Area.

11 IOWA LOCAL OPTION SALES TAX TIF Before a city can create a LOST TIF District by ordinance, the county board of supervisors from which county LOST revenues will be diverted must first approve: The city s plan for collection The use of county LOST revenues to fund the city s urban renewal projects

12 IOWA LOCAL OPTION SALES TAX TIF The Department of Revenue assists the city after an ordinance has passed, by establishing: Base year sales made in the urban renewal area. Increment which is the growth determined by comparing the base year with following year(s). The increase in LOST revenues from sales in the urban renewal area in subsequent years goes directly to a special city fund to be used on the city s urban renewal projects. In the absence of the LOST TIF, all LOST revenues are returned to the county where they are distributed according to the existing population and property tax levy-based formula.

13 Franchise Fees Increment Effects The following slide reflects procedures used to apply the Franchise Fees increment effects to active jurisdictions within your county. Local Option distributions for active participants in the county are reduced by the removal of the Utility Sales Tax collections from permit holders, that submit utility sales tax within a franchise fee area.

14 If a Utility Franchise Fee is implemented effects on LOST distributions follow: No County Franchise Fees: Gabrielson County - Utilities LOST collections Phipps city Kendall city UninCo $559, % 7.35% 26.37% Distributions without any Franchise fees --> $337,600 $41,116 $147,515 City of Phipps implements a Franchise Fee: Gabrielson Co remaining LOST Utilitiy Coll Phipps city Kendall city UninCo $221,804 $337,600 $16,303 $58,490 Reduction $0 ($24,814) ($89,025) Total effect of applied Franchise Fee: Gabrielson Co - remaining LOST Utilitiy Coll Phipps city Kendall city UninCo $221,804 $484,611 $16,303 $58,490 Reduction $0 ($24,814) ($89,025)

15 Flood Mitigation Program Program created in 2012 The Flood Mitigation Board reviews all flood mitigation area requests for approval, must be submitted before January 1, $15 million cap in sales tax increment revenue per government entity. $30 million annual cap for all flood mitigation projects in Iowa.

16 Flood Mitigation Areas Timeline The base year is the fiscal year ending during the calendar year in which the government entity s flood project is approved. Quarterly sales tax increments are computed and placed in a special flood mitigation fund established for each flood project. The Department of Revenue will distribute the money to the governing entity as soon as possible after the quarter is completed.

17 Reinvestment District Information Program created in 2013 (SF-3247) Description: Authorizes municipalities, with approval from the Iowa Economic Development Authority Board, to establish Reinvestment Districts and to receive remittances of state sales tax and state hotel and motel tax revenues collected in the districts to fund projects within the districts. Additional provisions include: Specific requirements for establishment and approval of reinvestment district projects. The district plan applications must be submitted by July 1, The district area consists of contiguous parcels and must not exceed 25 acres.

18 Reinvestment District Information Each project must have at least a $10.0 million capital investment. State tax revenue designated to the district from the State Reinvestment District Fund cannot exceed 35.0% of the total costs of the projects. Proposed capital investment for retail within a district must be 50.0% or less of the total capital investment. The total amount of State sales tax and State hotel and motel revenues remitted to all Reinvestment Districts cannot exceed $100.0 million.

19 Reinvestment District Information Creates a State Reinvestment District Fund New State sales tax and state hotel and motel tax revenue will be deposited in the fund along with 4/6 th of new State sales tax revenue. New State hotel and motel tax is defined as the total amount of State hotel/motel tax revenue from establishments within the district that receive a tax permit on or after the creation of the district. New State sales tax revenue is defined State sales tax revenue from retailers within the district that receive a sales tax permit on or after the creation of the district.

20 Reinvestment District Information Creates a Specific Reinvestment Project Fund for new taxes for the project consisting of: State sales tax revenue State hotel/motel tax revenues Requires any monies remaining in the fund after project completion, or in excess of project costs, or upon the dissolution of a reinvestment district, to be deposited in the State General Fund. Limits the length of existence for a Reinvestment District to 20 years after the commencement date

21 Elderly and Disabled Reimbursements The Elderly and Disabled Tax Credit Programs are for qualified low income elderly and disabled individuals. Elderly Credit Appropriated Funds FY14 $27,200, $24,957, $22,205, $23,400, $23,204, $23,400, $23,204,000 By June 15th, the Department of Revenue notifies counties if a prorated amount for property tax credit claims will be required for the coming fiscal year.

22 Elderly and Disabled Reimbursements Four programs provide credits for taxes paid by the elderly and disabled. Special Assessment, filed with the County Treasurer Mobile Home Tax, filed with the County Treasurer Property Tax, filed with the County Treasurer Rent reimbursement, filed with the Department of Revenue

23 Special Assessment Credit FY2013 FY2012 FY2011 FY2010 Special Assessment $19,930 $24,360 $16,042 $21,739 Description: Established in conjunction with the Disabled and Senior Citizens Property Tax Credit. The credit gives 100 percent assistance to qualified homeowners who are required to pay special assessments. Eligibility: Requirements parallel those for the Disabled and Senior Citizens Property Tax Credit. Household income cannot exceed $10,770. Filing Requirements: The claimant must file a claim with the County Treasurer by September 30 of each year.

24 Iowa Mobile Home Reduced Tax Rate FY2013 FY2012 FY2011 FY2010 Mobile Home $105,638 $113,273 $110,464 $112,931 Description: Enacted as a supplement to the Disabled and Senior Citizens Property Tax Credit. The objective is to provide mobile, manufactured, and modular home owners with equivalent aid. Eligibility: Must be an Iowa resident, 23 or older. Household income must be less than $20,906. Filing Requirements: On or before June 1 of each year, each mobile, manufactured, and modular home owner eligible for a reduced tax rate must file a claim with the County Treasurer. The County Treasurer or the Director may grant an extension of time to file.

25 Elderly Credit Property Tax Credit Provides a property tax credit for low-income homeowners who are 65 or older or disabled. The maximum credit is $1,000 and is further reduced based on household income. County Treasurer's file claim requests by May1st for eligible claimants. Tax Management Division verifies the claim amounts from each county and issues payments to each county by June 15th. FY $5,900,919 FY $6,102,162 FY $6,367,435 FY $5,882,286 FY $6,210,155 FY $5,887,801

26 Elderly Credit Rent Reimbursement Applicants must be 65 or totally disabled, low income and living in a rental property. The maximum reimbursement is $1,000. In December the Department mails Rent Reimbursement Claims to individuals that received a reimbursement in the prior year. Tax Management Division will calculate an amount of funds to be set aside for payment of county claims. In the period of January through June of each year the Department will receive, process and issue payments to qualifying claimants. Fiscal Year Expenditures $15,787,991 $16,941,662 $18,215,433 $16,420,549 Recipients 27,659 28,626 30,029 28,887 Average Payment $571 $592 $606 $568

27 Hotel/Motel Tax State imposed hotel motel tax rate = 5% Locally imposed hotel motel tax can be imposed in full percentage points from 1% to 7%. The tax is filed and remitted with quarterly sales tax returns, and distributed quarterly Each city or county receives 100% of the locally imposed revenues collected by permit holders within the jurisdiction. History of total of funds distributed to cities and counties FY2013-$45,665,767 FY2010 -$36,773,000 FY2012-$43,264,029 FY2009 -$39,119,000 FY2011-$40,083,868 FY2008 -$38,018,962

28 Transfer Taxes Monies & Credits The Department receives monies & credit funds, accounts for them, then transfers the funds to the Department of Commerce. These funds are generated by a State tax on Credit Union reserves. Monies & Credits $605, $470, $628, $473, $585, $466,000

29 Military Exemption Tax Credit Funds County Treasurers send in fund requests by August 15 th. The Department issues warrants by September 30 th. Usually this program is funded at 100% and claims have been gradually decreasing through the years (426A) Military service tax exemption. 80.2(1) $2,229, $2,370, $2,282, $2,410, $2,322, $2,450,563

30 Sales and Use Tax Reports The Department publishes five reports each fiscal year Four Quarterly Reports One Annual Report The quarterly reports contain the following information Statewide retail sales tax information by business group Retail, Consumer and Motor Vehicle Use Tax information Retail sales tax information by county and by each city within the county Retail sales tax information by business group within each county The annual report compiles the quarterly reports and includes much more tax information on a fiscal year basis. The report is available as a pdf document and the tables are also presented as a spreadsheet These reports can be accessed on the Department of Revenue Website

31 Changes to Sales and Use Tax Reports Beginning with the March 2013 quarterly report, changes were made to the spreadsheet County tables were adjusted to allow for sorting and filtering Taxable sales and tax by County and City Taxable sales and tax by County and Business Group Goal was to allow the reader to more easily work with the data Sort highest to lowest within and across counties Filter to one business group and compare across counties Similar changes planned for the FY 2013 annual report spreadsheet

32 County and City Table Iowa Retail Sales Tax By County and City Quarter Ending March 31, 2013 County City Number of Returns Taxable Sales Computed Tax Percent of Tax Adair Adair 54 $1,977,753 $117, % Adair Bridgewater 11 $317,042 $19, % Adair Fontanelle 37 $779,108 $46, % Adair Greenfield 107 $5,436,620 $325, % Adair Orient 18 $225,595 $13, % Adair Stuart 35 $2,127,062 $124, % Adair Other 11 $575,626 $34, % Adair County Totals 273 $11,438,806 $682, % Adams Corning 126 $7,038,323 $421, % Adams Other 29 $269,420 $16, % Adams County Totals 155 $7,307,743 $437, % Allamakee Harpers Ferry 33 $335,841 $20, % Allamakee Lansing 81 $2,225,049 $133, % Allamakee New Albin 30 $468,732 $28, % Allamakee Postville 78 $3,746,294 $224, % Allamakee Waterville 11 $112,934 $6, % Allamakee Waukon 227 $12,760,892 $763, % Allamakee Other 34 $265,998 $15, % Allamakee County Totals 494 $19,915,740 $1,192, %

33 County and Business Group Table

34 Sales and Use Tax Questions? We are very interested in knowing if you find these changes beneficial. If you have any questions or any suggestions on how The Department of Revenue may improve the sales and use tax reports or provide other sales and use tax information please contact me. Name: Joel Phipps Phone Number:

35 QUESTIONS??? the End