Iowa Barn Foundation

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Iowa Tax Legislation for Barn Restoration

The Iowa General Assembly, in a bill signed by Governor Tom Vilsack in May 2000, enacted legislation of great interest to those restoring barns and other farm structures. House File 2560 added (1) a property rehabilitation credit against state income tax and (2) a provision exempting from property tax increases in assessed value added by a farm structure built prior to 1937.

The income tax credit

The income tax credit, which is refundable, is available for "eligible property" which includes:

   ⚫  Property listed on the National Register of Historic Places or is eligible for such listing,

   ⚫  Property designated as of historic significance to a district listed in the national register,

   ⚫  A local landmark designated by a city or county ordinance, or

   ⚫  A barn constructed prior to 1937.

The amount of the credit is 25 percent of the "qualified rehabilitation costs" on eligible property. In the case of barns or residential property, the costs must equal at least $25000 or 25 percent of the fair market value of the structure excluding the land, whichever is the less. For commercial property, the rehabilitation costs must equal at least 50 percent of the assessed value of the property, excluding the land, prior to the rehabilitation.

In computing the tax credit, the only costs which may be included are the rehabilitation costs incurred between the period ending on the project completion date and beginning on the later of the date of issuance of approval of the project or two years before the project completion date.

"Qualified rehabilitation costs" include amounts properly includable in computing the income tax basis for the eligible property tax purposes. Architectural fees, site survey fees, legal expenses, insurance premiums, development fees, and other construction-related costs are qualified rehabilitation costs to the extent they are added to the basis of the property. Costs of sidewalks, parking lots, and landscaping do not constitute qualified rehabilitation costs.

The project must receive the approval of the state historic preservation office. The approval process is not to exceed 90 days.

A refunded tax credit cannot exceed 75 percent of the original credit.

Exemption from property tax

Under the same bill, H.F. 2560, the legislature decreed that the increase in assessed value added to a farm structure"for purposes of preserving the integrity of the internal and external features of the structure as a barn" is exempt from property tax. To be eligible for the exemption, the structure must have been first placed in service as a barn prior to 1937. The exemption applies to the assessment year beginning after the completion of the improvements to preserve the structure as a barn.

For this purpose, the term "barn" means "an agricultural structure, in whatever shape or design, which is used for the storage of farm products or feed or for the housing of farm animals, poultry, or farm equipment."

Application for the exemption is to be filed not later than February 1 of the first year for which the exemption is requested. The Department of Revenue and Finance is to provide application forms. Once the exemption is granted, it continues to be granted for subsequent assessment years without further action as long as the structure continues to be used as a barn. The taxpayer is to notify the assessing authority when the structure ceases to be used as a barn.

Future prospects

Passage of H.F. 2560 represents a major step in achieving the Iowa Barn Foundation's legislative goals. Achieving status to receive check-off funds from Iowa income tax forms remains a legislative objective. Work done by the Iowa Barn Foundation's legislative contacts has been enormously important to success of further initiatives in 2001 and future years.

Contributed by Neil E. Harl, Charles F. Curtiss Distinguished Professor in Agriculture and Professor of Economics, Iowa State University, Ames, Iowa; Director for the Center for International Agriculture Finance; Member of the Iowa Bar; charter board member of the Iowa Barn Foundation.

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Updated 12-22-16.

 

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