Linn County

Rollback (Assessment Limitation Order)

More than 20 years ago, residential property values were rising quickly. The legislature wanted to continue the practice of assessing residential property at fair market value, but limit the increase in how much the taxable value could increase in any given year (the limit is set at 4 percent for residential and agricultural class). To help cushion the impact of high inflation, the Legislature passed an assessment limitation law called rollback. This held property taxes down, and was well intended -- for without this change many homeowners would no longer have been able to afford their taxes.

This concept is known as "rollback," because it rolls back the taxable value of a house.

History of Assessment Limitations Order (Rollback) Understanding Concept of Rollback

Difference between Assessed Value and Taxable Value

Assessed Value Taxable Value Rollback Example for Residential Class

The following example assumes that the 4% limit in growth is not reduced due to agricultural valuations.
Starting Year
Assessed value = $2,000,000
Taxable value = $1,000,000
Rollback = 50% ($1,000,000 taxable divided by $2,000,000 assessed)

Different scenarios always result in a 4% increase in taxable value (excluding new construction)

Even if there is no growth in assessed value, there is still a 4 percent increase in residential taxable value due to the operation of the rollback. Whatever happens to assessed value, the rollback will always compensate in a way that results in a 4 percent growth in taxable value. New construction will result in additional taxable value above the 4 percent growth.

Tie Between Residential and Agricultural Class
Impact of Agricultural Values

There was concern that the limitation would shift the tax burden from residential to agricultural property, or vice versa. This was addressed with a provision that coupled average increases in one classification to average increases in the other. So ever since, residential and agricultural valuations have been linked. This means the annual increases for each property are limited to the smaller of the two increases in either class of property.

Example: If in a given year the increase in residential taxable valuations was 4 percent (remember it cannot be higher than 4 percent due to the rollback limitation) and the increase in agricultural property was only 2 percent, then the increase in residential taxable valuations would be reduced to 2 percent as well.

Until recently, agricultural valuations, which are based on land productivity and commodity prices, have been flat. So even though home prices soared over the years, increases in residential taxable valuations were very limited. But in the past few years, agricultural land values have increased significantly, which in turn has unleashed the restraint on residential taxable values. Due to the fact that agricultural valuations are based on a productivity and net earning capacity formula prescribed by law that is computed based on five years of average crop yields and prices, agricultural valuations will not limit growth in residential taxable valuations for many years to come.

The result is that even though residential price appreciation has slowed, or in some cases reversed, the percentage of the property that can be taxed is actually increasing. In fact, there has become such a chasm between assessed values and taxable values that there is now plenty of room for taxable values to catch up.

Rapidly growing areas can see an increase in the tax base, though a smaller one than would result in the absence of a rollback. Slow-growing areas, however, may see an actual decline in taxable values over time even while the costs of government increase simply due to inflation. The following paragraph (quoted from Iowa State Association of Counties, Rollback Q & A ) illustrates this.

The rollback applies uniformly statewide. All residential property, from Council Bluffs to Dubuque, gets the same rollback. A significant problem with uniform application is that there are very different housing markets around the state.

Commercial & Industrial Classification

Commercial and industrial property is also subject to a rollback, and is currently taxed at 90 percent of value.

Multi-Residential Classification

Starting with the 2015 assessment year, there is a new classification of property called multi-residential. Multi-residential properties consist of:

For parcels that partially satisfy the requirements for classification as multiresidential property, the assessor shall classify that portion of the parcel as multiresidential property. The remaining portion of the parcel shall be classified as the classification for which it qualifies.

Property that is rented or leased to low-income individuals or families which is assessed as Section 42 housing or a hotel, motel, inn, or other building where rooms or dwelling units are usually rented for less than one month cannot be classified as multiresidential property.

Multiresidential Rollback Schedule

2015 Assessment Year - 86.25%
2016 Assessment Year - 82.50%
2017 Assessment Year - 78.75%
2018 Assessment Year - 75.00%
2019 Assessment Year - 71.25%
2020 Assessment Year - 67.50%
2021 Assessment Year - 63.75%
2022 Assessment Year - same as residential rollback