Members,

2026 Legislative Session Final Update

The Legislature convened on January 12^th for the second session of the 91^st General Assembly. During the first week, leaders in both the House and the Senate delivered opening remarks outlining their priorities for the year, with a primary focus on property tax relief.

Governor Reynolds released the following statement upon adjournment.

“As I reflect on the end of my final legislative session, I’m incredibly proud of the work we’ve accomplished together on behalf of Iowans this year. With only a modest 1.4% increase to the state budget, Republicans are delivering big for Iowans.

“Throughout my time in office, the commonsense, conservative policies we’ve enacted will ensure our state remains strong, prosperous, and vibrant for generations to come. That has been my commitment to Iowans since day one, and I will continue to serve with that same purpose during my final months in office.” The full statement can be found here.

The legislature passed multiple bills that were a priority of Governor Reynolds this session, including a bill prohibiting local governments from enacting or enforcing civil rights protections that conflict with the 2025 law removing gender identity as a protected class; the Iowa Make America Healthy Again Act, which requires the use of the federal E-Verify and SAVE programs when hiring public employees; and a bill ensuring that cost-per-pupil state funding follows students who enroll in charter schools. Governor Reynolds' bill to create a new performance-based county grant program to incentivize better delivery of veteran services failed to advance.

During the 90^th General Assembly, the legislature adopted a proposed amendment to the Iowa Constitution that requires any future individual income tax increase to be approved by a two-thirds majority in both chambers. Constitutional amendments must pass both chambers in two consecutive General Assemblies before being placed on the ballot for voter approval. If a majority of voters approve the initiative, the amendment will be adopted.

The Senate passed SJR 11 for a second time in April of 2025 with a party-line vote, and the House passed the bill on the final day of session this year. SJR 11 will be placed on the ballot for voter approval this November.

FY27 Budget 

The Revenue Estimating Conference projected at the March meeting that the state would end FY26 with $8.11 billion, roughly a 9.3% decrease from FY25. For FY27, the state expects revenues to increase by 4.4% with a total revenue of $8.47 billion. Revenues are expected to grow again in FY28 by 2.9%.

Following the March REC meeting, the legislature agreed on an overall budget of $9.452 billion, a 1.4% increase in spending over FY26. The full summary of FY27 General Fund appropriations can be found here.

 

Property Tax

Senate Majority Leader Mike Klimesh and Speaker Pat Grassley both highlighted property tax reform as a top priority for 2026. During the first two weeks of the session, the Ways and Means committee chairs from both chambers introduced proposals alongside the Governor’s proposal to reform Iowa’s property tax system. All three proposals included a cap on local government spending with a variety of other proposed approaches to reduce burdens. The Senate also focused on overhauling residential, commercial, and industrial classifications, and on the recreation of the multi-residential classification.

After holding multiple subcommittee and committee meetings, a public hearing, and floor debate in both chambers, a final compromise was reached on the last day of the session.

Senate File 2472 includes the following changes to Iowa’s property tax laws:

• Revenue Growth Cap
  • Caps general services levy revenue growth at 2%, excluding new valuation connected to new construction, debt service, and school funding
  • Transit levies are limited to 3% revenue growth
  • Hospital levies are limited to 4% revenue growth
• Adds a Definition for New Valuation
  • New construction
  • Additions or improvements to existing structures that are not normal and necessary repairs under section 441.21, sub 8.
  • Net boundary adjustments, including annexation, severance, incorporation, consolidation, or discontinuance as those terms are defined in section 368.1.
• Tax Increment Financing Reform
  • Inclusion of “housing” as economic development and merging definitions with the workforce housing tax credit program.
  • Exclusion of $5.40 school aid levy and EMS levies moving forward with January 1, 2027, implementation date and 20-year grandfathered usage for perpetual districts.
  • Allowance for voluntary usage of $5.40 with school approval.
  • Revenue usage limitation for TIF districts without sunsets to 60% but not impacting existing debt.
  • Cap all new TIF districts at 23 years.
  • Complete removal of LMI requirements.
  • Limitations on the utilization of both urban revitalization and urban renewal are combined.
• Assessment Reform
  • Shift the burden of proof from the taxpayer to the assessor when assessment or equalization increases exceed 10%, requiring disclosure of the method used.
• Homestead Exemption
  • Phase-out of the homestead credit and creates a new homestead exemption.
• Bonding for General Operations
  • Prohibition on bonding for general operations
• Utility Replacement Tax Force
  • Review of the accuracy of the taxes imposed by the utility replacement tax.
• Limit on Reserves
  • Reserve recommendations established by GASB are equal to 35% or less.
• School Funding
  • Extension of SAVE and transfer of SAVE revenue for property tax relief.
  • State buy-down of the school foundation levy utilizing Homestead Tax Credit and C&I Credit appropriations.
• First Time Homebuyers
  • Establish a Firsthome Iowa Accounts Program similar to a 529 account.
• Multi-Residential Classification
  • Mult-Residential returns as a classification with a new rollback set at 6% above the residential rollback rate, with a 2-year phase-in.
• Valuations – Abnormal Transactions
  • Distortion of market value, including built-to-suit sales, sale-leaseback sales, leased fee sales, and abnormal transactions.

 

IEDA Omnibus Bill

The Iowa Economic Development Authority introduced its omnibus bill early in the session, which included five divisions. On the final day of the session, the bill was amended to address concerns about removing the 260E program and was passed by both chambers. House File 2799 is divided into the following divisions:

Division I – Creates the new Headquarters Expansion and Development for Growth and Employment Program (EDGE)

• Eligibility criteria set by IEDA.
• Tax Incentives
• Required program agreements with enforceable performance criteria.
• Qualifying wage tax credit available for up to 3 years, contingent on creating and retaining jobs paying at least 200% of the qualifying wage threshold.

Division II – Major Economic Growth Attraction Fund

• Extends the existing program sunset from 2027 to 2030
• Updates the definition of “foreign adversary.”

Division III – Business Incentives for Growth Program Training Fund

• Creates a new fund allowing up to 1.5% of the gross wages an eligible business pays to be credited to the fund from the withholding payments
• Jobs identified by IEDA as having a sufficient economic impact may use the fund to cover training costs.

Division IV – Repeal of the New Tax Jobs Tax Credit

Division V – Load Forecasting

• Directs IEDA to commission ISU to produce a report forecasting the probable future growth of electricity use within the state and the Midwest region every two years.
• Grants the Iowa Utilities Commission the authority to direct public utilities to share with IUS information necessary to develop the load forecasts and electric transmission system expansion planning analyses.

Division VI – Iowa Industrial New Jobs Training Program (260E)

• Provides that the new jobs credit from withholding component of the 260E Program will not be awarded after June 30, 2026.
• Provides that community colleges may not extend 260E agreements entered into on or before June 30, 2026.
• Provides that payments for 260E Program costs cannot be deferred for more than seven years for agreements entered into on or after July 1, 2026.
• Prohibits 260E Program costs from including travel, conference, or legal fee reimbursements.
• Limits community college administrative expenses to 15.0% of 260E Program costs.
• Requires 260E agreements to include a provision that employers reimburse community colleges at least 25.0% of program training costs incurred by the community colleges.
• Requests the Legislative Council to establish an interim study committee during the 2026 Legislative Session to review and make recommendations regarding the 260E Program. The interim study committee must submit a report detailing the committee’s findings and recommendations to the General Assembly no later than December 15, 2026.

Iowa Make America Healthy Again Act

During the Governor’s State of the State Address, she highlighted several initiatives to promote healthy behaviors in Iowa. Following the address, Governor Reynolds introduced Iowa's Make America Healthy Again Act (MAHA), which directs the state to maintain Iowa’s current waivers for the SNAP and Summer EBT programs, which prohibit the use of program dollars to purchase pop, candy, and certain prepared foods considered unhealthy. The bill would also allow the sale of ivermectin and make changes to school district breakfast and lunch programs by prohibiting certain food dyes and ingredients. Finally, the bill would raise the sales tax on cigarettes, loose tobacco products, cigars, vapor products, and consumable hemp.

House File 2676 was passed by both the House and the Senate in April after reaching an agreement on an amendment that included student physical activity requirements and instructional technology standards for K-5. The amendment also removed the tax increases on cigarettes, loose tobacco products, cigars, vapor products, and consumable hemp.

HMO Tax

House File 2739 was introduced in March and proposes a one-time tax increase on health maintenance organizations and Iowa’s managed care organizations, retroactively raising the tax rate from 0.925% to 3.5% between January 1 and September 30, 2026. This increased tax would generate $123 million and enable the state to receive matching federal funds before a provision in the One Big Beautiful Bill Act prevents such increases from taking effect in November.  The bill also transfers $296.2 million from the Taxpayer Relief Fund to the General Fund in FY26 to be included in the expenditure limitation for FY27.

Lobbyists for the Federation of Iowa Insurers, Wellmark, the Iowa Business Council, the Iowa Taxpayers Association, and Iowans for Affordable Healthcare all voiced opposition to the bill, citing concerns that the tax increase will raise healthcare costs for Iowans, and that tax increases and retroactive taxation were bad tax policy. In the Standings bill, language was included creating a tax credit to allow HMOs to recoup lost revenue over the next 8 years, with the goal of not raising insurance premiums for Iowans due to this tax increase.

 

Tobacco and Alternative Nicotine Product Taxes

After removing the increased tobacco tax from the Governor’s MAHA bill, the legislature approved Senate File 2480 on the final day of the session. The bill creates a 5-cent tax on vapes and alternative nicotine products and directs $3 million of the revenues generated to the University of Iowa for pediatric cancer research. The House had previously passed legislation in April that would have directed the research to be paid out of the state’s general fund; the Senate did not take up the bill before adjournment.

Senate Health and Human Services Chair, Senator Kara Warme, shared that she expects the tax to generate $15-18 million in the first year. After directing $3 million to cancer research, the remaining revenues will be used to fund Iowa’s Medicaid programs. Opponents of the bill argued the tax was not high enough to change behaviors, while proponents encouraged the passage to ensure the research was funded.

 

Eminent Domain

In January, House Republicans introduced a bill that would ban the use of eminent domain for the construction of carbon capture pipelines. The bill is a much-tightened version of the bill vetoed by Governor Reynolds in June. The bill passed the House 64-28 and was sent to the Senate for consideration. In the Senate Commerce Committee, the bill was amended to include language introduced by Senate Majority Leader Mike Klimesh that imposed additional requirements on companies seeking to use eminent domain and landowner protections, without banning their use.

The bill never advanced beyond the Senate Commerce Committee, and the legislative session adjourned without any legislation affecting eminent domain, despite being a priority for the House and members of the Senate Republican caucus at the start of the session.

 

Water Quality

On May 1^st, Governor Reynolds announced that $25 million would be directed to Central Iowa Water Works to upgrade nitrate removal facilities. The funding will also be used to improve water quality monitoring, increase funding for water treatment, and create a loan program for rural communities to upgrade their facilities.

Next Year

The first session of the 92nd Iowa General Assembly will convene on January 11^th, 2027. Legislation that failed to advance this year must be reintroduced next year. The primary election will be held on June 2^nd and the General election on November 6^th.

Take Care,

Chris LaFerla
President & CEO
Council Bluffs Chamber