FILE - Iowa State Capitol

Iowa State Capitol Building in Des Moines, Iowa.

(The Center Square) – Private corporations that provide water, sanitary sewage or storm water drainage service  to the public may be exempt from state corporate income taxes.

Bills currently considered by Iowa legislators would grant the tax exemption to corporations that provide the above services  by piped distribution or collection system.

Customers would be entitled to resulting cost reductions, according to HF 607, which was introduced Feb. 18. Companion bill SF 297 was in a Ways and Means subcommittee as of Feb. 16.

“The agreement is, if we were to exempt the corporate income tax because they are acting as a public utility, that that savings for them would not be their profit, but would actually, penny for penny, go back to the consumer, so that should lower the water bills for the people who use that private water utility,” Rep. Dave Jacoby, D-Coralville, told The Center Square in a phone interview. Jacoby is ranking member for the House’s Ways and Means committee, which filed HF 607.

The Iowa Utilities Board, which monitors meter readings and cost of water and approves or disapproves of any and all rate hikes, would be charged with ensuring that the corporations’ customers receive the cost reductions, he said.

“If these bills were to become law, the IUB would have a role in determining how this exemption should impact customer rates, including the amount of any necessary adjustment to those rates,” Myers said. “In light of the potential for the matter to come before the IUB, we can not offer any opinion in regard to such impacts until the evidence is presented to us and parties such as the Office of the Consumer Advocate have had the opportunity to provide input.”

The Iowa Association of Municipal Utilities is lobbying against the bill. The Iowa Association of Business and Industry (ABI) and the Iowa American Water Co. lobbied in favor of a preceding copy of the bill, HF 423.

“Iowa-American Water Company is currently the only investor-owned utility in Iowa to meet this description. Iowa-American provides drinking water in Clinton and most of Scott County and has operated in Iowa for more than 125 years. As a for-profit company, its rates are determined by the IUB,” Iowa Utilities Board Communications Specialist Melissa Myers told The Center Square in an email.

Jacoby said there has been some pushback on the bill.

“There are a couple of munis and others who don’t want it because they feel like that would be unfair competition to them,” Jacoby said. “They don’t have as much freedom as a private company would because they respond directly – not only to the consumer but also the voter in their district.”

Iowa American Water Co., an investor-owned water utility that provides water services to about 216,000 Iowans, requested the Iowa Utilities Board adjust its rates in August 2020 to offset costs for “almost $87 million” in water system improvements from October 2016 to June 2022, according to a news release. The monthly water bill for “a typical residential customer” in its Clinton and Quad Cities districts using 4,000 gallons monthly would be $42.70, an increase of $5.44 per month.

Myers said the hearing on Iowa American Water Co.’s rate case proceeding, Docket No. RPU-2020-0001, will be March 3, in the IUB's Hearing room, 1375 E. Court Ave. in Des Moines. The procedural schedule is presented in an order that was issued in September 2020.

If passed, the bills would take effect in January 2023.