Background
Growmark, Inc. is an agricultural cooperative that operates a propane fuel distribution terminal in New Hampton, Chickasaw County. The terminal’s eleven 90,000-gallon propane storage tanks rest on concrete saddles — pre-cast concrete piers — and are held in place solely by gravity. The tanks are not fastened or otherwise attached to the saddles. They have sat on the New Hampton site since 1977, but Growmark’s chief operating officer testified that the company would take the tanks with it if it ever relocated, noting that moving each tank would cost approximately $28,124 compared to a minimum of $180,000 to purchase a replacement.
In 2023, the Chickasaw County assessor valued the eleven tanks at $1,959,500 and included that value in the property-tax assessment, classifying the tanks as “improvements” under Iowa Code § 427A.1(1)(c). Under that paragraph, items “placed upon a foundation whether or not attached to the foundation” are taxable real property. Growmark appealed to the Property Assessment Appeal Board (PAAB), arguing that the tanks were unattached “equipment” under Iowa Code § 427A.1(1)(d) — taxable only if attached to a building, structure, or improvement defined in paragraph (c). Because the tanks were unattached, Growmark argued, they were nontaxable personal property under Iowa Code § 427A.2. The PAAB agreed, following a 2022 unpublished court-of-appeals decision, McDermott Propane, LLC v. Board of Review, that had reached the same conclusion for 30,000-gallon propane tanks in virtually identical circumstances. By the time of this case, county boards of review in thirty-one Iowa counties had already removed storage tanks of 30,000 gallons or less from their assessments based on McDermott Propane. The district court affirmed the PAAB, and the Board of Review appealed. The Iowa Supreme Court retained the case.
The Board of Review argued that under StateLine Cooperative v. Iowa Property Assessment Appeal Board, 958 N.W.2d 807 (Iowa 2021), storage tanks function like warehouses and should be assessed as improvements regardless of size. It also urged the court to defer to Department of Revenue guidance materials — an appraisal manual, valuation guides from 1977 and 1984, a 1985 internal memo, and a 1986 tax bulletin — all treating storage tanks as taxable real property.
The Court’s Holding
The Iowa Supreme Court unanimously affirmed, with Justice Oxley writing. The threshold question under Iowa Code § 427A.1(1) is whether the propane tanks are “improvements” under paragraph (c) or “equipment” under paragraph (d). The distinction matters fundamentally: improvements placed on a foundation are taxable regardless of attachment; equipment is taxable only if attached to a paragraph–(c) improvement. Because the parties agreed the tanks were unattached, classifying them as equipment resolved the case in Growmark’s favor.
Applying ordinary-meaning analysis, the court held the tanks are equipment. Black’s Law Dictionary defines an improvement as something permanently annexed to realty that increases its value or utility; it defines equipment as “articles or implements used for a specific purpose or activity.” The court’s prior decisions in Rose Acre Farms, Inc. v. Board of Review, 479 N.W.2d 260 (Iowa 1991), and the court of appeals’ decision in Wendling Quarries, Inc. v. Property Assessment Appeal Board, 865 N.W.2d 635 (Iowa Ct. App. 2015), had developed a similar distinction: improvements increase the utility of the land and are relatively permanent; equipment is an implement with a specific purpose that can be disassembled and removed without damaging the land. The propane tanks fit squarely in the equipment column: they serve a specific commercial purpose (storing propane for distribution to Growmark’s agricultural customers), they are removable, they can be lifted off the saddles without any damage to the saddles or the land, and they would be taken if Growmark relocated — a move that would cost a fraction of buying replacements.
The court rejected the Board of Review’s reliance on StateLine Cooperative. That case’s storage-versus-processing distinction was relevant only to whether items qualify as “machinery used in manufacturing” under paragraph (e) — a narrower category entirely separate from the improvement/equipment divide in paragraphs (c) and (d). The DOR guidance materials fared no better. The court declined to defer to the appraisal manual and valuation guides because they addressed valuation methodology, not the classification question at issue; the 1985 memo and 1986 bulletin were outdated and did not account for statutory changes since their issuance.
In a significant aside, the court overruled its longstanding rule that tax statutes imposing taxes are construed strictly against the taxing body and liberally in favor of the taxpayer — and conversely, that tax exemptions are construed strictly against the taxpayer. The court held that those contradictory, policy-driven canons are unsupported by the Iowa Code and conflict with the court’s commitment to ordinary-meaning statutory interpretation. Moving forward, Iowa tax statutes will be construed the same way as any other statute.
Key Takeaways
- Under Iowa Code § 427A.1(1), unattached propane storage tanks resting on concrete saddles by gravity are “equipment” under paragraph (d), not “improvements” under paragraph (c). Because equipment is taxable only if attached to a paragraph-(c) improvement, unattached tanks are nontaxable personal property under § 427A.2.
- The storage-versus-processing distinction drawn in StateLine Cooperative applies only to the paragraph (e) “machinery used in manufacturing” category; it has no bearing on whether a commercial-use item is an improvement or equipment under paragraphs (c) and (d).
- Iowa tax statutes will henceforth be construed by their ordinary meaning, under the same principles applied to any other statute. The historic pro-taxpayer and pro-taxing-body canons of construction are overruled.
Why It Matters
This is the first published Iowa Supreme Court decision to resolve the improvement-versus-equipment classification for commercial propane and fuel-distribution tanks. County assessors in thirty-one Iowa counties had already stopped taxing smaller storage tanks in the wake of the unpublished McDermott Propane decision; Chickasaw County extends that approach to larger-capacity tanks and gives it the force of published precedent. Property-tax practitioners representing agricultural cooperatives, fuel distributors, and industrial operators statewide should review pending and future assessments for storage tanks — of any size — that are unattached to their foundations.
The court’s overruling of the pro-taxpayer and anti-exemption canons is a development that reaches well beyond property tax. Iowa courts will no longer tilt the interpretive scales in either direction by default in any tax dispute. This aligns Iowa with a broader national trend toward textualism and away from policy-laden presumptions, and it means that arguments on both sides of tax disputes — including sales tax, corporate income tax, and Iowa’s various excise-tax regimes — should be grounded entirely in statutory text and ordinary meaning rather than invoking the now-overruled canons.