HF 1906

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:56am

A bill for an act
relating to taxation; property; prohibiting new nonagricultural relative
homesteads; reducing class rates for certain residential rental property; amending
Minnesota Statutes 2008, sections 273.124, subdivision 1; 273.13, subdivision
25.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2008, section 273.124, subdivision 1, is amended to read:

Subdivision 1.

General rule.

(a) Residential real estate that is occupied and used
for the purposes of a homestead by its owner, who must be a Minnesota resident, is
a residential homestead.

Agricultural land, as defined in section 273.13, subdivision 23, that is occupied and
used as a homestead by its owner, who must be a Minnesota resident, is an agricultural
homestead.

Dates for establishment of a homestead and homestead treatment provided to
particular types of property are as provided in this section.

Property held by a trustee under a trust is eligible for homestead classification if the
requirements under this chapter are satisfied.

The assessor shall require proof, as provided in subdivision 13, of the facts upon
which classification as a homestead may be determined. Notwithstanding any other law,
the assessor may at any time require a homestead application to be filed in order to verify
that any property classified as a homestead continues to be eligible for homestead status.
Notwithstanding any other law to the contrary, the Department of Revenue may, upon
request from an assessor, verify whether an individual who is requesting or receiving
homestead classification has filed a Minnesota income tax return as a resident for the most
recent taxable year for which the information is available.

When there is a name change or a transfer of homestead property, the assessor may
reclassify the property in the next assessment unless a homestead application is filed to
verify that the property continues to qualify for homestead classification.

(b) For purposes of this section, homestead property shall include property which
is used for purposes of the homestead but is separated from the homestead by a road,
street, lot, waterway, or other similar intervening property. The term "used for purposes
of the homestead" shall include but not be limited to uses for gardens, garages, or other
outbuildings commonly associated with a homestead, but shall not include vacant land
held primarily for future development. In order to receive homestead treatment for
the noncontiguous property, the owner must use the property for the purposes of the
homestead, and must apply to the assessor, both by the deadlines given in subdivision
9. After initial qualification for the homestead treatment, additional applications for
subsequent years are not required.

(c) Residential real estate that is occupied and used for purposes of a homestead by a
relative of the owner is a homestead but only to the extent of the homestead treatment
that would be provided if the related owner occupied the property. For purposes of this
paragraph and paragraph (g), "relative" means a parent, stepparent, child, stepchild,
grandparent, grandchild, brother, sister, uncle, aunt, nephew, or niece. This relationship
may be by blood or marriage. Property that has been classified as seasonal residential
recreational property at any time during which it has been owned by the current owner or
spouse of the current owner will not be reclassified as a homestead unless it is occupied as
a homestead by the owner; this prohibition also applies to property that, in the absence of
this paragraph, would have been classified as seasonal residential recreational property at
the time when the residence was constructed. Neither the related occupant nor the owner of
the property may claim a property tax refund under chapter 290A for a homestead occupied
by a relative. In the case of a residence located on agricultural land, only the house,
garage, and immediately surrounding one acre of land shall be classified as a homestead
under this paragraph, except as provided in paragraph (d). In the case of nonagricultural
property, this paragraph only applies to applications approved before July 1, 2009.

(d) Agricultural property that is occupied and used for purposes of a homestead by
a relative of the owner, is a homestead, only to the extent of the homestead treatment
that would be provided if the related owner occupied the property, and only if all of the
following criteria are met:

(1) the relative who is occupying the agricultural property is a son, daughter, brother,
sister, grandson, granddaughter, father, or mother of the owner of the agricultural property
or a son, daughter, brother, sister, grandson, or granddaughter of the spouse of the owner
of the agricultural property;

(2) the owner of the agricultural property must be a Minnesota resident;

(3) the owner of the agricultural property must not receive homestead treatment on
any other agricultural property in Minnesota; and

(4) the owner of the agricultural property is limited to only one agricultural
homestead per family under this paragraph.

Neither the related occupant nor the owner of the property may claim a property
tax refund under chapter 290A for a homestead occupied by a relative qualifying under
this paragraph. For purposes of this paragraph, "agricultural property" means the house,
garage, other farm buildings and structures, and agricultural land.

Application must be made to the assessor by the owner of the agricultural property to
receive homestead benefits under this paragraph. The assessor may require the necessary
proof that the requirements under this paragraph have been met.

(e) In the case of property owned by a property owner who is married, the assessor
must not deny homestead treatment in whole or in part if only one of the spouses occupies
the property and the other spouse is absent due to: (1) marriage dissolution proceedings,
(2) legal separation, (3) employment or self-employment in another location, or (4) other
personal circumstances causing the spouses to live separately, not including an intent to
obtain two homestead classifications for property tax purposes. To qualify under clause
(3), the spouse's place of employment or self-employment must be at least 50 miles distant
from the other spouse's place of employment, and the homesteads must be at least 50 miles
distant from each other. Homestead treatment, in whole or in part, shall not be denied to
the owner's spouse who previously occupied the residence with the owner if the absence
of the owner is due to one of the exceptions provided in this paragraph.

(f) The assessor must not deny homestead treatment in whole or in part if:

(1) in the case of a property owner who is not married, the owner is absent due to
residence in a nursing home, boarding care facility, or an elderly assisted living facility
property as defined in section 273.13, subdivision 25a, and the property is not otherwise
occupied; or

(2) in the case of a property owner who is married, the owner or the owner's spouse
or both are absent due to residence in a nursing home, boarding care facility, or an elderly
assisted living facility property as defined in section 273.13, subdivision 25a, and the
property is not occupied or is occupied only by the owner's spouse.

(g) If an individual is purchasing property with the intent of claiming it as a
homestead and is required by the terms of the financing agreement to have a relative
shown on the deed as a co-owner, the assessor shall allow a full homestead classification.
This provision only applies to first-time purchasers, whether married or single, or to a
person who had previously been married and is purchasing as a single individual for the
first time. The application for homestead benefits must be on a form prescribed by the
commissioner and must contain the data necessary for the assessor to determine if full
homestead benefits are warranted.

(h) If residential or agricultural real estate is occupied and used for purposes of a
homestead by a child of a deceased owner and the property is subject to jurisdiction of
probate court, the child shall receive relative homestead classification under paragraph (c)
or (d) to the same extent they would be entitled to it if the owner was still living, until
the probate is completed. For purposes of this paragraph, "child" includes a relationship
by blood or by marriage.

(i) If a single-family home, duplex, or triplex classified as either residential
homestead or agricultural homestead is also used to provide licensed child care, the
portion of the property used for licensed child care must be classified as a part of the
homestead property.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 2.

Minnesota Statutes 2008, section 273.13, subdivision 25, is amended to read:

Subd. 25.

Class 4.

(a) Class 4a is residential real estate containing four or more
units and used or held for use by the owner or by the tenants or lessees of the owner
as a residence for rental periods of 30 days or more, excluding property qualifying for
class 4d. Class 4a also includes hospitals licensed under sections 144.50 to 144.56, other
than hospitals exempt under section 272.02, and contiguous property used for hospital
purposes, without regard to whether the property has been platted or subdivided. The
market value of class 4a property has a class rate of 1.25 percent.

(b) Class 4b includes:

(1) residential real estate containing less than four units that does not qualify as class
4bb, other than seasonal residential recreational property;

(2) manufactured homes not classified under any other provision;

(3) a dwelling, garage, and surrounding one acre of property on a nonhomestead
farm classified under subdivision 23, paragraph (b) containing two or three units; and

(4) is unimproved property that is classified residential as determined under
subdivision 33.

The market value of class 4b property has a class rate of 1.25 percent.

(c) Class 4bb includes:

(1) nonhomestead residential real estate containing one unit up to three units, other
than seasonal residential recreational property; and

(2) a single family dwelling, garage, and surrounding one acre of property on a
nonhomestead farm classified under subdivision 23, paragraph (b)., containing up to
three units; and

(3) manufactured homes not classified under any other provision.

Class 4bb property has the same class rates as class 1a property under subdivision 22.

Property that has been classified as seasonal residential recreational property at
any time during which it has been owned by the current owner or spouse of the current
owner does not qualify for class 4bb.

(d) Class 4c property includes:

(1) except as provided in subdivision 22, paragraph (c), or subdivision 23, paragraph
(b), clause (1), real and personal property devoted to temporary and seasonal residential
occupancy for recreation purposes, including real and personal property devoted to
temporary and seasonal residential occupancy for recreation purposes and not devoted to
commercial purposes for more than 250 days in the year preceding the year of assessment.
For purposes of this clause, property is devoted to a commercial purpose on a specific
day if any portion of the property is used for residential occupancy, and a fee is charged
for residential occupancy. Class 4c property must contain three or more rental units. A
"rental unit" is defined as a cabin, condominium, townhouse, sleeping room, or individual
camping site equipped with water and electrical hookups for recreational vehicles. Class
4c property must provide recreational activities such as renting ice fishing houses, boats
and motors, snowmobiles, downhill or cross-country ski equipment; provide marina
services, launch services, or guide services; or sell bait and fishing tackle. A camping
pad offered for rent by a property that otherwise qualifies for class 4c is also class 4c
regardless of the term of the rental agreement, as long as the use of the camping pad
does not exceed 250 days. In order for a property to be classified as class 4c, seasonal
residential recreational for commercial purposes under this clause, at least 40 percent of
the annual gross lodging receipts related to the property must be from business conducted
during 90 consecutive days and either (i) at least 60 percent of all paid bookings by
lodging guests during the year must be for periods of at least two consecutive nights; or
(ii) at least 20 percent of the annual gross receipts must be from charges for rental of fish
houses, boats and motors, snowmobiles, downhill or cross-country ski equipment, or
charges for marina services, launch services, and guide services, or the sale of bait and
fishing tackle. For purposes of this determination, a paid booking of five or more nights
shall be counted as two bookings. Class 4c also includes commercial use real property
used exclusively for recreational purposes in conjunction with class 4c property devoted
to temporary and seasonal residential occupancy for recreational purposes, up to a total of
two acres, provided the property is not devoted to commercial recreational use for more
than 250 days in the year preceding the year of assessment and is located within two
miles of the class 4c property with which it is used. Owners of real and personal property
devoted to temporary and seasonal residential occupancy for recreation purposes and all
or a portion of which was devoted to commercial purposes for not more than 250 days in
the year preceding the year of assessment desiring classification as class 4c, must submit a
declaration to the assessor designating the cabins or units occupied for 250 days or less in
the year preceding the year of assessment by January 15 of the assessment year. Those
cabins or units and a proportionate share of the land on which they are located must be
designated class 4c as otherwise provided. The remainder of the cabins or units and
a proportionate share of the land on which they are located will be designated as class
3a. The owner of property desiring designation as class 4c property must provide guest
registers or other records demonstrating that the units for which class 4c designation is
sought were not occupied for more than 250 days in the year preceding the assessment if
so requested. The portion of a property operated as a (1) restaurant, (2) bar, (3) gift shop,
(4) conference center or meeting room, and (5) other nonresidential facility operated on a
commercial basis not directly related to temporary and seasonal residential occupancy for
recreation purposes does not qualify for class 4c;

(2) qualified property used as a golf course if:

(i) it is open to the public on a daily fee basis. It may charge membership fees or
dues, but a membership fee may not be required in order to use the property for golfing,
and its green fees for golfing must be comparable to green fees typically charged by
municipal courses; and

(ii) it meets the requirements of section 273.112, subdivision 3, paragraph (d).

A structure used as a clubhouse, restaurant, or place of refreshment in conjunction
with the golf course is classified as class 3a property;

(3) real property up to a maximum of three acres of land owned and used by a
nonprofit community service oriented organization and that is not used for residential
purposes on either a temporary or permanent basis, qualifies for class 4c provided that
it meets either of the following:

(i) the property is not used for a revenue-producing activity for more than six days
in the calendar year preceding the year of assessment; or

(ii) the organization makes annual charitable contributions and donations at least
equal to the property's previous year's property taxes and the property is allowed to be
used for public and community meetings or events for no charge, as appropriate to the
size of the facility.

For purposes of this clause,

(A) "charitable contributions and donations" has the same meaning as lawful
gambling purposes under section 349.12, subdivision 25, excluding those purposes
relating to the payment of taxes, assessments, fees, auditing costs, and utility payments;

(B) "property taxes" excludes the state general tax;

(C) a "nonprofit community service oriented organization" means any corporation,
society, association, foundation, or institution organized and operated exclusively for
charitable, religious, fraternal, civic, or educational purposes, and which is exempt
from federal income taxation pursuant to section 501(c)(3), (10), or (19) of the Internal
Revenue Code; and

(D) "revenue-producing activities" shall include but not be limited to property or that
portion of the property that is used as an on-sale intoxicating liquor or 3.2 percent malt
liquor establishment licensed under chapter 340A, a restaurant open to the public, bowling
alley, a retail store, gambling conducted by organizations licensed under chapter 349, an
insurance business, or office or other space leased or rented to a lessee who conducts a
for-profit enterprise on the premises.

Any portion of the property qualifying under item (i) which is used for revenue-producing
activities for more than six days in the calendar year preceding the year of assessment
shall be assessed as class 3a. The use of the property for social events open exclusively
to members and their guests for periods of less than 24 hours, when an admission is
not charged nor any revenues are received by the organization shall not be considered a
revenue-producing activity.

The organization shall maintain records of its charitable contributions and donations
and of public meetings and events held on the property and make them available upon
request any time to the assessor to ensure eligibility. An organization meeting the
requirement under item (ii) must file an application by May 1 with the assessor for
eligibility for the current year's assessment. The commissioner shall prescribe a uniform
application form and instructions;

(4) postsecondary student housing of not more than one acre of land that is owned by
a nonprofit corporation organized under chapter 317A and is used exclusively by a student
cooperative, sorority, or fraternity for on-campus housing or housing located within two
miles of the border of a college campus;

(5) manufactured home parks as defined in section 327.14, subdivision 3;

(6) real property that is actively and exclusively devoted to indoor fitness, health,
social, recreational, and related uses, is owned and operated by a not-for-profit corporation,
and is located within the metropolitan area as defined in section 473.121, subdivision 2;

(7) a leased or privately owned noncommercial aircraft storage hangar not exempt
under section 272.01, subdivision 2, and the land on which it is located, provided that:

(i) the land is on an airport owned or operated by a city, town, county, Metropolitan
Airports Commission, or group thereof; and

(ii) the land lease, or any ordinance or signed agreement restricting the use of the
leased premise, prohibits commercial activity performed at the hangar.

If a hangar classified under this clause is sold after June 30, 2000, a bill of sale must
be filed by the new owner with the assessor of the county where the property is located
within 60 days of the sale;

(8) a privately owned noncommercial aircraft storage hangar not exempt under
section 272.01, subdivision 2, and the land on which it is located, provided that:

(i) the land abuts a public airport; and

(ii) the owner of the aircraft storage hangar provides the assessor with a signed
agreement restricting the use of the premises, prohibiting commercial use or activity
performed at the hangar; and

(9) residential real estate, a portion of which is used by the owner for homestead
purposes, and that is also a place of lodging, if all of the following criteria are met:

(i) rooms are provided for rent to transient guests that generally stay for periods
of 14 or fewer days;

(ii) meals are provided to persons who rent rooms, the cost of which is incorporated
in the basic room rate;

(iii) meals are not provided to the general public except for special events on fewer
than seven days in the calendar year preceding the year of the assessment; and

(iv) the owner is the operator of the property.

The market value subject to the 4c classification under this clause is limited to five rental
units. Any rental units on the property in excess of five, must be valued and assessed as
class 3a. The portion of the property used for purposes of a homestead by the owner must
be classified as class 1a property under subdivision 22; and

(10) real property up to a maximum of three acres and operated as a restaurant
as defined under section 157.15, subdivision 12, provided it: (A) is located on a lake
as defined under section 103G.005, subdivision 15, paragraph (a), clause (3); and (B)
is either devoted to commercial purposes for not more than 250 consecutive days, or
receives at least 60 percent of its annual gross receipts from business conducted during
four consecutive months. Gross receipts from the sale of alcoholic beverages must be
included in determining the property's qualification under subitem (B). The property's
primary business must be as a restaurant and not as a bar. Gross receipts from gift shop
sales located on the premises must be excluded. Owners of real property desiring 4c
classification under this clause must submit an annual declaration to the assessor by
February 1 of the current assessment year, based on the property's relevant information for
the preceding assessment year.

Class 4c property has a class rate of 1.5 percent of market value, except that (i) each
parcel of seasonal residential recreational property not used for commercial purposes has
the same class rates as class 4bb property, (ii) manufactured home parks assessed under
clause (5) have the same class rate as class 4b property, (iii) commercial-use seasonal
residential recreational property has a class rate of one percent for the first $500,000 of
market value, and 1.25 percent for the remaining market value, (iv) the market value of
property described in clause (4) has a class rate of one percent, (v) the market value of
property described in clauses (2), (6), and (10) has a class rate of 1.25 percent, and (vi)
that portion of the market value of property in clause (9) qualifying for class 4c property
has a class rate of 1.25 percent.

(e) Class 4d property is qualifying low-income rental housing certified to the assessor
by the Housing Finance Agency under section 273.128, subdivision 3. If only a portion
of the units in the building qualify as low-income rental housing units as certified under
section 273.128, subdivision 3, only the proportion of qualifying units to the total number
of units in the building qualify for class 4d. The remaining portion of the building shall be
classified by the assessor based upon its use. Class 4d also includes the same proportion of
land as the qualifying low-income rental housing units are to the total units in the building.
For all properties qualifying as class 4d, the market value determined by the assessor must
be based on the normal approach to value using normal unrestricted rents.

Class 4d property has a class rate of 0.75 percent.

EFFECTIVE DATE.

This section is effective for assessment year 2009 and
thereafter and for taxes payable in 2010 and thereafter.