HF 1962

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxation; property; reinstating the
low-income apartment property class; providing for
certifications of housing qualifying for the reduced
property class rate; providing civil penalties;
authorizing rulemaking; allowing exemption from formal
rulemaking for one year; amending Minnesota Statutes
2004, section 273.13, subdivision 25; proposing coding
for new law in Minnesota Statutes, chapters 273, 462A.

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

Section 1.

new text begin [273.126] QUALIFYING LOW-INCOME RENTAL
HOUSING.
new text end

new text begin Subdivision 1. new text end

new text begin Qualifying rules. new text end

new text begin The market value of a
rental housing unit qualifies for assessment under class 4d if:
new text end

new text begin (1) it is occupied by individuals meeting the income limits
under subdivision 2;
new text end

new text begin (2) a rent restriction agreement under subdivision 3
applies;
new text end

new text begin (3) the unit meets the minimum housing quality standards
under subdivision 4; and
new text end

new text begin (4) the Minnesota Housing Finance Agency certifies to the
local assessor that the unit qualifies.
new text end

new text begin Subd. 2. new text end

new text begin Income limits. new text end

new text begin (a) In order to qualify under
class 4d, a unit must be occupied by an individual or
individuals whose income is at or below 60 percent of the median
area gross income. If the resident's income met the requirement
when the resident first occupied the unit, the income of the
resident continues to qualify. If an individual first occupied
a unit before January 1, 2006, the individual's income for
purposes of the preceding sentence is the income for calendar
year 2005.
new text end

new text begin (b) For purposes of this section, "median area gross income"
means the median gross income for the area determined under
section 42 of the Internal Revenue Code of 1986, as amended
through December 31, 2004.
new text end

new text begin (c) The median gross income must be adjusted for family
size.
new text end

new text begin (d) Vacant units qualify as meeting the requirements of
this subdivision in the same proportion that total units in the
building are subject to rent restriction agreements under
subdivision 3 and meet minimum housing standards under
subdivision 4. This paragraph applies only to the extent that
units subject to a rent restriction agreement and meeting the
minimum housing quality standards are vacant.
new text end

new text begin (e) The owner or manager of the property may comply with
this subdivision by obtaining written statements from the
residents that their incomes are at or below the limit.
new text end

new text begin Subd. 3. new text end

new text begin Rent restrictions. new text end

new text begin (a) In order to qualify
under class 4d, a unit must be subject to a rent restriction
agreement with the Minnesota Housing Finance Agency for at least
five years. The agreement must be in effect and apply to the
rents to be charged for the year in which the property taxes are
payable. The agreement must provide that the restrictions apply
to each year of the period, regardless of whether the unit is
occupied by an individual with qualifying income or whether
class 4d applies. The rent restriction agreement must provide
for rents for the unit to be no higher than 30 percent of 60
percent of the median gross income. The definition of median
gross income specified in this section applies. "Rent" means
"gross rent" as defined in section 42(g)(2)(B) of the Internal
Revenue Code of 1986, as amended through December 31, 2004.
new text end

new text begin (b) Notwithstanding the maximum rent levels permitted, 20
percent of the units in the metropolitan area and ten percent of
the units in greater Minnesota qualifying under class 4d must be
made available to a family with a section 8 certificate or
voucher. For applications for class 4d made before July 1,
2004, the required percent of units for an applicant is
increased to 40 percent and the maximum rent that may be charged
on a unit occupied by a family with a section 8 certificate or
voucher is limited to the fair market rent for the area, as
established by the United States Department of Housing and Urban
Development, if within the five-year period ending January 2 of
the assessment year:
new text end

new text begin (1) 40 percent or more of the units in the project or
development were covered by a section 8 project-based housing
assistance contract and the contract has been canceled or no
longer applies; or
new text end

new text begin (2) the units were in a project or development financed
with a direct federal loan or federally insured loan made
pursuant to Title II of the National Housing Act and the loan
has been paid or prepaid, eliminating the restrictions on rents
under Title II of the National Housing Act.
new text end

new text begin (c) The rent restriction agreement runs with the land and
binds any successor to title to the property without regard to
whether the successor had actual notice or knowledge of the
agreement. The owner must promptly record the agreement in the
office of the county recorder or must file it in the office of
the registrar of titles in the county where the property is
located. If the agreement is not recorded, class 4d does not
apply to the property.
new text end

new text begin Subd. 4. new text end

new text begin Minimum housing standards. new text end

new text begin In order to qualify
under class 4d, a unit must be certified by the Minnesota
Housing Finance Agency to meet the minimum housing standards
established under section 462A.071.
new text end

new text begin Subd. 5. new text end

new text begin Monitoring rent levels. new text end

new text begin The Minnesota Housing
Finance Agency is directed to monitor changes in rent levels and
the use of section 8 certificates in units qualifying under
class 4d.
new text end

new text begin Subd. 6. new text end

new text begin Penalties. new text end

new text begin Notwithstanding the provisions of
section 273.01 or 274.01 or any other law, if the Minnesota
Housing Finance Agency notifies the assessor that the provisions
of this section have not been met for any period during which a
unit was classified under class 4d, a penalty is imposed as
provided in section 462A.071, subdivision 8.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2006 and thereafter, for taxes payable in 2007 and
thereafter.
new text end

Sec. 2.

Minnesota Statutes 2004, 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 new text begin , excluding a
property qualifying for class 4d new text end . 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 deleted text begin 1.8 percent for taxes
payable in 2002, 1.5 percent for taxes payable in 2003, and deleted text end 1.25
percent deleted text begin for taxes payable in 2004 and thereafter, except that
class 4a property consisting of a structure for which
construction commenced after June 30, 2001, has a class rate of
1.25 percent of market value for taxes payable in 2003 and
subsequent years deleted text end .

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

The market value of class 4b property has a class rate of
1.5 percent for taxes payable in 2002, and 1.25 percent for
taxes payable in 2003 and thereafter.

(c) Class 4bb includes:

(1) nonhomestead residential real estate containing one
unit, 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).

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),
real property devoted to temporary and seasonal residential
occupancy for recreation purposes, including real 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. In order for a property to be
classified as class 4c, seasonal residential recreational for
commercial purposes, 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. Class 4c
property classified in this clause also includes the remainder
of class 1c resorts provided that the entire property including
that portion of the property classified as class 1c also meets
the requirements for class 4c under this clause; otherwise the
entire property is classified as class 3. Owners of real
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 1c or 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 will be designated
class 1c or 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 1c or 4c property must
provide guest registers or other records demonstrating that the
units for which class 1c or 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, and (4) other
nonresidential facility operated on a commercial basis not
directly related to temporary and seasonal residential occupancy
for recreation purposes shall not qualify for class 1c or 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 one acre of land owned
by a nonprofit community service oriented organization; provided
that the property is not used for a revenue-producing activity
for more than six days in the calendar year preceding the year
of assessment and the property is not used for residential
purposes on either a temporary or permanent basis. For purposes
of this clause, 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 of 1986, as amended through December 31, 1990. For
purposes of this clause, "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 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;

(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; and

(8) 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.

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, which includes any market value
receiving the one percent rate under subdivision 22, 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) and (6) has a class rate of 1.25 percent, and (vi) that
portion of the market value of property in clause (8) qualifying
for class 4c property has a class rate of 1.25 percent.

new text begin (e) Class 4d property is qualifying low-income rental
housing certified to the assessor by the Minnesota Housing
Finance Agency under sections 273.126 and 462A.071. Class 4d
includes land in proportion to the total market value of the
building that is qualifying low-income rental housing. 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.
new text end

new text begin Class 4d property has a class rate of 0.55 percent of
market value.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2006 and thereafter, for taxes payable in 2007 and
thereafter.
new text end

Sec. 3.

new text begin [462A.071] CERTIFICATION OF HOUSING QUALIFYING
FOR REDUCED PROPERTY CLASS RATE.
new text end

new text begin Subdivision 1. new text end

new text begin Certification. new text end

new text begin By June 30 of each year,
the agency must certify to local assessors the units of
low-income rental properties that qualify for class 4d under
sections 273.126 and 273.13, subdivision 25. In making these
certifications, the agency may rely on the application and
supporting information supplied by the property owner as to
compliance with the income limits under section 273.126,
subdivision 2, and satisfaction of the minimum housing quality
standards under section 273.126, subdivision 4.
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin (a) In order to qualify for
certification under subdivision 1, the owner or manager of the
property must annually apply to the agency. The application
must be in the form prescribed by the agency, contain the
information required by the agency, and be submitted by the date
and time specified by the agency.
new text end

new text begin (b) Each application must include:
new text end

new text begin (1) the property tax identification number;
new text end

new text begin (2) the number, type, and size of units the applicant seeks
to qualify as low-income housing under class 4d;
new text end

new text begin (3) the number, type, and size of units in the property for
which the applicant is not seeking qualification, if any;
new text end

new text begin (4) a certification that the property has been inspected by
a qualified inspector within the past three years and meets the
minimum housing quality standards or is exempt from the
inspection requirement under subdivision 4;
new text end

new text begin (5) a statement indicating the qualifying units in
compliance with the income limits;
new text end

new text begin (6) an executed agreement to restrict rents meeting the
requirements specified by the agency or executed leases for the
units for which qualification as low-income housing as class 4d
under section 273.13 is sought and the rent schedule; and
new text end

new text begin (7) any additional information the agency deems appropriate
to require.
new text end

new text begin (c) The applicant must pay a per-unit application fee to be
set by the agency. The application fee charged by the agency
must approximately equal the costs of processing and reviewing
the applications. The fee must be deposited in the housing
development fund.
new text end

new text begin Subd. 3. new text end

new text begin Agreement to restrict rents. new text end

new text begin The agency may
prescribe one or more standard form agreements to restrict rents
that meet the requirements of section 273.126, subdivision 3.
The agreements must be in recordable form. The agency may
require applicants to execute a rent restriction agreement in
this form as a condition of entering an agreement to restrict
rents.
new text end

new text begin Subd. 4. new text end

new text begin Minimum housing quality standards. new text end

new text begin (a) To
qualify for taxation under class 4d under section 273.13,
subdivision 25, a unit must meet the housing maintenance code of
the local unit of government in which the unit is located, if
such a code has been adopted, or the housing quality standards
adopted by the United States Department of Housing and Urban
Development, if no local housing maintenance code has been
adopted.
new text end

new text begin (b) In order to meet the minimum housing quality standards,
a building must be inspected by an independent designated
inspector at least once every three years. The inspector must
certify that the building complies with the minimum standards.
The property owner must pay the cost of the inspection.
new text end

new text begin (c) The agency may exempt from the inspection requirement
housing units that are financed by a governmental entity and
subject to regular inspection or other compliance checks with
regard to minimum housing quality. Written certification must
be supplied to show that these exempt units have been inspected
within the last three years and comply with the requirements
under the public financing or local requirements.
new text end

new text begin Subd. 5. new text end

new text begin Housing inspectors. new text end

new text begin (a) Housing inspections
required by this section may be conducted only by persons
designated by the agency. The agency may designate one or more
persons to conduct inspections for all or part of the state. A
designated inspector may charge a fee for an inspection up to a
maximum amount approved by the agency. The inspector must be
independent of the owner or manager of the inspected property.
new text end

new text begin (b) The agency must maintain a list of persons eligible to
conduct housing inspections under this section.
new text end

new text begin Subd. 6. new text end

new text begin Section 8; tax credit; rural housing service
units. new text end

new text begin (a) The agency may deem units as meeting the
requirements of section 273.126 and this section if the units:
new text end

new text begin (1) are subject to a housing assistance payments contract
under section 8 of the United States Housing Act of 1937, as
amended;
new text end

new text begin (2) are rent and income restricted units of a qualified
low-income housing project receiving tax credits under section
42(g) of the Internal Revenue Code of 1986, as amended through
December 31, 2004; or
new text end

new text begin (3) are financed by the Rural Housing Service of the United
States Department of Agriculture and receive payments under the
rental assistance program pursuant to section 521(a) of the
Housing Act of 1949, as amended.
new text end

new text begin (b) The agency may certify these deemed units under
subdivision 1 based on a simplified application procedure that
verifies the unit's qualifications under paragraph (a).
new text end

new text begin Subd. 7. new text end

new text begin Monitoring compliance. new text end

new text begin (a) The agency must
monitor compliance by building owners with the requirements of
section 273.126 and this section. The agency must annually
conduct on-site examinations of a sample of the buildings
receiving class 4d taxation to monitor compliance. The agency
may contract with third parties to monitor compliance.
new text end

new text begin (b) An inspector designated by the agency under subdivision
5 shall notify the agency if, in conducting an inspection under
subdivision 4, the inspector finds that:
new text end

new text begin (1) a unit is receiving class 4d taxation;
new text end

new text begin (2) the unit is not in compliance with the requirements of
subdivision 4; and
new text end

new text begin (3) the owner or manager fails or refuses to cure the
violations within a reasonable time after receiving notification
of the violation.
new text end

new text begin Subd. 8. new text end

new text begin Penalties. new text end

new text begin (a) The penalties provided by this
subdivision apply to each unit that received class 4d taxation
for a year and failed to meet the requirements of section
273.126 and this section.
new text end

new text begin (b) If the owner or manager does not comply with the rent
restriction agreement or does not comply with the income
restrictions, minimum housing quality standards, or the section
8 availability requirements, a penalty applies equal to the
increased taxes that would have been imposed if the unit had not
been classified under class 4d for the year in which
restrictions were violated, plus an additional amount equal to
ten percent of the increased taxes. Section 279.03 applies to
the amount of increased taxes that would have been imposed if a
unit had not been classified under class 4d for the year in
which restrictions were violated.
new text end

new text begin (c) If the agency finds that the violations were
inadvertent and insubstantial, a penalty of $50 per unit per
year applies in lieu of the penalty specified under paragraph
(b). In order to qualify under this paragraph, violations of
the minimum housing quality standards must be corrected within a
reasonable period of time and rent charged in excess of the
agreement must be rebated to the tenants.
new text end

new text begin (d) The agency may abate the penalties under this
subdivision for reasonable cause.
new text end

new text begin (e) Penalties assessed under paragraph (c) are payable to
the agency and must be deposited in the housing development
fund. If an owner or manager fails to timely pay a penalty
imposed under paragraph (c), the agency may choose to:
new text end

new text begin (1) impose the penalty under paragraph (b); or
new text end

new text begin (2) certify the penalty under paragraph (c) to the auditor
for collection as additional taxes. The agency shall certify to
the county auditor penalties assessed under this clause and
paragraph (b). The auditor shall impose and collect the
certified penalties as additional taxes which will be
distributed to taxing districts in the same manner as property
taxes on the property.
new text end

new text begin Subd. 9. new text end

new text begin Tax court review. new text end

new text begin (a) An owner may appeal to
Tax Court as provided in section 271.06:
new text end

new text begin (1) a denial of a request for certification of a property
as qualifying for class 4d taxation;
new text end

new text begin (2) the imposition of a penalty under this section; or
new text end

new text begin (3) a denial of a request to abate a penalty.
new text end

new text begin (b) The county attorney shall represent the public in
opposing the appeal.
new text end

new text begin Subd. 10. new text end

new text begin Interagency contracting authority. new text end

new text begin The agency
may contract with the Department of Revenue or any other state
agency or a private entity to carry out administrative functions
under this section.
new text end

new text begin Subd. 11. new text end

new text begin Rulemaking. new text end

new text begin (a) The agency may adopt
administrative rules under chapter 14 to carry out the
provisions of this section, including establishing standards for
abating penalties, violations that are inadvertent and
insubstantial, selection of inspectors, selection of persons to
monitor compliance, and establishing rent restriction agreement
terms.
new text end

new text begin (b) Pending final rulemaking, and in order to implement
this section by January 1, 2006, the agency shall be allowed to
make determinations regarding selection of inspectors, rent
restriction agreement terms, fees, application information,
application deadlines, required documentation, exemptions from
inspection requirements, and deeming of eligibility. Any
determinations adopted under this authority expire on January 1,
2007.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end