HF 2395

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

A bill for an act
relating to taxation; property; reestablishing a
low-income apartment property class; amending
Minnesota Statutes 2004, section 273.13, subdivision
25; proposing coding for new law in Minnesota
Statutes, chapter 273.

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

Section 1.

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 section 273.1321. Class 4d property
includes land in proportion to the total market value of the
building that is qualifying low-income rental housing. 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. 2.

new text begin [273.1321] VALUATION OF LOW-INCOME RENTAL
PROPERTY; CAPITALIZED VALUE OF NET OPERATING INCOME.
new text end

new text begin Subdivision 1. new text end

new text begin Requirement. new text end

new text begin Low-income rental property
classified as class 4d under section 273.13, subdivision 25, is
entitled to valuation under this section if at least 75 percent
of the units in the rental housing property meet any of the
following qualifications:
new text end

new text begin (1) the units 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) the units are rent-restricted 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;
new text end

new text begin (3) the units 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; or
new text end

new text begin (4) the units are subject to rent and income restrictions
under the terms of financial assistance provided to the rental
housing property by a federal, state, or local unit of
government as evidenced by a document recorded against the
property.
new text end

new text begin The restrictions must require assisted units to be occupied
by residents whose household income at the time of initial
occupancy does not exceed 60 percent of the greater of area or
state median income, adjusted for family size, as determined by
the United States Department of Housing and Urban Development.
The restriction must also require the rents for assisted units
to not exceed 30 percent of 60 percent of the greater of area or
state median income, adjusted for family size, as determined by
the United States Department of Housing and Urban Development.
new text end

new text begin Subd. 2. new text end

new text begin Determination of value. new text end

new text begin (a) The value of any
rental housing property meeting the qualifications of
subdivision 1 shall be determined, upon timely application by
the owner in the manner provided in subdivision 3, on the basis
of the restricted use of the property, notwithstanding sections
272.03, subdivision 8, and 273.11, by capitalizing the net
operating income prior to the payment of debt service.
new text end

new text begin (b) Net operating income prior to payment of debt service
must be the amounts shown in a financial statement prepared by
an independent certified public accountant or firm. The
financial statement must show the revenues, expenses, cash
flows, assets, liabilities, and net assets for the property for
which an application is made under this section.
new text end

new text begin (c) The capitalization rate applied to net operating income
shall be established jointly by the commissioner and the Housing
Finance Agency based on market data and industry standards. The
commissioner and the Housing Finance Agency shall jointly
establish separate rates based on types of rental housing
properties and their locations.
new text end

new text begin Subd. 3. new text end

new text begin Application. new text end

new text begin (a) Application for assessment
under this section must be filed by February 28 of the levy
year, or at a later date the Housing Finance Agency deems
practicable. The application must be filed with the Housing
Finance Agency, on a form prescribed by the agency, and must
contain the information required 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) evidence that the property meets the requirements of
subdivision 1; and
new text end

new text begin (3) a true and correct copy of the financial statement
related to the property.
new text end

new text begin (c) The applicant must pay an application fee to be set by
the Housing Finance 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. 4. new text end

new text begin Certification. new text end

new text begin By June 1 of each levy year, the
Housing Finance Agency must certify to local assessors the
valuation, as determined under this section, of rental
properties that apply and are qualified for valuation under this
section. In making the certification, the agency may rely on
the application and supporting information supplied by the
property owner.
new text end

new text begin EFFECTIVE DATE. new text end

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