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Minnesota Legislature

Office of the Revisor of Statutes

SF 526

as introduced - 91st Legislature (2019 - 2020) Posted on 01/28/2019 02:59pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - as introduced

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A bill for an act
relating to taxation; modifying the agricultural homestead rules for certain properties
owned by trusts; modifying provisions for service and filing of defense or objection
to real and personal property taxes; modifying provisions for relief for innocent
spouses for joint income tax returns; modifying qualified property provisions for
the estate tax;amending Minnesota Statutes 2018, sections 273.124, subdivisions
14, 21; 278.01, subdivision 1; 289A.31, subdivision 2; 291.03, subdivisions 9, 10.

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

Section 1.

Minnesota Statutes 2018, section 273.124, subdivision 14, is amended to read:


Subd. 14.

Agricultural homesteads; special provisions.

(a) Real estate of less than ten
acres that is the homestead of its owner must be classified as class 2a under section 273.13,
subdivision 23
, paragraph (a), if:

(1) the parcel on which the house is located is contiguous on at least two sides to (i)
agricultural land, (ii) land owned or administered by the United States Fish and Wildlife
Service, or (iii) land administered by the Department of Natural Resources on which in lieu
taxes are paid under sections 477A.11 to 477A.14;

(2) its owner also owns a noncontiguous parcel of agricultural land that is at least 20
acres;

(3) the noncontiguous land is located not farther than four townships or cities, or a
combination of townships or cities from the homestead; and

(4) the agricultural use value of the noncontiguous land and farm buildings is equal to
at least 50 percent of the market value of the house, garage, and one acre of land.

Homesteads initially classified as class 2a under the provisions of this paragraph shall
remain classified as class 2a, irrespective of subsequent changes in the use of adjoining
properties, as long as the homestead remains under the same ownership, the owner owns a
noncontiguous parcel of agricultural land that is at least 20 acres, and the agricultural use
value qualifies under clause (4). Homestead classification under this paragraph is limited
to property that qualified under this paragraph for the 1998 assessment.

(b)(i) Agricultural property shall be classified as the owner's homestead, to the same
extent as other agricultural homestead property, if all of the following criteria are met:

(1) the agricultural property consists of at least 40 acres including undivided government
lots and correctional 40's;

(2) the owner, the owner's spouse, or a grandchild, child, sibling, or parent of the owner
or of the owner's spouse, is actively farming the agricultural property, either on the person's
own behalf as an individual or on behalf of a partnership operating a family farm, family
farm corporation, joint family farm venture, or limited liability company of which the person
is a partner, shareholder, or member;

(3) both the owner of the agricultural property and the person who is actively farming
the agricultural property under clause (2), are Minnesota residents;

(4) neither the owner nor the spouse of the owner claims another agricultural homestead
in Minnesota; and

(5) neither the owner nor the person actively farming the agricultural property lives
farther than four townships or cities, or a combination of four townships or cities, from the
agricultural property, except that if the owner or the owner's spouse is required to live in
employer-provided housing, the owner or owner's spouse, whichever is actively farming
the agricultural property, may live more than four townships or cities, or combination of
four townships or cities from the agricultural property.

The relationship under this paragraph may be either by blood or marriage.

(ii) deleted text beginAgricultural property held by a trustee under a trust is eligible for agricultural
homestead classification under this paragraph if the qualifications in clause (i) are met,
except that "owner" means the grantor of the trust.
deleted text end

deleted text begin (iii)deleted text end Property containing the residence of an owner who owns qualified property under
clause (i) shall be classified as part of the owner's agricultural homestead, if that property
is also used for noncommercial storage or drying of agricultural crops.

deleted text begin (iv)deleted text endnew text begin (iii)new text end As used in this paragraph, "agricultural property" means class 2a property and
any class 2b property that is contiguous to and under the same ownership as the class 2a
property.

(c) Noncontiguous land shall be included as part of a homestead under section 273.13,
subdivision 23
, paragraph (a), only if the homestead is classified as class 2a and the detached
land is located in the same township or city, or not farther than four townships or cities or
combination thereof from the homestead. Any taxpayer of these noncontiguous lands must
notify the county assessor that the noncontiguous land is part of the taxpayer's homestead,
and, if the homestead is located in another county, the taxpayer must also notify the assessor
of the other county.

(d) Agricultural land used for purposes of a homestead and actively farmed by a person
holding a vested remainder interest in it must be classified as a homestead under section
273.13, subdivision 23, paragraph (a). If agricultural land is classified class 2a, any other
dwellings on the land used for purposes of a homestead by persons holding vested remainder
interests who are actively engaged in farming the property, and up to one acre of the land
surrounding each homestead and reasonably necessary for the use of the dwelling as a home,
must also be assessed class 2a.

(e) Agricultural land and buildings that were class 2a homestead property under section
273.13, subdivision 23, paragraph (a), for the 1997 assessment shall remain classified as
agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of the April 1997 floods;

(2) the property is located in the county of Polk, Clay, Kittson, Marshall, Norman, or
Wilkin;

(3) the agricultural land and buildings remain under the same ownership for the current
assessment year as existed for the 1997 assessment year and continue to be used for
agricultural purposes;

(4) the dwelling occupied by the owner is located in Minnesota and is within 30 miles
of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the 1997 floods,
and the owner furnishes the assessor any information deemed necessary by the assessor in
verifying the change in dwelling. Further notifications to the assessor are not required if the
property continues to meet all the requirements in this paragraph and any dwellings on the
agricultural land remain uninhabited.

(f) Agricultural land and buildings that were class 2a homestead property under section
273.13, subdivision 23, paragraph (a), for the 1998 assessment shall remain classified
agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of damage caused by a March 29, 1998, tornado;

(2) the property is located in the county of Blue Earth, Brown, Cottonwood, LeSueur,
Nicollet, Nobles, or Rice;

(3) the agricultural land and buildings remain under the same ownership for the current
assessment year as existed for the 1998 assessment year;

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of
one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to a March 29,
1998, tornado, and the owner furnishes the assessor any information deemed necessary by
the assessor in verifying the change in homestead dwelling. For taxes payable in 1999, the
owner must notify the assessor by December 1, 1998. Further notifications to the assessor
are not required if the property continues to meet all the requirements in this paragraph and
any dwellings on the agricultural land remain uninhabited.

(g) Agricultural property of a family farm corporation, joint family farm venture, family
farm limited liability company, or partnership operating a family farm as described under
subdivision 8 shall be classified homestead, to the same extent as other agricultural homestead
property, if all of the following criteria are met:

(1) the property consists of at least 40 acres including undivided government lots and
correctional 40's;

(2) a shareholder, member, or partner of that entity is actively farming the agricultural
property;

(3) that shareholder, member, or partner who is actively farming the agricultural property
is a Minnesota resident;

(4) neither that shareholder, member, or partner, nor the spouse of that shareholder,
member, or partner claims another agricultural homestead in Minnesota; and

(5) that shareholder, member, or partner does not live farther than four townships or
cities, or a combination of four townships or cities, from the agricultural property.

Homestead treatment applies under this paragraph for property leased to a family farm
corporation, joint farm venture, limited liability company, or partnership operating a family
farm if legal title to the property is in the name of an individual who is a member, shareholder,
or partner in the entity.

(h) To be eligible for the special agricultural homestead under this subdivision, an initial
full application must be submitted to the county assessor where the property is located.
Owners and the persons who are actively farming the property shall be required to complete
only a one-page abbreviated version of the application in each subsequent year provided
that none of the following items have changed since the initial application:

(1) the day-to-day operation, administration, and financial risks remain the same;

(2) the owners and the persons actively farming the property continue to live within the
four townships or city criteria and are Minnesota residents;

(3) the same operator of the agricultural property is listed with the Farm Service Agency;

(4) a Schedule F or equivalent income tax form was filed for the most recent year;

(5) the property's acreage is unchanged; and

(6) none of the property's acres have been enrolled in a federal or state farm program
since the initial application.

The owners and any persons who are actively farming the property must include the
appropriate Social Security numbers, and sign and date the application. If any of the specified
information has changed since the full application was filed, the owner must notify the
assessor, and must complete a new application to determine if the property continues to
qualify for the special agricultural homestead. The commissioner of revenue shall prepare
a standard reapplication form for use by the assessors.

(i) Agricultural land and buildings that were class 2a homestead property under section
273.13, subdivision 23, paragraph (a), for the 2007 assessment shall remain classified
agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of damage caused by the August 2007 floods;

(2) the property is located in the county of Dodge, Fillmore, Houston, Olmsted, Steele,
Wabasha, or Winona;

(3) the agricultural land and buildings remain under the same ownership for the current
assessment year as existed for the 2007 assessment year;

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of
one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the August 2007
floods, and the owner furnishes the assessor any information deemed necessary by the
assessor in verifying the change in homestead dwelling. For taxes payable in 2009, the
owner must notify the assessor by December 1, 2008. Further notifications to the assessor
are not required if the property continues to meet all the requirements in this paragraph and
any dwellings on the agricultural land remain uninhabited.

(j) Agricultural land and buildings that were class 2a homestead property under section
273.13, subdivision 23, paragraph (a), for the 2008 assessment shall remain classified as
agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of the March 2009 floods;

(2) the property is located in the county of Marshall;

(3) the agricultural land and buildings remain under the same ownership for the current
assessment year as existed for the 2008 assessment year and continue to be used for
agricultural purposes;

(4) the dwelling occupied by the owner is located in Minnesota and is within 50 miles
of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the 2009 floods,
and the owner furnishes the assessor any information deemed necessary by the assessor in
verifying the change in dwelling. Further notifications to the assessor are not required if the
property continues to meet all the requirements in this paragraph and any dwellings on the
agricultural land remain uninhabited.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning for property taxes payable in
2020.
new text end

Sec. 2.

Minnesota Statutes 2018, section 273.124, subdivision 21, is amended to read:


Subd. 21.

Trust property; homestead.

Real or personal propertynew text begin, including agricultural
property,
new text end held by a trustee under a trust is eligible for classification as homestead property
if the property satisfies the requirements of paragraph (a), (b), (c), deleted text beginordeleted text end (d)new text begin, or (e)new text end.

(a) The grantor or surviving spouse of the grantor of the trust occupies and uses the
property as a homestead.

(b) A relative or surviving relative of the grantor who meets the requirements of
subdivision 1, paragraph (c), in the case of residential real estate; or subdivision 1, paragraph
(d), in the case of agricultural property, occupies and uses the property as a homestead.

(c) A family farm corporation, joint farm venture, limited liability company, or partnership
operating a family farm in which the grantor or the grantor's surviving spouse is a
shareholder, member, or partner rents the property; and, either (1) a shareholder, member,
or partner of the corporation, joint farm venture, limited liability company, or partnership
occupies and uses the property as a homestead; or (2) the property is at least 40 acres,
including undivided government lots and correctional 40's, and a shareholder, member, or
partner of the tenant-entity is actively farming the property on behalf of the corporation,
joint farm venture, limited liability company, or partnership.

(d) A person who has received homestead classification for property taxes payable in
2000 on the basis of an unqualified legal right under the terms of the trust agreement to
occupy the property as that person's homestead and who continues to use the property as a
homestead; or, a person who received the homestead classification for taxes payable in 2005
under paragraph (c) who does not qualify under paragraph (c) for taxes payable in 2006 or
thereafter but who continues to qualify under paragraph (c) as it existed for taxes payable
in 2005.

new text begin (e) The qualifications under subdivision 14, paragraph (b), clause (i), are met. For
purposes of this paragraph, "owner" means the grantor of the trust or the surviving spouse
of the grantor.
new text end

new text begin (f) For purposes of this subdivision, the following terms have the meanings given them:
new text end

new text begin (1) "agricultural property" means the house, garage, other farm buildings and structures,
and agricultural land;
new text end

new text begin (2) "agricultural land" has the meaning given in section 273.13, subdivision 23, except
that the phrases "owned by same person" or "under the same ownership" as used in that
subdivision mean and include contiguous tax parcels owned by:
new text end

new text begin (i) an individual and a trust of which the individual, the individual's spouse, or the
individual's deceased spouse is the grantor; or
new text end

new text begin (ii) different trusts of which the grantors of each trust are any combination of an
individual, the individual's spouse, or the individual's deceased spouse; and
new text end

deleted text begin For purposes of this subdivision,deleted text endnew text begin (3)new text end "grantor" deleted text beginis defined asdeleted text endnew text begin meansnew text end the person creating
or establishing a testamentary, inter Vivos, revocable or irrevocable trust by written
instrument or through the exercise of a power of appointment.

new text begin (g) Noncontiguous land is included as part of a homestead under this subdivision, only
if the homestead is classified as class 2a, as defined in section 273.13, subdivision 23, and
the detached land is located in the same township or city, or not farther than four townships
or cities or combination thereof from the homestead. Any taxpayer of these noncontiguous
lands must notify the county assessor that the noncontiguous land is part of the taxpayer's
homestead, and, if the homestead is located in another county, the taxpayer must also notify
the assessor of the other county.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning for property taxes payable in
2020.
new text end

Sec. 3.

Minnesota Statutes 2018, section 278.01, subdivision 1, is amended to read:


Subdivision 1.

Determination of validity.

(a) Any person having personal property, or
any estate, right, title, or interest in or lien upon any parcel of land, who claims that such
property has been partially, unfairly, or unequally assessed in comparison with other property
in the (1) city, or (2) county, or (3) in the case of a county containing a city of the first class,
the portion of the county excluding the first class city, or that the parcel has been assessed
at a valuation greater than its real or actual value, or that the tax levied against the same is
illegal, in whole or in part, or has been paid, or that the property is exempt from the tax so
levied, may have the validity of the claim, defense, or objection determined by the district
court of the county in which the tax is levied or by the Tax Court by serving one copy of a
petition for such determination upon the county auditornew text begin. new text enddeleted text begin, one copy on the county attorney,
one copy on the county treasurer, and three copies on the county assessor. The county
assessor shall immediately forward one copy of the petition to the appropriate governmental
authority in a home rule charter or statutory city or town in which the property is located if
that city or town employs its own certified assessor. A copy of the petition shall also be
forwarded by the assessor to the school board of the school district in which the property
is located.
deleted text end

deleted text begin (b) In counties where the office of county treasurer has been combined with the office
of county auditor, the county may elect to require the petitioner to serve the number of
copies as determined by the county. The county assessor shall immediately forward one
copy of the petition to the appropriate governmental authority in a home rule charter or
statutory city or town in which the property is located if that city or town employs its own
certified assessor. A list of petitioned properties, including the name of the petitioner, the
identification number of the property, and the estimated market value, shall be sent on or
before the first day of July by the county auditor/treasurer to the school board of the school
district in which the property is located.
deleted text end

deleted text begin (c)deleted text endnew text begin (b)new text end For all counties, the petitioner must file the deleted text begincopiesdeleted text endnew text begin copynew text end with proof of service, in
the office of the court administrator of the district court on or before April 30 of the year
in which the tax becomes payable. A petition for determination under this section may be
transferred by the district court to the Tax Court. An appeal may also be taken to the Tax
Court under chapter 271 at any time following receipt of the valuation notice that county
assessors or city assessors having the powers of a county assessor are required by section
273.121 to send to persons whose property is to be included on the assessment roll that year,
but prior to May 1 of the year in which the taxes are payable.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2019.
new text end

Sec. 4.

Minnesota Statutes 2018, section 289A.31, subdivision 2, is amended to read:


Subd. 2.

Joint income tax returns.

(a) If a joint income tax return is made by a husband
and wife, the liability for the tax is joint and several. A spouse who qualifies for relief from
a liability attributable to an underpayment under section 6015new text begin subsection new text end(b)new text begin or (f)new text end of the
Internal Revenue Code is relieved of the state income tax liability on the underpayment.

(b) In the case of individuals who were a husband and wife prior to the dissolution of
their marriage or their legal separation, or prior to the death of one of the individuals, for
tax liabilities reported on a joint or combined return, the liability of each person is limited
to the proportion of the tax due on the return that equals that person's proportion of the total
tax due if the husband and wife filed separate returns for the taxable year. This provision
is effective only when the commissioner receives written notice of the marriage dissolution,
legal separation, or death of a spouse from the husband or wife. No refund may be claimed
by an ex-spouse, legally separated or widowed spouse for any taxes paid more than 60 days
before receipt by the commissioner of the written notice.

(c) deleted text beginA request for calculation of separate liability pursuant to paragraph (b) for taxes
reported on a return must be made within six years after the due date of the return. For
calculation of separate liability for taxes assessed by the commissioner under section 289A.35
or 289A.37, the request must be made within six years after the date of assessment.
deleted text end The
commissioner is not required to calculate separate liabilitynew text begin pursuant to paragraph (b)new text end if the
remaining unpaid liability for which recalculation is requested is $100 or less.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns first due for taxable years
beginning after December 31, 2018.
new text end

Sec. 5.

Minnesota Statutes 2018, section 291.03, subdivision 9, is amended to read:


Subd. 9.

Qualified small business property.

Property satisfying all of the following
requirements is qualified small business property:

(1) The value of the property was included in the federal adjusted taxable estate.

(2) The property consists of the assets of a trade or business or shares of stock or other
ownership interests in a corporation or other entity engaged in a trade or business. Shares
of stock in a corporation or an ownership interest in another type of entity do not qualify
under this subdivision if the shares or ownership interests are traded on a public stock
exchange at any time during the three-year period ending on the decedent's date of death.
For purposes of this subdivision, an ownership interest includes the interest the decedent is
deemed to own under sections 2036, 2037, deleted text beginanddeleted text end 2038new text begin, 2040, or 2044new text end of the Internal Revenue
Code.

(3) During the taxable year that ended before the decedent's death, the trade or business
must not have been a passive activity within the meaning of section 469(c) of the Internal
Revenue Code, and the decedent or the decedent's spouse must have materially participated
in the trade or business within the meaning of section 469(h) of the Internal Revenue Code,
excluding section 469(h)(3) of the Internal Revenue Code and any other provision provided
by United States Treasury Department regulation that substitutes material participation in
prior taxable years for material participation in the taxable year that ended before the
decedent's death.

(4) The gross annual sales of the trade or business were $10,000,000 or less for the last
taxable year that ended before the date of the death of the decedent.

(5) The property does not include:

(i) cash;

(ii) cash equivalents;

(iii) publicly traded securities; or

(iv) any assets not used in the operation of the trade or business.

(6) For property consisting of shares of stock or other ownership interests in an entity,
the value of items described in clause (5) must be excluded in the valuation of the decedent's
interest in the entity.

(7) The decedentnew text begin or the decedent's spousenew text end continuously owned the property,new text begin or an
undivided or joint interest in the property,
new text end including property the decedentnew text begin or the decedent's
spouse
new text end is deemed to own under sections 2036, 2037, deleted text beginanddeleted text end 2038new text begin, 2040, or 2044new text end of the Internal
Revenue Code,new text begin or under subdivision 1d,new text end for the three-year period ending on the date of
death of the decedent. In the case of a sole proprietor, if the property replaced similar property
within the three-year period, the replacement property will be treated as having been owned
for the three-year period ending on the date of death of the decedent.new text begin For the purposes of
the three-year holding period under this clause, any ownership by the decedent's spouse,
whether the spouse predeceases or survives the decedent, is attributed to the decedent.
new text end

(8) For three years following the date of death of the decedent, the trade or business is
not a passive activity within the meaning of section 469(c) of the Internal Revenue Code,
and a family member materially participates in the operation of the trade or business within
the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3)
of the Internal Revenue Code and any other provision provided by United States Treasury
Department regulation that substitutes material participation in prior taxable years for
material participation in the three years following the date of death of the decedent.

(9) The estate and the qualified heir elect to treat the property as qualified small business
property and agree, in the form prescribed by the commissioner, to pay the recapture tax
under subdivision 11, if applicable.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after December 31, 2017.
new text end

Sec. 6.

Minnesota Statutes 2018, section 291.03, subdivision 10, is amended to read:


Subd. 10.

Qualified farm property.

Property satisfying all of the following requirements
is qualified farm property:

(1) The value of the property was included in the federal adjusted taxable estate.

(2) The property consists of agricultural land and is owned by a person or entity that is
either not subject to or is in compliance with section 500.24.

(3) For property taxes payable in the taxable year of the decedent's death, the property
is classified as class 2a property under section 273.13, subdivision 23, and is classified as
agricultural homestead, agricultural relative homestead, or special agricultural homestead
under section 273.124.

(4) The decedentnew text begin or the decedent's spousenew text end continuously owned the property,new text begin or an
undivided or joint interest in the property,
new text end including property the decedentnew text begin or the decedent's
spouse
new text end is deemed to own under sections 2036, 2037, deleted text beginanddeleted text end 2038new text begin, 2040, or 2044new text end of the Internal
Revenue Code,new text begin or under subdivision 1d,new text end for the three-year period ending on the date of
death of the decedent either by ownership of the agricultural land or pursuant to holding an
interest in an entity that is not subject to or is in compliance with section 500.24.new text begin For the
purposes of the three-year holding period under this clause, any ownership by the decedent's
spouse, whether the spouse predeceases or survives the decedent, is attributed to the decedent.
new text end

(5) The property is classified for property tax purposes as class 2a property under section
273.13, subdivision 23, for three years following the date of death of the decedent.

(6) The estate and the qualified heir elect to treat the property as qualified farm property
and agree, in a form prescribed by the commissioner, to pay the recapture tax under
subdivision 11, if applicable.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after December 31, 2017.
new text end