as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to taxation; increasing the class rate on 1.3 certain vacant commercial, industrial, or residential 1.4 property; providing for appeals of classification; 1.5 amending Minnesota Statutes 2002, sections 273.13, 1.6 subdivisions 24, 25; 274.01, by adding a subdivision. 1.7 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.8 Section 1. Minnesota Statutes 2002, section 273.13, 1.9 subdivision 24, is amended to read: 1.10 Subd. 24. [CLASS 3.] (a) Except as provided in paragraph 1.11 (b) or (c), commercial and industrial property and utility real 1.12 and personal property is class 3a. 1.13 (1) Except as otherwise provided, each parcel of 1.14 commercial, industrial, or utility real property has a class 1.15 rate of 1.5 percent of the first tier of market value, and 2.0 1.16 percent of the remaining market value. In the case of 1.17 contiguous parcels of property owned by the same person or 1.18 entity, only the value equal to the first-tier value of the 1.19 contiguous parcels qualifies for the reduced class rate, except 1.20 that contiguous parcels owned by the same person or entity shall 1.21 be eligible for the first-tier value class rate on each separate 1.22 business operated by the owner of the property, provided the 1.23 business is housed in a separate structure. For the purposes of 1.24 this subdivision, the first tier means the first $150,000 of 1.25 market value. Real property owned in fee by a utility for 1.26 transmission line right-of-way shall be classified at the class 2.1 rate for the higher tier. 2.2 For purposes of this subdivision, parcels are considered to 2.3 be contiguous even if they are separated from each other by a 2.4 road, street, waterway, or other similar intervening type of 2.5 property. Connections between parcels that consist of power 2.6 lines or pipelines do not cause the parcels to be contiguous. 2.7 Property owners who have contiguous parcels of property that 2.8 constitute separate businesses that may qualify for the 2.9 first-tier class rate shall notify the assessor by July 1, for 2.10 treatment beginning in the following taxes payable year. 2.11 (2) All personal property that is: (i) part of an electric 2.12 generation, transmission, or distribution system; or (ii) part 2.13 of a pipeline system transporting or distributing water, gas, 2.14 crude oil, or petroleum products; and (iii) not described in 2.15 clause (3), and all railroad operating property has a class rate 2.16 as provided under clause (1) for the first tier of market value 2.17 and the remaining market value. In the case of multiple parcels 2.18 in one county that are owned by one person or entity, only one 2.19 first tier amount is eligible for the reduced rate. 2.20 (3) The entire market value of personal property that is: 2.21 (i) tools, implements, and machinery of an electric generation, 2.22 transmission, or distribution system; (ii) tools, implements, 2.23 and machinery of a pipeline system transporting or distributing 2.24 water, gas, crude oil, or petroleum products; or (iii) the mains 2.25 and pipes used in the distribution of steam or hot or chilled 2.26 water for heating or cooling buildings, has a class rate as 2.27 provided under clause (1) for the remaining market value in 2.28 excess of the first tier. 2.29 (b) Employment property defined in section 469.166, during 2.30 the period provided in section 469.170, shall constitute class 2.31 3b. The class rates for class 3b property are determined under 2.32 paragraph (a). 2.33 (c) Commercial and industrial property or residential 2.34 property is class 3c if it includes a structure that has, for at 2.35 least two years before the assessment date, been vacant or 2.36 substantially underutilized, and constitutes a blighting 3.1 influence. For purposes of this paragraph, the following terms 3.2 have the meanings given: (1) "Substantially underutilized" 3.3 means having at least 50 percent of its area either unoccupied, 3.4 illegally occupied, or occupied by tenants who pay no rent or 3.5 rent in an amount that is less than 50 percent of the typical 3.6 rent for a comparable property in that municipality or, if the 3.7 municipality does not contain enough comparable properties to 3.8 make a reasonable comparison, for comparable properties in that 3.9 county. (2) A building is considered "vacant" if it is 3.10 unoccupied and unsecured, or secured by other than normal means; 3.11 condemned, dangerous, or having multiple housing or building 3.12 code violations; condemned and illegally occupied; or unoccupied 3.13 for a period of over 365 days, during which time the enforcement 3.14 officer for the municipality has issued an order to correct 3.15 nuisance conditions. (3) A property is considered to 3.16 "constitute a blighting influence" if it is determined by the 3.17 assessor, with the advice of the local redevelopment, code 3.18 enforcement, or other municipal official designated by the 3.19 governing body of the municipality, to require substantial 3.20 investment to arrest a reduction in its value, which has a 3.21 negative effect on the value of surrounding properties. 3.22 Property that would otherwise be classified as class 3c 3.23 property shall be exempted from this classification if the 3.24 property owner can provide evidence satisfactorily to the 3.25 assessor that a good-faith effort is being made to market the 3.26 property for sale. A good-faith effort may be demonstrated by 3.27 the owner by providing evidence that the owner is actively 3.28 marketing the property by listing it for sale or lease. 3.29 The class rate for class 3c property is five percent. 3.30 [EFFECTIVE DATE.] This section is effective for taxes 3.31 payable in 2005 and thereafter. 3.32 Sec. 2. Minnesota Statutes 2002, section 273.13, 3.33 subdivision 25, is amended to read: 3.34 Subd. 25. [CLASS 4.] (a) Class 4a is residential real 3.35 estate containing four or more units and used or held for use by 3.36 the owner or by the tenants or lessees of the owner as a 4.1 residence for rental periods of 30 days or more. Class 4a also 4.2 includes hospitals licensed under sections 144.50 to 144.56, 4.3 other than hospitals exempt under section 272.02, and contiguous 4.4 property used for hospital purposes, without regard to whether 4.5 the property has been platted or subdivided. The market value 4.6 of class 4a property has a class rate of 1.8 percent for taxes 4.7 payable in 2002, 1.5 percent for taxes payable in 2003, and 1.25 4.8 percent for taxes payable in 2004 and thereafter, except that 4.9 class 4a property consisting of a structure for which 4.10 construction commenced after June 30, 2001, has a class rate of 4.11 1.25 percent of market value for taxes payable in 2003 and 4.12 subsequent years. 4.13 (b) Class 4b includes: 4.14 (1) residential real estate containing less than four units 4.15 that does not qualify as class 4bb, other than seasonal 4.16 residential, and recreational; 4.17 (2) manufactured homes not classified under any other 4.18 provision; 4.19 (3) a dwelling, garage, and surrounding one acre of 4.20 property on a nonhomestead farm classified under subdivision 23, 4.21 paragraph (b) containing two or three units; 4.22 (4) unimproved property that is classified residential as 4.23 determined under subdivision 33. 4.24 The market value of class 4b property has a class rate of 4.25 1.5 percent for taxes payable in 2002, and 1.25 percent for 4.26 taxes payable in 2003 and thereafter. 4.27 (c) Class 4bb includes: 4.28 (1) nonhomestead residential real estate containing one 4.29 unit, other than seasonal residential, and recreational; and 4.30 (2) a single family dwelling, garage, and surrounding one 4.31 acre of property on a nonhomestead farm classified under 4.32 subdivision 23, paragraph (b). 4.33 Class 4bb property has the same class rates as class 1a 4.34 property under subdivision 22. 4.35 Property that has been classified as seasonal recreational 4.36 residential property at any time during which it has been owned 5.1 by the current owner or spouse of the current owner does not 5.2 qualify for class 4bb. 5.3 (d) Class 4c property includes: 5.4 (1) except as provided in subdivision 22, paragraph (c), 5.5 real property devoted to temporary and seasonal residential 5.6 occupancy for recreation purposes, including real property 5.7 devoted to temporary and seasonal residential occupancy for 5.8 recreation purposes and not devoted to commercial purposes for 5.9 more than 250 days in the year preceding the year of 5.10 assessment. For purposes of this clause, property is devoted to 5.11 a commercial purpose on a specific day if any portion of the 5.12 property is used for residential occupancy, and a fee is charged 5.13 for residential occupancy. In order for a property to be 5.14 classified as class 4c, seasonal recreational residential for 5.15 commercial purposes, at least 40 percent of the annual gross 5.16 lodging receipts related to the property must be from business 5.17 conducted during 90 consecutive days and either (i) at least 60 5.18 percent of all paid bookings by lodging guests during the year 5.19 must be for periods of at least two consecutive nights; or (ii) 5.20 at least 20 percent of the annual gross receipts must be from 5.21 charges for rental of fish houses, boats and motors, 5.22 snowmobiles, downhill or cross-country ski equipment, or charges 5.23 for marina services, launch services, and guide services, or the 5.24 sale of bait and fishing tackle. For purposes of this 5.25 determination, a paid booking of five or more nights shall be 5.26 counted as two bookings. Class 4c also includes commercial use 5.27 real property used exclusively for recreational purposes in 5.28 conjunction with class 4c property devoted to temporary and 5.29 seasonal residential occupancy for recreational purposes, up to 5.30 a total of two acres, provided the property is not devoted to 5.31 commercial recreational use for more than 250 days in the year 5.32 preceding the year of assessment and is located within two miles 5.33 of the class 4c property with which it is used. Class 4c 5.34 property classified in this clause also includes the remainder 5.35 of class 1c resorts provided that the entire property including 5.36 that portion of the property classified as class 1c also meets 6.1 the requirements for class 4c under this clause; otherwise the 6.2 entire property is classified as class 3. Owners of real 6.3 property devoted to temporary and seasonal residential occupancy 6.4 for recreation purposes and all or a portion of which was 6.5 devoted to commercial purposes for not more than 250 days in the 6.6 year preceding the year of assessment desiring classification as 6.7 class 1c or 4c, must submit a declaration to the assessor 6.8 designating the cabins or units occupied for 250 days or less in 6.9 the year preceding the year of assessment by January 15 of the 6.10 assessment year. Those cabins or units and a proportionate 6.11 share of the land on which they are located will be designated 6.12 class 1c or 4c as otherwise provided. The remainder of the 6.13 cabins or units and a proportionate share of the land on which 6.14 they are located will be designated as class 3a. The owner of 6.15 property desiring designation as class 1c or 4c property must 6.16 provide guest registers or other records demonstrating that the 6.17 units for which class 1c or 4c designation is sought were not 6.18 occupied for more than 250 days in the year preceding the 6.19 assessment if so requested. The portion of a property operated 6.20 as a (1) restaurant, (2) bar, (3) gift shop, and (4) other 6.21 nonresidential facility operated on a commercial basis not 6.22 directly related to temporary and seasonal residential occupancy 6.23 for recreation purposes shall not qualify for class 1c or 4c; 6.24 (2) qualified property used as a golf course if: 6.25 (i) it is open to the public on a daily fee basis. It may 6.26 charge membership fees or dues, but a membership fee may not be 6.27 required in order to use the property for golfing, and its green 6.28 fees for golfing must be comparable to green fees typically 6.29 charged by municipal courses; and 6.30 (ii) it meets the requirements of section 273.112, 6.31 subdivision 3, paragraph (d). 6.32 A structure used as a clubhouse, restaurant, or place of 6.33 refreshment in conjunction with the golf course is classified as 6.34 class 3a property; 6.35 (3) real property up to a maximum of one acre of land owned 6.36 by a nonprofit community service oriented organization; provided 7.1 that the property is not used for a revenue-producing activity 7.2 for more than six days in the calendar year preceding the year 7.3 of assessment and the property is not used for residential 7.4 purposes on either a temporary or permanent basis. For purposes 7.5 of this clause, a "nonprofit community service oriented 7.6 organization" means any corporation, society, association, 7.7 foundation, or institution organized and operated exclusively 7.8 for charitable, religious, fraternal, civic, or educational 7.9 purposes, and which is exempt from federal income taxation 7.10 pursuant to section 501(c)(3), (10), or (19) of the Internal 7.11 Revenue Code of 1986, as amended through December 31, 1990. For 7.12 purposes of this clause, "revenue-producing activities" shall 7.13 include but not be limited to property or that portion of the 7.14 property that is used as an on-sale intoxicating liquor or 3.2 7.15 percent malt liquor establishment licensed under chapter 340A, a 7.16 restaurant open to the public, bowling alley, a retail store, 7.17 gambling conducted by organizations licensed under chapter 349, 7.18 an insurance business, or office or other space leased or rented 7.19 to a lessee who conducts a for-profit enterprise on the 7.20 premises. Any portion of the property which is used for 7.21 revenue-producing activities for more than six days in the 7.22 calendar year preceding the year of assessment shall be assessed 7.23 as class 3a. The use of the property for social events open 7.24 exclusively to members and their guests for periods of less than 7.25 24 hours, when an admission is not charged nor any revenues are 7.26 received by the organization shall not be considered a 7.27 revenue-producing activity; 7.28 (4) post-secondary student housing of not more than one 7.29 acre of land that is owned by a nonprofit corporation organized 7.30 under chapter 317A and is used exclusively by a student 7.31 cooperative, sorority, or fraternity for on-campus housing or 7.32 housing located within two miles of the border of a college 7.33 campus; 7.34 (5) manufactured home parks as defined in section 327.14, 7.35 subdivision 3; 7.36 (6) real property that is actively and exclusively devoted 8.1 to indoor fitness, health, social, recreational, and related 8.2 uses, is owned and operated by a not-for-profit corporation, and 8.3 is located within the metropolitan area as defined in section 8.4 473.121, subdivision 2; 8.5 (7) a leased or privately owned noncommercial aircraft 8.6 storage hangar not exempt under section 272.01, subdivision 2, 8.7 and the land on which it is located, provided that: 8.8 (i) the land is on an airport owned or operated by a city, 8.9 town, county, metropolitan airports commission, or group 8.10 thereof; and 8.11 (ii) the land lease, or any ordinance or signed agreement 8.12 restricting the use of the leased premise, prohibits commercial 8.13 activity performed at the hangar. 8.14 If a hangar classified under this clause is sold after June 8.15 30, 2000, a bill of sale must be filed by the new owner with the 8.16 assessor of the county where the property is located within 60 8.17 days of the sale; and 8.18 (8) residential real estate, a portion of which is used by 8.19 the owner for homestead purposes, and that is also a place of 8.20 lodging, if all of the following criteria are met: 8.21 (i) rooms are provided for rent to transient guests that 8.22 generally stay for periods of 14 or fewer days; 8.23 (ii) meals are provided to persons who rent rooms, the cost 8.24 of which is incorporated in the basic room rate; 8.25 (iii) meals are not provided to the general public except 8.26 for special events on fewer than seven days in the calendar year 8.27 preceding the year of the assessment; and 8.28 (iv) the owner is the operator of the property. 8.29 The market value subject to the 4c classification under this 8.30 clause is limited to five rental units. Any rental units on the 8.31 property in excess of five, must be valued and assessed as class 8.32 3a. The portion of the property used for purposes of a 8.33 homestead by the owner must be classified as class 1a property 8.34 under subdivision 22. 8.35 Class 4c property has a class rate of 1.5 percent of market 8.36 value, except that (i) each parcel of seasonal residential 9.1 recreational property not used for commercial purposes has the 9.2 same class rates as class 4bb property, (ii) manufactured home 9.3 parks assessed under clause (5) have the same class rate as 9.4 class 4b property, (iii) commercial-use seasonal residential 9.5 recreational property has a class rate of one percent for the 9.6 first $500,000 of market value, which includes any market value 9.7 receiving the one percent rate under subdivision 22, and 1.25 9.8 percent for the remaining market value, (iv) the market value of 9.9 property described in clause (4) has a class rate of one 9.10 percent, (v) the market value of property described in clauses 9.11 (2) and (6) has a class rate of 1.25 percent, and (vi) that 9.12 portion of the market value of property in clause (8) qualifying 9.13 for class 4c property has a class rate of 1.25 percent. 9.14 (e) Class 4d property is qualifying low-income rental 9.15 housing certified to the assessor by the housing finance agency 9.16 under sections 273.126 and 462A.071. Class 4d includes land in 9.17 proportion to the total market value of the building that is 9.18 qualifying low-income rental housing. For all properties 9.19 qualifying as class 4d, the market value determined by the 9.20 assessor must be based on the normal approach to value using 9.21 normal unrestricted rents. 9.22 Class 4d property has a class rate of 0.9 percent for taxes 9.23 payable in 2002, and one percent for taxes payable in 2003 and 9.24 1.25 percent for taxes payable in 2004 and thereafter. 9.25 (f) Notwithstanding paragraphs (a) to (e), residential 9.26 property that would otherwise be classified under this 9.27 subdivision is classified as class 3c property under subdivision 9.28 24, paragraph (c), if it is vacant or substantially 9.29 underutilized and constitutes a blighting influence as described 9.30 in subdivision 24, paragraph (c). 9.31 [EFFECTIVE DATE.] This section is effective for taxes 9.32 payable in 2005 and thereafter. 9.33 Sec. 3. Minnesota Statutes 2002, section 274.01, is 9.34 amended by adding a subdivision to read: 9.35 Subd. 4. [APPEAL OF CLASSIFICATION AS CLASS 3C 9.36 PROPERTY.] To appeal classification of property as class 3c 10.1 property, the property owner must provide evidence that the 10.2 property is not vacant or underutilized. Maintenance records 10.3 and code compliance records may be submitted to verify that the 10.4 property is being maintained in a condition necessary for 10.5 occupancy. Income tax records, rent records, and appraisals may 10.6 be submitted to verify occupancy and rental rates similar to the 10.7 typical rent for a comparable property in the area in which the 10.8 property is located. 10.9 [EFFECTIVE DATE.] This section is effective for property 10.10 assessed in 2004 and thereafter.