SF 3492

as introduced - 89th Legislature (2015 - 2016) Posted on 04/08/2016 09:00am

A bill for an act
relating to taxation; property; eliminating noncommercial seasonal residential
recreational property tax classification; modifying the state general tax; amending
Minnesota Statutes 2014, sections 126C.01, subdivision 3; 273.13, subdivision
25; 275.025, subdivisions 1, 4; repealing Minnesota Statutes 2014, section
275.025, subdivision 3.

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

Section 1.

Minnesota Statutes 2014, section 126C.01, subdivision 3, is amended to read:

Subd. 3.

Referendum market value.

"Referendum market value" means the
market value of all taxable property, excluding property classified as class 2 deleted text begin , deleted text end new text begin or new text end 4c(4) deleted text begin , or
4c(12) deleted text end under section 273.13. The portion of class 2a property consisting of the house,
garage, and surrounding one acre of land of an agricultural homestead is included in
referendum market value. For the purposes of this subdivision, in the case of class 1a,
1b, or 2a property, "market value" means the value prior to the exclusion under section
273.13, subdivision 35. Any class of property, or any portion of a class of property, that is
included in the definition of referendum market value and that has a classification rate of
less than one percent under section 273.13 shall have a referendum market value equal to
its market value times its classification rate, multiplied by 100.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2018 and
thereafter.
new text end

Sec. 2.

Minnesota Statutes 2014, section 273.13, subdivision 25, is amended to read:

Subd. 25.

Class 4.

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

(b) Class 4b includes:

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

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

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

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

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

(c) Class 4bb includes nonhomestead residential real estate containing one unit,
other than seasonal residential recreational property, and 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 classification 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 and personal property
devoted to commercial temporary and seasonal residential occupancy for recreation
purposes, for not more than 250 days in the year preceding the year of assessment. For
purposes of this clause, property is devoted to a commercial purpose on a specific day
if any portion of the property is used for residential occupancy, and a fee is charged for
residential occupancy. Class 4c property under this clause must contain three or more
rental units. A "rental unit" is defined as a cabin, condominium, townhouse, sleeping room,
or individual camping site equipped with water and electrical hookups for recreational
vehicles. A camping pad offered for rent by a property that otherwise qualifies for class
4c under this clause is also class 4c under this clause regardless of the term of the rental
agreement, as long as the use of the camping pad does not exceed 250 days. In order for a
property to be classified under this clause, either (i) the business located on the property
must provide recreational activities, 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 (A) 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 (B) at least 20 percent of the
annual gross receipts must be from charges for providing recreational activities, or (ii) the
business must contain 20 or fewer rental units, and must be located in a township or a city
with a population of 2,500 or less located outside the metropolitan area, as defined under
section 473.121, subdivision 2, that contains a portion of a state trail administered by the
Department of Natural Resources. For purposes of item (i)(A), a paid booking of five or
more nights shall be counted as two bookings. Class 4c property also includes commercial
use real property used exclusively for recreational purposes in conjunction with other class
4c property classified under this clause and 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. In order for a property to qualify for classification under this clause, the owner
must submit a declaration to the assessor designating the cabins or units occupied for 250
days or less in the year preceding the year of assessment by January 15 of the assessment
year. Those cabins or units and a proportionate share of the land on which they are located
must be designated class 4c under this clause as otherwise provided. The remainder of the
cabins or units and a proportionate share of the land on which they are located will be
designated as class 3a. The owner of property desiring designation as class 4c property
under this clause must provide guest registers or other records demonstrating that the units
for which class 4c designation is sought were not occupied for more than 250 days in the
year preceding the assessment if so requested. The portion of a property operated as a
(1) restaurant, (2) bar, (3) gift shop, (4) conference center or meeting room, and (5) other
nonresidential facility operated on a commercial basis not directly related to temporary and
seasonal residential occupancy for recreation purposes does not qualify for class 4c. For
the purposes of this paragraph, "recreational activities" means renting ice fishing houses,
boats and motors, snowmobiles, downhill or cross-country ski equipment; providing
marina services, launch services, or guide services; or selling bait and fishing tackle;

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

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

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

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

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

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

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

For purposes of this clause:

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

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

(C) a "nonprofit community service oriented organization" means any corporation,
society, association, foundation, or institution organized and operated exclusively for
charitable, religious, fraternal, civic, or educational purposes, and which is exempt from
federal income taxation pursuant to section 501(c)(3), (8), (10), or (19) of the Internal
Revenue Code; and

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

Any portion of the property not qualifying under either item (i) or (ii) is class 3a.
The use of the property for social events open exclusively to members and their guests
for periods of less than 24 hours, when an admission is not charged nor any revenues are
received by the organization shall not be considered a revenue-producing activity.

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

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

(5)(i) manufactured home parks as defined in section 327.14, subdivision 3,
excluding manufactured home parks described in section 273.124, subdivision 3a, and (ii)
manufactured home parks as defined in section 327.14, subdivision 3, that are described in
section 273.124, subdivision 3a;

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

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

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

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

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

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

(i) the land abuts a public airport; and

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

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

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

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

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

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

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

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

(11) lakeshore and riparian property and adjacent land, not to exceed six acres, used
as a marina, as defined in section 86A.20, subdivision 5, which is made accessible to
the public and devoted to recreational use for marina services. The marina owner must
annually provide evidence to the assessor that it provides services, including lake or river
access to the public by means of an access ramp or other facility that is either located on
the property of the marina or at a publicly owned site that abuts the property of the marina.
No more than 800 feet of lakeshore may be included in this classification. Buildings used
in conjunction with a marina for marina services, including but not limited to buildings
used to provide food and beverage services, fuel, boat repairs, or the sale of bait or fishing
tackle, are classified as class 3a property deleted text begin ; and deleted text end new text begin .
new text end

deleted text begin (12) real and personal property devoted to noncommercial temporary and seasonal
residential occupancy for recreation purposes.
deleted text end

Class 4c property has a classification rate of 1.5 percent of market value, except that
(i) deleted text begin each parcel of noncommercial seasonal residential recreational property under clause
(12) has the same classification rates as class 4bb property, (ii) deleted text end manufactured home parks
assessed under clause (5), item (i), have the same classification rate as class 4b property,
and the market value of manufactured home parks assessed under clause (5), item (ii),
has a classification rate of 0.75 percent if more than 50 percent of the lots in the park are
occupied by shareholders in the cooperative corporation or association and a classification
rate of one percent if 50 percent or less of the lots are so occupied, deleted text begin (iii) deleted text end new text begin (ii) new text end commercial-use
seasonal residential recreational property and marina recreational land as described in
clause (11), has a classification rate of one percent for the first $500,000 of market value,
and 1.25 percent for the remaining market value, deleted text begin (iv) deleted text end new text begin (iii) new text end the market value of property
described in clause (4) has a classification rate of one percent, deleted text begin (v) deleted text end new text begin (iv) new text end the market value of
property described in clauses (2), (6), and (10) has a classification rate of 1.25 percent, and
deleted text begin (vi) deleted text end new text begin (v) new text end that portion of the market value of property in clause (9) qualifying for class 4c
property has a classification rate of 1.25 percent.

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

(f) The first tier of market value of class 4d property has a classification rate of 0.75
percent. The remaining value of class 4d property has a classification rate of 0.25 percent.
For the purposes of this paragraph, the "first tier of market value of class 4d property"
means the market value of each housing unit up to the first tier limit. For the purposes of
this paragraph, all class 4d property value must be assigned to individual housing units.
The first tier limit is $100,000 for assessment year 2014. For subsequent years, the limit is
adjusted each year by the average statewide change in estimated market value of property
classified as class 4a and 4d under this section for the previous assessment year, excluding
valuation change due to new construction, rounded to the nearest $1,000, provided,
however, that the limit may never be less than $100,000. Beginning with assessment year
2015, the commissioner of revenue must certify the limit for each assessment year by
November 1 of the previous year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment year 2017 and
thereafter.
new text end

Sec. 3.

Minnesota Statutes 2014, section 275.025, subdivision 1, is amended to read:

Subdivision 1.

Levy amount.

The state general levy is levied against
commercial-industrial property deleted text begin and seasonal residential recreational property deleted text end , as defined
in this section. The state general levy base amount is deleted text begin $592,000,000 for taxes payable in
2002 deleted text end new text begin $835,344,100 for taxes payable in 2018 new text end . For taxes payable in subsequent years,
the levy base amount is increased each year by multiplying the levy base amount for
the prior year by the sum of one plus the rate of increase, if any, in the implicit price
deflator for government consumption expenditures and gross investment for state and
local governments prepared by the Bureau of Economic Analysts of the United States
Department of Commerce for the 12-month period ending March 31 of the year prior to the
year the taxes are payable. The tax under this section is not treated as a local tax rate under
section 469.177 and is not the levy of a governmental unit under chapters 276A and 473F.

The commissioner shall increase or decrease the preliminary or final rate for a year
as necessary to account for errors and tax base changes that affected a preliminary or final
rate for either of the two preceding years. Adjustments are allowed to the extent that the
necessary information is available to the commissioner at the time the rates for a year must
be certified, and for the following reasons:

(1) an erroneous report of taxable value by a local official;

(2) an erroneous calculation by the commissioner; and

(3) an increase or decrease in taxable value for commercial-industrial deleted text begin or seasonal
residential recreational deleted text end property reported on the abstracts of tax lists submitted under
section 275.29 that was not reported on the abstracts of assessment submitted under
section 270C.89 for the same year.

The commissioner may, but need not, make adjustments if the total difference in the tax
levied for the year would be less than $100,000.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2018 and
thereafter.
new text end

Sec. 4.

Minnesota Statutes 2014, section 275.025, subdivision 4, is amended to read:

Subd. 4.

deleted text begin Apportionment and deleted text end Levy of state general tax.

deleted text begin Ninety-five percent of the
state general tax must be levied by applying a uniform rate to all commercial-industrial tax
capacity and five percent of the state general tax must be levied by applying a uniform rate
to all seasonal residential recreational tax capacity. deleted text end On or before October 1 each year, the
commissioner of revenue shall certify the preliminary state general levy deleted text begin rates deleted text end new text begin rate new text end to each
county auditor that must be used to prepare the notices of proposed property taxes for taxes
payable in the following year. By January 1 of each year, the commissioner shall certify
the final state general levy rate to each county auditor that shall be used in spreading taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2018 and
thereafter.
new text end

Sec. 5. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2014, section 275.025, subdivision 3, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2018 and
thereafter.
new text end