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									Auditor/Treasurer Manual
PROPERTY TAX ADMINISTRATION
CHAPTER LISTING
Chapter 01 – Public Finance Overview

Chapter 02 – Administrative Roles

Chapter 03 – Property Identification

Chapter 04 – Tax Base Overview and Valuation of Property

Chapter 05 – Tax Levies and the Budgeting Process

Chapter 06 – Tax Rate Calculation and Determination of Net Tax

Chapter 07 – Reporting

Chapter 08 – Tax Collection – Real and Personal Property

Chapter 09 – Settlement and Distribution – Real And
             Personal Property

Chapter 10 – Delinquency Administration – Real Property

Chapter 10A – Delinquency Administration For Manufactured
             Homes And Personal Property

Chapter 11 – Tax Forfeiture

Chapter 12 – Tax Adjustments

Chapter 13 – Economic Development and Special Programs

Chapter 14 – Property Tax Refund Program

Chapter 15 – Senior Citizen Property Tax Deferral

Chapter 16 – Mortgage Registry and Deed Tax

Chapter 17 – Legislative Change
TOPIC LISTING
Chapter/Section                                                      
ABOUT THIS MANUAL

CHAPTER ONE – PUBLIC FINANCE OVERVIEW
     01.01 – Taxation and Federalism
     01.02 – Principles of Good Tax Policy
     01.03 – Tax Data for Minnesota Revenue

CHAPTER TWO – ADMINISTRATIVE ROLES
     02.01 – Assessors
     02.02 – Auditors
     02.03 – Treasurers
     02.04 – County Recorders
     02.05 – County Government Structure
     02.06 – Department of Revenue
     02.07 – Other State Entities

CHAPTER THREE – PROPERTY IDENTIFICATION
     03.01 – Property Identification
     03.02 – Parcel Legal Modifications
     03.03 – Annexations

CHAPTER FOUR – TAX BASE OVERVIEW AND VALUATION OF PROPERTY
     04.01 – Basic Terms and Concepts
     04.02 – Valuation and Assessment
     04.03 – State Assessed Properties
     04.04 – Review and Equalization Process
     04.05 – Exemptions
     04.06 – Classification of Property
     04.07 – Manufactured Homes
     04.08 – Special Valuations and Deferrals
     04.09 – Limited Market Value
     04.10 – Property Tax Exclusions
     04.11 – Taxable Market Value
     04.12 – Referendum Market Value
     04.13 – Net Tax Capacities
     04.14 – Taxable Net Tax Capacity
     04.15 – Tax Bases
     04.16 – Payment in Lieu of Taxes (PILT)

CHAPTER FIVE – TAX LEVIES AND THE BUDGETING PROCESS
     05.01 – Taxing Authorities and Taxing Districts
     05.02 – Aids and Levies
     05.03 – Truth-In-Taxation
     05.04 – Levy Certification
     05.05 – Overall Levy Limitation

CHAPTER SIX – TAX RATE CALCULATION AND DETERMINATION OF NET TAX
     06.01 – Overview
     06.02 – Unique Taxing Areas
TOPIC LISTING (cont’d)
Chapter/Section                                                      
     06.03 – Rate Calculation
     06.04 – Exception Rates
     06.05 – Extending Tax Rates
     06.06 – Credits and Determining Net Tax
     06.07 – Alternate Methods of Taxation

CHAPTER SEVEN – REPORTING
     07.01 – Overview
     07.02 – Timeline
     07.03 – Abstracts
     07.04 – Audit Reports
     07.05 – Budgets
     07.06 – Debt
     07.07 – Delinquencies
     07.08 – Financial Statements
     07.09 – Fiscal Disparity
     07.10 – Homesteads
     07.11 – Recording
     07.12 – Schools
     07.13 – Special Assessments and Service Charges
     07.14 – Tax Adjustments
     07.15 – Tax Forfeited Land
     07.16 – Tax Increment
     07.17 – Tax Levies and Rates
     07.18 – Tax Settlement
     07.19 – Tax Statements and TNT Notices
     07.20 – Valuation
     07.21 – Miscellaneous

CHAPTER EIGHT – TAX COLLECTION – REAL AND PERSONAL PROPERTY
     08.01 – Tax Collection Overview
     08.02 – Property Tax Statements
     08.03 – Payments and Penalties
     08.04 – Special Assessments and Charges
     08.05 – Receive and Distribute PILT

CHAPTER NINE – SETTLEMENT AND DISTRIBUTION – REAL AND PERSONAL PROPERTY
     09.01 – Settlement and Distribution

CHAPTER TEN – DELINQUENCY ADMINISTRATION – REAL PROPERTY
     10.01 – Delinquent Real Property Tax Overview
     10.02 – Stage One: Determination
     10.03 – Stage Two: Publication
     10.04 – Stage Three: Judgment
     10.05 – Stage Four, Part One: Redemption
     10.06 – Stage Four, Part Two: Confession
     10.07 – Stage Five: Expiration
TOPIC LISTING (cont’d)
Chapter/Section                                                           
CHAPTER TEN (A) – DELINQUENCY ADMINISTRATION FOR MANUFACTURED HOMES AND
                  PERSONAL PROPERTY
     10A.01 – Manufactured Homes
     10A.02 – Personal Property
     10A.03 – Collection Methods
     10A.04 – Distribution of Collections

CHAPTER ELEVEN – TAX FORFEITURE
     11.01 – Stage Six: Tax Forfeiture
     11.02 – Sale of Tax-Forfeited Lands
     11.03 – Repurchase of Tax-Forfeited Lands
     11.04 – Leasing Tax-Forfeited Lands
     11.05 – Government Acquisition of Tax-Forfeited Land

CHAPTER TWELVE – TAX ADJUSTMENTS
     12.01 – Abatements
     12.02 – Green Acre Tax Paybacks
     12.03 – JOBZ Tax Paybacks
     12.04 – Open Space
     12.05 – Corrections
     12.06 – IEDZ Paybacks

CHAPTER THIRTEEN – ECONOMIC DEVELOPMENT AND SPECIAL PROGRAMS
     13.01 – Tax Increment Financing
     13.02 – JOBZ
     13.03 – Economic Development Tax Abatements
     13.04 – Fiscal Disparities
     13.05 – Enterprise Zones
     13.06 – International Economic Development Zones

CHAPTER FOURTEEN – PROPERTY TAX REFUND PROGRAM
     14.01 – Property Tax Refund Program
     14.02 – Filing Information
     14.03 – Who Qualifies
     14.04 – Special Refund

CHAPTER FIFTEEN – SENIOR CITIZEN PROPERTY TAX DEFERRAL
     15.01 – Senior Citizen Property Tax Deferral

CHAPTER SIXTEEN – MORTGAGE REGISTRY AND DEED TAX
     16.01 – Mortgage Registry and Deed Tax

CHAPTER SEVENTEEN – LEGISLATIVE CHANGE
     17.01 – Overview of the Legislative Process
     17.02 – Explanation of Laws and Statutes
     17.03 – Effecting Change
     17.04 – Legislative Terms and Definitions
TABLE OF CONTENTS
Chapter/Section                                                                  Page # 
ABOUT THIS MANUAL                                                                00.01 – 1
            Introduction                                                         00.01 – 1
            Using this Manual                                                    00.01 – 1
                   Section Number and Title                                      00.01 – 2
                   Breakout Material                                             00.01 – 2
                   Revision Date                                                 00.01 – 2
                   Page Numbering                                                00.01 – 2
                   Table of Contents – No Index                                  00.01 – 2
            Future Revisions                                                     00.01 – 2

CHAPTER ONE – PUBLIC FINANCE OVERVIEW                                            01.00
     01.01 – TAXATION AND FEDERALISM                                             01.01 – 1
            Taxation in America                                                  01.01 – 1
            History of the Federal Property Tax                                  01.01 – 2
            History of State and Local Property Taxes                            01.01 – 3
            A Brief History of Minnesota Taxes                                   01.01 – 4
                   Background                                                    01.01 – 4
                   Property Tax Authorization                                    01.01 – 5
                   History of Major Changes in Property Taxes in Minnesota       01.01 – 6
            Federalism                                                           01.01 – 10
                   Federalism and Democracy                                      01.01 – 10
                   Federalism and the U.S. Constitution                          01.01 – 10
                   Federalism and Taxation                                       01.01 – 10

     01.02 – PRINCIPLES OF GOOD TAX POLICY                                       01.02 – 1
            Overview                                                             01.02 – 1
            Revenue in the Public Sector                                         01.02 – 1
                   Non-Taxation Sources                                          01.02 – 1
                   Taxation                                                      01.02 – 1
            Functions of Taxes                                                   01.02 – 2
            Guiding Principles of Tax Policy                                     01.02 – 2
                   Equity and Fairness                                           01.02 – 2
                   Certainty                                                     01.02 – 2
                   Convenience of Payment                                        01.02 – 2
                   Economy of Collection                                         01.02 – 3
                   Simplicity                                                    01.02 – 3
                   Neutrality                                                    01.02 – 3
                   Transparency and Visibility                                   01.02 – 3
                   Appropriate Government Revenues                               01.02 – 3
                   Maintain a Broad Base                                         01.02 – 3
                   Ensure an Open Process                                        01.02 – 3

     01.03 – TAX DATA FOR MINNESOTA REVENUE                                      01.03 – 1




                                                                                              i
TABLE OF CONTENTS                                  (cont’d)
Chapter/Section                                                               Page # 
CHAPTER TWO – ADMINISTRATIVE ROLES                                            02.00
     02.01 – ASSESSORS                                                        02.01 – 1
            Code of Conduct and Ethics                                        02.01 – 2
            Basic Duties of the County Assessor                               02.01 – 2
            Staff Appraisers                                                  02.01 – 4
            Local Assessors                                                   02.01 – 4

     02.02 – AUDITORS                                                         02.02 – 1
            Basic Duties of the County Auditor                                02.02 – 1

     02.03 – TREASURERS                                                       02.03 – 1
            Basic Duties of the County Treasurer                              02.03 – 1

     02.04 – COUNTY RECORDERS                                                 02.04 – 1
            Duties of the County Recorder                                     02.04 – 1

     02.05 – COUNTY GOVERNMENT STRUCTURE                                      02.05 – 1
            History of County Government                                      02.05 – 1
            County Board of Commissioners                                     02.05 – 1
            Election and Appointment of County Officials                      02.05 – 1
            Options for Restructuring County Government                       02.05 – 2
                   Elected Executive Plan                                     02.05 – 3
                   County Manager Plan                                        02.05 – 3
                   At-Large Chair Plan                                        02.05 – 4
                   County Administrator Plan                                  02.05 – 4
                   “County Administrator” or “County Coordinator”             02.05 – 4
            Professional County Management                                    02.05 – 5
                   County Administrator                                       02.05 – 5
                   County Coordinator                                         02.05 – 5
                   County Auditor-Administrator                               02.05 – 5
                   Other County Management                                    02.05 – 6
            Optional Forms of County Government                               02.05 – 6
            References                                                        02.05 – 6

     02.06 – DEPARTMENT OF REVENUE                                            02.06 – 1
            Property Tax Division                                             02.06 – 1
                   Equalization of Property Values                            02.06 – 1
                   Aid Certifications and Payments                            02.06 – 2
                   Information and Education                                  02.06 – 2
                   Audits                                                     02.06 – 2
            Special Taxes Division                                            02.06 – 3
                   Lawful Gambling and Insurance Unit                         02.06 – 3
                   Cigarette, Alcohol, and Environmental Taxes Unit           02.06 – 3
                   MinnesotaCare Tax Unit                                     02.06 – 4
                   Minerals Tax Office                                        02.06 – 4



                                                                                          ii
TABLE OF CONTENTS                                  (cont’d)
Chapter/Section                                                            Page # 
           Tax Research Division                                           02.06 – 5
           Administering the Property Tax Refund                           02.06 – 6
                 Tax Operations Division                                   02.06 – 6
                 Individual Income Tax Division                            02.06 – 6

     02.07 – OTHER STATE AGENCIES                                          02.07 – 1
            Minnesota Department of Administration                         02.07 – 1
            Minnesota Board of Assessors                                   02.07 – 1
            Minnesota Department of Education (MDE)                        02.07 – 1
                   Reporting                                               02.07 – 1
            Metropolitan Council                                           02.07 – 2
            Office of the State Auditor (OSA)                              02.07 – 2
                   Auditing                                                02.07 – 2
                   Reporting                                               02.07 – 2
                   Collaborating                                           02.07 – 2
            Minnesota Department of Employment and Economic Development    02.07 – 3
                   Business and Community Development                      02.07 – 3
                   Workforce Development                                   02.07 – 3
                   Unemployment Insurance Division                         02.07 – 3
                   Information and Marketing                               02.07 – 3
            Minnesota Department of Natural Resources (DNR)                02.07 – 3
            Office of the Secretary of State (SOS)                         02.07 – 4
            Board of Water and Soil Resources (BOWSR)                      02.07 – 4

CHAPTER THREE – PROPERTY IDENTIFICATION                                    03.00
     03.01 – PROPERTY IDENTIFICATION                                       03.01 – 1
            Parcel Creation                                                03.01 – 1
                   Assign a Legal Description                              03.01 – 1
                   Assign a Unique Taxing Area                             03.01 – 2
                   Assign a Parcel Number or Code                          03.01 – 2
            Ownership & Interested Parties – Assign a Taxpayer/Owner       03.01 – 3
                   Glossary                                                03.01 – 3
            Property Tax Records                                           03.01 – 5
                   Deed Transfers                                          03.01 – 5
                   Sheriff Certificates of Foreclosure Sales               03.01 – 6
                   Affidavit of Survivorship                               03.01 – 7
                   Decree of Distribution                                  03.01 – 7
                   Judgment and Decree                                     03.01 – 8
            Undivided Interests                                            03.01 – 8
            Condominiums and Cooperatives                                  03.01 – 8
                   Cooperative                                             03.01 – 8
                   Condominium                                             03.01 – 9
            Reference                                                      03.01 – 9




                                                                                       iii
TABLE OF CONTENTS                                     (cont’d)
Chapter/Section                                                                           Page # 
     03.02 – PARCEL LEGAL MODIFICATIONS                                                   03.02 – 1
            Combinations                                                                  03.02 – 1
                    County Processes                                                      03.02 – 1
            Splits/Subdivisions                                                           03.02 – 2
                    County Processes                                                      03.02 – 2
                    Payment of Taxes                                                      03.02 – 2
            Parcel Creation or Adjustment                                                 03.02 – 3
            Reference                                                                     03.02 – 3

     03.03 – ANNEXATIONS                                                                  03.03 – 1
            Municipality Annexation                                                       03.03 – 1
                    New Municipal Incorporation                                           03.03 – 1
                    Annexation of Unincorporated Property into
                            an Existing Municipality                                      03.03 – 2
                    Orderly Annexation                                                    03.03 – 2
                    Annexation by Ordinance                                               03.03 – 3
                    Annexation by Petition                                                03.03 – 3
            Effective Dates & Property Taxation                                           03.03 – 3
                    Annexation order effective prior to August 1 of a levy year           03.03 – 3
                    Annexation order effective date of August 1 or later of a levy year   03.03 – 3
                    Municipal payments to the Township                                    03.03 – 4
                            After 2002 and Prior to 2007                                  03.03 – 4
                            Post 2006 Legislation                                         03.03 – 4
                    Tax Rate Differential                                                 03.03 – 7
            Apportionment of Assets and Obligations                                       03.03 – 7
                    Partial Annexation                                                    03.03 –7
                    Entire Annexation                                                     03.03 – 7
            School District Annexations                                                   03.03 – 7
                    Detachment and Annexation                                             03.03 – 7
                    Split Residential Annexation                                          03.03 – 9
            Reference                                                                     03.03 – 9

CHAPTER FOUR – TAX BASE OVERVIEW AND VALUATION OF PROPERTY                                04.00
     04.01 – BASIC TERMS AND CONCEPTS                                                     04.01 – 1
            Overview                                                                      04.01 – 1
            Property Value                                                                04.01 – 1
            Review and Equalization                                                       04.01 – 1
            Taxable Value                                                                 04.01 – 2
                   Exempt Property                                                        04.01 – 2
                   Classification System                                                  04.01 – 2
                   Manufactured Homes                                                     04.01 – 2
                   Special Valuations and Deferrals                                       04.01 – 2
                   Limited Market Value                                                   04.01 – 2
                   Exclusions                                                             04.01 – 3
                   Taxable Market Value                                                   04.01 – 3



                                                                                                      iv
TABLE OF CONTENTS                                 (cont’d)
Chapter/Section                                                           Page # 
           Base of Taxation                                               04.01 – 3
                  Referendum Market Value                                 04.01 – 3
                  Net Tax Capacity                                        04.01 – 3
                  Taxable Net Tax Capacities                              04.01 – 3
           Alternate Taxation                                             04.01 – 3

     04.02 – VALUATION AND ASSESSMENT                                     04.02 – 1
            Basics                                                        04.02 – 1
            New Construction and Demolition                               04.02 – 1
            Omitted Properties                                            04.02 – 2
            Undervalued Properties                                        04.02 – 2
            Timing and Corrections                                        04.02 – 2
            Taxable Market Value                                          04.02 – 3
            Contamination Values                                          04.02 – 3
            Timeline of Assessment Cycle                                  04.02 – 3

     04.03 – STATE ASSESSED PROPERTIES                                    04.03 – 1
            Commissioner Assessed Property                                04.03 – 1
                   Flight Property                                        04.03 – 1
                   Railroads                                              04.03 – 1
                   Utility Property                                       04.03 – 2
            Recommended Values                                            04.03 – 2
            State General Tax Implications                                04.03 – 3
            Wind Energy Production                                        04.03 – 3
            Reference                                                     04.03 – 3

     04.04 – REVIEW AND EQUALIZATION PROCESS                              04.04 – 1
            Notice of Value and Classification                            04.04 – 1
            Appeals and Equalization Processes                            04.04 – 2
                   Informal Appeal                                        04.04 – 2
                   Open Book Meetings                                     04.04 – 2
                   Local Board of Appeal and Equalization                 04.04 – 2
                   County Board of Appeal and Equalization                04.04 – 3
                   State Board of Equalization                            04.04 – 5
                   Tax Court                                              04.04 – 5
            Sales Ratios                                                  04.04 – 6
                   Certificate of Real Estate Value (CRV)                 04.04 – 6
                   Sales Ratio Studies                                    04.04 – 7
                   Measuring Assessment Levels                            04.04 – 7
                   Measuring Assessment Uniformity                        04.04 – 8
            Equalized Values                                              04.04 – 9
            About Abatements                                              04.04 – 9




                                                                                      v
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                 Page # 
     04.05 – EXEMPTIONS                                                         04.05 – 1
            Types of Property Eligible for Exemption                            04.05 – 1
                   Indian Lands                                                 04.05 – 1
                   Cemeteries                                                   04.05 – 1
                   K-12 Schools                                                 04.05 – 1
                   Colleges and Universities                                    04.05 – 1
                   Hospitals                                                    04.05 – 1
                   Church Property                                              04.05 – 2
                   Charitable Institutions and Various Nonprofit Uses           04.05 – 2
                   Public Property                                              04.05 – 2
                   Personal Property                                            04.05 – 2
                   Economic Development Property                                04.05 – 3
                   Pollution Control Property                                   04.05 – 4
                   Wetlands                                                     04.05 – 4
                   Native Prairie                                               04.05 – 4
                   Utilities                                                    04.05 – 4
                   Miscellaneous                                                04.05 – 5
            Tax Imposed for Private Use for Profit                              04.05 – 5
                   Tax Imposed                                                  04.05 – 5
                   Exceptions                                                   04.05 – 5
            Taxation of Lessees and Equitable Owners                            04.05 – 6
                   Tax Treatment                                                04.05 – 6
                   Exceptions and Special Provisions                            04.05 – 6
            Application and Eligibility                                         04.05 – 6
            Valuation of Exempt Property                                        04.05 – 7
            Conversion to Exempt or Taxable Uses                                04.05 – 7
                   Exempt to Taxable                                            04.05 – 7
                   Taxable to Exempt                                            04.05 – 7
                   Tax Forfeited Property                                       04.05 – 7

     04.06 – CLASSIFICATION OF PROPERTY                                         04.06 – 1
            Classifications and Class Rates                                     04.06 – 1
            Homestead Status                                                    04.06 – 3
                    Homestead Determination                                     04.06 – 3
                    Manufactured Homes                                          04.06 – 4
                    Homestead Application and Discontinuation                   04.06 – 4
                    Social Security Numbers                                     04.06 – 4
                    Fraudulent Homesteads/Social Security Match                 04.06 – 4
                    Relative Homesteads                                         04.06 – 4
                    Special Ag Homesteads (“Actively Farming”)                  04.06 – 5
                    Prohibition on Seasonal Residential Recreational            04.06 – 5
                    Townhouses and Condominiums                                 04.06 – 5
                    Other Topics                                                04.06 – 5
            Certification of 1b Property and Blind Homesteads                   04.06 – 6
            Agricultural Property and the House, Garage, and One Acre (HGA)     04.06 – 7



                                                                                            vi
TABLE OF CONTENTS                                 (cont’d)
Chapter/Section                                                                  Page # 
           Agricultural homesteads – First Tier Valuation Limit                  04.06 – 7
           Non-Homestead and Multi-Unit Residential Property                     04.06 – 7
           Seasonal Recreational Property                                        04.06 – 8
           Other Classification Descriptions and Provisions                      04.06 – 8
           Split Class Properties                                                04.06 – 8
           Borrowing                                                             04.06 – 8
           Multiple Owners                                                       04.06 – 9
           Chaining or Linking of Parcels                                        04.06 – 9
           Economic Development Zones                                            04.06 – 9
                   Border City Development Zones                                 04.06 – 9
                   JOBZ, Ag Processing, Biotechnology and Health Science Zones   04.06 – 10
                   International Economic Development Zone                       04.06 – 10
           Reference                                                             04.06 – 10

     04.07 – MANUFACTURED HOMES                                                  04.07 – 1
            Definitions                                                          04.07 – 1
            Taxability                                                           04.07 – 1
            Assessment as Real Property                                          04.07 – 2
            Assessment as Personal Property                                      04.07 – 2
            Improvements                                                         04.07 – 2
            Taxation of Manufactured Homes Assessed as Personal Property         04.07 – 3
            Taxes Paid before Transfer of Title                                  04.07 – 3

     04.08 – SPECIAL VALUATIONS AND DEFERRALS                                    04.08 – 1
            Minnesota Open Space Property Tax Law                                04.08 – 1
                  Qualifications                                                 04.08 – 1
                  Application                                                    04.08 – 2
                  Valuation                                                      04.08 – 2
                  Deferred Taxes                                                 04.08 – 2
            Minnesota Agricultural Property Tax Law (Green Acres)                04.08 – 2
                  Qualifications for Green Acres                                 04.08 – 3
                  Application                                                    04.08 – 3
                  Valuation                                                      04.08 – 3
                  Deferred Taxes and Special Assessments                         04.08 – 3
            Metropolitan Agricultural Preserves Act                              04.08 – 4
                  Computation of Tax                                             04.08 – 5
                  Eligibility and Application                                    04.08 – 6
                  Commencement of Agricultural Preserve                          04.08 – 6
                  Termination                                                    04.08 – 6
                  Transfer from Green Acres                                      04.08 – 6
            Non-Metropolitan Ag Land Preservation (County Conservation Credit)   04.08 – 7
                  Metro Fringe Cities                                            04.08 – 7
                  Transfer from green Acres                                      04.08 – 7
                  Reference                                                      04.08 – 7




                                                                                              vii
TABLE OF CONTENTS                                    (cont’d)
Chapter/Section                                                                       Page # 
     04.09 – LIMITED MARKET VALUE                                                     04.09 – 1
            History                                                                   04.09 – 1
            Rules When Calculating Limited Market Values                              04.09 – 4
                    Rounding of Dollar Amounts and Percentages                        04.09 – 4
                    Determine a Separate Limited Market Value for Each
                        Classification per Parcel of Property                         04.09 – 4
                    If a Property is Split Class Consisting of Both Qualifying
                        and Non-Qualifying Classes                                    04.09 – 4
                    If the Classification of a Property Changes                       04.09 – 5
                    If a Property is Exempt from Property Tax becomes Taxable         04.09 – 5
                    Limited Market Value does not Apply to New Improvements           04.09 – 5
                    When a Qualifying Parcel of Property is Split into 2 or More      04.09 – 6
                    If two or more parcels of property are combined into one parcel   04.09 – 6
                    If a Property was Omitted from the Property Tax                   04.09 – 7
                    If Unplatted Vacant land Becomes Platted                          04.09 – 7
                    Properties qualifying for the provisions of the Green Acres law   04.09 – 9
                    Homes that Qualify for This Old House                             04.09 – 10
                    If the EMV of a property for a Prior Year is Reduced              04.09 – 11
            Apportioning the Limited Market Value to Land and Buildings               04.09 – 11

     04.10 – PROPERTY TAX EXCLUSIONS                                                  04.10 – 1
            Plat Law                                                                  04.10 – 1
                   Vacant Land platted in Metropolitan Counties                       04.10 – 1
                   Vacant Land Platted in Non-Metropolitan Counties                   04.10 – 1
            Valuation Exclusion for Certain Improvements (This Old House)             04.10 – 3
                   Property Eligible for the Exclusion                                04.10 – 3
                   Qualifying Value for Exclusion                                     04.10 – 3
                   Improvements That Qualify for Exclusion                            04.10 – 3
                   Homes Damaged by Natural Disaster                                  04.10 – 4
                   Homes Relocated to a Property                                      04.10 – 4
                   Application for Value Exclusion                                    04.10 – 4
                   Relationship to Market Value Changes                               04.10 – 4
                   Duration, Phase-In, and Termination of the Exclusion               04.10 – 5
                   Sale or Transfer of Property                                       04.10 – 5
            Valuation Exclusion for Improvements to Certain Business Property
               (This Old Business)                                                    04.10 – 5
                   M.S. 273.11, Subdivision 19 Conditions                             04.10 – 6
                   M.S. 273.11, Subdivision 20 Conditions                             04.10 – 6
            Valuation Reduction for Homestead Property Damaged by Mold                04.10 – 6
            Valuation Reduction for Properties determined to be a Lead Hazard         04.10 – 7

     04.11 – TAXABLE MARKET VALUE                                                     04.11 – 1
            Hierarchy of Market Value Components                                      04.11 – 1




                                                                                                   viii
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                   Page # 
     04.12 – REFERENDUM MARKET VALUE                                              04.12 – 1
            Definition                                                            04.12 – 1
            History                                                               04.12 – 1

     04.13 – NET TAX CAPACITIES                                                   04.13 – 1
                  Properties Multiple Classes or Tiers                            04.13 – 1
                  Local Net Tax Capacity vs. State Net Tax Capacity               04.13 – 1

     04.14 – TAXABLE NET TAX CAPACITY                                             04.14 – 1
                 Power Line Net Tax Capacity Value                                04.14 – 1
                 Fiscal Disparities                                               04.14 – 1
                 Tax Increment Financing Values                                   04.14 – 1

     04.15 – TAX BASES                                                            04.15 – 1
            Summary of Tax Bases                                                  04.15 – 1
                  Referendum Market Value and Net Tax Capacity                    04.15 – 1
                  State NTC vs Local NTC Tax bases                                04.15 – 1
                  Two State NTC Tax Bases: C-I and SRR                            04.14 – 1
                  Fully Taxable vs JOBZ/Biotech Values and Exception Levy
                     Tax Base                                                     04.15 – 1
                  TIF and Fiscal Disparities                                      04.15 – 2
            Tax Base Summary Table                                                04.15 – 2

     04.16 – PAYMENT IN LIEU OF TAXES (PILT)                                      04.16 – 1
            State PILT Programs                                                   04.16 – 1
                    Consolidated Conservation Areas (Con-Con Land)                04.16 – 1
                    Public Hunting and Game Refuges                               04.16 – 1
                    Goose Management Croplands                                    04.16 – 1
                    Excess Real Estate Acquired for Trunk Highway Purposes        04.16 – 2
                    Property Acquired by the State or Local Units of Government
                       and then Rented                                            04.16 – 2
                    HRA Low Income Housing Projects                               04.16 – 2
                    Natural Resources Land                                        04.16 – 2
            Federal PILT Programs                                                 04.16 – 3
                    Forest Service Timber Payments                                04.16 – 3
                    Entitlement Lands                                             04.16 – 3
                    Fish and Wildlife Service Fee Payments                        04.16 – 3
                    Waterfowl Production Area Land                                04.16 – 3
            Reference                                                             04.16 – 3

CHAPTER FIVE – TAX LEVIES AND THE BUDGETING PROCESS                               05.00
     05.01 – TAXING AUTHORITIES AND TAXING DISTRICTS                              05.01 – 1
            Taxing Authorities                                                    05.01 – 1
            Taxing Districts                                                      05.01 – 1
                   Special Taxing Districts                                       05.01 – 1



                                                                                              ix
TABLE OF CONTENTS                                    (cont’d)
Chapter/Section                                                                        Page # 
                   Special Taxing Districts Determined by Department of Revenue        05.01 – 2
                   Implications of Authority vs Special Taxing District Distinctions   05.01 – 2
            Other (Non-Taxing) “Districts”                                             05.01 – 3
                   Service Districts                                                   05.01 – 3
                   Non-Property Tax Service Districts                                  05.01 – 3
                   Miscellaneous ‘Districts”                                           05.01 – 3
            Special Taxing Districts vs. Special Levies                                05.01 – 4
            Special Taxing Districts; Organization Date                                05.01 – 4
            Overlapping, or Cross-Country, Jurisdictions                               05.01 – 4
            Auditors to Verify Tax Authority                                           05.01 – 5
            State Codes                                                                05.01 – 5

     05.02 – AIDS AND LEVIES                                                           05.02 – 1
            Overview of the Budget Process                                             05.02 – 1
            The Levy Process                                                           05.02 – 1
                   Timing by Type of Jurisdiction                                      05.02 – 1
                   Levy in Specific Amounts                                            05.02 – 1
                   (No) Accounting for Manufactured Home Tax Revenues                  05.02 – 2
                   Accounting for Wind Energy Production Tax Revenues                  05.02 – 2
            Aids                                                                       05.02 – 3
                   Local Government Aid                                                05.02 – 3
                   County Program Aid                                                  05.02 – 4
                   PERA Aid                                                            05.02 – 5
                   State Peace Officer Aid                                             05.02 – 5
                   State Fire Aid                                                      05.02 – 5
                   Authorization Aid, Supplemental Amortization Aid, Additional
                      Amortization Aid, and Teacher’s Retirement Amortization Aid      05.02 – 6
                   Taconite Aid                                                        05.02 – 6
                   Wetland Preservation Area Aid                                       05.02 – 6
                   Disparity Reduction Aid                                             05.02 – 6
                   What was HACA?                                                      05.02 – 7

     05.03 – TRUTH-IN-TAXATION                                                         05.03 – 1
            Overview                                                                   05.03 – 1
            Application of Requirements                                                05.03 – 1
                    Exemption from the Public Hearing Publication Requirement          05.03 – 1
            Calendar of Truth-in-Taxation Provisions                                   05.03 – 2
            Certification of Proposed Levies                                           05.03 – 4
                    Counties and Cities                                                05.03 – 4
                    School Districts                                                   05.03 – 4
                    Towns                                                              05.03 – 5
                    Special Taxing Districts                                           05.03 – 5
                    Market Value Based Referendum Taxes                                05.03 – 5
                    Sharing, Merger, or Consolidation of Services                      05.03 – 5
                    Cross-County Jurisdictions                                         05.03 – 5



                                                                                                   x
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                      Page # 
                   JOBZ Detail                                                       05.03 – 6
            Preparation and Delivery of Parcel Specific Notices                      05.03 – 6
                   Requirement and Mailing Dates                                     05.03 – 6
                   General Form and Content of Notices                               05.03 – 6
                   Exceptions to the General Tax Breakouts                           05.03 – 7
                   Amounts Noted as NOT Being Included in Proposed Taxes             05.03 – 8
                   School District Operating Referendum                              05.03 – 8
                   Relationship Between Tax Amounts and Abatements/Deferrals         05.03 – 8
                   Supplemental Information                                          05.03 – 8
                   Apportionment of Costs                                            05.03 – 9
                   Delivery or Posting of Notice by Owners of Rental Housing         05.03 – 9
                   Failure to Provide notice                                         05.03 – 10
            Public Advertisement                                                     05.03 – 10
                   Form and Content of Advertisement                                 05.03 – 10
                   Definition of “Budget” for Counties and Cities                    05.03 – 11
                   Explanation of Tax Rate Information for Counties and for Cities
                       over 2,500 Population                                         05.03 – 11
                   Selection of Newspaper and Location of Notice                     05.03 – 14
                   Ramsey County, the City of St. Paul, and ISD No. 625              05.03 – 14
                   Using the Sample Notice                                           05.03 – 14
            Public Hearings                                                          05.03 – 14
                   “Initial,” “Continuation,” and “Subsequent” Hearings              05.03 – 14
                   Selection of Hearing Dates and Times                              05.03 – 15
                   Special Election Conflict                                         05.03 – 16
                   Rule if Hearing held on Same Date as a Regularly Scheduled
                       Meeting                                                       05.03 – 16
                   Metro Counties Discuss Regional Rail Levies                       05.03 – 17
                   Joint Public Hearings                                             05.03 – 17
                   Final Levy Restrictions                                           05.03 – 18
            Penalty for Violation of Truth-in-Taxation                               05.03 – 19
                   Certification of Compliance                                       05.03 – 19
                   Examples of Serious TNT Violations                                05.03 – 19
                   Explanation of Penalty                                            05.03 – 19
                   Possible Remedial Action to Avoid Penalty                         05.03 – 19
            Reference                                                                05.03 – 19

     05.04 – LEVY CERTIFICATION                                                      05.04 – 1
            Certification of Proposed Property Tax Levy                              05.04 – 1
            Certification of Final Proposed Levy                                     05.04 – 1
                    Deadline for Certifying Final Levy                               05.04 – 1
                    Market Value Taxes Certified Separately                          05.04 – 1
                    Final Property Tax Levy Restriction                              05.04 – 1
            Auditors to File Levy Reports                                            05.04 – 1
            Auditors to Verify Tax Authority and Enforce Levy Limits                 05.04 – 2
            Checking Bonds against the Register                                      05.04 – 2



                                                                                                  xi
TABLE OF CONTENTS                                  (cont’d)
Chapter/Section                                                                     Page # 
            Deadlines for Certifying Special Assessments and Finance Charges        05.04 – 3

     05.05 – OVERALL LEVY LIMITATION                                                05.05 – 1
            Types of Levy Limits                                                    05.05 – 1
                   Overall Levy Limits                                              05.05 – 1
                   Specific Levy Limits                                             05.05 – 1
                   Truth in Taxation Levy Limits                                    05.05 – 1
                   School District Levy Limits                                      05.05 – 2
            Applying Specific Levy Limits                                           05.05 – 2
                   Converting Mill Rate Limitations to Dollars                      05.05 – 2
                   Definition of Taxable Market Value for Determining Levy Limits   05.05 – 3
            Process for Adjusting Levies That Exceed Levy Limits                    05.05 – 3
            Administration of Overall Levy Limits                                   05.05 – 3
                   History                                                          05.05 – 4
                   Usual Construct of Limits                                        05.05 – 4
                   Consolidations, Annexations, Transfers of Function               05.05 – 5
                   Elections for Additional Levies                                  05.05 – 6

CHAPTER SIX – TAX RATE CALCULATION AND DETERMINATION
              OF NET TAX                                                            06.00
     06.01 – OVERVIEW                                                               06.01 – 1
                 Unique Taxing Areas                                                06.01 – 1
                 Tax Rates                                                          06.01 – 1
                 Extending Rates                                                    06.01 – 1
                 Credits and Net Taxes                                              06.01 – 1
                 Alternate Methods of Taxation                                      06.01 – 1

     06.02 – UNIQUE TAXING AREAS                                                    06.02 – 1
                 Determinants of Unique Taxing Areas                                06.02 – 1
                 UTAs May be Non-Contiguous                                         06.02 – 1
                 Illustration of Unique Taxing Areas                                06.02 – 1
                 Use of Subcodes on Abstracts                                       06.02 – 3
                 Referendum Market Value Levies                                     06.02 – 4

     06.03 – RATE CALCULATION                                                       06.03 – 1
                   When Computed                                                    06.03 – 1
                   Collection of Levies and Values                                  06.03 – 1
                   Cross-County Process; Estimates                                  06.03 – 1
                   Rounding of Rates                                                06.03 – 2
            Local Net Tax Capacity Rates                                            06.03 – 2
                   Initial Tax Rates                                                06.03 – 2
                   Taxable Net Tax Capacity vs. Net Tax Capacity                    06.03 – 2
                   Disparity Reduction Aid Rate (DRA)                               06.03 – 3
                   Local Tax Rates                                                  06.03 – 3
                   Exception Rates                                                  06.03 – 4



                                                                                                xii
TABLE OF CONTENTS                                    (cont’d)
Chapter/Section                                                                   Page # 
                   Did you catch this?                                            06.03 – 4
            Referendum Market Value Tax Rates                                     06.03 – 4
                   Referendum Market Value Based Levies                           06.03 – 4
                   Referendum Market Value vs. All Market Value                   06.03 – 4
                   Calculating the Referendum Market Value Based Tax Rates        06.03 – 5
            State General Property Tax Rate                                       06.03 – 5
                   One State Levy; Two Bases and Two Rates                        06.03 – 5
                   State NTC’s vs. Local NTC’s                                    06.03 – 5
                   No TIF; No Fiscal Disparities                                  06.03 – 5
                   Relationship to Powerlines                                     06.03 – 5
                   Relationship to Credits                                        06.03 – 6
                   Collection and Distribution                                    06.03 – 6
            Other Rates                                                           06.03 – 6
                   Aid Rates                                                      06.03 – 6
                   Countywide Average Tax Rate for Powerlines                     06.03 – 6
                   Fiscal Disparities Areawide Rate                               06.03 – 7
                   Contamination Tax Rates                                        06.03 – 7
                   Wind Energy Production Tax Rate                                06.03 – 7
                   Taconite Production Tax Rate                                   06.03 – 7
            Reference                                                             06.03 – 7

     06.04 – EXCEPTION RATES                                                      06.04 – 1
            Rural/Urban Service Districts                                         06.04 – 1
            Subordinate Service Districts and Special Service Districts           06.04 – 3
            Annexations and Phase-in of Rates                                     06.04 – 3
            Reference                                                             06.04 – 5

     06.05 – EXTENDING TAX RATES                                                  06.05 – 1
                 Cross-County Process                                             06.05 – 1
                 Extending Local Net Tax Capacity Tax Rates                       06.05 – 1
                 Extending State Property Tax Rates                               06.05 – 2
                 Additional Rates to be Extended; How Applied                     06.05 – 2

     06.06 – CREDITS AND DETERMINING NET TAX                                      06.06 – 1
            Overview                                                              06.06 – 1
                   Net Tax                                                        06.06 – 1
                   Order of Determination and Subtraction                         06.06 – 1
            Homestead Disaster Credits (273.1234)                                 06.06 – 1
                   Eligibility                                                    06.06 – 1
                   Computation                                                    06.06 – 2
                   Examples (list)                                                06.06 – 2
                   How Applied                                                    06.06 – 2
                   Payment                                                        06.06 – 3
                   Reporting                                                      06.06 – 3
                   Relationship to Tax Rates, TIF, LMV, etc.                      06.06 – 3



                                                                                              xiii
TABLE OF CONTENTS                                 (cont’d)
Chapter/Section                                                                   Page # 
                  Flow Chart                                                      06.06 – 3
           Local Option Disaster Credits (273.1235)                               06.06 – 7
                  Eligibility                                                     06.06 – 7
                  Computation                                                     06.06 – 7
                  Examples (list)                                                 06.06 – 8
                  How Applied                                                     06.06 – 8
                  Payment                                                         06.06 – 8
                  Reporting                                                       06.06 – 9
                  Relationship to Tax Rates, TIF, LMV, etc.                       06.06 – 9
                  Flow Chart                                                      06.06 – 9
           Power Line Credit                                                      06.06 – 14
                  Eligibility                                                     06.06 – 14
                  Computation; Limits                                             06.06 – 14
                  How Applied                                                     06.06 – 15
                  Funding; Payment                                                06.06 – 16
                  Reporting                                                       06.06 – 16
           Agricultural Preserves Credit                                          06.06 – 16
                  Eligibility                                                     06.06 – 16
                  Computation                                                     06.06 – 16
                  How Applied                                                     06.06 – 18
                  Funding; Payment                                                06.06 – 18
                  Reporting                                                       06.06 – 18
           Enterprise Zone Credit (expired provision)                             06.06 – 18
           Disparity Reduction Credit                                             06.06 – 18
                  Eligibility                                                     06.06 – 18
                  Computation                                                     06.06 – 14
                  How Applied                                                     06.06 – 19
                  Payment                                                         06.06 – 19
                  Reporting                                                       06.06 – 19
                  Special Provisions: Vacant Commercial Industrial Property       06.06 – 19
           County Conservation Credit                                             06.06 – 20
                  Eligibility                                                     06.06 – 20
                  Computation                                                     06.06 – 20
                  How Applied                                                     06.06 – 20
                  Funding; Payment                                                06.06 – 20
                  Reporting                                                       06.06 – 21
           Residential Homestead Market Value Credit                              06.06 – 21
                  Eligibility                                                     06.06 – 21
                  Computation                                                     06.06 – 22
                  Examples (list)                                                 06.06 – 24
                  How Applied                                                     06.06 – 24
                  Reporting                                                       06.06 – 24
                  Payment                                                         06.06 – 24
           Agricultural Homestead Market Value Credit                             06.06 – 32
                  Eligibility                                                     06.06 – 32



                                                                                               xiv
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                   Page # 
                  Computation                                                     06.06 – 32
                  Examples (list)                                                 06.06 – 34
                  How Applied                                                     06.06 – 34
                  Reporting                                                       06.06 – 35
                  Payment                                                         06.06 – 35
           Taconite Credits                                                       06.06 – 42
                  Eligibility                                                     06.06 – 42
                  Computation                                                     06.06 – 43
                  Examples (list)                                                 06.06 – 43
                  How Applied                                                     06.06 – 43
                  Funding; Payment                                                06.06 – 44
                  Reporting                                                       06.06 – 44
           Supplemental (Taconite)Homestead Credit                                06.06 – 45
                  Eligibility                                                     06.06 – 45
                  Computation                                                     06.06 – 46
                  Examples (list)                                                 06.06 – 47
                  How Applied                                                     06.06 – 47
                  Funding; Payment                                                06.06 – 47
                  Reporting                                                       06.06 – 47
           Summary of Credit Features                                             06.06 – 47
           Miscellaneous General Credit Provisions                                06.06 – 49
                  Applying Credits to TIF Districts                               06.06 – 49
                  Allocating Credits based on Shares of the Local Tax Rates       06.06 – 49
                  Credits, the State Property Tax, and Fiscal Disparities Taxes   06.06 – 50
                  Chained Parcels                                                 06.06 – 50
                  Payment Dates – Saturdays, Sundays, and Holidays                06.06 – 50
                  Payments to School Districts                                    06.06 – 50
           Miscellaneous Net Tax Provisions                                       06.06 – 50
                  Rounding                                                        06.06 – 50
           Reference                                                              06.06 – 51

     06.07 – ALTERNATE METHODS OF TAXATION                                        06.07 – 1
            Overview                                                              06.07 – 1
            The Contamination Tax                                                 06.07 – 1
                   Determining the Contamination Value, Tax Rate, and Tax         06.07 – 1
                   Tax Increment Financing and the Contamination Tax              06.07 – 12
                   Fiscal Disparity Procedures and the Contamination Tax          06.07 – 12
                   Levy and Collection of Contamination Taxes                     06.07 – 13
                   Abstract Reporting of Contamination Values and Taxes           06.07 – 14
                   Distribution of Contamination Taxes                            06.07 – 14
                   Termination of Contamination Tax                               06.07 – 16
            Power Line Taxation                                                   06.07 – 16
                   Taxation of Transmission and Distribution Lines                06.07 – 17
                   Power Line Credit                                              06.07 – 18
                   Distribution Lines of Cooperative Associations                 06.07 – 18



                                                                                               xv
TABLE OF CONTENTS                                  (cont’d)
Chapter/Section                                                                     Page # 
                   The State General Property Tax and Power Lines                   06.07 – 18
                   Abstract Reporting of Power Line Values, Credits, and Taxes      06.07 – 19
            Wind Energy Production Tax                                              06.07 – 24
                   Rate of Tax                                                      06.07 – 24
                   Reporting and Tax Determination                                  06.07 – 24
                   Payment and Collection                                           06.07 – 24
                   Distribution of Revenues                                         06.07 – 24
                   JOBZ Exemption                                                   06.07 – 25
                   Payment in Lieu, Exemption                                       06.07 – 25
            Reference                                                               06.07 – 25

CHAPTER SEVEN – REPORTING                                                           07.00
     07.01 – OVERVIEW                                                               07.01 – 1
            07.01.01 – Scope                                                        07.01 – 1
            07.01.02 – Major Categories                                             07.01 – 2

     07.02 – TIMELINE                                                               07.02 – 1

     07.03 – ABSTRACTS                                                              07.03 – 1
            Overview                                                                07.03 – 1
            07.03.01-Abstract of Tax Lists                                          07.03 – 1
            07.03.02-Tax Increment Supplement to the Abstract of Tax Lists          07.03 – 5
            07.03.03-Assessment Abstract                                            07.03 – 7
            07.03.04-Manufactured Home Abstract                                     07.03 – 9
            07.03.05-Exempt Abstract & PILT Supplement                              07.03 – 11
            07.03.06-Other Property Tax-Related Abstracts                           07.03 – 13

     07.04 - AUDIT REPORTS                                                          07.04 – 1
             07.04.01 - County Financial Reporting Form
             07.04.02 - Local Government Lobbying Expenditures Reporting Form
             07.04.03 – Levy Book (Taxes Receivable)
             07.04.04 – Schedule of Taxes Levied

     07.05 – BUDGETS                                                                07.05 – 1
            07.05.01 - County Summary Budget Form
            07.05.02 – Approved budget and tax levy by taxing district and fund
            07.05.03 – Where the county dollar comes from
            07.05.04 – Net tax capacity values and rates and county tax comparisons
            07.05.05 – Comparison of estimated revenue by major classification
            07.05.06 – Determination of uncollectibles

     07.06 – DEBT                                                                   07.06 – 1
            Overview                                                                07.06 – 1
            07.06.01 - Bond Register                                                07.06 – 1
            07.06.02 - Local Government Report of Outstanding Indebtedness          07.06 – 3



                                                                                                 xvi
TABLE OF CONTENTS                                    (cont’d)
Chapter/Section                                                                       Page # 
            07.06.03 - Annual Debt Report (County)                                    07.06 – 6
            07.06.04 - Certification of Entry into Bond Register and Tax Levy         07.06 – 7
            07.06.05 - Auditor’s Certificate                                          07.06 – 8
            07.06.06 - Largest Taxpayers                                              07.06 – 14
            07.06.07 - Overlapping & Underlying Debt Report                           07.06 – 16
            07.06.08 - Debt Levy Certification                                        07.06 – 17

     07.07 – DELINQUENCIES                                                          07.07 – 1
            07.07.01 - Delinquent Tax Report
            07.07.02 - State General Property Tax Annual Report
            07.07.03 - Courtesy Letters
            07.07.04 - Confession of Judgment
            07.07.05 - Confession of Judgment – Notice of Payment Due
            07.07.06 - Confession of Judgment – Notice of Nonpayment
            07.07.07 - Judgment List
            07.07.08 – Delinquent Notice
            07.07.09 – Delinquent Notice – Affidavit of Mailing
            07.07.10 – Judgment List – Payments Made Before or After Judgment
            07.07.11 - Publication List
            07.07.12 - Notice of Expiration of Redemption
            07.07.13 - Forfeiture Certificate
            07.07.14 – Public Notice of When Taxes Will Become Delinquent
            07.07.15 – Notice of Nonpayment of taxes on Property Acquired by MNDOT
            07.07.16 – Notice of nonpayment of taxes on property acquired by a governmental
        agency (except MNDOT)
            07.07.17 – Return of Tax Lists Showing Delinquencies
            07.07.18 – Filing to Receive Notice of Delinquent Taxes

     07.08 – FINANCIAL STATEMENTS                                                     07.08 – 1
             07.08.01 – Treasurer’s Books
             07.08.02 – Comprehensive Annual Financial Report (“CAFR”) – Financial
             07.08.03 – CAFR – Required supplementary – Schedule of revenues, expenditures, and
         changes in fund balance – budget and actual
             07.08.04 – CAFR – Government-wide revenue by source
             07.08.05 – CAFR – Revenues by source (last ten years)
             07.08.06 – CAFR – General government revenues and expenditures by source and
         function (last ten years)
             07.08.07 – CAFR – Tax levies and collections on property located within the county (last
         ten years)
             07.08.08 – CAFR – Tax levies and tax rates by fund (last ten years)
             07.08.09 – CAFR – Comparison of property tax collections to amount required to finance
         county budget (last ten years)
             07.08.10 – CAFR – Market value by use of property
             07.08.11 – CAFR – Tax capacity and estimated market value of taxable property (last ten
         years)



                                                                                                   xvii
TABLE OF CONTENTS                                     (cont’d)
Chapter/Section                                                                         Page # 
           07.08.12 – CAFR – Tax capacity of taxable property by municipality
           07.08.13 – CAFR – Taxable valuations, tax levies and tax rates
           07.08.14 – CAFR – Property tax rates and levies – all overlapping governments (last ten
        years)
           07.08.15 – CAFR – Ratio of net general obligation debt to property market value, net
        debt per capita, and the current year legal debt margin (last ten years)
           07.08.16 – CAFR – Direct, overlapping, and underlying general obligation debt
           07.08.17 – CAFR – Computation of legal debt margin
           07.08.18 – CAFR – Deferred tax levies for future bond debt service
           07.08.19 – CAFR – Property value, new construction and bank deposits (last ten years)
           07.08.20 – CAFR – Principal taxpayers
           07.08.21 – CAFR – Special assessment collections (last ten years)
           07.08.22 – CAFR – Selected ratio measures of financial condition (last ten years)
           07.08.23 – CAFR – Selected per capita measures of financial condition (last ten years)
           07.08.24 – CAFR – Tax increment district captured net tax capacity (last ten years)
           07.08.25 – CAFR – Fiscal disparity payments to the county (last ten years)


     07.09 – FISCAL DISPARITY                                                           07.07 – 1
            07.09.01 - Table V and Supplemental V (Contribution Values)                 07.09 – 3
            07.09.02 - Table VIII (Distribution Dollars)                                07.09 – 5
            07.09.03 - Table II, III, IV (Values by Type)                               07.09 – 7
            07.09.04 - Table I (Original base values)                                   07.09 – 10
            07.09.05 - Table IX (Allocation of Contribution Values)                     07.09 – 11
            07.09.06 - Table X (Values for calcing rates and local tax rate calc)       07.09 – 13
            07.09.07 - Table VII (Certification of distribution value)                  07.09 – 14
            07.09.08 – Area-wide Tax Rate                                               07.09 – 15
            07.09.09 – Certification of Area-wide Tax Levies                            07.09 – 17

     07.10 – HOMESTEADS                                                            07.10 – 1
            07.10.01 – General Homestead Application
            07.10.02 - Special Ag Homestead Forms
            07.10.03 – Application for Disabled Homestead (Form PE12)
            07.10.04 – Application for Blind Homestead (Form PE13)
            07.10.05 – Social Security Number List
            07.10.06 – Notification of Improperly Claimed Homestead (to auditor)
            07.10.07 – Notification of Improperly Claimed Homestead (to Homesteader)
            07.10.08 – Notification of Improperly Claimed Homestead (to Treasurer)
            07.10.09 – Improperly Claimed Homestead Certification Summary
            07.10.10 – Microdata Sample Generation
            07.10.11 – Estimate of Taconite Homestead Property Tax Relief
            07.10.12 – Estimate of Supplementary Taconite Homestead Property Tax Relief
            07.10.13 – Cross County Homesteads

     07.11 – RECORDING                                                                  07.11 – 1



                                                                                                    xviii
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                       Page # 
            07.11.01 – Current Taxes Paid – CIC Declarations                          07.11 – 1
            07.11.02 – Current Taxes paid – Transfer of Less than a Whole Parcel      07.11 – 1
            07.11.03 – Current Taxes Paid – Registered land Surveys                   07.11 – 2
            07.11.04 – Delinquent Tax Certification                                   07.11 – 3
            07.11.05 – Notification of Parcel Identification Number (“PIN”)           07.11 – 5
            07.11.06 – Parcel Identification Number/Tax Description Cross-reference   07.11 – 6

     07.12 – SCHOOLS                                                                  07.12 – 1
            Overview                                                                  07.12 – 1
            07.12.01 - 6 Month School Abatement Report                                07.12 – 1
            07.12.02 - Yearly School Abatement Report                                 07.12 – 2
            07.12.03 - School Tax Report                                              07.12 – 4
            07.12.04 - School Tax Receivable (Form 51)                                07.12 – 6
            07.12.05 - Taconite Credit Report                                         07.12 – 7
            07.12.06 – School Referendum Notice                                       07.12 – 9

     07.13 – SPECIAL ASSESSMENTS & SERVICE CHARGES                                   07.13 – 1
            07.13.01 - Extension of Special Assessment Roll
            07.13.02 - Deferred Special Assessment – Senior Citizen, Hardship – Application
            07.13.03 - Deferred Special Assessment – Senior Citizen, Hardship – Notice
            07.13.04 - Deferred Special Assessment – Senior Citizen, Hardship – Satisfaction
            07.13.05 - Deferred Special Assessment – Green Acre – Notice
            07.13.06 - Deferred Special Assessment – Green Acre – Satisfaction
            07.13.07 - Prepaid Special Assessments
            07.13.08 - Special Assessments Receivable
            07.13.09 – Local Improvement Assessments – Initial Notification

     07.14 – TAX ADJUSTMENTS                                                          07.14 – 1
            07.14.01 – Abatement Form
            07.14.02 – Notice of Tax Court Petition
            07.14.03 – Notice of Overpayment
            07.14.04 – Notice of Unclaimed Property Tax Refunds
            07.14.05 – Disaster Credit Certification

     07.15 – TAX FORFEITED LAND                                                       07.15 – 1
            07.15.11 – Red Lake Game Preserve – Certificate of New Forfeitures
            07.15.12 – Conservation Area – Certificate of New Forfeitures
            07.15.13 – Conservation Area – Certificate of New Forfeitures

     07.16 – TAX INCREMENT                                                            07.16 – 1
            07.16.01 – Tax Increment Plan
            07.16.02 - Certification of a New Tax Increment District
            07.16.03 - Certification of Tax Increment Tax Extensions
            07.16.04 - Certification of Changes to Tax Increment Original Values
            07.16.05 – Assessment Agreement



                                                                                                  xix
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                      Page # 
           07.16.06 - 3 Year Knockdown
           07.16.07 - 4 Year Knockdown
           07.16.08 - Annual Disclosure Statement
           07.16.09 - Annual Financial Report
           07.16.10 - Tax Increment Excess Determination
           07.16.11 - Pooled Debt Report
           07.16.12 – Notice of Potential Valuation Reductions
           07.16.13 – Decertification
           07.16.14 - Business Subsidy Report (JOBZ, Tax Increment, Economic Development
        Abatement, Other)
           07.16.15 – Pre-79 Port Authority Tax Increment Certification of Net Tax Capacity
           07.16.16 – Pre-79 Port Authority Tax Increment Certification of Changes in Net Tax
        Capacity
           07.16.17 – Pre-79 Tax Increment Certification of Original Net Tax Capacity
           07.16.18 – Tax Increment Annual Financial Report – Fiscal Disparity – “A” Election
           07.16.19 – State Auditor – JOBZ & Business Subsidy Report
           07.16.20 – County Road Costs

     07.17 – TAX LEVIES & RATES                                                      07.17 – 1
            07.17.01 - TNT Hearing Certification – Schools, Regional Library         07.17 – 1
            07.17.02 - TNT Hearing Certification to Cities                           07.17 – 4
            07.17.03 - Tax Levy Instructions                                         07.17 – 7
            07.17.04 - Outstanding Debt Levies                                       07.17 – 12
            07.17.05 - Proposed Tax Levy Report                                      07.17 – 12
            07.17.06 - Final Tax Levy Report                                         07.17 – 14
            07.17.07 - Property Tax Levy Report                                      07.17 – 15
            07.17.08 - Schedules of Taxes Levied                                     07.17 – 17
            07.17.09 – Cross County Tax Rates                                        07.17 – 18
            07.17.10 – Tax Rate Publication                                          07.17 – 20
            07.17.11 – Tax Rate Summary                                              07.17 – 21
            07.17.12 – Manufactured Home Tax Extension                               07.17 – 25
            07.17.13 – Levy Certification – County, City & Special Taxing District   07.17 – 26
            07.17.14 – Levy Certification – School                                   07.17 – 27
            07.17.15 – Disparity Reduction Aid                                       07.17 – 29
            07.17.16 – State Paid Aid                                                07.17 – 30
            07.17.17 – State General Tax Rates                                       07.17 – 32

     07.18 – TAX SETTLEMENT                                                          07.18 – 1
            07.18.01 - May Tax Settlement With County Auditor                        07.18 – 2
            07.18.02 - May Tax Settlement – Abstract                                 07.18 – 6
            07.18.03 - May Tax Settlement – Remittance Advance                       07.18 – 6
            07.18.04 - October Tax Settlement – Remittance Advance                   07.18 – 7
            07.18.05 - Final Tax Settlement with County Auditor                      07.18 – 8
            07.18.06 - Final Tax Settlement – Remittance Advance                     07.18 – 9
            07.18.07 – Advances and Partial Settlements                              07.18 – 9



                                                                                                  xx
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                     Page # 
            07.18.08 - School Apportionment                                         07.18 – 11
            07.18.09 - Tax Increment Excess Paid to Schools                         07.18 – 13
            07.18.10 - School Tax Settlement Report (Form 52)                       07.18 – 14
            07.18.11 - State Deed and Mortgage Registration                         07.18 – 17
            07.18.12 - State Share of State General Tax                             07.18 – 19
            07.18.13 - State Share of Contamination Tax                             07.18 – 20
            07.18.14 - State Auditor Tax Increment Fee                              07.18 – 21

     07.19 – TAX STATEMENTS & TNT NOTICES                                           07.19 – 1
            07.19.01 - Tax Statement – Real Estate and Personal Property            07.19 – 1
            07.19.02 - Tax Statement – Manufactured Homes                           07.19 – 5
            07.19.03 - Truth in Taxation Notice                                     07.19 – 5
            07.19.04 - Truth In Taxation Published Notice                           07.19 – 7
            07.19.05 - Truth In Taxation Levy Certification & Stmt. of Compliance   07.19 – 10

     07.20 – VALUATION                                                              07.20 – 1
            07.20.01 – Valuation Notice                                             07.20 – 1
            07.20.02 – Cross County Values                                          07.20 – 4
            07.20.03 – 1st Class Cities Market Values and Net Tax Capacities        07.20 – 6
            07.20.04 – Special Service District Net Tax Capacity                    07.20 – 7
            07.20.05 – State Board of Equalization – Request for Assistance         07.20 – 8
            07.20.06 – State Board of Equalization Orders                           07.20 – 9
            07.20.07 – Cert. of Assessment Costs – Failure to Employ Assessor       07.20 – 11
            07.20.08 – Cert. of Assessment Costs – Local Assessment Deficiencies    07.20 – 12
            07.20.09 – List of Contamination Values                                 07.20 – 13
            07.20.10 – Certificate of Real Estate Value (“CRV”)                     07.20 – 14
            07.20.11 – Assessment Books                                             07.20 – 17
            07.20.12 – Proceedings of the County Board of Equalization              07.20 – 17
            07.20.13 – Township Assessment Rolls                                    07.20 – 18

     07.21 – COLLECTIONS                                                            07.21 – 1


     07.22 – MISCELLANEOUS                                                           07.22 – 1
            07.22.01 – Application for Senior Citizen Deferral                       07.22 – 1
            07.22.02 - Senior Citizen Deferral – Yearly Notification to Taxpayer     07.22 – 3
            07.22.03 - Senior Citizen Deferral – Yearly Notification to DOR          07.22 – 4
            07.22.04 - Senior Citizen Deferral – Satisfaction                        07.22 – 5
            07.22.05 - Annexation Report (PT01)                                      07.22 – 6
            07.22.06 – Certification of Disparity Reduction Credits                  07.22 – 8
            07.22.07 - Gravel Tax Report – Quarterly Payment Report                  07.22 – 8
            07.22.08 – Gravel Tax – Notification of Failure to File Quarterly Report 07.22 – 9
            07.22.10 – Gravel Tax – Annual DOR Report                                07.22 – 10
            07.22.07 – Property Tax Refund Return (Form M1PR)                        07.22 – 12
            07.22.09 – Mortgage Registry and Deed Tax – Exemption or Minimum Tax Claim



                                                                                                  xxi
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                 Page # 
CHAPTER EIGHT – TAX COLLECTION – REAL AND PERSONAL PROPERTY                     08.00
     08.01 – TAX COLLECTION OVERVIEW                                            08.01 – 1
            Overview                                                            08.01 – 1
            Delivery of Lists to Treasurer                                      08.01 – 1
            Publication of Tax Rates                                            08.01 – 1
            Treasurer to Collect Taxes                                          08.01 – 1
            Treasurer to Collect Local Assessments                              08.01 – 2
            Filing to Receive Notice of Delinquent Taxes                        08.01 – 2

     08.02 – PROPERTY TAX STATEMENTS                                            08.02 – 1
            Contents of Tax Statements                                          08.02 – 1
            Qualifying Tax Amount (QTA)                                         08.02 – 4
                   Calculating the QTA                                          08.02 – 5
            Mailing of Tax Statements                                           08.02 – 5
            Collection Site                                                     08.02 – 6
            State Copy                                                          08.02 – 6
                   PTR Homestead File                                           08.02 – 7

     08.03 – PAYMENTS AND PENALTIES                                             08.03 – 1
            Timely Payments                                                     08.03 – 1
                   Date of Mailing                                              08.03 – 1
                   Mailing Requirements                                         08.03 – 1
                   Postal Service Postmark                                      08.03 – 1
                   Date of Receipt                                              08.03 – 1
            Due Dates                                                           08.03 – 1
                   Due Dates on a Saturday, Sunday, or a Holiday                08.03 – 2
            Penalties for Late Payments                                         08.03 – 2
                   Real Property                                                08.03 – 3
                   Homestead Property                                           08.03 – 3
                    Seasonal Residential Recreational Property                  08.03 – 3
                   Non Homestead Property                                       08.03 – 3
                   Agricultural Property                                        08.03 – 4
                   Abatement of Penalty                                         08.03 – 6
                   Manufactured Homes                                           08.03 – 4
                   Personal Property                                            08.03 – 4
                   First Business Day in January                                08.03 – 5

     08.04 – SPECIAL ASSESSMENTS AND OTHER CHARGES                              08.04 – 1
            Overview                                                            08.04 – 1
            Special Assessments – M.S. Chapter 429                              08.04 – 1
                   Improvements to Property                                     08.04 – 1
                   Authority to Give Notice/Provide Hearings/Right to Appeal    08.04 – 3
                   Apportionment of Costs                                       08.04 – 4
                   Assessments on Publicly Owned Property excluding the State   08.04 – 4
                   Assessments on State Owned Property                          08.04 – 5



                                                                                            xxii
TABLE OF CONTENTS                                (cont’d)
Chapter/Section                                                                   Page # 
                  The Assessment Roll                                             08.04 – 5
                  Certification to County Auditor                                 08.04 – 6
                  Assessment Prepayment or Payoff                                 08.04 – 6
           Deferral of Assessment Principal and Interest                          08.04 – 7
                  Unimproved Property                                             08.04 – 7
                  Agricultural Property –Green Acres Property                     08.04 – 7
                  Agricultural Property – Ag Preserve Program                     08.04 – 7
                  Hardship Assessment Deferrals for Seniors or the Disabled       08.04 – 8
                  Senior Citizen Tax Deferral                                     08.04 – 8
           Collection                                                             08.04 – 9
                  Power to Abate; Correction of Errors                            08.04 – 9
                  Cancellation of Assessments due to Project Incompletion         08.04 – 9
                  Cancellation of Assessments due to Tax Forfeiture               08.04 – 10
                  Administrative Expenses                                         08.04 – 10
                  Reapportionment of Special Assessments upon Land Subdivisions   08.04 – 10
                  Reassessment on Tax Forfeited Lands                             08.04 – 10
           Unpaid Service Charges                                                 08.04 – 11
                  Service Charge to Dispose of Garbage in Certain Cities          08.04 – 11
                  Service Charge for Sanitary Sewer & Storm Sewers                08.04 – 12
                  Payment of Unpaid Service Charge Assessment                     08.04 – 12
           Water Law                                                              08.04 – 12
                  Introduction                                                    08.04 – 12
           County Drainage System (County Ditches) – M.S. 103E                    08.04 – 14
                  General Information                                             08.04 – 14
                  Projects by Petition                                            08.04 – 15
                  Project Procedures                                              08.04 – 17
           Water Management Organization (WMO) – M.S. Chapter 103B                08.04 – 24
           Lake Improvement District (LID) – M.S. Chapter 103 B                   08.04 – 25
           Soil & Water Conservation District – M.S. Chapter 103C                 08.04 – 25
           Watersheds – M.S. Chapter 103D                                         08.04 – 26
                  Introduction                                                    08.04 – 26
                  Establishment of a Project                                      08.04 – 26
                  Appointing of Appraisers                                        08.04 – 26
                  Drainage Systems in Watershed Districts                         08.04 – 27
                  Maintenance of Watershed Projects                               08.04 – 27
                  Repairs or Improvements to Watershed Projects                   08.04 – 27
                  Determination of Benefits                                       08.04 – 27
                  Appeal Rights                                                   08.04 – 28
                  Assessment, Levy & Collection                                   08.04 – 28
           Assessments Outside of Chapters 103 and 429                            08.04 – 29
                  Shade Tree Pest & Disease Control                               08.04 – 29
                  Wild Fire and Forest Fire prevention & Extinguishment           08.04 – 29
                  Individual Sewage Treatment System or Water Well programs       08.04 – 30
                  Solid Waste Management & Household Hazardous Waste              08.04 – 31
                  Contracted Fire Service                                         08.04 – 31



                                                                                            xxiii
TABLE OF CONTENTS                                    (cont’d)
Chapter/Section                                                                   Page # 
                   Unpaid Governmental Service Charges                            08.04 – 32
                   Special Service Districts                                      08.04 – 32
                   Housing Improvement Area                                       08.04 – 33
                   Establishment of a Boundary Commission and Fees Appropriated   08.04 – 33
            Assessments by State Agencies and Departments                         08.04 – 34
                   Assessments under Bankruptcy                                   08.04 – 35
            Reference                                                             08.04 – 36

     08.05 – RECEIVE AND DISTRIBUTE PILT                                          08.05 – 1
            Overview                                                              08.05 – 1
            Department of Interior, Refuge Revenue Sharing Act                    08.05 – 1
                   Distribution                                                   08.05 – 1
            Game and Fish                                                         08.05 – 1
                   Public Hunting Areas and Game Refuges                          08.05 – 1
                   Wild Goose Management                                          08.05 – 2
                   Distribution                                                   08.05 – 2
            Natural Resources Land                                                08.05 – 2
                   Distribution                                                   08.05 – 3
                   Inflation Adjustments                                          08.05 – 4
            Property Acquired by the State or Other Political Subdivision         08.05 – 4
                   Housing Redevelopment                                          08.05 – 4
            Seaway Port Authorities                                               08.05 – 5
            Other Payments in Lieu of Tax                                         08.05 – 5
                   Specific Property Tax Exemptions                               08.05 – 5
                   Tax Increment                                                  08.06 – 1

CHAPTER NINE – SETTLEMENT AND DISTRIBUTION
                                – REAL AND PERSONAL PROPERTY                      09.00
     09.01 – SETTLEMENT AND DISTRIBUTION                                          09.01 – 1
            Overview                                                              09.01 – 1
                   Definition of Terms                                            09.01 – 1
            Settlement Dates                                                      09.01 – 1
            Payment Dates                                                         09.01 – 2
            Specific Tax Information                                              09.01 – 4
                   Current Real Estate Property Tax                               09.01 – 4
                   Current Personal Property Tax                                  09.01 – 4
                   Current Manufactured Home Tax (Personal Property)              09.01 – 5
                   Delinquent, Real Estate, Personal Property, and MH Tax         09.01 – 5
                   Special Assessments                                            09.01 – 6
                   Penalty                                                        09.01 – 6
                   Interest                                                       09.01 – 6
                   Power Line Taxes                                               09.01 – 7
                   School District Apportionment                                  09.01 – 7




                                                                                              xxiv
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                   Page # 
CHAPTER TEN – DELINQUENCY ADMINISTRATION – REAL PROPERTY                          10.00
     10.01 – DELINQUENT REAL PROPERTY TAX OVERVIEW                                10.01 – 1
            Definition of Terms                                                   10.01 – 1
            Overview                                                              10.01 – 1
            Organizational Plan                                                   10.01 – 2

     10.02 – STAGE ONE: DETERMINATION                                             10.02 – 1
            General Overview                                                      10.02 – 1
            First Business Day in January                                         10.02 – 2
                    Delinquent Taxes                                              10.02 – 2
                    Penalties Added to Delinquent Taxes                           10.02 – 2
            February 15                                                           10.02 – 2
                    Delinquent Tax List: Parcels Included and Excluded            10.02 – 2
            February 20                                                           10.02 – 3
            March 20                                                              10.02 – 3
            Interest on Delinquent Taxes                                          10.02 – 4
                    Basis of Interest                                             10.02 – 4
                    Interest Prorated Monthly                                     10.02 – 4
            Bankruptcy                                                            10.02 – 4
            Reference                                                             10.02 – 6

     10.03 – STAGE TWO: PUBLICATION                                               10.03 – 1
            General Overview                                                      10.03 – 1
            First Business Day in January                                         10.03 – 2
                   Criteria for Selection of Newspaper                            10.03 – 3
                   Designation by Board Resolution                                10.03 – 3
            Auditor’s Tasks before Publication                                    10.03 – 3
                   Task #1: Notice and List sent to Publisher                     10.03 – 3
                   Task #2: Corrected Proofs Returned to Publisher                10.03 – 3
            Publication Requirements                                              10.03 – 4
                   Requirement #1: Number of times                                10.03 – 4
                   Requirement #2: March 20 Deadline                              10.03 -4
            Conditions for Republication                                          10.03 – 4
                   Correction of Errors found within 10 days of Publication       10.03 – 4
                   Affidavit                                                      10.03 – 4
                   Who is to Receive Mailings?                                    10.03 – 5
                   Are Mailings Required for Later Legal Action?                  10.03 – 5
                   Publication: Deadline March 20                                 10.03 – 5
            Reference                                                             10.03 – 5

     10.04 – STAGE THREE: JUDGMENT                                                10.04 – 1
            General Overview                                                      10.04 – 1
            Objection to Delinquent Taxes                                         10.04 – 1
                   Deadline: Within 20 Days of Last Publication of Notice         10.04 – 2
                   Filers: Owners, Taxpayers, and Interested Parties              10.04 – 2



                                                                                              xxv
TABLE OF CONTENTS                                 (cont’d)
Chapter/Section                                                                    Page # 
                  Filing Office: Court Administrator                               10.04 – 2
                  Failure to File: Loss of Defense                                 10.04 – 2
           Tax Judgment by Court Administrator                                     10.04 – 2
                  Court Administrator: Cases with No Objections                    10.04 – 3
                  Deadline for Judgments: After 20 Days                            10.04 – 3
                  Administrator’s Tax Judgment: Lien                               10.04 – 3
                  Administrator’s Tax Judgment: In Rem                             10.04 – 3
                  Court Ruling: Uphold Written Objection                           10.04 – 4
                  Court Ruling: Uphold Taxes and Penalties                         10.04 – 4
                  Court’s Tax Judgment: Lien                                       10.04 – 4
                  Court’s Tax Judgment: In Rem                                     10.04 – 4
                  Court’s Tax Judgment: Subject to Appeal                          10.04 – 4
                  Interest Rate for Tax Judgments by Court                         10.04 – 5
           Copy of Tax Judgment to County Auditor                                  10.04 – 5
           Conditions for Canceling a Tax Judgment                                 10.04 – 5
                  Condition #1: Taxes and Penalties were paid before Judgment      10.04 – 6
                  Condition #2: Property is Exempt from Taxes                      10.04 – 6
           Recording Payments Before/After Judgment                                10.04 – 6
                  Methods of Recording Payment before Tax Judgment                 10.04 – 6
                  Methods of Recording Payment after Tax Judgment                  10.04 – 6
                  Legal Tender: U.S. Currency, Check or Money Order                10.04 – 6
           Distribution of Delinquent Tax Amount                                   10.04 – 6
           Tax Judgment Sale: 2nd Monday in May                                    10.04 – 7
                  Bid in for the State: Definition                                 10.04 – 7
                  Reference                                                        10.04 – 8

     10.05 – STAGE FOUR, PART ONE: REDEMPTION                                      10.05 – 1
            Method #1: Redemption under the Tax Judgment Plan                      10.05 – 1
            Method #2: Confession of Judgment                                      10.05 – 1
            Redemption under the Tax Judgment Plan                                 10.05 – 2
                    Eligible Parties                                               10.05 – 2
                    Lienholder’s Rights                                            10.05 – 2
                    Time Periods                                                   10.05 – 2
                    Five-Year Period of Redemption                                 10.05 – 3
                    Three-Year Period of Redemption                                10.05 – 3
                    Exceptions to the Standard Periods of Redemption               10.05 – 4
            Methods of payment for Redemption                                      10.05 – 4
                    Method #1: Single Payment of Total Delinquent Tax Amount       10.05 – 5
                    Method #2: Each Year’s Delinquent Tax Amount Paid Separately   10.05 – 5
            Partial Redemption                                                     10.05 – 5
                    Conditions for Partial Redemption                              10.05 – 5
                    Partial Redemption: Eligibility                                10.05 – 5
                    Administration of Partial Redemption                           10.05 – 6
            Full Redemption                                                        10.05 – 6
                    Task #1: Auditor Certifies Delinquent Tax Amount               10.05 – 6



                                                                                               xxvi
TABLE OF CONTENTS                                    (cont’d)
Chapter/Section                                                                    Page # 
                   Task #2: Treasurer Receives Payment                             10.05 – 6
                   Task #3: Auditor Issues Receipt                                 10.05 – 6
                   Cancellation of Court Judgment                                  10.05 – 7
                   Removal of Tax Lien on Title                                    10.05 – 7
                   Lienholder’s Claim against the Property                         10.05 – 7
                   Auditor Certifies Less Than Required Amount                     10.05 – 8
            Delinquent Taxes Paid in Reverse Order                                 10.05 – 8
                   No Effect on State’s Lien                                       10.05 – 8
                   Legislative Purpose                                             10.05 – 8
            Distribution of Delinquent Tax Amount                                  10.05 – 9
            Voluntary Conveyance in Lieu of Forfeiture                             10.05 – 9
                   Conditions Required                                             10.05 – 9
                   Legal Title to the State                                        10.05 – 9
                   Cancellation of Taxes                                           10.05 – 9
                   Cause for Reinstatement of Taxes                                10.05 – 10
                   Name of Grantee                                                 10.05 – 10
                   Statutory Reference                                             10.05 – 10
            Attachment of Rent or Crops                                            10.05 – 10
            Reference                                                              10.05 – 11

     10.06 – STAGE FOUR, PART TWO: CONFESSION                                      10.06 – 1
            General Overview                                                       10.06 – 1
            10-Year Plan                                                           10.06 – 2
                   Eligibility                                                     10.06 – 2
                   Eligible Parties                                                10.06 – 2
                   Eligible Property                                               10.06 – 3
                   Market Value Cut-Off for Eligibility                            10.06 – 4
                   Unimproved Land                                                 10.06 – 4
                   Classification Year                                             10.06 – 5
                   Number of Confessions Allowed                                   10.06 – 5
                   Confession Agreement                                            10.06 – 6
                   Payment of Current Year Taxes and Penalty                       10.06 – 7
                   Recording of Confession                                         10.06 – 7
                   Default on Payments                                             10.06 – 7
                   Notice of 60-day Grace Period                                   10.06 – 7
                   Reinstatement of Original Tax Judgment upon Default             10.06 – 8
                   Default: 2nd Confession Allowed                                 10.06 – 8
            5-Year Plan                                                            10.06 – 9
                   Eligibility                                                     10.06 – 9
                   Eligible Parties                                                10.06 – 9
                   Eligible Property                                               10.06 – 9
                   Unimproved Land                                                 10.06 – 10
                   Market Value Cut-Off for Eligibility                            10.06 – 10
            Properties Not Eligible for Confession                                 10.06 – 11
                   Special Exclusions for the Cities of Minneapolis and St. Paul   10.06 – 11



                                                                                             xxvii
TABLE OF CONTENTS                                    (cont’d)
Chapter/Section                                                                  Page # 
            Calculation of Interest, Installments, and Administrative Fees       10.06 – 11
            Reference                                                            10.06 – 12

     10.07 – STAGE FIVE: EXPIRATION                                              10.07 – 1
            General Overview                                                     10.07 – 1
                    Auditor’s Notice of Expiration of Redemption                 10.07 – 1
                    Auditor’s Certificate of Forfeiture                          10.07 – 1
                    Exact Date of Forfeiture                                     10.07 – 1
            Notice of Expiration                                                 10.07 – 2
                    Four Methods of Notification: Comprehensive Plan             10.07 – 2
                    Deadline for Notice: 120 Days before Expiration              10.07 – 2
                    Parcels That May be Listed on the Notice                     10.07 – 3
            Notice of Expiration: Posting                                        10.07 – 3
                    Location                                                     10.07 – 3
                    Time Period                                                  10.07 – 3
                    Content                                                      10.07 – 3
                    Suggested Format                                             10.07 – 4
                    Affidavit of Posting                                         10.07 – 4
            Notice of Expiration: Publishing                                     10.07 – 4
                    County Newspaper                                             10.07 – 5
                    Time Period                                                  10.07 – 5
                    Form and Content                                             10.07 – 5
                    Affidavit of Publication                                     10.07 – 5
            Notice of Expiration: Mailing                                        10.07 – 5
                    Receivers Required by Statute                                10.07 – 6
                    Extra Receivers                                              10.07 – 6
                    Type of Mailing                                              10.07 – 6
                    Receipt Not Required                                         10.07 – 6
                    Form and Content                                             10.07 – 7
                    Addresses for State/Federal Tax Liens                        10.07 – 8
                    Affidavit of Mailing                                         10.07 – 9
            Notice of Expiration: Service                                        10.07 – 10
                    Task #1: Auditor Delivers Copies of Notice to Sheriff
                       or Other Person Assigned to do the Service                10.07 – 10
                    Task #2: Service of Notices to Occupants                     10.07 – 10
                    Task #3: Affidavit of Service on Occupants                   10.07 – 10
                    Task #4: Affidavit of Vacancy                                10.07 – 11
                    Task #5: Affidavit of Posting                                10.07 – 11
            Notice of Expiration: 60-Day Grace Period                            10.07 – 12
                    No Effect on the Period of Redemption                        10.07 – 12
                    Extension of Redemption Period                               10.07 – 12
            Notice of Expiration: County Costs                                   10.07 – 12
            Certificate of Forfeiture                                            10.07 – 13
                    Two-Fold Purpose                                             10.07 – 13
                    Required Information                                         10.07 – 13



                                                                                           xxviii
TABLE OF CONTENTS                                (cont’d)
Chapter/Section                                                                  Page # 
                   Recording Abstract Property                                   10.07 – 14
                   Recording Registered Property                                 10.07 – 14
                   Property in Bankruptcy                                        10.07 – 14
                   Suggested Format                                              10.07 – 14
           Cancellation of Forfeiture                                            10.07 – 14
                   Authorized Reasons for Cancellation                           10.07 – 15
                   Type #1: Exemption Based Upon United States Laws              10.07 – 15
                   Type #2: Exemption Based on State/Local Government Ownership 10.07 – 15
                   Type #3: County Administrative Error                          10.07 – 15
                   Application for Cancellation by Owner or Auditor              10.07 – 15
                   Approval of Application for Cancellation by County Board      10.07 – 15
                   Approval of Cancellation by Department of Revenue             10.07 – 16
                   Cancellation Rejected by Department of Revenue                10.07 – 16
                   Cancellation Accepted by Department of Revenue                10.07 – 16
                   Cancellation Only before Property is Conveyed                 10.07 – 16
           Certificate of Cancellation                                           10.07 – 17
                   Required Information                                          10.07 – 17
                   Restores Original Title                                       10.07 – 18
                   Suggested Format                                              10.07 – 18
           Tax Action Following Cancellation                                     10.07 – 18
                   Tax Action #1: Cancellation of Forfeiture for Exempt Property 10.07 – 18
                   Tax Action #2: Cancellation of Forfeiture for Other Errors
           Reference                                                             10.07 – 19

CHAPTER TEN (A) – DELINQUENCY ADMINISTRATION FOR MANUFACTURED
                 HOMES AND PERSONAL PROPERTY                                     10A.00
     10A.01 – MANUFACTURED HOMES                                                 10A.01 – 1
           Overview                                                              10A.01 – 1
           How Real and Personal Property Taxes Differ                           10A.01 – 1
           Defining “Manufactured Homes”                                         10A.01 – 2
           Dates and Penalties                                                   10A.01 – 3
                    Total Tax of $50 or Less                                     10A.01 – 4
                    Total Tax over $50                                           10A.01 – 4
           Interest                                                              10A.01 – 4
                    Basis of the Interest                                        10A.01 – 4
                    Method of Changing Interest                                  10A.01 – 5
                    Adjusted Prime Rate                                          10A.01 – 5
                    Source of Adjusted Prime Rate                                10A.01 – 5

     10A.02 – PERSONAL PROPERTY                                                  10A.02 – 1
           Overview                                                              10A.02 – 1
           How Real and Personal Property Taxes Differ                           10A.02 – 1
           Defining “Personal Property”                                          10A.02 – 2
                  Non-Municipal Utility Companies                                10A.02 – 2
                  Leased Government-Owned Property                               10A.02 – 4



                                                                                           xxix
TABLE OF CONTENTS                                 (cont’d)
Chapter/Section                                                                Page # 
                    Elevators and Warehouses on Leased Railroad Land           10A.02 – 5
           Dates and Penalties – General                                       10A.02 – 6
           Dates and Penalties – Leased Government Property                    10A.02 – 6
                    Total Tax of $50 or Less                                   10A.02 – 6
                    Total Tax over $50                                         10A.02 – 7
           Dates and Penalties                                                 10A.02 – 7
                    Tyes of Personal Property                                  10A.02 – 7
                    Total Tax Due on May 15                                    10A.02 – 7
                    Penalty 8%                                                 10A.02 – 8
           Interest                                                            10A.02 – 8
                    Basis of Interest                                          10A.02 – 8
                    Method of Changing Interest                                10A.02 – 8
                    Adjusted Prime Rate                                        10A.02 – 8
                    Source of Adjusted Prime Rate                              10A.02 – 8

     10A.03 – COLLECTION METHODS                                               10A.03 – 1
           Outline of Current Collection Methods                               10A.03 – 1
           Suggested Sequence of Collection Actions                            10A.03 – 2
                  1st Action: Notice of Delinquent Taxes                       10A.03 – 2
                  2nd Action: Notice of Tax Lien                               10A.03 – 2
                  3rd Action: Telephone Contact and Collection Plan            10A.03 – 3
                  Final Action: Use Enforced Collection Methods                10A.03 – 3
           Total Delinquent Tax Amount                                         10A.03 – 3
           Notice of Delinquent Taxes                                          10A.03 – 4
                  Purpose of the Notice                                        10A.03 – 4
                  Schedule for Mailing Notices for Manufactured Homes          10A.03 – 4
                  Schedule for Mailing Notices for All Other Property          10A.03 – 4
                  Content of the Notice                                        10A.03 – 5
           Collection Plan                                                     10A.03 – 6
                  Application of the Collection Plan                           10A.03 – 6
           Telephone Contact                                                   10A.03 – 6
                  Purpose of Telephone Contact                                 10A.03 – 7
                  Reasons for No Telephone Contact                             10A.03 – 7
                  Guidelines for Telephone Contact                             10A.03 – 7
           Tax Lien                                                            10A.03 – 7
                  Definition and Purpose                                       10A.03 – 8
                  Effective Dates                                              10A.03 – 8
                  Court Judgment Not Needed                                    10A.03 – 8
                  Authorization for Filing                                     10A.03 – 9
                  90-Day Grace Period                                          10A.03 – 9
                  Creation                                                     10A.03 – 9
                  Priority                                                     10A.03 – 9
                  Enforceability                                               10A.03 – 10
                  Duration                                                     10A.03 – 10
                  More Information of Tax Liens                                10A.03 – 10



                                                                                            xxx
TABLE OF CONTENTS                                  (cont’d)
Chapter/Section                                                             Page # 
            Revenue Recapture                                               10A.03 – 10
                   General Information                                      10A.03 – 12
                   Filing the Claim                                         10A.03 – 14
            Levy and Seizure Authority                                      10A.03 – 14
                   Definition: “Levy” vs. “Seize”                           10A.03 – 14
                   Effective Date for Levy and Seizure Provisions           10A.03 – 15
                   Court Judgment Not Needed for Levy or Seizure            10A.03 – 15
                   Duration of Levy and Seizure Authority                   10A.03 – 15
            Levy and Seizure Methods                                        10A.03 – 16
                   Levy on Bank Accounts                                    10A.03 – 16
                   Levy on Wages                                            10A.03 – 16
                   Seizure and Sale of Property                             10A.03 – 16
            Other Collection Methods                                        10A.03 – 17
            Special Collection Methods: Manufactured Homes                  10A.03 – 17
                   Notice to Lender                                         10A.03 – 17
                   Tax Escrow Accounts                                      10A.03 – 18
                   Confession of Judgment                                   10A.03 – 18
                   Oversized Load Moving Permit                             10A.03 – 18
                   Alternative Monthly Payment Plan                         10A.03 – 18

     10A.04 – DISTRIBUTION OF COLLECTIONS                                   10A.04 – 1
           Component #1: The Unpaid Tax Itself                              10A.04 – 1
           Component #2: Penalties and Interest                             10A.04 – 1
           Component #3: Fees for Recording and Releasing a Tax Lien        10A.04 – 3
           Component #4: County Sheriff’s Fees                              10A.04 – 3
           Component #5: Court Cases                                        10A.04 – 4
           Special Case: TIF Districts                                      10A.04 – 4

CHAPTER ELEVEN – TAX FORFEITURE                                             11.00
     11.01 – STAGE SIX: TAX FORFEITURE                                      11.01 – 1
            Introduction                                                    11.01 – 1
            Delegation of County Board Powers to Auditor                    11.01 – 2
            Removal from Tax Rolls                                          11.01 – 2
                    Definition of “Parcel” for Condominium Apartments       11.02 – 3
                    Exception to July 1 Cutoff Date                         11.02 – 3
                    Rationale for Exception                                 11.02 – 3
            Liens and Encumbrances                                          11.01 – 3
                    Real Property + Special Assessment Liens                11.01 – 3
                    Federal and State Income Tax Liens                      11.01 – 4
                    Personal Property Tax Liens                             11.01 – 5
                    Mortgage Liens                                          11.01 – 5
                    Easement Right-of-Ways                                  11.01 – 5
                    Environmental Liens                                     11.01 – 6
            Classification of Tax-Forfeited Land                            11.01 – 6
                    Criteria for Classification                             11.01 – 6



                                                                                        xxxi
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                             Page # 
                   Goals of Classification                                  11.01 – 6
                   Information Used for Classification                      11.01 – 7
                   Authority for Reclassification                           11.01 – 7

     11.02 – SALE OF TAX-FORFEITED LANDS                                    11.02 – 1
            Approval of Classification and Sale                             11.02 – 1
                   DNR Approval of Classification and Sale                  11.02 – 1
                   Municipal Approval of Classification and Sale            11.02 – 2
            Appraisal of Tax-Forfeited Land                                 11.02 – 2
                   Official Source                                          11.02 – 2
                   Value set by the County Board                            11.02 – 3
                   Special Assessments Levied after Forfeiture              11.02 – 3
                   Costs of Hazardous Waste                                 11.02 – 3
                   Basic Sale Price                                         11.02 – 4
                   DNR Approval for Timber Sales                            11.02 – 4
                   Authority for Reappraisals                               11.02 – 4
            Exchanging Tax-Forfeited Land                                   11.02 – 4
            Improvements to Tax-Forfeited Land                              11.02 – 5
            Notice of Public Sale                                           11.02 – 5
                   Preparation of List for Public Sale                      11.02 – 5
                   Preparation of Terms for Public Sale                     11.02 – 7
                   Approval of Public Sale by Resolution                    11.02 – 8
                   Publication of Notice of Sale                            11.02 – 8
                   Mailing of Notice of Sale                                11.02 – 9
            Conduct of Public Sales                                         11.02 – 9
                   Eligible Purchasers                                      11.02 – 10
                   Location                                                 11.02 – 10
                   Number and Time                                          11.02 – 10
                   Basic Sale Price                                         11.02 – 11
                   Extra Costs                                              11.02 – 11
                   Procedures for the Sale                                  11.02 – 11
                   Proof of Purchase                                        11.02 – 12
                   Time of Possession                                       11.02 – 12
                   Forfeited Tax Sale Fund                                  11.02 – 12
                   Limitations on Sale                                      11.02 – 12
            Contract for Deed                                               11.02 – 13
                   Authorization                                            11.02 – 13
                   Cancellation                                             11.02 – 13
            State Deed Information                                          11.02 – 13

     11.03 – REPURCHASE OF TAX-FORFEITED LANDS                              11.03 – 1
            Eligible Tax-Forfeited Land                                     11.03 – 1
            Restrictions on Nonconservation Land                            11.03 – 1
            Eligible Parties                                                11.03 – 2
            Time Periods                                                    11.03 – 3



                                                                                        xxxii
TABLE OF CONTENTS                                 (cont’d)
Chapter/Section                                                                  Page # 
                   Non-Homestead Property                                        11.03 – 3
                   Homestead Property                                            11.03 – 3
           County Board Approval                                                 11.03 – 3
           Impose Conditions Limiting Use                                        11.03 – 4
           Reinstate Cancelled Special Assessments                               11.03 – 4
           Compute Special Assessments not Levied                                11.03 – 4
           Reinstate Cancelled Taxes                                             11.03 – 4
           Compute Taxes not Levied                                              11.03 – 5
           Compute Additional Costs and Interest                                 11.03 – 5
           Basic Repurchase Price                                                11.03 – 5
                   Repurchase of “Nonconservation Land”                          11.03 – 5
                   Alternative Method for Qualifying Nonconservation Land        11.03 – 5
                   Cost of Response Actions for Hazardous Waste Control          11.03 – 5
                   Repurchase of “Conservation Land”                             11.03 – 6
           Extra Costs                                                           11.03 – 6
                   State Deed Tax                                                11.03 – 6
                   State Deed Fee                                                11.03 – 6
                   Maintenance Costs                                             11.03 – 6
                   County Service Fee                                            11.03 – 6
                   County Deed Recording Fee                                     11.03 – 7
                   Agricultural Conservation Fee                                 11.03 – 7
           No 3% Surcharge                                                       11.03 – 7
           Auditor’s Receipt                                                     11.03 – 7
           10-Year Installment Plan                                              11.03 – 8
                   10% Down Payment + 10 Installments                            11.03 – 8
                   Deadline for Paying Installments                              11.03 – 8
                   Notice of Installments Due                                    11.03 – 8
                   Installments: County Treasurer + Forfeited Tax Sale Fund      11.03 – 9
                   Current Taxes                                                 11.03 – 9
           Alternative 4-Year Plan                                               11.03 – 9
                   Two Basic Requirements                                        11.03 – 9
                   20% Down Payment + 4 Installments                             11.03 – 9
                   Other Terms + Forms Same as 10-year Plan                      11.03 – 9
           Actions Prohibited before Full Payment                                11.03 – 10
           State “Repurchase” Deed                                               11.03 – 10
                   County Auditor: Mails Application to Property Tax Division    11.03 – 10
                   DOR: Issues State “Repurchase” Deeds                          11.03 – 10
                   County Auditor: Records and Delivers State Repurchase Deeds   11.03 – 11
           State Deed Issued in Whose Name?                                      11.03 – 11
           Title Subject to Restrictions                                         11.03 – 12
           Forfeited Tax Sale Fund                                               11.03 – 13
           Minimum Bid at Tax-Forfeited Land Sale                                11.03 – 13
           Sample Forms                                                          11.03 – 13




                                                                                           xxxiii
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                 Page # 
     11.04 – LEASING TAX-FORFEITED LANDS                                        11.04 – 1
            Standard 10-Year Leases for General Purposes                        11.04 – 1
            Special 10-Year Lease for Stockpiled Iron-Bearing Material          11.04 – 1
            Special 15-Year Lease for Mining Deposits                           11.04 – 2
            Special 25-Year Lease for Peat Removal                              11.04 – 2
            Special 1-Year Lease for Land with Buildings                        11.04 – 2
            Leasing of Conservation Land under County Control                   11.04 – 3
            Leasing of Surface Land Containing Materials                        11.04 – 3
            Taxation of Leased Tax-Forfeited Land                               11.04 – 4

     11.05 – GOVERNMENT ACQUISITION OF TAX-FORFEITED LAND                       11.05 – 1
            Overview                                                            11.05 – 1
                   Definition: “Governmental Subdivision”                       11.05 – 1
                   Definition “ State Agency”                                   11.05 – 1
                   Rationale for Government Acquisition                         11.05 – 2
                   First Priority for City or Township                          11.05 – 2
                   Government Acquisition after City or Township First Option   11.05 – 3
                   Decision: Two or more Requests                               11.05 – 4
            Acquisition through Private Sale                                    11.05 – 4
                   Definition: “Authorized Public Purpose”                      11.05 – 4
                   Cost of Government Purchase                                  11.05 – 5
                   Handling Receipts for Govt. Purchases                        11.05 – 5
            Acquisition through Conveyance (“Use Deed”)                         11.05 – 5
                   Definition: “Authorized Public Use”                          11.05 – 6
                   Open Space                                                   11.05 – 7
                   Special Cases                                                11.05 – 7
            County Board Approval of Government Acquisition                     11.05 – 7
            Rule of Reversion                                                   11.05 – 8
                   No Rule of Reversion for Government Purchases                11.05 – 8
                   Rule of Reversion Applies to Government Conveyance           11.05 – 8
                   Voluntary Reconveyance by Govt. Subdivision                  11.05 – 8
                   State Enforced Reconveyance                                  11.05 – 9
                   Purchase in Lieu of Reversion                                11.05 – 10
            State Deed Information                                              11.05- 10

CHAPTER TWELVE – TAX ADJUSTMENTS                                                12.00
     12.01 – ABATEMENTS                                                         12.01 – 1
            Abatements                                                          12.01 – 1
                   Powers and Restrictions                                      12.01 – 1
                   Auditor and Treasurer Approvals                              12.01 – 2
                   Delegation of Powers to Auditor                              12.01 – 2
                   Auditor to Notify Commissioner                               12.01 – 3
                   School Tax Abatement Report                                  12.01 – 3
            Local Option Disaster Abatement (273.1233)                          12.01 – 3
                   Eligibility                                                  12.01 – 3



                                                                                          xxxiv
TABLE OF CONTENTS                                  (cont’d)
Chapter/Section                                                                   Page # 
                   Computation                                                    12.01 – 3
                   Examples (list)                                                12.01 – 5
                   How Applied                                                    12.01 – 5
                   Payment                                                        12.01 – 5
                   Reporting                                                      12.01 – 5
                   Relationship to Tax Rates, TIF, LMV, etc                       12.01 – 5
                   Flow Chart                                                     12.01 – 5
            Reference                                                             12.01 – 7

     12.02 – GREEN ACRE TAX PAYBACKS                                              12.02 – 1
            Reference                                                             12.02 – 2

     12.03 – JOBZ TAX PAYBACKS                                                    12.03 – 1
                  Repayment Required                                              12.03 – 1
                  Identifying Ceased Operations or Ceased Qualification           12.03 – 1
                  Determining Benefits Received and Subject to Repayment          12.03 – 1
                  Auditor to Prepare Separate Tax Statement, Repayment Due Date   12.03 – 2
                  Appeal Rights                                                   12.03 – 3
                  Delinquent Repayments                                           12.03 – 3
                  Disposition of Repayment                                        12.03 – 3
                  Business Subsidy Law; Reconciliation                            12.03 – 3
                  DOR Waivers                                                     12.03 – 3

     12.04 – OPEN SPACE                                                           12.04 – 1
            Reference                                                             12.04 – 1

     12.05 – CORRECTIONS                                                          12.05 – 1
            Correction of Levies                                                  12.05 – 1
            Reference                                                             12.05 – 1

     12.06 – INTERNATIONAL ECON DEV ZONE TAX PAYBACKS                             12.06 – 1
                 Repayment Required                                               12.06 – 1
                 Identifying Ceased Operations or Ceased Qualification            12.06 – 1
                 Determining Benefits Received and Subject to Repayment           12.06 – 1
                 Auditor to Prepare Separate Tax Statement, Repayment Due Date    12.06 – 2
                 Appeal Rights                                                    12.06 – 3
                 Delinquent Repayments                                            12.06 – 3
                 Disposition of Repayment                                         12.06 – 3
                 Business Subsidy Law; Reconciliation                             12.06 – 3
                 DOR Waivers                                                      12.06 – 3

CHAPTER THIRTEEN – ECONOMIC DEVELOPMENT AND SPECIAL PROGRAMS                      13.00
     13.01 – TAX INCREMENT FINANCING                                              13.01 – 1
            The Primary Purpose of TIF                                            13.01 – 1
            The TIF Concept in Academic Terms                                     13.01 – 1



                                                                                              xxxv
TABLE OF CONTENTS                                  (cont’d)
Chapter/Section                                                                     Page # 
           Typical Uses of TIF                                                      13.01 – 3
                   An example of how TIF is Used                                    13.01 – 3
           The Source of the Financing                                              13.01 – 4
           Creation of the Development District and TIF District                    13.01 – 5
                   Development District                                             13.01 – 5
                   Tax Increment Financing District                                 13.01 – 5
           Tax Increment Financing Plan                                             13.01 – 5
           Opportunity to Comment on New or Modification of Existing TIF Plan       13.01 – 6
           Certification of New District TIF or Modifications to Existing Plan      13.01 – 10
                   Modification to an Existing TIF Plan                             13.01 – 10
           County Auditor Checklist                                                 13.01 – 15
           Certification of Values and Rates                                        13.01 – 17
                   Original Value Certification & Base Adjustments                  13.01 – 17
                   Creation of a Hazardous Substance Subdistrict (HSS)              13.01 – 19
                   Local Tax Rate Certification                                     13.01 – 19
           Differences between Increment and the Full Taxes (Excess Taxes and
              Fiscal Disparities                                                    13.01 – 19
           Increments may be Attributable to Other Factors as well as
              New Construction                                                      13.01 – 20
           Other Limitations to Using TIF as a Financing Method                     13.01 – 20
           Local Government’s Role in TIF                                           13.01 – 21
           The Role of the County in TIF Decisions                                  13.01 – 21
           Road Costs                                                               13.01 – 22
           The County’s Role in Administering TIF                                   13.01 – 22
           Three Year “Knockout” Rule                                               13.01 – 22
           Four-Year “Knockdown” Rule                                               13.01 – 23
           Five-Year Rule in TIF                                                    13.01 – 24
                   Five-Year Rule does not Apply to all TIF Districts               13.01 – 24
                   After the Five-Year Period                                       13.01 – 24
           TIF Pooling                                                              13.01 – 25
           Waiving of Increment                                                     13.01 – 25
           TIF May Not Be Used For General Government Purposes                      13.01 – 26
                   Public Improvements                                              13.01 – 26
           Excess Increments                                                        13.01 – 27
                   How Excess Increments are Calculated                             13.01 – 27
                   When Excess Increments are Determined                            13.01 – 28
                   Permitted Uses of Excess Increments                              13.01 – 28
                   Special Reporting Requirements that apply to Excess Increments   13.01 – 28
           Duration Extension due to Deficits                                       13.01 – 28
           Delinquent Taxes on Decertified TIF Parcels                              13.01 – 29
           Decertification of TIF Districts                                         13.01 – 30
           A Minnesota Tax Increment Financing Glossary                             13.01 – 32

     13.02 – JOB OPPORTUNITY BUILDING ZONES (JOBZ)                                  13.02 – 1
            Overview                                                                13.02 – 1



                                                                                              xxxvi
TABLE OF CONTENTS                                (cont’d)
Chapter/Section                                                                  Page # 
           General JOBZ Features                                                 13.02 – 1
                  Plans, Applications, and Designation                           13.02 – 2
                  JOBZ Tax Incentives                                            13.02 – 3
                  Definitions and Limitations                                    13.02 – 3
                  Repayments and Remedies                                        13.02 – 6
           The JOBZ Property Tax Exemption                                       13.02 – 6
                  The Statutory Language                                         13.02 – 7
                  Improvements vs. Land and New Improvements                     13.02 – 7
                  Ad Valorem vs. Special Assessments and PILT                    13.02 – 7
                  Class 3 Confusion                                              13.02 – 7
                  Zone Boundaries, Footprints, and Business Subsidy Agreements   13.02 – 8
                  Agricultural Processing Facility Zones                         13.02 – 8
                  Qualified Business vs. Existing Businesses                     13.02 – 8
                  Occupants (Leased Property) vs. Owners                         13.02 – 8
                  Timing of Exemptions (Duration; July 1 Cutoff)                 13.02 – 9
                  July 1 Cutoff Requirements                                     13.02 – 9
                  The Complexity of JOBZ: Exception levies                       13.02 – 9
                  Any GO Debt Levies vs. Pre-Existing School Operating Levies    13.02 – 10
                  GO Debt Levies vs. Other Debt Levies                           13.02 – 10
           JOBZ Tax Bases and Rates                                              13.02 – 11
                  JOBZ Tax Base and Rate Terminology                             13.02 – 11
                  Summary of Bases and Rate Calculations                         13.02 – 12
                  JOBZ and Averaged Rates or Aid Rates                           13.02 – 13
           JOBZ and the Abstracts                                                13.02 – 15
                  The Abstract of Assessment (Assessors)                         13.02 – 15
                  The Abstract of Tax Lists (Auditors)                           13.02 – 15
                  The Exempt Abstract (Assessors)                                13.02 – 15
                  The TIF Supplement (Auditors)                                  13.02 – 15
           Overview of JOBZ Interactions in the Property Tax System              13.02 – 15
                  General Rule on Exempt Status                                  13.02 – 16
                  Exceptions to the General Rule                                 13.02 – 16
           JOBZ and TIF                                                          13.02 – 16
                  Can TIF and JOBZ Be Used Together?                             13.02 – 16
                  Warning – JOBZ May Ruin a TIF District                         13.02 – 16
                  Possible False Assumptions                                     13.02 – 17
                  So, What Would TIF Capture in a JOB Zone?                      13.02 – 17
                  How to Administer TIF and JOBZ, Generally                      13.02 – 17
                  Adjusting Original Net Tax Capacity (ONTC)                     13.02 – 17
           JOBZ and Economic Development Abatements                              13.02 – 19
                  Where ED Abatements are used to Refund or Defer Taxes          13.02 – 19
                  Where ED Abatements are used with Bonding Authority            13.02 – 19
                  Abatement Limit Calculations         `                         13.02 – 19
           JOBZ and Fiscal Disparities                                           13.02 – 20
           JOBZ and Property Tax Statements                                      13.02 – 20
                  TIF Confusion?                                                 13.02 – 21



                                                                                         xxxvii
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                  Page # 
            The JOBZ Wind Energy Production Tax Exemption                        13.02 – 21

     13.03 – ECONOMIC DEVELOPMENT TAX ABATEMENTS                                 13.03 – 1
            General Discussion                                                   13.03 – 1
            Types of Real Property Potentially Qualifying for an Abatement       13.03 – 1
            Property Tax Subject to Abatement                                    13.03 – 2
            Maximum Abatement Provisions                                         13.03 – 2
            Other Negotiated Limits on Abatements (Forms of Abatements)          13.03 – 4
            Deferred Taxes Repayment Schedule                                    13.03 – 4
            Duration Limit                                                       13.03 – 5
            Abatement Resolution                                                 13.03 – 5
            Notice and Public Hearing                                            13.03 – 6
            Bonding for Abatements                                               13.03 – 7
            Required Levy for Abatements                                         13.03 – 7
            Proposed and Final Tax Statements, Tax Payments,
               and Abatement Payments                                            13.03 – 8
            Annual Reports                                                       13.03 – 9
            Reference                                                            13.03 – 9

     13.04 – FISCAL DISPARITIES                                                  13.04 – 1
            How the Fiscal Disparities Program Works                             13.04 – 1
                   Contributions to the Areawide Tax Base                        13.04 – 1
                   Distributions from the Areawide Tax Base                      13.04 – 1
                   Calculating the Property Tax for each C-I Property            13.04 – 1
            Tables and Timelines                                                 13.04 – 2
            Fiscal Disparity Terminology                                         13.04 – 4
            References                                                           13.04 – 5

     13.05 – ENTERPRISE ZONES                                                    13.05 – 1
            Border City Development Zones                                        13.05 – 1
                   Duration                                                      13.05 – 1
                   Funds Allocated                                               13.05 – 1
                   Qualifying Property                                           13.05 – 1
                   Application                                                   13.05 – 1
                   Tax Credit Certificates                                       13.05 – 1
                   Property Tax                                                  13.05 – 1
                   City Must Notify County                                       13.05 – 2
                   Phase-Out                                                     13.05 – 2
                   Disqualified Taxpayers                                        13.05 – 2
                   Relocation from Outside the Zone                              13.05 – 2
                   Relocation from Outside of the County                         13.05 – 3

     13.06 – INTERNATIONAL ECONOMIC DEVELOPMENT ZONE                             13.06 – 1
            Overview                                                             13.06 – 1
            General IEDZ Features                                                13.06 – 1



                                                                                        xxxviii
TABLE OF CONTENTS                                  (cont’d)
Chapter/Section                                                                Page # 
                   Port Authority Powers; No Property Tax Levy                 13.06 – 1
            The Statutory Language                                             13.06 – 2
            Improvements vs. Land and New Improvements                         13.06 – 2
            Ad Valorem vs. Special Assessments and PILT                        13.06 – 2
            Class 3 Only                                                       13.06 – 2
            Zone Boundaries, Footprints, and Business Subsidy Agreements       13.06 – 2
            Qualified Businesses and Regional Distribution Centers             13.06 – 3
            Occupants (Leased Property) vs. Owners                             13.06 – 3
            Timing of Exemptions (Duration; July 1 Cutoff)                     13.06 – 3
            July 1 Cutoff Requirements                                         13.06 – 3
            All Levies Exempt                                                  13.06 – 4

CHAPTER FOURTEEN – PROPERTY TAX REFUND PROGRAM                                 14.00
     14.01 – PROPERTY TAX REFUND PROGRAM                                       14.01 – 1
            Introduction                                                       14.01 – 1
                   Property Tax Refund                                         14.01 – 1
                   Special Refund                                              14.01 – 1
            Proof of Taxes Paid                                                14.01 – 1
            Qualifying Tax Amount (QTA)                                        14.01 – 1
            State Copy/PTR Homestead File                                      14.01 – 1

     14.02 – FILING INFORMATION                                                14.02 – 1
            When to File                                                       14.02 – 1
                    Due Date                                                   14.02 – 1
                    Extended Due Date                                          14.02 – 1
                    Timely Mailed is Timely Filed                              14.02 – 1
            Where to File                                                      14.02 – 1
            How to File                                                        14.02 – 1
                    Filing Electronically                                      14.02 – 1
                    Paper Return                                               14.02 – 1
                    Scanning                                                   14.02 – 1
                    Enclosures                                                 14.02 – 2
                    Missing Enclosures                                         14.02 – 3
            After the Return is Filed                                          14.02 – 3
                    When to Expect Refunds                                     14.02 – 3
                    Direct Deposit                                             14.02 – 3
                    Cashing the Check                                          14.02 – 3
                    Interest                                                   14.02 – 3
                    How to Report on the Federal Return                        14.02 – 4
            Offsets                                                            14.02 – 4
                    Offset against taxes                                       14.02 – 4
                    Revenue Recapture                                          14.02 – 4
                    Non-liable spouse must claim refund from agency            14.02 – 5
                    Disputes                                                   14.02 – 5
            Amending the Return                                                14.02 – 5



                                                                                         xxxix
TABLE OF CONTENTS                                   (cont’d)
Chapter/Section                                                                Page # 
                   Timeframe to Amend                                          14.02 – 5
                   Interest                                                    14.02 – 5
                   Amending before payment is received                         14.02 – 5

     14.03 – WHO QUALIFIES                                                     14.03 – 1
            General Filing Requirements                                        14.03 – 1
            All Filers                                                         14.03 – 1
                    Full or part-year resident                                 14.03 – 1
                    Cannot be a dependent                                      14.03 – 1
                    Nonresident Alien                                          14.03 – 2
            Homeowners                                                         14.03 – 2
                    Household Income Limits                                    14.03 – 2
                    Own and Occupy on January 2nd                              14.03 – 2
                    Homesteaded Property                                       14.03 – 2
                    Not Delinquent on Property Taxes                           14.03 – 2
                    Special Circumstances                                      14.03 – 2
            Renters                                                            14.03 – 2
                    Household Income Limits                                    14.03 – 2
                    Rental Unit Subject to Property Taxes                      14.03 – 3
                    Paid Rent                                                  14.03 – 3
            Deceased Filers                                                    14.03 – 3
                    Surviving Spouse or Decedent                               14.03 – 3
            Military Members                                                   14.03 – 3
                    MN resident stationed outside of Minnesota Revenue         14.03 – 3
                    Part-year Residents                                        14.03 – 4
                    Domiciled outside Minnesota                                14.03 – 4
            Nonresident Aliens                                                 14.03 – 4
                    Dependent nonresident aliens                               14.03 – 4
                    Additions for household income                             14.03 – 4
                    Nonresident alien claiming dependents                      14.03 – 5

     14.04 – SPECIAL REFUND                                                    14.04 – 1
            Qualifications                                                     14.04 – 1
                   No income limit                                             14.04 – 1
                   Net Property Taxes defined                                  14.04 – 1
                   Qualifies for both special and regular refund               14.04 – 1
                   Optional                                                    14.04 – 1
            New Improvements                                                   14.04 – 1
                   Reported on property tax statement                          14.04 – 2
                   How to Report                                               14.04 – 2
                   Household Income                                            14.04 – 2
            Unusual Situations                                                 14.04 – 2
                   No tax amount on line 2 of property tax statement           14.04 – 2
                   All prior year entries are N/A                              14.04 – 2
                   Part of home used for business                              14.04 – 2



                                                                                           xl
TABLE OF CONTENTS                                     (cont’d)
Chapter/Section                                                                      Page # 
                    Co-owners                                                        14.04 – 2
                    Classification changed from farm to residential homestead        14.04 – 2

CHAPTER FIFTEEN – SENIOR CITIZEN PROPERTY TAX DEFERRAL                               15.00
     15.01 – SENIOR CITIZEN PROPERTY TAX DEFERRAL                                    15.01 – 1
            Qualifications                                                           15.01 – 1
            Qualifying Homestead                                                     15.01 – 1
            Application for Deferral                                                 15.01 – 2
            Approval and Recording                                                   15.01 – 3
            Payment of Delinquent Taxes and Special Assessments                      15.01 – 3
            Excess Income Certification by Taxpayer                                  15.01 – 3
            Resumption of Eligibility Certification by Taxpayer                      15.01 – 4
            Penalty for Failure to file Excess Income Certification Investigations   15.01 – 4
            Annual Notice to Participant                                             15.01 – 4
            Maximum Property tax Amount and Deferred Tax Amount                      15.01 – 6
            Certification by Commissioner of Revenue                                 15.01 – 6
            Calculation of Deferred Property Tax                                     15.01 – 6
            Requirement to Notify Taxpayer                                           15.01 – 7
            Limitation on Total Amount of Deferred Taxes                             15.01 – 8
            Refunds                                                                  15.01 – 8
            Lien – Deferred Portion                                                  15.01 – 8
            Termination of Deferral                                                  15.01 – 9
            Payment upon Termination                                                 15.01 – 9
            State Reimbursement                                                      15.01 – 10
            Reference                                                                15.01 – 10

CHAPTER SIXTEEN – MORTGAGE REGISTRY AND DEED TAX                                     16.00
     16.01 – Mortgage Registry and Deed Tax                                          16.01 – 1
            Mortgage Registry Tax                                                    16.01 – 1
                   MRT must be paid before recording                                 16.01 – 1
            Deed Tax                                                                 16.01 – 1
                   Grantor’s Statement of Deed Tax Due                               16.01 – 2
                   Treasurer’s Certification of Deed Tax Paid                        16.01 – 2
                   Auditor’s Notice of CRV Filed                                     16.01 – 2
                   Auditor’s Certification of Delinquent Taxes Paid                  16.01 – 2
                   Treasurer’s Statement of Current Taxes Paid                       16.01 – 2
            Dispute over Amount Due                                                  16.01 – 3
            Calculation of Tax                                                       16.01 – 3

CHAPTER SEVENTEEN – LEGISLATIVE CHANGE                                               17.00
     17.01 – OVERVIEW OF THE LEGISLATIVE PROCESS                                     17.01 – 1
            Overview                                                                 17.01 – 1
                   The United States Congress                                        17.01 – 1
                   State Legislatures                                                17.01 – 1
            What is a Bill?                                                          17.01 – 2



                                                                                                  xli
TABLE OF CONTENTS                                      (cont’d)
Chapter/Section                                                                    Page # 
            Bill Proposal                                                          17.01 – 2
            Types of Bills                                                         17.01 – 2
                    Department of Revenue Bills                                    17.01 – 2
                    Tax Bills                                                      17.01 – 2
                    Omnibus Bill                                                   17.01 – 2
                    Omnibus Tax Bill                                               17.01 – 3
            Legal Form                                                             17.01 – 3
            Authors                                                                17.01 – 3
            Bill Numbering                                                         17.01 – 3
            Parts of a Bill                                                        17.01 – 4
            Introduction of a Bill – First Reading                                 17.01 – 4
            Legislative Committees                                                 17.01 – 4
            Floor – Second Reading                                                 17.01 – 4
            General Register/General Orders                                        17.01 – 5
            Calendar for the Day                                                   17.01 – 5
            Special Orders                                                         17.01 – 5
            Conference Committees                                                  17.01 – 5
            Floor – Final Vote                                                     17.01 – 6
            Revisor’s Office                                                       17.01 – 6
            Governor                                                               17.01 – 6
            Tracking Legislation                                                   17.01 – 6

     17.02 – EXPLANATION OF LAWS AND STATUTES                                      17.02 – 1
            The Difference between Laws and Statutes                               17.02 – 1
            How do I read the statutes? What do the italicized numbers mean?       17.02 – 1
            When is a law effective?                                               17.02 – 1
            How can you tell if Laws are still effective?                          17.02 – 2
            How can I find a law on a particular subject?                          17.02 – 2

     17.03 – EFFECTING CHANGE                                                      17.03 – 1
            Drafting a Bill                                                        17.03 – 1
            Introducing a Bill                                                     17.03 – 1
            Is a Bill Dead if it Fails on Final Passage?                           17.03 – 2
            Legislative Calendar Deadlines                                         17.03 – 2
                    What happens to remaining bills?                               17.03 – 2
            Contacting your Legislator                                             17.03 – 3

     17.04 – LEGISLATIVE TERMS AND DEFINTIONS                                      17.04 – 1




                                                                                               xlii
AUDITOR/TREASURER – PROPERTY TAX ADMINISTRATION




00.01 – ABOUT THIS MANUAL

Introduction

The purpose of this manual is to provide county auditors, treasurers, and their staff with both an
educational text and ongoing administrative resource on the Minnesota property tax system. For those
with little or no experience in the complexities of Minnesota’s property tax system, this manual could be
a frequently used handbook for use in learning the many facets of the system. Others, who have already
developed a solid working knowledge of how the system works, may come to view this book as a guide
in which to turn when more unique situations arise. The ultimate goal is to establish an accurate and
consistent base of knowledge amongst county officials.

Using this Manual

Below is a sample page highlighting some of the features used in the manual:             Section
                                                                                         Title
Chapter Number
and Title




       Section
       Number



                                                                                           Breakout
                                                                                           Material
Topic
Heading




     Section
     Title



                                                                                      Page
                                                                                      Number


 Revision
 Date
                         A detailed description of these features follows below.
ABOUT THIS MANUAL                                                                              00.01 - 1
REVISION DATE: JULY, 2005
AUDITOR/TREASURER – PROPERTY TAX ADMINISTRATION



Section Number and Title
The Section Number is a decimal-based assignment with relation to the chapter number. For example,
the sample page shown on the previous page is Chapter Six, Section Seven or 06.07. It is followed by
the Section Title, The Contamination Tax. The Section Title will appear at the bottom of every page.
The Section Number is also used in the page number. (see Page Numbering below)

Breakout Material
One of the more readily noticeable components of this
                                                                   “Breakout Material”
manual is the “breakout material.” This information could
be a definition, a word of caution, or some information that   Breakout material is important information
is important to highlight. You can see an example of           that we have chosen to highlight in boxes
“breakout material” to the right of this paragraph.            such as this one.

Revision Date
The revision date is listed for the entire section and will reflect the most recent date that any material
within that section has been updated.

Page Numbering
Another component of this manual that should be pointed out is the page numbering system that is being
used. The page numbers are listed as the section number, followed by a hyphen, followed by the page
number with the section. Again referring to the sample page on the previous page, the page number
indicates it is the first page of Chapter Six, Section Seven or 06.07 - 1.

Table of Contents – No Index
An editorial decision was made early on to not include an index in the manual due to the difficulty
associated with maintaining an index through frequent updates and given the search tools available when
using electronic versions of this document. Instead, the Table of Contents at the beginning of the book
will list every topic heading and subsequent subheadings. The beginning of each chapter will also
contain a basic table of contents outlining the sections within the chapter.

Development and Future Revisions

This manual was designed and created by a partnership between the Department of Revenue and several
county auditors and treasurers with the support of the Minnesota Association of County Officers
(MACO) and the Association of Metropolitan County Officers (AMCO). However, editorial control
and responsibility for revisions will be retained by the Department of Revenue so that this manual can
carry the weight of state guidance and instruction. The ultimate goal is to provide a manual that will
meet the needs of property tax administrators. As such, your feedback is essential. Please let us know
about any additional information you would like to see included in this manual, feedback regarding the
level of detail, and any corrections that need to be made.

This feedback can be directed to:

        Derrick Hodge
       (651) 556-6113
       audtreas.manual@state.mn.us

ABOUT THIS MANUAL                                                                             00.01 - 2
REVISION DATE: JULY, 2005
Chapter      1      

    PUBLIC FINANCE OVERVIEW


                       TABLE OF CONTENTS

      Taxation and Federalism              01.01 – 1

      Principles of Good Tax Policy        01.02 – 1

      Tax Data for Minnesota Revenue       01.03 – 1




                                                       01.00
CHAPTER 1 – PUBLIC FINANCE OVERVIEW




01.01 – TAXATION AND FEDERALISM
Taxation dates back to the earliest recorded history. In Egypt, tax collectors are depicted in tomb
paintings dated at 2000 BC. Egyptian Pharaohs taxed cooking oil, and tax collectors ensured that
citizens didn’t use substitutes to avoid the tax. In ancient Greece, no one was exempt from special taxes
that were imposed to pay for wartime expenditures. Ancient Rome had an elaborate tax system that
included sales taxes, inheritance taxes, land taxes, poll taxes, and taxes on imports and exports.

During the occupation by the Roman Empire, the first taxes were imposed in England. When Rome fell,
the Saxon kings imposed customs duties and taxes land and property. During the reign of Charles I
(1625-49), taxes were imposed on land, and excise taxes were collected. In 1404, Parliament passed the
world’s first income tax, but the tax was so unpopular that it was rescinded. The British enacted a
precursor to the modern income tax in 1800 to finance the war with Napoleon.

Taxation in America

Since the beginning of American history, the states have maintained the right to impose taxes. When the
first Congress of the United States was created under the Articles of Confederation, it had no power to
levy taxes. The Founding Fathers viewed direct taxes as dangerous because they give government great
power over its citizens and, in order to assess such taxes, agents must look into the private lives of the
citizens. They agreed that direct taxes are safer if administered by the states, where elected
representatives are closer to the people.

Indirect taxes, on the other hand, were viewed as less dangerous because people could avoid them by not
purchasing the items being taxed. This assumes the establishment of taxes only on those items that
considered nonessential, such as liquor or tobacco, often called luxury or sin taxes. Furthermore, the
process of collecting indirect taxes does not endanger the individual’s right of privacy.

For these reasons, the delegates to the Constitutional Convention agreed that indirect taxes would be
more appropriate for the federal government. While the Constitution gave Congress the power to levy
taxes, it imposed two provisions: (1) The federal government was to derive it primary revenue from
indirect taxes, and those were to be uniform in all states. (2) In the event of war or similar emergencies,
the federal government, with the consent of Congress, would have the authority to levy direct taxes
through the states to their citizens, but these were to be proportional to the number of representatives
that each state had in Congress. In other words, if there were 100 representatives in Congress, and the
state of Virginia had seven of them, the voters in Virginia would have to pay seven percent of the direct
national, emergency tax.

In 1789, colonial governments had a limited need for revenue, and the colonies imposed different types
of taxes. The southern colonies taxed imports and exports, and the middle colonies imposed a property
tax and a head or poll tax on each adult male. The New England colonies raised revenue through
general real estate taxes, excise taxes, and taxes based on occupation.

Real property tax has a long history in America. In 1646, the Massachusetts Bay Colony began taxing
settlers who owned property. After independence, many states started to tax property. As time passed,


HISTORY OF TAXATION                                                                            01.01 - 1
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local governments, school districts, county governments, and water districts took over the power to tax
property.

History of the Federal Property Tax

Congress followed the provisions of the Constitution and levied direct taxes, in the form of a federal
property tax, on the citizens of America in times that were believed to be national emergencies.

In 1798, Congress enacted the Federal Property Tax for the expansion of the Army and Navy in the
event of possible war with France. The direct tax amount on American property included land,
dwellings, and slaves. It was in the amount of $2 million and was apportioned among the states on the
basis of the current census. The purpose of the tax was to eliminate part of the debt incurred by the
Revolutionary War. Reduction of the national debt was viewed as an emergency that would justify
imposing a direct tax.

Legislators charged Federal officials with assessing property and collecting the tax, but a local board of
commissioners was convened in each state to provide assessment regulations that would reflect local
needs and customs. It did not provide for any deductions or exemptions, but it was progressive in
nature, with larger homes paying more per $100 of value than other homes.

Assessment rolls from the first federal property tax show the property owner’s name and occupation,
and describe the principal dwelling in terms of construction materials, square footage, and number of
stories and windows. Land holdings and other structures on a property were documented. In the case of
farms, this included barns and other agricultural buildings. The records also listed the number of slaves.
The tax not only applied to homes and farms, but also to mills, shops, warehouses, tenant-occupied
properties, and other commercial sites.

The first direct tax in the United States was constitutional because Congress had stated the purpose and
the amount. The measure had been debated and passed, and the tax would expire once collected.

Despite its constitutionality, the tax was met with considerable resistance and led to a revolt among
German settlers along the Eastern Seaboard. Pennsylvania’s quota of the $2 million tax was $273,000,
which fell mainly on land and houses. Primarily, the valuation of houses was estimated by counting the
number and size of windows, a practice inherited from England. When the tax assessors arrived, the
German residents thought they were reviving the hated European hearth tax, a lax levied on each
fireplace and its size. They believed the idea of being taxed on the size of a house, the size and number
of windows in that house, and the amount of land owned was similar to the Hearth Tax. They organized
into small bands, set out to assault the assessors and drove them from the district. When some of the
rebels were arrested and put into prison, an auctioneer named John Fries led a march on the courthouse
and freed them. President John Adams called out the militia. Fries was captured, tried, and convicted of
treason but later received a presidential pardon.

The second time a direct tax was levied in accordance with the apportionment requirements of the
Constitution was in 1813, principally to pay for the War of 1812. The amount was for $3 million. A
third direct tax was assessed in 1815 for the same purpose in the amount of $6 million. The terms of
assessment and proportion among the states were given the option of levying the tax entirely on their

HISTORY OF TAXATION                                                                           01.01 - 2
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own, saving the federal government the expense of administering the project. The states could take a 15
percent discount if they paid within six months, and a 10 percent discount if they paid within nine
months. The federal government also created tax districts, each with its own private tax assessor and
collector who earned a commission from the taxes they collected.

On August 5, 1861, Congress enacted the nation’s fourth direct-tax revenue bill for the stated amount of
$20 million. It was similar to the previous bills except slaves were no longer taxed as property – only
land, “improvements,” and dwellings. Tax collectors were allowed to sell the property of citizens that
did not pay their share of the tax, but essential property like homes, tools of trade, and household
utensils could not be sold to pay tax debts. To protect the public from abusive tax collectors, penalties
applied to collectors who used extortion or otherwise broke the law to make collections.

Congress enacted the 16th Amendment in 1913 imposing a federal income tax that provided a constant
flow of revenue and eliminated the need to impose federal property taxes.

History of State and Local Property Taxes

A survey of the tax systems – especially property tax usage – of the 16 existing states in 1796 showed
that real property components, such as land and buildings, constituted most of the property tax base,
supplemented by tangible items, including household possessions, and intangible items, such as interest
on loans. Arbitrary assessment procedures, numerous tax rates, and various exemptions plagued local
property tax administration.

Some states used the property tax only sporadically. For example, Maryland levied it mainly to finance
the Revolutionary War. Pennsylvania, Delaware, and New York used it because other tax and non-tax
revenues were insufficient to cover expenses or finance debt. Otherwise, license taxes, public land
sales, and income from state investments generally provided needed revenue.

Around 1820, several states initiated a reform in property taxation through a general property tax. The
general property tax attempted to impose a uniform tax rate on all forms of property subject to taxation
through constitutional or statutory means – reflecting the Jacksonian belief that the actual value of
property best represented taxpaying ability. However, unlike land, tangible and intangible personal
property was mobile and became harder to locate for tax purposes. As the process of industrialization
unfolded around the mid-1800s, general property tax complaints became more widespread as critics
argued that increasing amounts of household and business property were exempt from taxation,
underreported, or underassessed. The results were inequitable tax burdens within and among property
classes. This led to the initiation of the state assessment of railroad, express, and telegraph property in
the two decades after the Civil War, which often resulted in modified general property and other special
taxes.

Unable to meet interest and principal payments from defaulting bonds as a result of the Panic of 1837,
many states reluctantly raised property taxes, expanded special corporate and license taxes, and even
experimented with inheritance and income taxes. Approximately one-third of the states derived more
than fifty percent of their total state tax revenues from non-general property taxes by 1902. Most of
these states had gradually embraced the relegation of the general property tax to local entities. A portion


HISTORY OF TAXATION                                                                            01.01 - 3
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of these state-administered special taxes was often returned to localities through state aid or tax sharing
payments.

Rising property tax rates in the 1920s, significant property tax delinquencies in the 1930s and further
efforts to reach intangible property prompted the adoption of other taxes. By 1940, 33 states had an
individual and/or corporate income tax. State income tax usage accelerated the movement toward less
dependence on the general property tax. A majority of states received more than 50 percent of their total
tax revenue from specialized corporate, special property, inheritance, poll, business licenses, and income
taxes for the first time in 1924.

Today, the states acquire the necessary revenue to provide public services to their citizens such as public
schools, police protection, health and welfare benefits, and the operation of the state government
through tax collection, fees and licenses, as well as money from the Federal Government. Among the
common types of taxes that many states currently impose are personal income tax, corporate income tax,
sales tax, and real property tax.

A Brief History of Minnesota Taxes

Background
The power of taxation is generally provided in the organizational charters and constitutions of newly
formed governments. Minnesota had been claimed as a possession of several countries prior to its
ownership by the United States. As such, it had been subject to the laws established by the various
provincial and colonial charters and territorial constitutions.

The first governmental organization of which Minnesota became subject to as a United States possession
began with the Northwest Ordinance of 1787. This ordinance established a temporary territorial
government for the lands lying north and west of the Ohio River. The eastern portion of Minnesota was
included in this area.

At the time of the passage of the Northwest Ordinance, the northern and western portions of Minnesota
were possessions of the British and French governments. In 1803, the United States purchased a large
area of land from the French government with the Louisiana Purchase. The western portion of
Minnesota then became a United States Possession.

The northern portion of Minnesota remained a part of the British Empire until the Treaty of Ghent in
1814 and the subsequent Convention of 1818 which ceded the land to the United States. These
agreements ended the War of 1812 and established the boundary between the United States and British
territories.

The former French and British areas in Minnesota were organized into the territories of Louisiana then
Missouri. As the territories were dissolved and reorganized because of the formation of new states,
Minnesota became a part of Michigan, Wisconsin, and Iowa territories. After the States of Iowa and
Wisconsin gained statehood in 1846 and 1848, Minnesota and large portions of North and South Dakota
were organized into the Territory of Minnesota by the Organic Act of 1849.



HISTORY OF TAXATION                                                                            01.01 - 4
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CHAPTER 1 – PUBLIC FINANCE OVERVIEW



That year, the first territorial assembly established a property tax levy to support schools— nine years
before Minnesota became a state.

The Minnesota Enabling Act of 1857 authorized the inhabitants of the Territory of Minnesota to form a
State Constitution and State Government. In May of 1858, Congress ratified the Constitution of the State
of Minnesota and admitted the State into the Union with the Act of Admission of 1858.

Property taxes remained the main source of revenue until the 1920s, when the growing number of
automobiles in the state forced the legislature to find a way to pay for a state highway system. In 1920,
the amendment to the state constitution that authorized a trunk highway system also provided for a 2
percent registration tax on the purchase of motor vehicles. (Prior to the amendment, the tax had been a
flat $1.50 per vehicle.) Five years later, a 2 cent per gallon gas tax was established to meet the growing
need for additional highway funds.

The next major change in the state’s tax system came as the hardships of the Great Depression made
property taxes harder to collect. Between 1929 and 1933, the number of property tax delinquencies in
the state doubled. At the same time, citizens looked to the state for services that local governments,
charities and other private resources were unable to provide. The need for more revenue to meet citizen
demand, combined with the need for tax relief for property owners, led the legislature to establish the
state income tax. Minnesota adopted individual and corporate income tax systems in 1933.

The shift toward income tax and away from property tax as the major source of state revenue continued
in the 1950s and 1960s. In 1967, the state eliminated the state property tax and turned over the collection
of property taxes to the counties. The department continued to assist local government officials in
administering the property tax system, but the primary responsibility for assessing property and
collecting taxes was delegated to the counties.

In that same year, the state instituted the sales tax, in part to offset the loss in revenue it experienced by
turning property taxes over to local governments. However, the department established a system for the
uniform valuation and taxation of property and continued to provide property tax relief in the form of
state aid to local governments.

Property Tax Authorization
Minnesota's power of taxation is shaped by in Article X of the Constitution of the State of Minnesota.
The article states that the power of taxation will never be surrendered, suspended or contracted away.
The article also states that the taxes will be uniform upon the same class of subjects and will be levied
for public purposes. This "uniformity" clause is important in that it permits the use of different tax rates
to be applied to different classes of property.

Article X also exempts certain types of properties from taxation. The article exempts public burying
grounds, public school houses, public hospitals, academies, colleges, universities, all seminaries of
learning, all churches, church property, houses of worship, institutions of purely public charity and
public property used exclusively for public purposes. The legislature may, however, define or limit the
properties exempted by this article except for churches, houses of worship, and properties used solely
for educational purposes by college, universities, academies and seminaries of learning.



HISTORY OF TAXATION                                                                               01.01 - 5
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This article also contains constitutional provisions for taxation of forest lands and yield tax on forest
products, occupation taxes on ores, motor fuels taxes, aircraft taxes, and taconite taxes.

History of Major Changes in Property Taxes in Minnesota
The following milestones highlight the evolution of the property tax system in Minnesota. (These
highlights do not include changes to state aids to local governments, which are often connected to
property tax relief.)

1860 -State Board of Equalization created to reduce inequities of assessment.
1913 -Classification system enacted with four classes of property.
1933 -Property classes increased from four to seven.
1934 -Constitutional amendment authorized the limited exemption of household goods and farm
     machinery.
1937 -First $4,000 of homesteads exempted for state tax.
1945 -Airflight property tax enacted.
1961 -Indian lands exempt from taxation.
1967 -Homestead credit enacted at 35% of gross tax with a maximum credit of $250.
     -Senior citizen property tax credit enacted.
     -State property tax levy eliminated.
     -Livestock and agricultural machinery exempted.
     -Manufacturers given option to exempt either tools and machinery or inventory.
     Adoption of county assessor system.
     -Minnesota Agrigultural Property Tax Law enacted.
     Farm homestead increased from 40 to 80 acres.
1969 -Taconite homestead credit enacted.
     Minnesota Open Space Property Tax Law enacted.
1971 -Overall levy limitation laws enacted for school districts, counties, and municipalities.
     -Business inventories and tools and machinery made entirely exempt.
     -Mobile homes taxed as personal property.
     -Fiscal disparities enacted.
1973 -Senior citizen property tax freeze credit enacted.
     -Increase in market value for residential property limited to 5% per year.
     -Manufacturing and business machinery considered as real property (attached machinery)
     exempted.
1974 -Homestead credit increased to 45% of gross tax with a maximum credit of $325.
     -Farm homestead increased from 80 to 120 acres.
1975 -Limited market value for residential property replaced with general limits on valuation
     increases.
     -Property tax refund enacted.
     -Flexible homestead base established.
     -Agricultural mill rate differential increased.
1976 -Agricultural mill rate differential eliminated and replaced with a credit at a higher rate.
1977 -Farm homestead increased from 120 to 160 acres.
     -Classification ratios for homesteads reduced.
     -Relief under property tax refund increased; senior citizen property tax freeze credit repealed.
1979 -Eliminated limited market value. Enacted two-stage shift to estimated market value.


HISTORY OF TAXATION                                                                               01.01 - 6
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      -Homestead credit increased to 50% of gross tax with a maximum credit of $550.
      -Classification ratios for homestead and certain other property reduced.
      -Farm homestead increased from 160 to 240 acres.
      -Agricultural mill rate credit increased.
      -Enacted powerline credit (1982).
      -Wetlands exemption and credit enacted.
      -Gross earning tax on railroads replaced with the general property tax.
1980 -Classification ratios lowered for homestead and certain other property.
      -Homestead credit increased to 58% of gross tax with a maximum credit of $650.
      -Native prairie exemption and credit enacted.
      -Targeting credit for homesteads enacted.
1981 -Classification ratios for commercial-industrial property and certain apartment buildings reduced.
      -Agricultural mill rate credit made more progressive.
1982 -Enterprize zone classification of property created.
      -Reduced assessments for property damaged by a natural disaster enacted, with state payments to
      offset local revenue lass.
1983 -Homestead credit percentage reduced to 54%.
      -Classification ratios for homestead property, certain apartments, and commercial-industrial
      changed.
      -State paid credit for enterprise zone business enacted.
      -Enacted a new property tax refund formula.
      -Removed 240-acre limit for farm homesteads.
1984 -Classification ratios for commercial/industrial property reduced.
      -Agricultural credit increased.
      -Targeting credit enacted for taxes payable in 1985.
1985 -Maximum homestead credit increased to $700.
      -Agricultural credit increased, maximum repealed.
1987 -Small business property tax transition credit enacted for 1988 only.
      -Homestead classification ratios reduced.
    Beginning with taxes payable in 1989:
      -Replaced homestead credit on nonagricultural property and the agricultural credit with
      exemptions. Local units of government reimbursed through replacement aid.
      -Restructured the classification system, reducing the number of classes and increasing the ratios.
      -Repealed the native prairie and wetlands credits.
      -Exempted electric power distribution lines used to supply electricity at retail to farmers.
1988 -Classification ratios and mill rates replaced by tax capacity rates applied to market value.
      -“Truth in Taxation” system enacted (pay 1990).
      -Homestead credit reinstated for 1989 only and maximum increased from $700 to $725.
      -Agricultural credit reinstated for 1989 only but no longer applicable to seasonal recreational
      property.
1989 -The homestead and agricultural credits replaced by new state aids, including school equalization
      aid and homestead and agricultural credit aid (HACA).
      -New class rates for 1990 and subsequent years.
      -Levy limits repealed (pay 1993).
      -Noncommercial seasonal recreational property eligible for targeting refund for 1990 only.
1990 -Class rates changed for several types of property.


HISTORY OF TAXATION                                                                         01.01 - 7
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1991   -Class rates and brackets changed for commercial/industrial, residential rental, and seasonal
       residential property.
       -Separate vacant land class eliminated (pay 1993).
1992   -Homestead treatment extended to dwellings occupied by relative of the owner.
       -Calculation of targeting refund modified and limited to a maximum of $1,500.
1993   -Limited market value established for agricultural, residential, and noncommercial seasonal
       recreational residential property for 1993-1998.
       -Exclusion for up to ten years enacted for certain improvements to older homes made prior to
       January 2, 2003, After ten years, 20% of the excluded value added in each of the next five years.
       -Class rates reduced for certain agricultural property.
       -Non-school referendum levies applied to taxable market value.
1994   -Restrictions added to exclusion of improvements for older homes, including market value limit
       of $150,000 ($300,000 in some areas).
       -For the property tax refund, increased the income thresholds and maximum refund amounts;
       indexed both. Increased percent paid by the state.
       -For targeting, reduced the percent paid by the state from 75% to 60% and the maximum refund
       from $1,500 to $1,000.
1995   -Class rates reduced for: cabins (pay 1997); apartments in qualifying smaller cities outside the
       metropolitan area; and new commercial/industrial property within transit zones.
       -New operating school district referendum levies based on referendum market value.
1996   -Class rates reduced for cabins.
       -Electric power generation facilities eligible for partial market value exclusion based on
       efficiency.
       -Income qualifications changed for Class 1b.
       -Fiscal disparities enacted for taconite tax relief area.
1997   -Class rates reduced for most types of property, including homesteads (2nd tier),
       commercial/industrial, apartments, cabins (1st tier), and Class 5.
       -Brackets changed for homesteads and commercial/industrial property.
       -New classifications created for seasonal farm worker housing and residential nonhomestead
       single unit property.
       -Education homestead credit enacted equal to 32% of the property’s general education levy, with
       a maximum credit of $225 per homestead.
       -Levy limitations enacted for counties and for citieis over 2,500 in population for pay 1998 and
       1999 only.
       -Rebate enacted as a refundable income tax credit for homeowners and renters equal to 20% of
       property taxes paid in 1997.
       -Property tax deferral program enacted for qualifying senior citizens (pay 1999).
       -Limited market value program extended to 2001.
       -Income tax credit for increases in cabin property taxes for pay 1998 and 1999 only.
       -For property tax refund and rebate, rent constituting taxes paid changed to 18% of gross rent.
       -New referendum levies applied to referendum market value.
1998   -Class rates reduced for most types of property.
       -Education homestead credit percentage increase; maximum credit increased to $320 for 1999
       and $335 thereafter.
       -Rebate enacted as a refundable income tax credit for homeowners and renters equal to 20% of
       property taxes paid in 1998, with a maximum rebate of $1,500.


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       -For property tax refund and rebate, rent constituting taxes increased from 18% to 19% of gross
       rent.
1999   -Class rates reduced for most types of property, including homesteads (2nd tier), commercial,
       industrial, apartments, and cabins.
       -Brackets changed for homesteads, one-unit nonhomestead property, and cabins.
       -Bracket for agricultural homestead land over $115,000 market value changed from 320 acres to
       $600,000 market value.
       -Education homestead credit percentages increased; maximum credit increased to $390.
       -Education agricultural credit enacted to equal 54% of the general education levy for agricultural
       homestead land and 50% for agricultural nonhomestead land and timberland.
       -Limited market value calculation modified to further restrict annual market value increases.
2000   -Education agricultural credit increased from 54% to 70% of the general education levy on the
       first $600,000 market value for agricultural homestead land and buildings and from 50% to 63%
       on other agricultural land.
2001   -Class rates reduced for most types of property, including 2nd tier of homesteads, commercial,
       industrial, apartments, and cabins.
       -Brackets changed for homesteads and cabins.
       -State-determined general education levy eliminated.
       -Agricultural and seasonal recreational property exempted from school district referendum
       levies.
       -A new state general property tax levied on commercial, industrial, and seasonal recreational
       property enacted.
       -Education homestead credits eliminated, and market value credits established for residential and
       agricultural property.
       -Limited market value extended to phase out over six years.
       -Tree growth tax repealed; land subject to property tax. Owners of qualifying sustainable forest
       land eligible for an annual per-acre payment from the state (pay 2003).
       -Property tax refund increased for homeowners.
2002   -Market value credit increased for agricultural homestead land.
       -Wind energy conversion systems exempted from the property tax (except for the land) and now
       subject to a new production tax.
       -Owner-occupied bed and breakfast facilities reclassified as class 4c with a class rate of 1.25%
2003   -Exemption enacted for improvements to commercial, industrial, and utility property of qualified
       businesses in a Job Opportunity Building Zone or the Biotechnolohy and Health Scheiences
       Industry Zone.
2005   -State tax levy divided between commercial-industrial property (95%) and seasonal residential
       recreational property (5%) with separate tax rates.
       -Delayed the phaseout of limited market value by two years.
       -Changed class rates for class 1c resorts.
       -Established class 4d for low-income rental housing.
2006   -For agricultural homestead land, the $600,000 class rate bracket adjusted annually by the
       increase in average taxable market value of agricultural property per acre.




HISTORY OF TAXATION                                                                           01.01 - 9
REVISION DATE: JANUARY, 2007
CHAPTER 1 – PUBLIC FINANCE OVERVIEW




Federalism

Simply defined, federalism is the political philosophy that underlies a system of government in which
sovereignty is constitutionally divided between a central governing authority and constituent political
units, such as states or provinces, creating what is often called a federation. Traditionally, those who
favor this notion of divided sovereignty favor a stronger central government and weaker provincial
governments. Historically in the United States, however, we have favored a weaker federal government
and stronger state governments. This conceptually converse philosophy is commonly referred to as a
confederation.

Federalism and Democracy
Federalist theory provides the backbone for the advocacy of federalism. It suggests that federalism
provides for a system that anchors pluralist democracy, while enhancing democratic participation.

The classic statement of this position can be found in The Federalist, which argued that federalism helps
enshrine the principle of due process, limiting arbitrary action by the state. First, federalism can limit
government power to infringe rights, since it creates the possibility that a legislature wishing to restrict
liberties will lack the constitutional power, whole the level of government that possesses the power lacks
the desire. Second, the legalistic decision making processes of federal systems limit the speed with
which governments can act.

Federalism and the U.S. Constitution
Before the U.S. Constitution was written, each American state was essentially sovereign. The U.S.
Constitution created a national government with sufficient powers to unify the states, but did not
supplant state governments. This federal arrangement, by which the central national government
exercises power over some issues and the state governments exercise power over other issues, is one of
the basic characteristics of the U.S. Constitution that checks governmental power. Other such
characteristics are the separation of powers among the three branches of government – the legislative,
executive, and judicial. The expectation is for state governments to exercise checks and balances on the
national government to maintain limited government over time.

Federalism and Taxation
The divided sovereignty of federalism creates multiple layers of governance that all require a funding
source to operate. As a result, we have many corresponding layers of taxation that exist, each
possessing their own set of unique complexities and policy implications. The property tax is one such
example of a layer of taxation born out of the federalist system.




HISTORY OF TAXATION                                                                             01.01 - 10
REVISION DATE: JANUARY, 2007
CHAPTER 1 – PUBLIC FINANCE OVERVIEW




01.02 – PRINCIPLES OF GOOD TAX POLICY

Overview

Before we can discuss what some of the generally accepted principles of good tax policy are, it is
important to establish a framework or context in which to apply them. Because of this, the first part of
this section will examine the revenue in the public sector, while the second part offers a brief
examination of the function of taxes. The final part will then study some principles of good tax policy.

Revenue in the Public Sector

The public sector certainly has its share of responsibilities and obligations to fulfill. With new demands
for benefits and services constantly on the rise, funding flat lining or on the decline, the system is always
facing the challenge of prioritizing and managing its resources. In order to understand the challenges
better, let us examine how the public sector acquires resources.

Non-Taxation Sources
There are a variety of non-tax sources by which governments can obtain resources necessary to operate.
Three of these are common in today’s society.

First, governments can gain resources through voluntary contributions of either money or time.
Examples of such would be parents volunteering in schools, individuals serving for little or no
compensation on boards and commissions, and monetary gifts to artistic endeavors. Nonprofit
organizations, often times given tax incentives, can also fulfill this function.

Second, the public sector may own resources. Typically, these services will be provided without any
permanent consumption, and charges may or may not apply. Examples of services that would not
require a charge would be public parks and national defense. However, public utilities and education
from state universities are examples of services that can be sold for revenue. Governments may also
charge user fees, impose fines, or earn money by investing their cash balances in the financial markets.

Third, governments may take the resources they need. Because of the perception of arbitrary behavior,
this type of acquisition can be controversial. This could be as simple as jury duty or as extreme as the
use of eminent domain power to acquire property. Nonetheless, while compensation is often required, it
is rarely considered to be equivalent to the value of what has been taken, be it something as esoteric as
time or as real as property.

Taxation
In 1904, Justice Oliver Wendell Holmes said, “Taxes are the price of civilization”. Over one hundred
years later, taxes are still the most predominant way for governments to raise revenues. Taxation,
generally speaking, knows few boundaries. Taxes are levied on property (both real and personal),
income (corporate and individual), consumption (sales and use taxes), and legacy (inheritance). Some
taxes are flat, while others increase as the amount being taxed increases. Regardless of what is being
taxed or how it is calculated, there is one certainty – the tax is being levied to finance the activities that
the population deems necessary for government to provide.

PRINCIPLES OF GOOD TAX POLICY                                                                       01.02 - 1
REVISION DATE: MAY, 2006
CHAPTER 1 – PUBLIC FINANCE OVERVIEW




Functions of Taxes

Taxation refers to the power of a government to levy a specific tax upon its citizens. If you go to the
store you will pay tax on the goods you purchase, or if you own property you will pay taxes based upon
its value. These are specific taxes paid under specific circumstances. That concept on its own is simple
enough.

A tax system, however, is a multi-layered, multi-dimensional accumulation of several types of taxes, as
well as the consideration of non-tax revenue – instituted by a government – that combines to raise
enough revenue to cover its necessary expenses. Assembling a tax system that achieves its principal
purposes, such as raising enough revenue, maintaining efficiency, and is politically acceptable can be
extremely tough waters to navigate.

Guiding Principles of Tax Policy

At all levels of government – national, state, and local – the complexity of the various tax systems in
place makes them extremely difficult to administer, let alone provide any meaningful analysis or
proposal for improvement. Some might argue that a broad simplification of our tax laws would solve
many problems. However, it is many of those complexities – such as a mortgage interest deduction on
our income tax return or even reduced property taxes for homesteading – taxpayers perceive as real and
tangible benefits. As a result, they would be very difficult to remove from the system.

How is it then that we, as tax administrators and tax policy developers, formulate proposals to change
existing tax rules? The best answer is to rely on a framework of principles that can serve as a guide
towards current and future policymaking. The following principles have been generally accepted and
commonly cited as indicators of good tax policy. The weight and importance given to any one factor
may vary from issue to issue, but all certainly maintain their relevance regardless.

Equity and Fairness
The principle of taxing similar taxpayers similarly is typically defined as equity. While a tax system
cannot be all things to all people and therefore cannot meet an all-encompassing definition of fair, in the
context of good tax policy it is important to whether a tax system is perceived as fair.

Certainty
A person’s tax liability should be certain rather than ambiguous. The tax rules should specify when the
tax is to be paid, how it is to be paid, and the amount to be paid. A tax system’s rules must enable
taxpayers to determine what is subject to tax (the tax base) and at what tax rate(s).

Taxpayers should be able to determine their tax liabilities with reasonable certainty. This certainty is
important to a tax system because it helps to improve compliance with the rules and to increase respect
for the system. Certainty generally comes form clear statutes as well as timely and understandable
administrative guidance that is readily available to taxpayers.

Convenience of Payment
A tax should be due at a time or in a manner that is most likely to be convenient for the taxpayer. A tax
should be payable when it is most likely to be convenient for the taxpayer. An example of this would be

PRINCIPLES OF GOOD TAX POLICY                                                                   01.02 - 2
REVISION DATE: MAY, 2006
CHAPTER 1 – PUBLIC FINANCE OVERVIEW



taxing purchased goods at the time of purchase. Convenience is important in ensuring compliance – the
more difficult a tax is to pay the more likely that it will not be paid.

Economy of Collection
The costs to collect a tax should be kept to a minimum. These costs include the administrative cost to
the government as well as the compliance costs incurred by the taxpayer. Typically, the more simple a
tax, the lower the costs, and the more complex a tax the greater the costs become.

Simplicity
The tax system should be as simple as possible, and should minimize gratuitous complexity. Simplicity
in the tax system is important both to taxpayers and to those who administer the various taxes. Complex
rules lead to errors and disrespect for the system that can reduce compliance.

Neutrality
The effect of any tax law on business and personal decisions should be kept to a minimum. The effect
of the tax law on a taxpayer’s decisions as to how to carry out a particular transaction or whether to
engage in a transaction should be kept to a minimum. The tax system’s central aim should be to
minimize distortions in the economy, and to interfere as little as possible with the decisions of free
people in the marketplace.

Transparency and Visibility
Taxpayers should know that a tax exists and how and when it is imposed upon them and others. A good
tax system requires informed taxpayers who understand how taxes, are assessed, collected and complied
with. Visibility enables individuals and businesses to know the true cost of transactions, as wells as to
understand how tax burdens effect them and the economy.

Appropriate Government Revenues
Tax systems should have some level of predictability and reliability to enable the government to
determine how much tax revenue is likely collected and when. This is extremely important to levels of
government that operate with a balanced budget requirement.

Maintain a Broad Base
Taxes should be broadly based, allowing tax rates to be as low as possible. A mix of taxes provides a
more stable tax base because different types of taxes are affected differently by changes in the economy.
This responsiveness to economic conditions is often referred to as elasticity.

Ensure an Open Process
Tax legislation should be based on careful economic analysis and transparent legal procedures. Tax
legislation should be subject to open hearings with full opportunity to comment on legislation and
regulatory proposals.




PRINCIPLES OF GOOD TAX POLICY                                                                 01.02 - 3
REVISION DATE: MAY, 2006
CHAPTER 1 – PUBLIC FINANCE OVERVIEW




01.03 – TAX DATA FOR MINNESOTA REVENUE

Chart 01.03-1: Distribution of Revenues by Tax Type (FY06)



                                                                         Individual Income Tax
                                                                                 21.5%


         Fees and other revenue
                31.6%




                                                                                     General Sales and Motor
                                                                                          Vehicle Tax
                                                                                              16.4%
      Corporate Income Tax
              2.4%
            State Property Tax
                   2.1%
     Gasoline, Special Fuels
       and Motor Vehicle
            License
                                                          Local Property Tax
             Taxes
                                  Health Care and other         16.6%
              3.9%
                                          taxes
                                          5.6%




The above chart, Chart 01.03-1, illustrates the distribution of revenues as they are generated by tax type.
As you can see, Local Property Tax ranks third amongst the specific tax types, while the State Property
Tax ranks the lowest.




TAX DATA FOR MINNESOTA REVENUE                                                                        01.03 - 1
REVISION DATE: MAY, 2006
CHAPTER 1 – PUBLIC FINANCE OVERVIEW




Chart 01.03-2: Statewide Property Tax by Type of Government (Taxes Payable 2004)
                Amounts shown are after allocation of property tax credits.



                                                                                      City
                                                                                     26.4%
                                                                                   (TIF 5.1%)
                    County
                    32.0%




                                                                                            Town
                                                                                            2.6%

                                                                                          Special Taxing District
                                                                                                   3.4%




                             State
                             11.7%

                                                                 School District
                                                                    23.9%




This chart displays the percentage of property tax that is collected statewide by type of government.




TAX DATA FOR MINNESOTA REVENUE                                                                         01.03 - 2
REVISION DATE: MAY, 2006
CHAPTER 1 – PUBLIC FINANCE OVERVIEW




Chart 01.03-3: Statewide Shares of Market Value and Property Tax by Property Type
              (Pay 2004)



                                           2.8%
  Seasonal Residential Recreational
                                            4.0%



                                                 5.8%
                        Agricultural
                                                           13.0%



                                             4.6%
                       Public Utility
                                          1.9%



                                                                                            32.9%
             Commercial/Industrial
                                                           12.6%



                                             5.1%
                        Apartment
                                            4.2%



                                            3.9%
         Residential Nonhomestead
                                             4.6%



                                                                                                              44.9%
            Residential Homestead
                                                                                                                              59.7%


                                   0.0%            10.0%           20.0%         30.0%              40.0%           50.0%   60.0%        70.0%

                                                                   Estimated Market Value            Property Tax




This chart reflects the inherent differences between estimated market value and the amount of property
tax burden amongst property types. As you can see, Agricultural and Residential Homestead properties
shoulder significantly less of the property tax burden in relation to their respective share of estimated
market value. Conversely, Commercial/Industrial properties shoulder nearly two and a half times the
share of the property tax burden compared to their share of estimated market value.




TAX DATA FOR MINNESOTA REVENUE                                                                                                      01.03 - 3
REVISION DATE: MAY, 2006
Chapter      2      

     ADMINISTRATIVE ROLES


                       TABLE OF CONTENTS

      Assessors                            02.01 – 1

      Auditors                             02.02 – 1

      Treasurers                           02.03 – 1

      Recorders                            02.04 – 1

      County Government Structure          02.05 – 1

      Department of Revenue                02.06 – 1

      Other State Entities                 02.07 – 1




                                                       02.00
CHAPTER 2 – ADMINISTRATIVE ROLES




02.01 – COUNTY ASSESSORS
This section means to provide an overview of the role of the county assessor. More detail can be found
in the Property Tax Administrator’s Manual, either with your county assessor’s office or online at
www.state.taxes.mn.us.

Each county in the state is required to have a county assessor. The county assessor is appointed by the
county board of commissioners based on his or her knowledge and training in the field of property
assessment and taxation. The Commissioner of Revenue must approve the appointment before it
becomes effective.

The term of office of the county assessor is four years. A new term begins on January 1 of every fourth
year after 1973 (1997, 2001, 2005, 2009,…).            When a vacancy occurs, the county board of
commissioners shall fill the office for the remainder of the term, by appointment, within 90 days.
During that time, the deputy assessor (or if there is no deputy, the county auditor’s appointee), will
perform the functions of the assessor.

The county board may terminate the term of the county assessor at any time, on charges of malfeasance,
misfeasance or nonfeasance made by the Commissioner of Revenue.

Malfeasance can be defined as wrong or illegal conduct, or an unlawful act, especially those committed
by politicians or civil servants. This term is often used when a professional or public official commits
an illegal act that interferes with the performance of his or her duties. An example of malfeasance
would be an elected official who accepts a bribe in exchange for political favors or an assessor who
intentionally undervalues a county commissioner’s house.

Misfeasance can be defined as illegally performing something legal; acting improperly or illegally in
performing an action that is in itself lawful; or general incompetence. This term is frequently used when
a professional or public official does his job in a way that is not technically illegal but is nevertheless
mistaken or wrong. Examples of misfeasance include a lawyer who is mistaken about a deadline and
files an important document too late, an accountant who makes an unintentional error on a client’s tax
return or a doctor who accidentally writes the wrong dosage on a prescription, or an assessor exempting
his own house.

Nonfeasance can be defined as the failure to meet legal obligations; failure to do something that is
legally obligatory. It is the failure to perform or complete neglect of a contractual duty. For example, an
assessor that does not physically inspect properties in their jurisdiction at least once every 5 years.

If the county board does not intend to reappoint a county assessor, they must present written notice to
the county assessor no later than 90 days prior to the termination of the term. If written notice is not
made by this day, the county assessor will be automatically reappointed by the county board.




COUNTY ASSESSORS                                                                               02.01 - 1
REVISION DATE: MAY, 2006
CHAPTER 2 – ADMINISTRATIVE ROLES




Code of Conduct and Ethics

Licensed Minnesota assessors are required to abide by the ethical and professional guidelines
established in the Code of Conduct and Ethics developed by the Commissioner of Revenue. The
purpose of this code of conduct and ethics is to instill public confidence in property assessment and
promote fairness and uniformity of assessment practices. As a counterpart to this code of conduct and
ethics, there is also an ethics seminar required for all licensed assessors to be completed once in every
four year period starting July 1, 2004.

Basic Duties of the County Assessor:

   •   Minnesota Statute 273.08 states that “the assessor shall actually view, and determine the market
       value of each tract or lot of real property listed for taxation, including the value of all
       improvements and structures thereon, at maximum intervals of five years and shall enter the
       value opposite each description.”

   •   Responsible for instructing and directing local and city assessors and staff appraisers to perform
       their duties under the laws of the state to ensure that a uniform assessment of all real property in
       the county is attained.

   •   Keep the local assessors and staff appraisers advised of all changes in assessment laws.

   •   The county assessor has the authority to require the attendance of local assessors at sectional
       meetings called by the county assessor for the purpose of giving them further assistance and
       instruction as to their duties.

   •   Provide information to local and county boards of appeal and equalization.

   •   The county assessor is to prepare a large scale topographical land map of the county showing the
       location of all railroads, highways and road, bridges, rivers, lakes, swamp areas, wooded tracts,
       stony ridges and other features that affect land values. Appropriate symbols should indicate the
       best, fair and poor land of the county. In addition the assessor must prepare office tables
       showing minimum and maximum market values per acre of cultivated, meadow, pasture,
       cutover, timber and waste lands of each township.

   •   The county assessor is also to prepare a land valuation map of the county. This map should
       include the bordering tier of townships of each bordering county and should show the average
       market value per acre both with and without improvements, as equalized in the last assessment,
       or all land in each town or unorganized township which lies outside the corporate limits of cities.

   •   The county assessor is to regularly examine all conveyances of land outside the corporate limits
       of cities of the first and second class and keep a file, by description, of the considerations shown
       thereon. From the information obtained by the considerations shown and the assessed market
       values, the county assessor is to make recommendations to the county board of appeal and
       equalization of necessary changes in individual assessments or aggregate valuations.


COUNTY ASSESSORS                                                                               02.01 - 2
REVISION DATE: MAY, 2006
CHAPTER 2 – ADMINISTRATIVE ROLES



   •   The county assessor should become familiar with the values of the different items of personal
       property so that they will be in a position to advise the local and county boards of appeal and
       equalization concerning the market values of the property.

   •   The county assessor is required to provide every possible assistance to the county board of
       appeal and equalization while it is in session.

   •   At the request of either the county board of commissioners or the Commissioner of Revenue, the
       county assessor is to investigate applications for reductions of valuation and abatements and
       settlements of taxes.

   •   The county assessor is to make a diligent search each year for real and personal property that has
       been omitted from the assessment, and report all such omissions to the county auditor.

   •   Confer with assessors in neighboring counties in order to attain a uniform and equalized
       assessment.

   •   Ultimately responsible for final assessments and classifications based on the values reported by
       local or deputy assessors.

   •   The county assessor is to maintain a record, in conjunction with other county offices, of all
       transfers of property to assist in determining the proper classification of property, including but
       not limited to, transferring homestead property and name changes on the homestead property.

   •   The county assessor is responsible for determining if a homestead application is necessary due to
       a transfer of homestead property or an owner’s name change on homestead property.

   •   The county assessor is to personally view and value any property, which may be difficult for the
       local assessor to appraise.

   •   The county assessor is to make all value changes ordered by the local or county board of appeal
       and equalization.

   •   Notwithstanding any provision of the law to the contrary, in order to promote a uniform
       assessment and review of assessments, the Commissioner of Revenue, county assessors and local
       assessors may exchange data on property which are classified under Chapter 13 as public,
       nonpublic or private. The data for any property may include but is not limited to sales, income,
       expenses, vacancies, rentable or usable areas, anticipated income and expenses, projected
       vacancies, lease information, and private multiple listing service data. Data exchanged under
       this provision that is classified as nonpublic or private data shall retain its classification.

The county assessor must examine the appraisal records of each local assessor at any time after
December 1 of each year. If the county assessor finds that the local assessor is not proceeding
satisfactorily with the assessment, the assessor should immediately give notice, in writing, to the
governing body of that district. The notice must include the deficiencies of the quantity or quality of the
work and the corrective action to be taken.


COUNTY ASSESSORS                                                                               02.01 - 3
REVISION DATE: MAY, 2006
CHAPTER 2 – ADMINISTRATIVE ROLES



If the deficiencies are not substantially remedied by the local assessor within 30 days, the county
assessor may, with the approval of the county board, obtain the books and complete the assessment. The
costs of completing the assessment are charged to the assessment district. When the county assessor has
completed the assessment, the local assessor may resume the assessment function of the district. This
does not apply to cities whose assessors have the powers and duties of a county assessor pursuant to
Minnesota Statute 273.063. (M.S. 273.064)

Staff Appraisers

The county assessor may employ one or more assistants (appraisers) and clerical help in order to
complete the assessment work. Appraisers must meet the qualifications set forth by the State Board of
Assessors.

Local Assessors

Local assessors contract with a city or township to perform their assessment. The duty of a local
assessor is to view and appraise all property in their assessment district. The value of all property
subject to assessment and taxation shall be determined by the county assessor. Any other book work
such as mailing of valuation notices is done by the county assessor.

The provisions of Extra Session Laws 1967, Chapter 32, Article 8, shall apply to all counties except
Ramsey County. The following limitations shall apply as to the extent of the county assessor’s
jurisdiction:

       In counties having a city of the first class, the powers and duties of the county assessor shall be
       performed by the duly appointed city assessor.

       In all other cities having a population of 30,000 persons or more, according to the last preceding
       federal census (except in counties having a county assessor on January 1, 1967) the powers and
       duties of the county assessor shall be performed by the duly appointed city assessor, provided
       thaat the county assessor shall retain the supervisory duties contained in section 273.061,
       subdivision 8. (M.S. 273.063)

Local assessors must complete all appraisal records and deliver them to the county assessor by February
1 of each year. Any work not completed by the local assessor by February 1 must be completed by the
county assessor. The cost of completing the work may be charged to the assessment district. Extensions
of time to complete the appraisal records may be granted to the local assessor by the county assessor
with the approval of the county board.




COUNTY ASSESSORS                                                                              02.01 - 4
REVISION DATE: MAY, 2006
CHAPTER 2 – ADMINISTRATIVE ROLES




02.02 – COUNTY AUDITORS
Minnesota State Statute 384.01 states a county auditor shall be elected in each county. Most county
auditors in the state are elected with the balance being appointed. Many counties have combined the
office of Auditor/Treasurer.

County auditors may by certificate in writing appoint deputies who, before entering upon their duties,
shall record with the county recorder such certificates, with their oaths of office endorsed thereon. Such
deputies may sign all papers and do other things which county auditors may do. Auditors shall require
bonds of their deputies in such amount and such sureties as they deem proper, shall be responsible for
their acts, and may revoke their appointment at pleasure. (M.S. 384.08)

Basic Duties of the County Auditor

   •   The duties of the County Auditor may vary from county to county depending upon the form of
       government the County Board has chosen. The Auditor’s duties are vast in nature and cover a
       wide variety of responsibilities.

   •   In some counties serves as Clerk to County Board and is responsible for preparing and
       preserving the minutes. Also may be responsible for the annual financial statement prepared for
       the County.

   •   Maintains the official financial records for the County, consisting of ledger journals and related
       documents. Signs all warrants issued against the County and is responsible for the monthly trial
       balance. May serve as recipient of all bids on behalf of the county construction projects,
       equipment and services provided.

   •   Based on the levies submitted for the county, townships, cities, school districts and special taxing
       districts the Auditor will calculate the tax capacity rates on which all taxes are levied and
       compute the tax on each parcel of land for real and personal property taxes. A Truth in Taxation
       statement in November as well as the annual tax statement in March is sent to the taxpayer by the
       Auditor. Statements for Mobile Home taxes are also sent from the Auditor’s office.

   •   Maintains status and collects delinquent taxes and spreads collections to proper taxing districts.

   •   Researches the legality of and initiates a Confession of Judgment pertaining to the payment of
       taxes.

   •   Works with property tax credits and the deferment of tax to qualifying Agricultural Preserve
       Programs and Green Acres Program.

   •   Collects special assessments for cities and townships and remits collections to proper taxing
       authority.

   •   May initiate or concur with Assessor in the preparation and issuance of tax abatements.


COUNTY AUDITORS                                                                                02.02 - 1
REVISION DATE: MARCH, 2006
CHAPTER 2 – ADMINISTRATIVE ROLES



   •   The Auditor is responsible for the Tax Forfeiture process. This involves identifying, tracking,
       implementing legal proceedings and conducting the Tax Forfeited Land Sale.

   •   Is involved with the Department of Natural Resources on lease lots, state leases, forestry issues
       and severed minerals.

   •   Issues tax certificates under the seal of the office indicating thereon whether taxes are paid or
       not.

   •   Completes Auditor’s Certificate for requesting entities with all pertinent taxing information
       relating to the taxing district.

   •   Administers the Fiscal Disparities program which provides for tax-base sharing within the seven
       county metropolitan areas. This involves calculating a contribution to the Fiscal Disparities
       “pool” and then redistributing aid based on relative fiscal capacity percentages.

   •   Administers all aspects of Tax Increment Financing Districts created by municipalities/counties.
       These districts fund improvements that increase market values of properties in the district. The
       taxes generated by the increased market value are “captured” by the district to finance project
       development costs.

   •   Maintains up to date records on each parcel of land in the County to include legal description and
       ownership. Daily changes are made involving transfers, sales, splits, mortgages, etc.

   •   Records all County and Judicial Ditch proceedings and assesses any payments ordered by the
       Ditch Board.

   •   The Auditor is the Chief Election Administrator for the county. Responsibilities include the
       training of election judges and officials, layout and printing of ballots, registering voters,
       absentee ballot administration, accepting filings from candidates for office, preparing and
       publishing sample ballots, providing ballots and election supplies to all precincts or wards,
       receiving and tabulating election results. Also, preparing the county Election Abstract and
       administering the County Canvass of election results, reporting of these results to the Secretary
       of State and issuing pertinent Certificates of Election.

   •   Is the chief custodian of official voter registration records. Maintains current listings in state
       wide computer system.

   •   May serve as the Deputy Registrar (License Center) for the county. This may include the sale of
       Game & Fish licenses, issuance of I.D. cards, Drivers Licenses and Passports. Also includes the
       renewal, registrations and title transfers for all motor vehicles and recreational equipment.

   •   May serve as the administrator for Vital Statistics which are comprised of birth and death
       certificates, marriage licenses, notary commissions and ministerial credentials.




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   •   Issues liquor, wine, beer, auctioneer, dance, dangerous dog, charitable gambling and other
       licenses deemed by the County to be appropriate. Collects smoking tickets.

   •   Serves as a member of the Board of Equalization, aforementioned Canvassing Board and
       Secretary of the Extension Committee.

   •   As stated prior, the duties of the Auditor’s office may vary from county to county. Regardless of
       duties assigned each Auditor has many personnel duties which may include, hiring, firing,
       training, assignment of staff duties, discipline of staff, evaluation/review of staff, prepare yearly
       budget, schedule and approve vacation requests.




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02.03 – COUNTY TREASURERS
State Statute M.S. 385.01 states a county treasurer shall be elected in each county. The county treasurer
position in Minnesota is an elected position unless the county board has taken official action to make it
appointed. Minnesota statutes also allow counties to combine the office of the auditor and treasurer
through official board action and this action may include changes to the elected or appointed status of
the position. When the County Treasurer is an elected position, the qualifications outlined in M.S.
204B.06. Candidates must be eligible to vote, age 21 on assuming the office and a resident of the
county for 30 days before the election. Any person holding the office of county attorney, sheriff, county
recorder, county auditor or county commissioner at the time of any election at which a county treasurer
is to be elected is not eligible to the office of county treasurer at that election. Most county treasurers in
the state are elected but some are appointed. Half of the counties have a combined office of
Auditor/Treasurer.

County treasurers may by certificate in writing appoint one or more deputies, who, before entering upon
their duties, shall record with the county recorder such certificates, with their oaths of office endorsed
thereon. Being a bonded deputy treasurer allows that individual to sign documents on behalf of the
treasurer and to perform treasurer duties as directed by the county treasurer. County treasurers are
responsible for the acts of their deputies and may revoke their appointments at pleasure. A deputy
treasurer should be of full age since that person would be required to give a bond.

Before entering upon the duties of the office the county treasurer, every deputy county treasurer and
every employee in the office of the county treasurer shall give bond, to be approved by the county board,
and in such sum as the boards directs.

Basic Duties of the County Treasurer

   •   The County Treasurer keeps a full and accurate account of all moneys received, receipts all
       county money directed by law to be paid to the treasurer and pays out only on the order of the
       proper authority. The county treasurer invests excess county funds under statutory guidelines to
       receive the highest return for the county providing it is a safe investment. The public funds at all
       times must be kept separate from any private funds of the treasurer or any private person.

   •   The county treasurer must be aware of Legislative updates that pertain to this office and apply
       those updates in office procedures. Must comply with the Minnesota Retention Schedule for
       safekeeping of permanent records and to determine the disposition of files/records of the office.

   •   The county treasurer provides customer service and information as requested by state agencies,
       general public and other county personnel. The county treasurer attends meetings of professional
       organizations, county/state committees and agencies providing services directly related to the
       duties performed by the County Treasurers Office.

   •   The county treasurer maintains and balances the Treasurer’s Cashbook, directs day-to-day
       operations of the Treasurer’s office, prepares and deposit county funds and account transfers.
       The treasurer’s office balances funds daily and balances twice a month with the auditor’s office.


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       At year end, the county treasurer balances and closes all ledger accounts for the previous year
       and prepares reports for audit purposes for the state audit team. Some of the fund transactions
       are made on the computer by automatic transfers to and from our accounts. The treasurer’s
       office also receives information over the internet to perform the daily transactions of the office.
       The county treasurer maintains sufficient liquidity to cover disbursements, ensures appropriate
       and sufficient collateral is pledged and maintains a principal/interest earned record on
       investments and securities. The county treasurer works with broker/banks on Certificates of
       Deposits and investments.

   •   The county treasurer mails statements and accepts payment for real estate not delinquent,
       personal property, mineral interest and mobile home taxes; maintains and collects delinquent
       mobile home taxes. The County Treasurer also mails the TNT notices, mails and distributes
       county payroll, Auditor warrants, Commissioner warrants and welfare warrants, maintains the
       escrow listing/escrow transactions and maintains mailing addresses on the tax system. County
       treasurer maintains tax books showing taxes paid or unpaid, changes in ownership or taxpayer.
       The treasurer’s office provides tax searches for the general public, real estate sales agents,
       mortgage companies and escrow agencies.

   •   The county treasurer collects deed tax and mortgage registration tax distributes tax receipts to the
       appropriate units of government. The treasurer’s office examines and signs off on recorded
       documents as presented by the county recorder for compliance with Minnesota Statutes that
       require payment of various taxes before documents related to real estate can be recorded or
       manufactured home documents are issued.

   •   The county treasurer assigns tasks, disciplines employees, performs evaluations/reviews, hires
       and train employees, prepares office payroll, prepares yearly budget, schedules and approves
       vacation leave. The county treasurer writes/develops policies as needed for office procedure.

   •   The county treasurer collects NSF checks, refunds overpayments, prepares stop payments on
       outstanding checks, answers correspondence and prepares media advertisements for tax
       deadlines. The county treasurer signs off on the Affidavit/permit for manufactured home for
       titling and relocation purposes. The county treasurer prepares the documents to report delinquent
       manufactured home taxes to the Department of Revenue to be collected by the revenue recapture
       program. The county treasurer files Unclaimed Property with the Minnesota Department of
       Revenue.

   •   Some county treasurers handle drivers license renewals, issue birth and death certificates,
       marriage licenses and file notary commissions and ministerial credentials. Some county
       treasurers prepare most of the settlement for payment after each tax deadline and in other
       counties the county auditor performs those functions. In some counties, the treasurer’s office
       takes care of the Game and Fish duties and issues hunting and fishing licenses.




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02.04 – COUNTY RECORDERS
Minnesota Statute 386.01 states every county recorder, before entering upon the duties of office, shall
give bond to the state in the penal sum of $5,000.00, to be approved by the county board, conditioned
that the recorder will faithfully and impartially fulfill the duties of office. The bond and an oath of
office shall be filed for record with the court administrator of the district court.

Minnesota Statute 386.33 states any county recorder may appoint one or more deputies in writing whose
oath of office shall be endorsed on the appointment and recorded therewith in the office. County
recorders shall be responsible for the acts of their deputies and may revoke their appointment at
pleasure.

Duties of the County Recorder

   •   Minnesota Statute 386.37 states in part in a county in which the county recorder performs
       abstract services, the county recorder, upon being paid lawful fees therefor, shall make out, under
       the recorder’s certificate and seal, as the same appears of record or on file in the office, and
       deliver to any person requesting the same: a full and perfect abstract of title or continuation of
       any abstract of title to any real estate.

   •   Minnesota Statute 386.73 County Recorder may employ licensed abstractors.

   •   Minnesota Statute 386.015 (Subd. 5) states in part the county recorder shall charge and collect all
       fees as prescribed by law and all such fees collected as county recorder shall be paid to the
       county in the manner and at the time prescribed by the county board, but not less often than once
       each month.

   •   Minnesota Statute 386.03 states in part every county recorder shall keep an index, to be
       denominated, as a grantor’s and grantee’s reception index. The recorder shall enter in the index,
       as soon as the same are received, all deeds and other instruments left, and all copies left, as
       cautions or notices of liens, authorized by law to be recorded.

   •   Minnesota Statute 386.04 states in part allows combination of indexes under 386.03 and 386.32

   •   Minnesota Statute 386.05 states in part that the county board shall procure suitable books or
       electronic media for a tract index. Such tract index shall be kept as one of the records in the
       office of the County Recorder and such recorder shall note therein the date, time, and minute of
       every instrument affecting the title to any land filed for record.

   •   Minnesota Statute 386.31 states in part every county recorder shall endorse plainly upon each
       instrument received for record a consecutive number and enter such number in all the indexes
       kept in the office and such number shall be prima facie evidence of priority of registration.




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   •   Minnesota Statute 386.32 Each county recorder shall keep an index of all records kept in the
       office showing the number of the instrument consecutively, the kind, the time of its reception,
       and where the same is recorded.

   •   Minnesota Statute 386.17 states the county recorder shall exhibit free of charge, during the hour
       that the office is or is required by law to be open, any of the records or papers in the recorders
       official custody to the inspection of any person demanding the same, either for examination or
       for the purpose of making or completing an abstract or transcript therefrom; but no such person
       shall have the right to have or use such records for the purpose of making or completing abstracts
       or transcripts therefrom, so as to hinder or interfere with the recorder in the performance of
       official duties.

   •   Minnesota Statute 386.20 states in part that certificates of military discharge and releases or
       transfers from active duty therein may be recorded in the office of the county recorder of any
       county in this state by the person to whom such discharge, release or transfer was issued without
       the payment of any fee to the county recorder for recording the same. The release of any
       information pertaining to military certificates of discharge is governed by section 196.08.

   •   Minnesota Statute 358.15 states in part the county recorders have the powers of a notary public
       within the state.

   •   Minnesota Statute 386.14 reads in part original instruments so recorded and a certified copy of
       such record shall be admissible in evidence in all the courts of this state.

   •   Minnesota Statute 386.19 states in part The county recorder shall keep suitable word for word
       records of all instruments left with the recorder.

   •   Minnesota Statute 386.39 states in part no county recorder shall record any conveyance,
       mortgage, or other instrument by which any interest in real estate may be in any way affected
       unless the same is duly signed, executed and acknowledged according to law; offending officers
       guilty of misdemeanor and civil action.

   •   Minnesota Statute 272.12 provides in part Taxes paid before recording of conveyances. A
       violation of this section by the county recorder or registrar of titles shall be a gross misdemeanor.

   •   Minnesota Statute 386.78 states in part the county recorder shall accept security deposits to
       guarantee payment of charges.

   •   Minnesota Chapter 508 refers to Torrens Property

   •   Minnesota Statute 508.30 states County recorders shall be the registrars of titles in their
       respective counties.

   •   Minnesota Statutes 508.34 states in part immediately upon the filing of the decree of registration
       with the registrar, the registrar shall proceed to register the title pursuant to the terms of the
       decree in the manner provided. The registrar shall keep a book known as the “Registrar of


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       Titles”, and shall enter all first and subsequent certificates of title by binding or entering them
       therein in the order of their numbers, beginning with number one.

   •   Before entering upon the duties of the Registrar, the Registrar of Titles shall execute a bond to
       the State, that shall be approved by the district court, filed in the office of the county recorder. A
       copy of the bond shall be filed upon the records of the court. The registrar shall be at all times
       under the control of the district court.

   •   Minnesota Statute 508.33 states in part the registrar may appoint one or more deputy registrars of
       titles, who may also be deputy county recorders, to act in the registrar’s stead. The registrar shall
       be liable for any neglect or omission of a deputy.

   •   Minnesota Statute 508.37 states in part the registrar shall keep tract indexes in which the registrar
       shall enter an accurate description of all registered land, with the names of the respective owners,
       and a reference to the number of the certificate of title. The registrar shall keep two indexes, to
       be known as the grantor and grantee reception indexes.

   •   Minnesota statute 508.38 states in part every instrument affecting the title to land, filed with the
       registrar, shall be numbered by the registrar consecutively, and the registrar shall endorse the
       same the number thereof, together with the date, hour and minute when the same is filed. All
       records and papers relating to registered land in the office of the registrar shall be open to the
       public at such times and under such conditions as the court may prescribe. Every such
       instrument shall be retained by the registrar and regarded as registered such instrument may be
       copied or reproduced. The registrar shall furnish certified copies of the instruments filed and
       registered in the registrar’s office.

   •   Minnesota Chapter 336 refers to Uniform Commercial Code (UCC)

   •   Under Minnesota Stat. 336.9-527 to 336.9-530, the State is empowered to designate satellite
       offices as deemed necessary. A satellite office accepts financing statement filings and fulfills
       information requests for information on fillings in the central filing system. These functions shall
       be carried out within the two-business day limit imposed by Minnesota Statutes, Chapter 336.

   •   Minnesota Chapter 144 contains references to Vitals Statistics
       Minnesota Statutes, section 144.214 states in part that the counties of the state shall constitute the
       87 registration districts of the state and a local registrar of vital statistics in each county shall be
       designated by the county board of commissioners. The county board has the authority to
       designate which office within their county structure will carry out the functions of the local
       registrar in their county. The local registrar is under the direction and supervision of the
       Minnesota Department of Health, Office of the State Registrar. The duties of the local registrar
       are defined in Minnesota Statutes, sections 144.211 to 144.227, commonly referred to as the
       Vitals Statistics Act and Minnesota Rules, part 4601.0100 to 4601.2600. If the appointed local
       registrar is not in compliance with the above mentioned statues and rules, the Minnesota
       Department of Health has the authority to relieve the local registrar of their duties and the county
       board would then need to re-designate a local registrar. The Minnesota Statutes, chapter 517
       directs the local registrar in reference to acceptance, preparation and issuance of marriage


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       licenses and certificates. The County Attorney, not the Minnesota Department of Health, is the
       legal advisor to the local registrar regarding marriage and certification issues.

   •   The county recorders office is custodian of all records for the county pertaining to real estate title
       which involves recording deeds, mortgages and hundreds of other documents. The recorders
       office records military discharge papers and issues certified copies of the same. State and
       Federal Tax liens of many types are recorded in this office along with plats and government
       corners. The Recorder is also the custodian of the original government land survey. As
       Registrar of Titles, originates Certificates of Title conveying perfect title to property.
       Responsibility for legal records of all real estate in the county is under jurisdiction of this office.
       We are also the jurisdiction for personal lien data which involves the filing of liens on crops,
       machinery, household goods, boats, motors, etc., providing information certificates on the liens
       and entering liens into the central filing system. Some recorders offices provide abstracts of title,
       handle drivers licenses renewals, issue birth and death certificates, marriage licenses, files notary
       commissions and provides passports.

Statutory citations that govern the office of the County Recorder are as follows:
Duties, Responsibilities, Requirements

CHAPTER 13 GOVERNMENT DATA PRACTICES
CHAPTER 88 DITCH LIEN
CHAPTER 92 STATE LANDS
CHAPTER 93 MINTERAL INTERESTS
CHAPTER 103I WELL CERTIFICATE
CHAPTER 138 HISTORICAL SOCIETIES; ARCHIVES
CHAPTER 144 DEPARTMENT OF HEALTH (VITAL STATISTICS)
CHAPTER 160 ROADS
CHAPTER 161 TRUNK HIGHWAYS
CHAPTER 164 TOWN ROADS
CHAPTER 222 RAILWAYS
CHAPTER 254 SERVICE COMMISSIONER HUMAN SERVICES
CHAPTER 256 AFDC EMERGENCY LIEN
CHAPTER 259 ADOPTION BIRTH CERTIFICATE
CHAPTER 268 ECONOMIC SECURITY LIEN
CHAPTER 270 CHILD SUPPORT LIEN/STATE TAX LIEN
CHAPTER 272 TAXATION (DOCUMENT TRANSFER) (CRV)
CHAPTER 272 FEDERAL TAX LIENS
CHAPTER 277 MOBILE HOME LIENS
CHAPTER 280 REAL ESTATE TAX JUDGEMENT SALES
CHAPTER 281 REAL ESTATE TAX SALES, REDEMTION
CHAPTER 282 TAX FORFEITED LAND SALES
CHAPTER 284 ACTIONS INVOLVING TAX TITLES
CHAPTER 287 MORTGAGE REGISTRATION/DEED TAX
CHAPTER 300GENERAL PROVISIONS, PIPELINE FILINGS
CHAPTER 306 PUBLIC CEMETERIES
CHAPTER 307 PRIVATE CEMETERIES


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CHAPTER 331 NEWSPAPERS
CHAPTER 336 UNIFORM COMMERCIAL CODE
CHAPTER 336A FARM PRODUCT LIENS AND FINANCING STATEMENTS
CHAPTER 351 VACANCY IN PUBLIC OFFICE
CHAPTER 357 FEES
CHAPTER 358 SEALS; OATHS; ACKNOWLEDGMENTS
CHAPTER 359 NOTARIES PUBLIC
CHAPTER 381 SURVEYS, SECTION CORNERS
CHAPTER 382 COUNTY OFFICERS
CHAPTER 386 COUNTY RECORDER; ABSTRACTER
CHAPTER 389 COUNTY SURVEYOR, SURVEYS AND FIELD NOTES
CHAPTER 394 PLANNING, DEVELOPMENT
CHAPTER 440 ACQUISITION OF PROPERTY FOR STREETS
CHAPTER 462 HOUSING, REDEVELOPMENT, PLANNING & ZONING
CHAPTER 481 ATTORNEY LIENS
CHAPTER 487 COUNTY COURTS, PROBATE
CHAPTER 500 ESTATES IN REAL PROPERTY
CHAPTER 501A TRUSTS
CHAPTER 502 POWERS OF ATTORNEY
CHAPTER 505 PLATS
CHAPTER 507 RECORDING AND FILING CONVEYANCES
CHAPTER 508 REGISTRATION TORRENS
CHAPTER 508A REGISTRATION WITHOUT COURT PROCEEDINGS
CHAPTER 514 LIENS; LABOR, MATERIAL
CHAPTER 515 CONDOMINIUMS
CHAPTER 515A UNIFORM COMMERCIAL ACT
CHAPTER 5l5B MINNESOTA COMMON INTEREST OWNERSHIP ACT
CHAPTER 571 MARRIAGE
CHAPTER 518 MARRIAGE DISSOLUTION
CHAPTER 519 MARRIED PERSONS; RIGHTS, PRIVILEGES
CHAPTER 523 POWERS OF ATTORNEY
CHAPTER 525 PROBATE PROCEEDINGS
CHAPTER 541 COMMENCING ACTIONS
CHAPTER 548 JUDGMENTS
CHAPTER 550 EXECUTIONS, REDEMPTIONS, EXEMPTIONS
CHAPTER 557 ACTIONS RELATING TO REAL PROPERTY
CHAPTER 558 PARTITION OF REAL ESTATE
CHAPTER 559 ADVERSE CLAIMS TO REAL ESTATE
CHAPTER 574 BONDS, FINES, FORFEITURES
CHAPTER 577 ASSIGNMENTS FOR BENEFITS OF CREDITORS
CHAPTER 580 MORTGAGES; FORECLOSURE BY ADVERTISEMENT
CHAPTER 581 MORTGAGES; FORECLOSURE BY ACTION
CHAPTER 582 MORTGAGES; FORECLOSURES GENERAL PROVISIONS
CHAPTER 600 DOCUMENTS AS EVIDENCE
CHAPTER 645 INTERPRETATION OF STATUTES



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MINNESOTA RULES
CHAPTER 2820
CHAPTER 4600
CHAPTER 8100
CHAPTER 8260
CHAPTER 8265
CHAPTER 8271
CHAPTER 9500

U S CODE OF FEDERAL REGULATIONS - PASSPORTS




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02.05 - COUNTY GOVERNMENT STRUCTURE

History of County Government

The 87 counties in Minnesota are rapidly changing from a purely quasi-municipal corporation of the
state to a general purpose form of government which, for many counties, has necessitated a change in
the way the county delivers its services and, consequentially, the structure of the county itself. Counties,
in their infancy, were organized to be administrative agencies of the state. In addition to serving as an
administrative arm of the state, counties are now providing services to its citizens beyond the original
scope of county government. Traditionally, counties performed state mandated duties which included
assessment of property, record keeping (i.e. property and vital statistics), maintenance of rural roads,
administration of election and judicial functions, maintaining peace in rural areas, and poor relief.
Today, counties are rapidly moving into other areas of government support, including social services,
corrections, child protection, library services, hospitals and rest homes, public health services, planning
and zoning, economic development, parks and recreation, water quality, and solid waste management.
Relief for the poor is generally provided by the federal and state governments through the income
maintenance programs.

County Board of Commissioners

County boards are elected by district, serve a four-year term, and are responsible for the operation of the
county and the delivery of county services. The number of commissioners on
a county board is five. Counties with a population of over 100,000 people may, by board resolution,
increase the size of the county board from five to seven members. Six counties—
Anoka, Dakota, Hennepin, Olmsted, Ramsey and St. Louis— have boards consisting of seven members.

Election and Appointment of County Officials

During the Jacksonian Era and after, it became the practice of county government to increase the
number of elective county offices. Appointed positions were changed into elected ones and new elected
offices were developed. This caused the list of elected officials to grow from a few such as the coroner
and sheriff, to many, including election of the auditor, recorder, treasurer, surveyor, clerk of court,
watershed district directors, judge of probate, assessors and attorney.

Since the mid-1960’s, counties and the state have gradually reduced the number of elective county
offices. Hennepin and Ramsey counties were the first to be given organizational reform by special
legislation. Today, the Legislature has allowed counties to appoint the positions of county auditor,
treasurer and recorder, on an individual basis. However, the positions of county sheriff, county attorney
and watershed district directors, as well as the governing board, continue to be elective positions. In
addition, Dakota, Olmsted and St. Louis counties appoint the position of county recorder. (The county
auditor/treasurer continues to be an elective position.) In 1987, enabling legislation was passed to allow
Ramsey County to become a home rule charter county. Ramsey County has established the home rule
charter, operates under the guidance of the charter and is the only home rule charter County in
Minnesota.


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In the early 1970’s, clerk of courts (now court administrators), county coroners and county surveyors
became appointed positions. In 1973, the Optional Forms of County Government was passed. While this
offers several major options for the modernization of county government, most counties have instead
made structural changes by seeking special legislation. In recent years, 36 counties have moved to
combine the position of county auditor and county treasurer into one elected position.

Traditionally, property tax administration has been the primary responsibility of the County Auditor,
Auditor-Treasurer and Treasurer. Over time, the configuration of these statutory duties and the titles
given to the positions responsible for their performance have changed and will likely continue to.
Common titles today for these positions include Taxpayer Services Offices, Property Records and
Licensing Offices, or Land Records Departments. The future focus is not so much on the title of the
offices but rather on a reasonable aggregation of similar duties.

The underlying tension for this discussion remains whether these offices are elected or appointed, in
addition to the issue of combining of the offices and the respective statutory functions. Statutorily, there
is a requirement that any move to appoint is subject to a referendum of the voters. These elections,
particularly in Greater Minnesota have tended to not be successful.

A concise and factual summary of this activity is updated periodically by the Office of House Research
and titled “Options in County Government Structure.”

Since 2001, special legislation allowing a county to make a position appointed or combining auditor and
treasurer has:
    1. required the county board to adopt the resolution providing for the change by at least 80 percent;
    2. provided for a reverse referendum;
    3. required local approval; and
    4. provided for the elected officeholder, if any, to continue to hold the office until the term expires.

The most popular options are making the office of county recorder an appointed position and combining
the offices of auditor and treasurer, whether the combined office remains elective or is made appointive.
Less than half of the options exercised were done so under general law authority. Those that were
exercised under general law authority were the ones that do not require a referendum, although in
several instances a referendum was in fact held. Most changes were made following special legislation.
To date, no county has opted to make the sheriff an appointive position.

Options for Restructuring County Government

Under MS Chapter 375A, counties may choose from the following five plans of organization:
        Elected executive
        County manager
        At-large chair
        County administrator
        County auditor-administrator

Some plans and options may not be adopted while others are in force. For example, a county may not
adopt the auditor-administrator or the county administrator plans while it is operating under either the

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elected executive or county manager plans. The at-large chair and county administrator plans, however,
are not mutually exclusive and may be adopted either concurrently or while the other is in effect.
Except for the county administrator plan, all plans and options require the affirmative vote on a
countywide referendum before being adopted. Minn. Stat. § 375A.12 A county administrator may be
appointed by the county board without a referendum. Minn. Stat. § 375A.06, subd. 5.
A referendum required to be held as a condition of adoption of a plan may be initiated by:
           A resolution of the county board,
           A recommendation of a county government study commission, or
           A petition signed by voters equal in number to at least 5 percent of the voters voting at the
           last election for governor, requesting that a referendum be held on the adoption of one or
           more of the plans.

If a study commission is established under Minnesota Statutes, section 375A.13, a referendum on a plan
may not be initiated by resolution of the county board or a petition of the voters until after the study
commission completes its work.

Elected Executive Plan
The elected executive plan provides for a county executive elected countywide by the voters of the
county to a four-year term of office. Minn. Stat. § 375A.02
           The county executive is the administrative head of the county with all the power and duties
           of an administrative or executive nature vested in or imposed upon the county board.
           The salary of the county executive is set by the county board at a figure not less than 150
           percent of the highest paid member of the county board.
           The county executive is responsible for the administration of the affairs of the county and, by
           resolution of the county board, may serve as head of a county department.
           Specific powers and duties are described in section 375A.02, subdivisions 3 and 4. The
           county executive has veto power over ordinances or resolutions of the county board that
           make appropriations.

In a county that has adopted the elected executive plan, various boards and commissions of the county
are abolished and placed under the county board. Also, the offices of county auditor, treasurer, and
recorder are abolished and the office of county coroner and county surveyor are made appointive unless
previously abolished and terminated. Minn. Stat. § 375A.04
St. Louis County proposed establishing the elected executive plan in 1974, but the referendum failed.

County Manager Plan
The county manager plan provides for an appointed chief executive officer of the county who is
designated as county manager. Minn. Stat. § 375A.03
           The manager is appointed by the county board for an indefinite period of time and serves at
           the board's pleasure.
           The county board sets the manager's salary.
           The county manager is the administrative head of the county and has all the powers and
           duties of an administrative or executive nature vested in or imposed upon the county board.
           The official is responsible for the administration of the affairs of the county and, may by
           resolution of the county board, serve as head of any county department.



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           Specific powers are described in section 375A.03, subdivision 3. The county manager has no
           veto power over actions of the county board.
In a county that has adopted the county manager plan, various boards and commissions of the county are
abolished and placed under the county board. Also, the offices of county auditor, treasurer, and recorder
are abolished and the office of county coroner and county surveyor are made appointive unless
previously abolished and terminated. Minn. Stat. § 375A.04

At-Large Chair Plan
Under the at-large chair plan, a chair of the board of county commissioners is elected in a countywide
election. Minn. Stat. § 375A.05
           The at-large chair is elected, but is otherwise a member of the county board and is its
           chairperson.
           The salary of the at-large chair is set by the county board, but cannot be less than 120 percent
           of the highest paid member of the board.
           The at-large plan may be adopted only in counties that have a five- or seven-member county
           board.
           The term is four years, as is the case for other members of the board.

County Administrator Plan
The county administrator plan provides for an administrator who is appointed by the county board and
serves at its pleasure. This plan is not available to counties operating under either the elected executive
plan, the county manager plan, or the auditor-administrator plan. Minn. Stat. § 375A.06
             The county board may appoint as administrator any qualified county official or employee,
             but if appointed, the person must resign the county position held before appointment as
             administrator.
             The salary of the administrator is set by the county board.
             The county administrator is the head of the county for the management of county affairs
             placed under the administrative charge.
             The county board may make the administrator head of any department over which the board
             has the power of appointment.
             Specific powers and duties of the administrator are described in section 375A.06, subdivision
             4. (See below)
             The county board may appoint an administrator without going to a countywide referendum
             on the question.

Referenda in 1976 to establish the county administrator plan in St. Louis County and Cook County both
failed. A 1978 referendum to create a position of county administrator in St. Louis County also failed.

"County Administrator" or "County Coordinator"
According to the Association of Minnesota Counties, 34 counties have county administrators and 26
counties have county coordinators. The chart below notes the differences in the powers and duties of
each.




COUNTY GOVERNMENT STRUCTURE                                                                    02.05 - 4
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Chart 02.05-1: County Government Structures in Minnesota
                (January 2006)

Counties with combined elected auditor/treasurer position:          36
Counties with appointed auditor/treasurers:                         10
Counties with broad re-organizational powers:                        6
Counties that appoint the county recorder:                          16
Counties with a county administrator position:                      34
Counties with a county coordinator position:                        26
Counties with “other county management”:                            24
Counties with an auditor/administrator position:                     3
Counties with seven governing board members:                         6


Professional County Management

Over the last 30 years, county boards across the state have recognized the need to expand into
professional management for the county, mostly as a result of increasing demands placed on counties for
the delivery of services.

Three forms of professional management currently exist in Minnesota statute: County Administrator,
County Coordinator and County Auditor-Administrator.

County Administrator
Under the county administrator plan, the administrator is the head of the county for the management of
the county affairs placed in the administrator’s charge. If required by the county board, the administrator
is the supervisor of all county institutions and agencies, and of non-elected department heads. The
administrator also is responsible for the preparation and execution of the county budget, including a long
range capital expenditure plan, and serves as the purchasing agent for the county. As of September 2000,
34 counties had established the position of county administrator. (Ramsey County uses the title of
county manager.) The county administrator serves at the pleasure of the county board.

County Coordinator
The county coordinator plan is much like the county administrator plan except that the coordinator
generally does not have a supervisory role over county department heads, elected or appointed. If
required by the county board, the county coordinator must submit an annual budget to the county board
and manage all affairs of the county which the county board has assigned to the position. Currently, 26
counties have the position of county coordinator. The county coordinator serves at the pleasure of the
county board.

County Auditor-Administrator
Three counties have adopted the county auditor-administrator plan, where, in addition to carrying out the
duties of the auditor’s office, the auditor may also be assigned all duties of the county administrator as
outlined in the “county administrator” section above. The county auditor-administrator remains an
elective position.

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Other County Management
The remaining 24 counties generally assign central administrative tasks to a department head within the
county, most often the county auditor. In those counties, no central administrative plan has been
adopted; rather, the duties of the central administration falls to the office which has the most contact
with the county board. (Of those counties, two counties have a position called “secretary to the board.”
That position does not include budget preparation or any supervisory role.)


Optional Forms of County Government

Minnesota Statutes, Chapter 375A
Allows for the following plans of organization:
           Elected Executive Plan
           County Manager Plan
           At-Large Chair Plan
           County Administrator Plan
           County Auditor-Administrator Plan

Allows for the following organizational options for certain county offices:
           Provides for appointment of county auditor, treasurer, sheriff or recorder by county-wide
           referendum.
           Provides for the office of county civil counsel by county board action
           Provides for the consolidation of the county auditor and county treasurer by county board
           action or county-wide referendum.

Allows for the following miscellaneous plans:
           Provides for the establishment of a county government study commission by county board
           action or county voter petition.

References

Association of Minnesota Counties
House Research




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02.06 – DEPARTMENT OF REVENUE
The Minnesota Department of Revenue manages the state's revenue system and administers state tax
law. Money collected from taxpayers helps fund nearly all programs and services provided by the state,
as well as local government through the state aid payments.

•   The department administers 28 different taxes, collecting approximately $13 billion annually. It
    collects taxes on income from Minnesota citizens and corporations, sales and use tax on the value of
    goods and services sold in the state, and also a variety taxes and fees on other types of business and
    service.

•   Revenue raised through these taxes provides funds for school aid, local government aid, property tax
    relief, social service programs, the maintenance of the state-owned infrastructure, including
    highways, and other state programs and operations.

•   Using 275 different tax forms, the department receives nearly 4.6 million tax returns and processes
    more than 5 million documents each year. Three-fourths of the annual tax collections are received
    via electronic funds transfer.

Within the agency there are sixteen divisions that carry out the Commissioner of Revenue’s
responsibilities. Described below are the divisions that are involved with the administration of the
property tax system and the property tax refund.

Property Tax Division
Minnesota property tax is a local tax primarily administered at the county level. It accounts for the
majority of revenue available to operate local units of government.

The Property Tax Division ensures the proper administration of the state’s property tax laws. It plays a
key role in the property tax process through its interaction with county government by overseeing the
administration of the property tax system, ensuring fairness in assessment, distributing funds accurately,
and educating local officials and the public about how the property tax system works. Its customers
include the county officials who administer the property taxes, such as auditors, treasurers and assessors,
as well as the general public who pays property taxes.

The Property Tax Division provides the following services:

Equalization of Property Values
The division works to ensure that property is uniformly assessed throughout the state and that property
tax payers pay only their fair share - no more, no less. The law gives the commissioner of revenue, who
acts as the State Board of Equalization, the authority to issue orders increasing or decreasing market
values in order to bring about equalization. The long-term goal is to educate assessors so that their
performance is at a level where it is unnecessary to issue equalization orders.

Assessment-to-sales ratios are determined and are used to equalize school district net tax capacity
values, which were formerly known as assessed values. The values are certified with the Department of

DEPARTMENT OF REVENUE                                                                          02.06 - 1
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Education. It uses them to determine school district property tax levy limitations and school aids.
Equalized city net tax capacity values are also developed for use in determining aid to cities and
counties.

The division is also responsible for assessing/valuing certain types of property, such as railroads, air
flight property and utilities.

Aid Certifications and Payments
Each year, the division makes accurate and timely payments totaling hundreds of millions of dollars to
local units of government including counties, cities, townships and special taxing districts. Following
statutory formulas, property tax aid determinations are made each year and certified to the local units of
government for use in their budgeting process. The division also provides certain credit and aid amounts
to the Department of Education so it can make aid payments to school districts. The division also
certifies property tax levies for those jurisdictions subject to levy limits.

Information and Education
The division serves as a source of information for local government officials, the state legislature and
others concerned with property tax policy. It publishes the Property Tax Bulletin, a compilation of
property tax data, and generates a summary of property tax laws passed during each legislative session.
It also produces several manuals that include policies and procedures for use by county officials when
implementing property assessment and delinquent property law.

The division routinely responds to questions from individual taxpayers, members of the legislature, and
various tax-related groups. In addition, it is responsible for developing and teaching courses and
seminars for assessors, as well as making frequent presentations to local government officials who are
involved in the day-to-day administration of Minnesota’s property tax laws.

The division also plays an important role in the administration of the Truth in Taxation process by
providing counties and local districts with instructions for compliance with the law.

It is also involved in the administration of the state property tax by providing instructions to the counties
for the proper administration of the tax, as well as calculating and certifying the rate to counties that is
used in computing the tax.

Audits
In order to provide accurate information to the legislature and correctly pay hundreds of millions of
dollars in aid payments, the division relies on property tax data from local governments and thoroughly
audits it. The division’s regional representatives also conduct annual audits of selected assessment
practices at the county level.

The Property Tax Division has over 30 employees including appraisers, research analysts, revenue tax
specialists, and office and administrative specialists. Regional representatives are assigned territories
and their offices are outside the Twin Cities metro area.




DEPARTMENT OF REVENUE                                                                            02.06 - 2
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Special Taxes Division

The Special Taxes Division administers more than 25 taxes and fees that are imposed on specific
industries or activities that collectively yielded more than $1 billion in general and dedicated state and
local revenue in Fiscal Year 2003. Except for the Minerals Office, which is located in Eveleth,
Minnesota, the division is located in the Stassen Office Building in St. Paul and employs approximately
50 people, including revenue tax specialists, information technology specialists, office and
administrative staff and two engineers. They perform taxpayer service, education, auditing, processing,
and other duties related to the administration and enforcement of assorted taxes and fees.

Lawful Gambling and Insurance Unit
Lawful Gambling - The types of lawful gambling in Minnesota are bingo, paddlewheels, raffles,
tipboards and pulltabs. Each distributor, a business that sells gambling equipment to organizations
conducting lawful gambling, must be licensed in Minnesota and file a monthly tax return. This is also
true for organizations offering lawful gambling. The pulltab and tipboard tax paid by distributors is a
percentage of the games’ ideal gross receipts when put into play by the organizations. The tax on bingo,
raffles and paddlewheels is a percentage of an organization’s net receipts, which means gross receipts
minus prize payouts.

Insurance Premiums Tax - This tax is a percentage of all insurance premiums collected from Minnesota
customers by insurance companies, which file annual tax returns and make quarterly estimated tax
payments. The unit also collects a variety of other insurance taxes and surcharges, and calculates
distributions to fire and police relief associations.

Unrelated Business Income Tax - Unrelated business income is income generated by the activities of
non-profit organizations that is not related to their non-profit activities. For example, the Science
Museum is a non-profit, but the gift shop in the museum generates income subject to tax.

Fur Clothing Tax - This tax is imposed on the retail gross receipts from the sale of fur clothing.

Cigarette, Alcohol, and Environmental Taxes Unit
Cigarette and Tobacco Taxes - State taxes are collected at the wholesale level from cigarette and tobacco
product distributors. The distributors must be licensed by the Special Taxes Division and file monthly
tax returns.

Fee on Nonsettlement Cigarettes - The division collects a fee on cigarettes manufactured by companies
other than those having entered into a settlement agreement with the Attorney General. Distributors
collect and remit the fee with their monthly tax returns.

Alcoholic Beverages Excise Tax - Minnesota has a tax on distilled spirits, sometimes called hard liquor,
wine and beer. Wholesalers pay the tax on distilled spirits and wine; breweries and importers pay the
beer tax.

Deed Tax - Enacted in 1961, the deed tax is imposed on the transfer of real estate.



DEPARTMENT OF REVENUE                                                                           02.06 - 3
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Mortgage Registry Tax - Enacted in 1907, this tax is imposed on the principal debt that is secured by a
mortgage of real property. Both the deed and mortgage registry taxes are administered by the county
treasurer in which the property is located. On the tenth of each month, the county sends 97 percent of the
taxes collected during the previous month to the Department of Revenue; counties keep three percent for
tax administration.

Environmental Taxes - These taxes and fees are collected and used primarily for the oversight,
management and cleanup of landfills and contaminated waste sites. They include the solid waste
management tax, the metropolitan landfill fee, the hazardous waste generator tax and dry cleaner fees.

MinnesotaCare Tax Unit
MinnesotaCare tax is imposed on healthcare providers, hospitals, surgical centers and wholesale drug
distributors. The two percent tax is imposed on the gross receipts from patient services and from
prescription drug sales made by wholesalers. Hospitals and surgery centers pay the tax in monthly
installments; most others pay quarterly. However, all taxpayers must also file an annual return by March
15 for the previous year.

The taxes collected are deposited into the state's Health Care Access Fund, which is used, in part, to pay
for the MinnesotaCare program, a state-subsidized health insurance program for low-income Minnesota
residents who are otherwise uninsured. The program was enacted by the state legislature in 1992; the
MinnesotaCare Unit was formed in 1993 to administer and collect the tax.

Minerals Tax Office
Taconite Production Tax - This is a tax based on the amount of taconite pellet tonnage produced. In
order to administer and collect the tax, two department engineers verify the tons produced and their
metallurgical components, specifically the amount of iron ore. Collections from the tax are distributed
through various aids to schools, cities, counties and townships in the taconite relief area, which includes
parts of six northeastern Minnesota counties generally known as the Iron Range. The tax also funds the
operations of the Iron Range Resources and Rehabilitation Agency.

Occupation Tax - Established under the Minnesota Constitution in 1921, the Occupation Tax is an
income tax on the profits made from mining. The amount collected is paid to the state's General Fund. A
revenue tax specialist handles the auditing/administration of the tax.

Ad Valorem Taxes - There are several minor ad valorem (property) taxes on lands containing mineral
value. Engineers help establish property values for county assessors. Taxes are paid directly to the
county in which the property is located; the state receives no money from them.

Aggregate Material Tax - This is county- or township-assessed production tax on aggregate material,
generally known as the gravel tax. From southeastern to northwestern Minnesota, 27 counties collect the
tax. Sixty percent of the tax is allocated to county road and bridge funds, 30 percent to township road
and bridge funds and 10 percent is held in reserve for environmental restoration of abandoned pits on
public lands.




DEPARTMENT OF REVENUE                                                                          02.06 - 4
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Royalty Withholding Tax - This is an income tax withheld on mineral royalties that are paid by mining
companies to landowners who allow mining to take place on their land. The Minerals Office provides
information and assistance to companies required to withhold the tax.

Tax Research Division

The Tax Research Division’s mission is to promote the development of sound tax policy through high
quality research; objective, accurate, and timely analysis and measurement; and effective
communication to the legislature, the Department of Revenue and other stakeholders.

The division supports the tax policy process by providing the legislature and the administration with
revenue estimates of the fiscal impact of tax proposals. It is also responsible for forecasting revenues for
more than two dozen state taxes as part of the state budget process. To support policy development and
revenue estimation, the division builds and maintains tax simulation models and databases for the major
state and local taxes.

For each tax bill introduced to the legislature, a revenue analysis needs to be completed by one of its
research analysts. First, the researcher makes sure he or she understands the tax bill before proceeding to
analyze it, which may involve speaking with a legislator or staff member.

Then the researcher writes an explanation of the proposed bill, including information gathered and
assumptions that were made. This step might involve speaking with people affected by the proposed
change, as well as gathering information from several other sources. It also involves determining how
many taxpayers would be affected. The final product is an estimate of the change in revenues by fiscal
year that would result if the bill were enacted. These analyses, used in conjunction with the Department
of Finance's revenue forecast, help keep the state's budget in balance.

Next, administrative or operational issues affecting the Department of Revenue are assessed. This step
considers the cost of implementation and documents them, such as processing, postage, promotion or the
creation of new tax forms.

When the legislature is not in session, the Research Division prepares reports and studies that are used at
the next legislative session, and by the administration in preparing budgets. The division publishes a
number of studies that describe and evaluate tax system performance, including the Tax Expenditure
Report and the Tax Incidence Study, which are mandated by the legislature. The division also provides a
variety of tax information to the public and publishes the Minnesota Tax Handbook. These reports,
along with others, can be found on the department’s Web site at www.taxes.state.mn.us.

The department’s Tax Research Library is also a part of the Research Division. It features books,
magazines and journals, online databases for quick reference information, such as newspaper articles
and business information, and many other reference materials for the entire agency. Library staff is
available to assist with all your research needs.




DEPARTMENT OF REVENUE                                                                           02.06 - 5
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Administering the Property Tax Refund

Tax Operations Division
All tax filings and payments received by the department, whether on paper or electronically, are
processed by the Tax Operations Division. Responsibilities include managing electronic
registration/filing/paying, opening and verifying tax and non tax mail, depositing payments, scanning
and imaging tax returns and correspondence, data capture tax data, early audit of tax returns, registering
taxpayers, managing the taxpayers’ financial accounts, processing refunds, and Revenue Recapture.

Early Audit - Employees in Early Audit review and audit original and amended individual income tax
returns, property tax refund returns and sales tax returns. They also audit withholding, partnership, s-
corporation and fiduciary returns. Audits can be as simple as correcting computation and statutory
errors or may involve complex tax issues requiring taxpayer contact. Most returns are reviewed and
corrected online.

Individual Income Tax Division
The Individual Income Tax Division is responsible for administering the income tax and property tax
refund laws. It serves more than 2.4 million income tax filers each year. The division employs more than
100 people including revenue tax specialists, revenue examiners, community services program
specialists, also known as community outreach coordinators, information technology specialists,
supervisors and administrative support staff.

The division contains three field audit groups and one office audit group that focus on compliance. The
audit units develop audit criteria and utilize computer programming to generate and follow up on lists of
taxpayers who are out of compliance with state income tax laws. Some lists are used to create volumes
of automated audits, while others are used to manually review and select individuals to audit. The main
focus is on finding those who do not report all of their income. Once identified, audit notices are sent
and taxes are assessed accordingly. Taxpayers have the right to appeal if they disagree.

The audit units also find it beneficial to use educational letters that inform taxpayers about common
errors they make. This allows taxpayers to voluntarily comply. For example, when the unit noticed that
many taxpayers who claimed the education credit where actually ineligible, education letters were sent
in lieu of audit notices. The result was a 50 percent decline in similar errors the next year.




DEPARTMENT OF REVENUE                                                                         02.06 - 6
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02.07 – OTHER STATE AGENCIES

Minnesota Department of Administration

The Department of Administration provides services to government agencies, information for vendors
who wish to do business with the state, information on data practices, public auctions, State Register,
Minnesota Bookstore as well as many other functions.

Minnesota Board of Assessors

In 1971, the Minnesota Legislature passed a bill establishing a Board of Assessors. The purpose of the
Board is to establish criteria for determining assessor’s qualifications and to educate, license and
monitor the conduct of assessors. The end result is to insure property taxpayers in Minnesota receive the
most accurate and equitable assessment of their property.

Minnesota Department of Education (MDE)

The Minnesota Department of Education formerly Children, Families & Learning works to help
communities to measurably improve the well-being of children through programs that focus on
education, community services, prevention, and the preparation of young people for the world of work.
Department responsibilities include implementing education finance and enhancing accountability. As
part of these responsibilities, the Division of Program Finance determines the Levy Limitations for
School Districts in Minnesota based on a number of statutory formulas. With voter approval and within
the confines of state law, school districts may also add to their levy limits to fund general operations and
to finance building construction and improvements. These additional levy authorities are calculated and
administered by the Division of Program Finance, and added to the Levy Limitations for School
Districts.

Reporting
County Auditors receive the School District Levy Limitation and Certification Reports from the
Department of Education, Program Finance Division. School Districts certify their proposed and final
levies to the County Auditor each year using this report.
The Department of Education, Program Finance Division receives the following reports completed
throughout the year by the county auditors:
        •   County Auditor Report of School District Apportionment
        •   Taxes Receivable Report (Form 51)
        •   Tax Settlement Report (Form 52)
        •   School Tax Abatement Report
        •   School Tax Abatement Six-Month Supplemental Report
        •   School Tax Report




OTHER STATE AGENCIES                                                                            02.07 - 1
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Metropolitan Council

The Metropolitan Council is the regional agency of government serving the Twin Cities seven-county
metropolitan area. The Council establishes regional growth policies, plans and manages transit services,
plans and funds regional parks, provides affordable housing, and manages regional water resources.

The Council’s operating budget is funded in part by a property tax levied across the seven county metro
area. The Council is required to provide the proposed and final levies which is allocated to metropolitan
county auditors each year by the Department of Revenue.

Office of the State Auditor (OSA)

The Office of the State Auditor is a constitutional office, which serves as a watchdog for Minnesota
taxpayers by helping to ensure financial integrity, accountability, and cost-effectiveness of Minnesota's
local governmental entities. The vision of the State Auditor's Office is to perform professional reviews
of financial statements, documents, and reports submitted to the Office, making consistent comments on
financial accuracy and legal compliance, while adhering to general accounting standards.

The State Auditor has oversight responsibility for all units of local government, including: counties,
cities, school districts, townships as well as many other special districts.

Oversight of these local governments is achieved through auditing, reporting, and collaboration.

Auditing
The Office of the State Auditor performs approximately 250 audits per year. In addition, the State
Auditor's Office maintains copies of annual audit reports prepared by private firms for local government
units and nonprofit organizations that receive federal funds through the state of Minnesota. Audit staff
provides services to other local governments when requested either by governing boards or by taxpayer
petition.

Reporting
Another function of the Office is the collection and distribution of financial data about Minnesota's
cities, counties, townships, and special districts, as well as tax increment finance districts, and police and
volunteer firefighter relief association pension funds. Data is collected through audits and financial
reports and is then analyzed and compiled. The reports based on the data are then made available for
lawmakers, governmental units, and citizens.

As part of the auditing and compliance of Districts, County Auditors are required to complete the
following forms:
       •    County Auditor's Reporting Form of Outstanding Indebtedness
       •    2005 Taxes Receivable and Settlement Reports (Forms 51 & 52)

Collaborating
The Office of the State Auditor is a resource for cities and counties to obtain, review, and compare
financial data to be more efficient and economical with public funds. The office works with local
government officials to provide answers to legal and financial compliance questions and to find ways to

OTHER STATE AGENCIES                                                                              02.07 - 2
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implement cost-effective internal controls. The office also does investigations of allegations of
misconduct by local government.

Minnesota Department of Employment and Economic
Development (DEED)

The Minnesota Department of Employment and Economic Development (DEED) is the state's principal
economic development agency, with programs promoting business recruitment, expansion, and
retention; workforce development; international trade; and community development. The agency's
mission is to support the economic success of individuals, businesses, and communities by improving
opportunities for growth.

Business and Community Development
The Business and Community Development Division provides a variety of financial and technical
services to businesses, communities and economic development professionals. The division promotes
and assists in the expansion of exports, works with companies to locate and expand in Minnesota, and
helps communities with capacity building and infrastructure financing. Minnesota’s Job Opportunity
Building Zones (JOBZ) is a key initiative to stimulate economic development activity in Greater
Minnesota by providing local and state tax exemptions to new and expanding businesses. Further details
of JOBZ can be found in Section 13.02.

Workforce Development
The Workforce Development Division works with local and statewide partners to provide training and
support to unemployed and dislocated workers, and financial assistance for businesses seeking to
upgrade the skills of their workforce. Additional services include State Services for the Blind,
Rehabilitation Services, Local Labor Exchange, and Disability Determination. Many of these services
are provided at Minnesota WorkForce Centers located throughout the state.

Unemployment Insurance Division
The Unemployment Insurance Program provides temporary income to people who have lost their jobs
through no fault of their own.

Information and Marketing
The Information and Marketing Division supports all the department’s activities through centralized
communications and marketing, labor market research and economic analysis products and services.

Minnesota Department of Natural Resources (DNR)

This department manages the states natural resources – Hunting, Fishing, State Forests and Parks, Lakes,
Rivers and Streams, Boating and Water Safety, Trails, Snowmobiling, Skiing, Education, Enforcement,
Wildlife Management, Lands and Minerals among other things.

Each year the DNR makes payments in-lieu-of-taxes (PILT) to county auditors for lands purchased for
Wildlife Management Areas (WMAs). All in-lieu-of-taxes payments come out of the state general fund.


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Payments are made according to formulas that factor in acreage, appraised value of the land, and the
amount of money generated by the state from special use permits and leases.

County treasurers distribute all in-lieu-of-tax payments among the counties and respective towns and
school districts where the WMAs are located in proportion to the amount that would be distributed as
property taxes. The other payments are distributed by the counties based on a formula set in state
statutes. Further details on PILT receivables and distributions can be found in Section 08.05.

In addition, they make payments to counties for other DNR lands, including state parks, state forests,
state trails, scientific and natural areas (SNAs), and other state property such as county tax-forfeited
lands and school trust fund lands.

The DNR works in partnership with county auditors to fairly and efficiently review tax-forfeited parcels.
As public lands, tax-forfeited lands can provide multiple public benefits, including natural resources
uses. Refer to Chapter 11 on tax forfeiture.

Office of the Secretary of State (SOS)

The secretary of state, a statewide elected official, is the keeper the Seal of the State of Minnesota and
files and certifies the authenticity of a wide variety of official documents. The Secretary of State also
performs the following functions:
        •   Registers a variety of business organizations including corporations, assumed business
            names, banks, insurance companies, limited liability companies, limited liability
            partnerships, and limited partnerships. Other business-related filings include trade and
            service marks, auctioneer's licenses, and other filings.
        •   Uniform Commercial Code: A statewide-computerized network with county recorders is
            maintained so that the public may search UCC records throughout the state from any filing
            office. UCC information is also available for a fee at any county courthouse through this
            communications network.
        •   Elections Official: The secretary of state is the chief election official in Minnesota and is
            responsible for administration of the Minnesota election law. In this capacity, the secretary
            of state operates the statewide voter registration system and prepares the official roster of
            voters for every election conducted in Minnesota.
        •   The secretary of state administers the open appointments process and publishes the
            Minnesota Legislative Manual, a compendium of federal, state and county government
            information.

Board of Water and Soil Resources (BOWSR)

The Minnesota Board of Water and Soil Resources is the state’s administrative agency for 91 soil and
water conservation districts, 46 watershed districts, 23 metropolitan watershed management
organizations, and 80 county water managers. The agency’s purpose, working through local
government, is to protect and enhance the state’s irreplaceable soil and water resources by implementing
the state’s soil and water conservation policy, comprehensive local water management, and the Wetland
Conservation Act as it relates to the 41.7 million acres of private land in Minnesota.


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The board consists of 17 members, including local government representatives that deliver BWSR
programs, state agencies, and citizens. The board sets a policy agenda designed to enhance service
delivery though the use of local government. It meets 9 times a year. Board members, including the
board chair, are appointed by the governor to four-year terms.




OTHER STATE AGENCIES                                                                       02.07 - 5
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Chapter      3       

    PROPERTY IDENTIFICATION


                        TABLE OF CONTENTS

      Property Identification               03.01 – 1

      Parcel Legal Modifications            03.02 – 1

      Annexations                           03.03 – 1




                                                        03.00
CHAPTER 3 – PROPERTY IDENTIFICATION




03.01 – PROPERTY IDENTIFICATION
Every property has identifiers that assist in determining what taxing authority can extend taxes, service
fees or assessments against the property. Properties also have recorded documents that indicate
interested parties associated with the property such as: fee title, contract for deed interests, life estate
interests, undivided interests, mortgage and other types of lien holder’s interests. Each property contains
a legal description that identifies the legal location of the property. Properties can include a property
address assigned by either the County or City or Township. County Assessors establish the estimated
market value of the land and improvements, along with any deferments or limitations to the value
allowed by statute, and the property classification(s) that indicate the properties use. The valuation and
classification information particular to available property values, processes, and classifications are
indicated in further detail in Chapter 4. This section will detail additional information particular to
establishing parcels, legal descriptions and interested parties affiliated with each parcel.

Parcel Creation

Assign a Legal Description
Parcels each contain a legal description which is a recorded description of where the property is legally
located. Parcels can be either platted or un-platted.

A plat is a recorded survey by which parcel boundaries are identified initially by the plat name and by
further definition of one of the following: a lot/block combination, tract, unit number, outlot, park, or
some form of right of way. When a plat arrives at the County for recording, an underlying parcel that is
identified on the plat may be subdivided into many parcels of land. Each new parcel created will be
given the name of the plat and a legal description of the portion of the plat by which it is identified. All
property taxes, current and delinquent, must be paid on the underlying parcel(s) that are either entirely or
partially included in the plat. A certification on the plat requires the signatures from the County Auditor
and County Treasurer that taxes have been paid. (For counties that have combined offices, the signature
of the official(s) fulfilling those duties will suffice.)


Example 03.01 – 1:

A plat comes to the County for recording. The plat name is Smith Addition. The plat has two blocks
identified on it and each block contains two lots. Four parcels will be created and will have the plat
name of Smith Addition as a part of their legal description. Furthermore, each parcel will have a
different lot and block combination. The underlying parcel will be inactivated or deleted.


Un-platted parcels are identified by the section, township and range in which they are located.
Additionally, parcels are defined by quarter-quarters or Government lots. Descriptions of these types
can be quite lengthy as added language can define parcels to smaller areas within quarter-quarter
regions. In many instances there is added language to further define the property by feet, links, chains
and other types of surveying tools. These forms of legal descriptions are labeled as metes and bounds
descriptions.

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Once an instrument is received by the County Recorder’s office for recording, the legal description is
assigned to a parcel and is carried on all assessment and tax rolls. It is also used on the many notices
sent to owners and taxpayers throughout the year.

Assign a Unique Taxing Area
Within the State of Minnesota are established boundaries that identify each legal boundary of every
County, City, Township, and School (taxing authorities). In addition to these established boundaries,
there are other types of jurisdictions that have various statutory authority rights. These jurisdictions are
known as Special Taxing Districts. Examples of these other jurisdictions are: Housing &
Redevelopment Authorities, Economic Development Authorities, Watersheds, Port Authorities, Fire
Districts, Ambulance Districts, Water & Sewer Districts, Library Districts, Transit Districts, Park
Districts, Metropolitan Districts that affect the seven County Metropolitan Area such as Metropolitan
Council, Metropolitan Mosquito Control and Metropolitan Council. Special Taxing Districts, are
discussed in greater detail in Section 05.01.

Each parcel is assigned a County, City or Township and School code. In addition, there may be one or
more special taxing districts that have the authority to tax or enter fees upon the parcel. The
combination of all taxing authorities is a unique taxing area and a code is established for each area
within the County. Each parcel is assigned a unique taxing area code. See section 6.02 for further
information on a unique taxing area.

Assign a Parcel Number or Code
Counties across the state have varied parcel numbering systems. Parcel numbers on a County to County
basis differ in the number of characters as well as the use of delimiters within them. Regardless of how
a County numbers tracts of land, each number is unique to the location of the parcel within the County.
The parcel number assigned to a tract of land shall include the district code or unique taxing area
indicator, the name of the owner, the section, township and range numbers if un-platted, along with
acreage, and if platted, the lot(s) and block(s) numbers, and the name of the addition or subdivision
under which it was platted.

If a an owner conveys a portion of a parcel which is described by metes and bounds, the County Auditor
shall cancel the original parcel number and assign a new number and code to both the new and
remaining portions.

The Auditor must provide a notice, by certified mail, of assigned parcel numbers to the owners. The
notice shall give the description of the parcel, according to the description used in the instrument
conveying the property and recorded in the County Recorders office, or the description used and now
carried on the assessment and tax roll, the parcel number assigned to the tract of land and a statement
stating that the parcel number and description will be thereafter described for taxation purposes. The
County Auditor, instead of giving notice to the owner by certified mail may note upon the instruments
conveying the property the words: “the land described within has been coded (numbered) and is
described for taxation purposes as follows:
(list the parcel number(s) assigned by the County).”




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Ownership & Interested Parties – Assign a Taxpayer/Owner

Counties track documents and the recording thereof through their County Recorders office. This section
includes some of the terminology that is used and some types of the documents that are recorded with
the County Recorder that deal with title or the transfer of various types of interests.

Glossary (In alphabetical order)
Adverse Possession: A claim made against the lands of another by virtue of open and notorious
possession of said lands by the claimant. The possession, by one person, of land belonging to another in
a manner deemed adverse to the interest of the owner. In some instances, title to the land becomes
vested in such person after a fixed number of years if the owner fails to assert his or her rights.

Assignee: one to whom a transfer of interest is made. For example: the assignee of a mortgage or
contract. (grantee/buyer)

Assignor: One who make an assignment. For example: the assignor of a mortgage or contract.
(grantor/seller)

Assignment: A recordable document transferring the interest in a specific piece of property from one
party to another.

Attachment: Legal seizure of property to force payment of a debt.

Bill of Sale: The instrument by which title to personal property is transferred.

Certificate of Title: (In Minnesota) A certificate issued by the County Registrar’s Office stating the
condition of a title for a specific owner.

Chain of Title: A term applied to the historical series of transactions and documents affecting the title
to a particular parcel of land.

Clear Title: Real property ownership free of liens, defects, encumbrances or claims.

Condemnation: (1) The taking of private property for a public purpose, with compensation to the owner
under the right of eminent domain. Governmental units, railroads and utility companies have the right to
condemn and take private property. (2) The destruction by government of private property that imperils
the life, health or safety of the public.

Condominium: A system of individual fee ownership of units in a multi-unit structure, combined with
joint ownership of common area of the structure and land.

Contract for Deed: An agreement and method of financing to sell and purchase under which title is
withheld from the buyer until such time as the required payments to the seller have been completed, the
seller will then deliver a deed to the buyer.

Conveyance: The transfer of title to property from one person to another.

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Deed: A written document by which the ownership of land is transferred from one person to another.

Devise: The disposition of land by will. A term used for land alone and never for personal property.

Eminent Domain: The right of a government to take privately owned property for public purposes
under condemnation proceedings subject to payment of its fair market value.

Fee Simple: The highest degree or maximum amount of interest in a parcel of land that it is possible to
own (sometimes designated simply as Fee).

Foreclosure: A legal proceeding in which real estate secured by a mortgage or deed of trust is sold to
satisfy the underlying debt due to a default.

Forfeiture of title: Provision in a deed creating a condition which will cause title to be passed to
another in the event certain circumstances occurs.

Grantee: A person who acquires an interest in land by deed, grant, or other written instrument. (buyer)

Grantor: A person who by a written instrument transfers to another an interest in land. (seller)

Heir: One who might inherit or succeed to an interest in land under the rules of law applicable where an
individual dies without leaving a will.

Joint Tenancy: Where two or more person holds real estate jointly. The survivor inherits the property
without reference to the decedent’s will.

Judgment: A order or decree of a court. A judgment for the payment of money is a lien against all
abstract real property owned by the judgment debtor in the county where the judgment is docketed,
which is process similar to recording, but is not a lien against registered property unless recorded.

Lien: A hold, a claim or a charge allowed a creditor upon the lands of a debtor. Some examples are
mortgage liens, judgment liens, mechanic’s liens.

Life Estate: A grant or reservation of ownership for the life of an individual.

Mechanic’s Lien: A lien allowed by statute to contractors, laborers and material men on buildings or
other structures upon which work has been performed or materials supplied.

Ownership: The right to possess and use property to the exclusion of others.

Prima Facie: Sufficient in law to establish a case or fact, unless disproved

Quiet Title: An action (suit) in the proper Court to remove record defects or possible claims of other
parties named in the action.



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Quitclaim Deed: A deed releasing whatever interest you may hold in a property but making no
warranty whatsoever.

Redeem: Literally to buy back. The act of buying back lands after a mortgage foreclosure, tax
foreclosure or other execution sale.

Tenants in Common: When two or more persons own a property, tenants in common means the
survivor’s rights are subject to the decedents will.

Title: The evidence or right which a person has to the ownership and possession of land.

Title Defect: Any competing legal right held by others to claim property or to make demands upon the
owner.

Torrens Title: A system whereby, after court proceedings, a certificate is issued setting forth the extent
of the applicant’s estate in land subject to the exceptions shown. Most popular in the early 1900’s, the
system was adopted in 19 states. It is presently used only in parts of six states.

Trust: A property right held by one for the benefit of another.

Trustee: A person holding property in trust.

Trustee’s Deed: A deed transferring title from a trust.

Vendee: A purchaser of real property under land contract.

Vendor: A seller of real property under land contract.

Warranty Deed: A deed conveying the title to a property with a warranty of clean, clear marketable
title.

Will: A document outlining the disposition of property that takes effect upon death.

Property Tax Records

Assessment & Tax Rolls all need to have a taxpayer of record assigned to them for the purposes of
receiving notices. In many cases, taxpayer & owner may be the same, but Counties, across the state,
have different directives from their County Attorney that allow or prohibit County Offices from
determining ownership rights. Accordingly, Counties use the best methods possible, given potential
restrictions, to keep interested parties apprised of property value and tax.

Deed Transfers
Deeds that are commonly received by County offices that indicate transfers of property interests include,
but are not limited to: Warranty Deeds, Quit Claim Deeds, Personal Representative Deeds, and Trustee
Deeds. Contract for deeds are not deeds, but may also indicate transfers of property interests. Included
on many deeds are the following: Document date, Deed Tax Due, Grantor(s), Grantee(s), Type of Title

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ie: joint tenancy, tenants in common etc., County in which the property is located, Legal Description,
Well statement, Grantor(s) signatures, Notary data, Drafted by information and Tax statement
information as indicated below:

No deed conveying title to real estate shall be recorded by the County Recorder or registered by the
Registrar of Titles until the name and address of the grantee, to whom future tax statements should be
sent, is printed, typewritten, stamped or written on it in a legible manner. A statement in the following
form is included on every deed: “Tax statements for the real property in this instrument should be sent
to: ___________________(name) __________________(address).”
Instruments that are exempt from this statement are decrees, order, judgments or writs of any court, a
will or death record of any instrument executed or acknowledged outside the state.

Upon receiving the deed in the County office that processes documents for tax purposes, the County
must change the taxpayer and owner according to the deed and verify that all other information that is
included on the deed matches the current Assessment and Tax Rolls

A Certificate of Real Estate Value (CRV) must accompany all sales of property that exceed $1,000. The
CRV serves multiple purposes for both the County and the State of Minnesota. Counties may use the
instrument for the following reasons:
    •  Verify name, address and legal of the property. This is beneficial when documents are
       incorrectly drafted and property addresses, legal descriptions, or other information provided on
       the form does not match records at the County.
    •  Verify whether the property is vacant or improved
    •  Verify the classification of the property
    •  Verify whether the sale is a qualified or un-qualified sale for sales ratio purposes

The State of Minnesota may use the CRV for the following reasons:
   •   Verify sales ratios for each region, by classification, to determine whether a state increase will be
       mandated at the State Board of Equalization
   •   Data provided on the form in comparison to records maintained at the County is used in the
       calculation of State Education Aid formulas
   •   Social Security numbers assist the Income Tax Division in monitoring capital gains

A CRV is not required when the conveyance of property is made to the State of Minnesota, a political
subdivision of the state, or any combination of them for highway or roadway purposes as long as the
political subdivision agrees to file a list of all properties conveyed to them with the Commissioner of
Revenue by June 1 of each year.

Sheriff Certificates of Foreclosure Sales
Any mortgage of real estate containing a power of sale, upon default made in any condition, may be
foreclosed by advertisement. After all required statutory notices of mortgage foreclosure have been
made, the property may be sold to the highest bidder. The sale is conducted by the sheriff or the
sheriff’s deputy in the County in which the premises are situated. The Certificate of Sale must contain
the description of the mortgage, the description of the property sold, the price paid for the property sold,
the time and place of the sale, the name of the purchaser and the time allowed by law for redemption.



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The Certificate of Foreclosure is a document that provides for prima facie evidence of title for the
purchaser and the purchasers heirs or assigns after the time for redemption has expired.

Redemptions of the property can be made by the mortgagor, the mortgagor’s personal representative or
assigns. If the preceding does not redeem, the most senior creditor having a legal or equitable lien upon
the property subsequent to the foreclosed mortgage may redeem after seven days after the expiration of
redemption period expires. In addition, the law provides a mechanism by other creditors to redeem,
priority of which is given to the date by which each of the liens are filed. There are additional
requirements that apply to any creditor’s ability to redeem properties under foreclosure. The creditor
must, within the period allowed for redemption by the mortgagor: a.) file their intent to redeem with the
County Recorder; b.) file in each office where the notice is filed all documents necessary to create the
lien on the property and to give evidence of the creditor’s ownership of the lien; c.) after completing
items (a) and (b) delivers to the sheriff’s office, copies of the documents filed for (a) and (b) along with
the office of filing, and the date and time of the filing.

A person wishing to redeem the property has generally 6 to 12 months to do so. The redemption period
is indicated in the Certificate of Foreclosure. Upon the redeeming of property, a Certificate of
Redemption is issued. The person or officer from whom the redemption is made shall make and deliver
to the person redeeming a certificate which shall include: the name of the person redeeming; the
description of the property being redeemed; and a statement of the claim upon which such redemption is
made and, if upon a lien, the amount claimed to be due thereon at the date of redemption. The
Certificate of Redemption is to be recorded within four days after the redemption.

On February first of each year, the County Recorder shall file with the County Auditor a list of all
sheriff’s Certificate of Sales or foreclosures upon which the period of redemption has expired during the
preceding year. The County Auditor will make the proper entries upon the tax records to conform to the
list.

Affidavit of Survivorship
An Affidavit of Survivorship is an instrument that is recorded with the County Recorder that provides
evidence of death of a person, in all cases of joint tenancy in lands, and in all cases where any estate,
title interest in, or lien upon, lands, has been or may be created, which estate, title interest, or lien was,
or is, to continue only during the life of any person named or described in the instrument. When a
certified copy of such death record is attached to an affidavit of survivorship, the county auditor shall
note the transfer on the books and shall inscribe upon the instrument over the auditor's official signature
the words "Transfer entered."

Decree of Distribution
A decree of distribution is an instrument that is a court directive that allows for interests in real estate
and personal property to be re-distributed. A certified copy of any decree of distribution may be filed
for record in the office of the county recorder of any county. It shall not be necessary to pay real estate
taxes in order to record such certified copy, but the copy shall be first presented to the county auditor for
entry upon the transfer record to the person(s) listed in the instrument and shall have noted thereon
"Transfer entered" over that person's official signature. Upon request, the court shall furnish a certified
copy of any decree of distribution, omitting the description of any property except that specified in the
request, but indicating omissions by the words "other property omitted." Such copy and its record shall


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have the same force and effect as to property therein described as though the entire decree had been so
certified and recorded.

Judgment and Decree
An instrument of Judgment and Decree is a document that has Court directives due to a dissolution of
marriage. It will indicate whether either party changed the party's name through the judgment and
decree; the legal description of each parcel of real estate; the name or names of the persons awarded an
interest in each parcel of real estate and a description of the interest awarded; and liens, mortgages,
encumbrances, or other interests in the real estate described in the judgment and decree. The Court
order or provision in a judgment and decree that provides that the judgment and decree must be recorded
in the office of the county recorder or filed in the office of the registrar of titles means, if a summary real
estate disposition judgment has been approved by the court, that the summary real estate disposition
judgment, rather than the judgment and decree, must be recorded in the office of the county recorder or
filed in the office of the registrar of titles. The summary real estate disposition judgment operates as a
conveyance and transfer of each interest in the real estate in the manner and to the extent described in
the summary real estate disposition judgment. No deed tax of any amount, or conservation fee, is due
on any instruments of judgments and decree or deeds by which title of one person is being transferred to
the other person due to the dissolution of marriage.


Undivided Interests

A parcel of land can be conveyed to multiple parties with each being assigned a certain percentage of
interest in the property. Some Counties create new parcels for each interest and others list all interested
parties on the singular parcel. A proportionate part of any delinquent tax that is due on the parcel must
be paid in order for the County Auditor to certify that no delinquent taxes exist on the parcel and allow
the instrument to be recorded. As long a party continues to pay their proportionate share of the tax that
is owed, the party is exempt from any proceeding to enforce payment of other parties who have interests
in the property. The property tax on the undivided interests, that remain unpaid, are to be treated as
though each interest was a separate description.

Condominiums and Cooperatives

Cooperative
 The unit owners' interests in units and their allocated interests are wholly personal property, unless the
declaration provides that the interests are wholly real estate. The characterization of these interests as
real or personal property do not affect whether homestead exemptions or classifications apply.

The ownership interest in a unit which may be sold, conveyed, voluntarily or involuntarily encumbered,
or otherwise transferred by a unit owner, is the right to possession of that unit under a proprietary lease
coupled with the allocated interests of that unit, and the association's interest in that unit is not affected
by the transaction.




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Condominium
Each unit, and its allocated interest in the common elements, constitutes a separate parcel of real estate.
If there is any unit owner other than a declarant, each unit shall be separately taxed and assessed, and no
separate tax or assessment may be rendered against any common elements.

A unit used for residential purposes together with not more than three units used for vehicular parking,
and their common element interests, shall be treated as one parcel of real estate in determining whether
homestead exemptions or classifications apply.

The descriptions of the parcels are legally sufficient if each is identified by the County in which it is
located, a unit number which is to contain no more than six characters, only one of which may be a
letter, and where the common interest elements are either identified on parcels that also contain a unit
number or on separate parcels.


Reference

Minnesota Statutes, Chapter 513A
Minnesota Statutes, Chapter 515
Minnesota Statutes, Chapter 507
Minnesota Statutes, Chapter 580
M.S. 525.483
M.S. 600.21
M.S. 518.191
M.S. 272.115
M.S. 272.17
M.S. 272.14
M.S. 276.07




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03.02 – PARCEL LEGAL MODIFICATIONS
When a parcel is coded and a legal description is attached, the legal description, for assessment and tax
roll purposes, will be considered a valid legal once the owner has received notice. Modifications of
parcels and legal descriptions may be done due to combinations, splits, plats, annexations or any other
instrument that would cause a parcel’s boundary to change.

Combinations

Owners of contiguous property may request in writing to the County Auditor an application to combine
the parcels for tax purposes. The County Auditor can choose to deny the request, if the parcels cross
section lines and the parcels are in different unique taxing areas. The Auditor may also deny the request
if the combination would interfere with the Auditor’s ability to maintain their existing parcel record
keeping system. An example of such a request would be the combination of a platted parcel with a
contiguous parcel that is either in a different plat or that carries a metes and bounds description and the
County’s parcel numbering system is established in a manner that identifies each independent of the
other.

City, Township, or County Planning and Zoning Departments may also adopt ordinances that require the
owner of properties file for an Administrative Subdivision in order to adjust any parcel boundaries. An
example which would require the filing may be where the owner is attempting to improve the property
in some manner and applies for a permit for the improvement at the City, Township or County
(whichever one has the planning and zoning authority). The planning and zoning authority may
determine that the current boundary of their property prohibits the granting of permit and improvement
without a parcel expansion due to local zoning ordinances.

County Processes
Each County handles combination requests differently. But even though the requirements per County
may differ, some processes are consistent. The consistent processes are as follows:
   •   All current and delinquent taxes must be paid prior to any parcel legal modification
   •   The parcels must be located in the same unique taxing area
   •   Parcels currently located in a TIF district cannot be combined with parcel(s) that are not located
       in the same TIF district (this also applies to parcels in hazardous substance subdistricts)

Other items that may be required by each County could include the following:
   •    Common ownership of the entire combined parcel
   •    The combined parcel have the approval of the municipality, township, or zoning department if
        certain resolutions are filed with the County Recorder
   •    Modified parcels be recorded with the County Recorder on some type of document allowing for
        the tracking of the combined parcel for future title searches or for tracking the compliance with
        zoning ordinances
   •    A survey that indicates the new entire parcel legal description along with any buildings or other
        improvements that are located on the parcel is submitted along with the combination request
   •    Payment of any Administrative fees that are adopted by the County Board



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Splits/Subdivisions

A split or subdivision is defined as a separation of an area, parcel or tract of land that is less than a
whole parcel, as identified in the current year tax lists, into two or more parcels. A split may occur if an
owner(s) requests a subdivision of their parcel and or documents are received by the County Recorder
that will subdivide a parcel. Many Counties and Municipalities have resolutions and/or ordinances that
govern the modification of existing legal boundaries and modifications to them.

County Processes
Each County has different requirements and fees, most of which are established through adopted
policies and resolutions. Some of the requirements are due to statutory regulations others are County
regulations established for parcel tracking and parcel characteristic and description identification.
Statutorily, the property taxes, current and delinquent must be paid in order to modify an existing legal
description of a property. An exemption to this rule applies if a portion of a parcel is conveyed to a
political subdivision as identified in the section identified as Payment of Taxes. Unless a subdivision is
due to an annexation order, the current Unique Taxing Area (UTA) that is applicable to the existing
parcel is extended to the new parcel(s).

Counties can adopt policies or resolutions that will assist the County in tracking of property descriptions
or that will assist them in identifying boundaries, improvements and ultimately market value. Many of
the policies or resolutions encompass both parcel combinations and parcel splits or subdivisions. Some
of the County requirements may include:
    •   Survey or each end result tract of land
    •   Documents filed with the County Recorder that will create the parcel(s) of record.
    •   Certifications by the Municipality, Township or County that has the authority to restrict or
        approve the transfer of or creation of portions of parcels pursuant to MS 272.162 and MS
        462.358. These statutes empower the authority, by resolution, to disallow any modification or
        creation of a parcel without their stamped or certified approval, once the resolution is recorded
        with the County Recorder. The statutes allow the governing body the ability to mandate that
        current and future parcels of record stay compliant with their existing planning & zoning
        ordinances.
    •   Payment of the County Administration fee
    •   Platting by mandating the filing of an Auditor’s Subdivision only if the parcels are of irregular
        shape and cannot be described except by metes and bounds

When a subdivision occurs due to an annexation order changing a portion of a parcel from one political
subdivision to another, property taxes do not need to be paid and processes identified above are not
required.

Payment of Taxes
For the purposes of this section, current year taxes are extended as of January 2 or the first business day
of the year. Whenever less than a whole parcel, as described in the current year tax lists, is split into one
or more parcels either, through conveyance or other instrument, all current year taxes in addition to all
delinquent taxes must be paid to the County Treasurer. The exemption to this rule is one which allows a
conveyance to the federal government, the state, or a home rule charter or statutory city or any other
political subdivision without the taxes being paid.

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A County should be aware that when a taxpayer brings a check drawn on the federal government, the
state, or a home rule charter or statutory city or any other political subdivision for endorsement from the
County because the check lists both the taxpayer and the County as payees, they should check with the
political subdivision to identify whether the check includes the total tax liability currently extended on
the parcel. If the check does include the taxes extended on the parcel, the County can retain that portion
in order to satisfy the tax. (Attorney Generals opinion) The state or political subdivision acquiring
property may make provisions for the apportionment of the taxes and unpaid assessments if less than a
complete parcel is acquired.

Parcel Creation or Adjustment

Once all the requirements to subdivide or modify a parcel have been met, the County will attach to the
new parcel a number that will identify the parcel for taxation purposes. The new parcel number will
need to have the following assigned to it: Unique taxing area code; taxpayer(s) and or
owner(s)/interested party(s) along with their addresses; the property address, if one has been assigned; a
legal description that will identify either a plat, lot, block, tract, unit etc or the metes and bounds
description including the section, township, range, quarter quarters and other information included on
the document of record in the County offices; acreage, if needed; property classification and market
value; any special assessments which have been re-apportioned from the parent parcel to the child
parcel. Any remnant parcel that remains active will also have much of the same information changed
due to a consolidation or separation of the legal description.

Once the parcel number, along with all other information indicated in the prior paragraph, has been
established or modified, and notice of the parcel has been given to the owner of the property, it is a legal
and valid description for taxation purposes and will be described on the assessment and tax rolls
accordingly.

County offices need to stay in communication with each other regarding all adjusted, deleted and newly
created parcels in order to ensure the accuracy of the data maintained upon them. The offices include,
but are not limited to: County Assessor, County Auditor, County Treasurer, County Recorder, County
Surveyor, and City, Township or County Planning and Zoning Offices.

Reference

M.S. 272.12 ~272.19
M.S. 272.195
M.S. 272.68
M.S. 462.358




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03.03 – ANNEXATIONS
An annexation is an adjustment to a boundary of an existing township or school by order of the authority
that has the statutory ability to make such an adjustment. The adjustment authority for municipalities
and townships differ from that of the school district. The final authority to grant an order in a Municipal
annexation is the Director of the State of Minnesota Office of Administrative Hearings, Municipal
Boundary Adjustments Unit. The Authority to grant an order for annexation for a school district is the
County Board of Commissioners.

Municipality Annexation

Findings that assist in determining whether adjustments to municipal boundaries from unincorporated
areas should be allowed are as follows:
    •   To provide for the extension of municipal government to areas which are developed or are in the
        process of being developed for intensive use for residential, commercial, industrial, institutional,
        and governmental purposes or are needed for such purposes; and
    •   To protect the stability of unincorporated areas which are used or developed for agricultural,
        open space, and rural residential purposes and are not presently needed for more intensive uses;
        and
    •   To protect the integrity of land use planning in municipalities and unincorporated areas so that
        the public interest in efficient local government will be properly recognized and served.

New Municipal Incorporation
A township can request full incorporation into a municipality by a petition if 100 or more property
owners request it or by resolution of the town board that includes platted property of lots and blocks.
The petition should include the proposed name of the new municipality, the reason for the request, all
property owners who need to receive notice and a boundary map. The Director of the State of
Minnesota Office of Administrative Hearings, Municipal Boundary Adjustments Unit considers the
following issues to determine whether to grant the petition:
    1. Present, past, and projected population
    2. The total area of request along with all terrain features
    3. Present and future planned development by type: residential, agricultural, commercial, industrial
       and institutional
    4. Transportation plan
    5. Planning and zoning comprehensive plans which include policies of the Metropolitan Council
    6. Current service levels of the government and action plans on continued delivery of service
       including sewer & water service, fire protection, law enforcement, street maintenance and
       improvements, administrative services and recreational facilities and the ability to provide
       services both adequately and economically
    7. Environmental issues and resolutions to the issues by the granting of the petition
    8. Fiscal impacts on the requested area and adjacent governmental units including impact on
       bonded debt, tax rate information of all units of government that have the ability to tax on the
       subject property, the net tax capacity of platted and un-platted land and the relation it has to
       homestead and non-homestead property, and other tax and governmental aid issues



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   9. Whether the request will best provide governmental services or if a different form of boundary
       adjustment should be ordered
   10. The contiguity of the proposed area boundary and other adjacent units of government
   11. Analysis of the applicability of the State Building Code

The director may choose to order the incorporation based upon the urban or suburban nature of the area
or that the township cannot adequately protect the public health, safety or welfare of the existing
township; or that the request is in the best overall interest of the township. The director may choose to
deny the all, or a portion, of the petitioned area if it is felt the township could be better served by
annexation to an adjacent municipality.

Annexation of Unincorporated Property into an Existing Municipality
Annexation of unincorporated property into an existing adjacent municipality can be initiated if the
director and the township receive one of the following:
•       Resolution from the annexing municipality
•       Resolution from the affected township
•       A petition of either 20% of the affected property owners or 100 affected property owners, which
ever is less
•       Resolutions by both the municipality and the township requesting full annexation of the
township into the municipality.
If the request is received in the form of a petition, the petition must contain the boundaries of the area
requested, the reason for the request and the names of all interested parties that are to receive notice. In
addition, the petition must be accompanied by a resolution by the municipality supporting the request.

The director will consider all factors listed under the section above relating to a request for incorporation
by a township. The director may order the annexation based upon the determinations listed in New
Municipal Incorporation earlier in this Section 03.03. The director may deny the request based upon the
ability of the township to carry on the functions without undue hardship; or that the monetary benefit to
the municipality does not have a reasonable relationship to the monetary benefits of the affected area; or
that annexation into an adjacent municipality would better serve the residents of the property. The
director may also modify the request to include only those portions of the proposed area that are either
urban or suburban in nature or can preserve the symmetry of the area.

Orderly Annexation
One or more townships or municipalities, by joint resolution, may agree upon a specified area that is
need of orderly annexation. An orderly annexation agreement is a binding contract upon all parties and
is enforceable in the district court of the County in which it is located. The joint resolution is submitted
to the director and includes the description of the specified area and the reasons for the request. The
joint resolution may limit the authority of the director in the ability to modify the boundaries of the
specified area and the ability to deny the request for annexation if the resolution states that the
boundaries are appropriate and that no consideration of the request is necessary by the director. Orderly
annexation agreements generally specify approximate timeframes for portions or all of the specified area
to be annexed into a municipality. Upon receipt by the director of a resolution for annexation, the
director will review factors listed in New Municipal Incorporation earlier in this Section 03.03. The
director may deny the annexation if it conflicts with the joint agreement or may choose to modify the
boundaries after determining the need for municipal services. If the request is denied, another request


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for annexation of approximately the same area cannot be submitted again for a minimum of two years
unless the majority of property owners petition for annexation. A copy of the annexation order gets
delivered to the County Auditor from the director, as well as, a copy of the annexation resolution from
the municipality. The order is effective on the day the director issues the order or on a later date
indicated in the order.

Annexation by Ordinance
If land is owned by a municipality, or is completely surrounded by property within municipal
boundaries, or is 60 acres or less and abuts the municipality and currently does not municipal sewer
services and property owners within the area petition for annexation, or has a preliminary or final plat
that has been approved after August 1, 1995 and the lots average 21,780 square feet or less and is
located within two miles of the existing municipal boundary, the municipality may declare the land
annexed into the municipality after holding the necessary public hearings. Another mechanism by
which the municipality may adopt an ordinance by which to annex property is one that requires land to
be at least 60 percent bordered by the municipality as well as being 40 acres or less in size. In this case,
the municipality must serve a notice of intent to annex to the town board and the director. The town
board has 90 days to file an objection to the notice. If no objections are filed, the land may be annexed
into the municipality. If objections are filed, the director will conduct hearings and review factors from
the New Municipal Incorporation earlier in this Section 03.03 and issue an order approving or denying
the request.

Annexation by Petition
If land does not exceed 200 acres and abuts a municipality, a majority of property owners of the land
may petition the municipality for annexation into the municipality. Within 10 days after the filing of the
petition, copies of the petition must be filed with the director, town board, county and any other
municipality which abuts the land. Within 90 days from the service of the petition, the town board or
other municipality may file objections to the director. If no objections are filed and all property owners
signed the petition, the annexing municipality may, by ordinance, annex the land into the municipality.
Otherwise the municipality must hold a public hearing. If objections are filed by the town board or
other municipality, the director must hold a public hearing and issue an order after reviewing the factors
listed in New Municipal Incorporation earlier in this Section 03.03.

Effective Dates & Property Taxation

Annexation order effective date prior to August 1 of a levy year
The annexing municipality levies taxes on the annexed property in the following payable year.
All taxes that are collected are distributed to the municipality.

Annexation order effective date of August 1 or later of a levy year
The township levies taxes on the annexed property for the following payable year. All taxes that are
collected are distributed to the township. The municipality will receive no taxes from the annexed
property until the year following the year the city may levy on the annexed area.




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Municipal payments to the Township

After 2001 and Prior to 2007
The directors’ order may also list a requirement by which the municipality is to pay a portion of the
municipal tax collection on the annexed property to the township. Prior to the 2006 Legislation, the
payments were for the first five years of property tax collections received on the annexed property by
the municipality based upon a percentage of the taxes that were distributed to the township in the final
year the township received a distribution on the annexed area. Also, Annexations by Ordinance were
the only types of annexations that were subject to reimbursement provisions. The schedule was as
follows:

The percentages were as follows:
   1. Year one of distribution of taxes to the municipality:
       The municipality pays to the township 90% of the tax revenue of       the annexed area received by
       the township in the last year the township received property taxes.
   2. Year two of distribution of taxes to the municipality:
       The municipality pays to the township 70% of the tax revenue of       the annexed area received by
       the township in the last year the township received property taxes.
   3. Year three of distribution of taxes to the municipality:
       The municipality pays to the township 50% of the tax revenue of       the annexed area received by
       the township in the last year the township received property taxes.
   4. Year four of distribution of taxes to the municipality:
       The municipality pays to the township 30% of the tax revenue of       the annexed area received by
       the township in the last year the township received property taxes.
   5. Year five of distribution of taxes to the municipality:
       The municipality pays to the township 10% of the tax revenue of       the annexed area received by
       the township in the last year the township received property taxes.
   6. Year six of distribution of taxes to the municipality:
       No further payments to the township are made.

(see example 03.03-1)

Post 2006 Legislation
After the 2006 Legislative session, all annexations are subject to payments from the City to the
Township. Unless the City and Township agree otherwise, the annexation order must indicate a
reimbursement provision for all or a part of the property that was annexed and the schedule for the
reimbursement calls for substantially equal payments over a period of two to eight years from the time
of annexation. The County Auditor may be asked by the City or Township to assist in calculating the
payback as they have concise information as to what the taxable market value of the property is and
what the final taxes paid to the Township were. (see example 03.03-2)

Additionally, the City must reimburse the Township for all special assessments that were assigned by
the Township and any debt for which the property was subject to for which special assessments were not
levied.




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Example 03.03-1, illustrates the payments that a city would pay to a township for an annexed area. This
example indicates how the reimbursement would have been calculated prior to the 2006 Legislation.



Example 03.03-1: Annexation by Ordinance Effective Beginning in 2001 and Prior to payable
year 2007.

(1)    The city of Enterprise annexes a portion of Grow Township by a
       city ordinance effective 10/1/01.

(2)    Grow Township levies on the annexed area for the taxes payable
       year 2002 in the amount of:                                                      $       20,000

(3)    The county treasurer distributes the town share of 2002 tax
       collections for the annexed area to Grow Township, in the amount of:             $       19,800

(4)    The city of Enterprise levies on the annexed area for the taxes
       payable year 2003 in the amount of:                                              $       30,000

(5)    The county auditor determines the amount of taxes distributed in 2002
       to Grow Township in regard to the annexed area and certifies that
       amount to the city of Enterprise:                                                $       19,800

(6)    In 2003, the city pays the town 90% of the amount determined on
       line 5:                                                                          $       17,820

(7)    In 2004, the city pays the town 70% of the amount determined on
       line 5:                                                                          $       13,860

(8)    In 2005, the city pays the town 50% of the amount determined on
       line 5:                                                                          $        9,900

(9)    In 2006, the city pays the town 30% of the amount determined on
       line 5:                                                                          $        5,940

(10)   In 2008, the city pays the town 10% of the amount determined on
       line 5:                                                                          $        1,980

(11)   In 2009 and thereafter, no further payments are made by the city
       to the town.


In the above example the City reimbursed the Township for a period of five years. The total
reimbursement equaled $ 49,500, but each installment declined over the repayment schedule.



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Example 03.03-2, illustrates the payments that a city would pay to a township for an annexed area. This
example indicates how the reimbursement would have been calculated after the 2006 Legislation. The
order calls for a reimbursement to the Township for five years with each installment in the amount of
$ 9,900.




Example 03.03-2: City Annexation for payable year 2007 and after.

(1)    The city of Enterprise annexes a portion of Grow Township effective 10/1/06.

(2)    Grow Township levies on the annexed area for the taxes payable
       year 2007 in the amount of:                                                       $       20,000

(3)    The county treasurer distributes the town share of 2007 tax
       collections for the annexed area to Grow Township, in the amount of:              $       19,800

(4)    The city of Enterprise levies on the annexed area for the taxes
       payable year 2008 in the amount of:                                               $       30,000

(5)    The annexation order has a reimbursement amount of $49,500 that is
       to be paid the Grow Township over a period of five years.

(6)    In 2008, the city pays the town:                                                  $        9,900

(7)    In 2009, the city pays the town:                                                  $        9,900

(8)    In 2010, the city pays the town:                                                  $        9,900

(9)    In 2011, the city pays the town:                                                  $        9,900

(10)   In 2012, the city pays the town:                                                  $        9,900

(11)   In 2013 and thereafter, no further payments are made by the city
       to the town.


In the above example the City reimbursed the Township for a period of five years. The total
reimbursement equaled $ 49,500, but the installments were the same for each of the five years.

This is not going to be the case in most situations, but it could occur. Regardless, this information is
important for each County Auditor-Treasurer to know in order to assist Cities or Townships in payback
provisions.




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CHAPTER 3 – PROPERTY IDENTIFICATION




Tax Rate Differential
Another mechanism by which Municipalities ease the tax burden of municipal taxes verses township
taxes is to increase the tax rate incrementally on the annexed area. The annexation order would identify
if there is to be a tax rate differential and, if so, the increase is to be done in equal proportions over not
more than six years. Generally, the time frame by which services would be offered to the annexed area
drives the agreement for a tax rate differential.

Apportionment of Assets and Obligations

Partial Annexation
Whenever all or a portion of a township or other municipality is annexed into another municipality, the
director may allocate portions of the liability and assets based upon many factors. The allocation is
based upon the value of the proposed annexed area in comparison to the entire value of the existing
township or municipal property, the assets and location of the existing township or municipality, the
bonded indebtedness, tax delinquency & other revenue sources that have been accrued but remain
unpaid, and the ability of the remaining township or municipality to function appropriately.


Entire Annexation
Whenever an entire township is annexed into an existing municipality, all revenues that are past, present
and future, become the property of the municipality. As well, all debt associated with the former
township become the debt of the municipality. The full faith and credit pledge of the entire
municipality, including the newly annexed area are pledged to secure the remaining debt of the former
township, even though, it is possible that the directors order stipulates that only the annexed portion will
pay any taxes levied to fulfill the obligation. If the debt liability of the former township is to be spread
across the entire municipality, the municipality must pass a resolution stating so.

Prior to December 15th of the levy year, the director may order the County to revise tax records and re-
spread levies or order the treasurer to redistribute taxes levied and receivable.

School District Annexations

There are two mechanisms by which school boundary adjustments can be made. One deals with strictly
an owners petition who owns a single split residential piece of property subdivided into multiple parcels
due to multiple school district boundaries to be consolidated into one school district, the other deals with
petitions from owners to have school district boundaries adjusted due to their desire to be detached from
their existing school district and adjoined (annexed) into another adjoining school district.

Detachment and Annexation
Property owner(s) who have property(s) that adjoin another school district and that are not in special
districts can petition the County Board in which the property is located to have their property
permanently detached from the existing school district and annexed into the adjoining school district if
the following conditions are met:



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   1. The school district in which the owner is requesting annexation to is one whose boundary line is
      the same as the one in which detachment is being requested from, or
   2. The property is within one-half mile from the property in which annexation is being requested to
      and the property between it is either owned by the United States, State of Minnesota or one of its
      political subdivisions or the person who owns the property between the area petitioned for
      annexation and the school district is either unknown or cannot be found, or
   3. The property is adjacent to another property whose property adjoins the school district to which
      annexation is being requested to and that property has a pending petition as well to the same
      school district.

Included in the petition must be the following information:
    •  The property(s) legal description(s), map(s) showing location proximities to the petitioned school
       district and a copy of the deed by which title was taken, and
    •  The reasons for the request and a map showing that by granting the annexation the school district
       from which the property(s) are detached from will not be reduced to less than four sections,
       unless the district does not operate a school within the district, and
    •  Consent on the petition by the school district from which detachment is being sought if any part
       of the property is part of a district which maintains and operates a secondary school, and
    •  A map identifying the school district to which annexation is being sought
    •  Other information property owners feel is pertinent, and
    •  An acknowledgement by the owner, and
    •  Information regarding existing bonded debt and whether the debt would be allocated

The auditor is to receive the petition and must bring it forward to the County Board meeting to set a
hearing date and time. The hearing date must be within 10 to 60 days from the meeting. The auditor
must notify each affected school district of the upcoming hearing, post the hearing notice in each school
district and publish the hearing notice. The postings and publications can be combined with other
pending petitions. All testimony on the request will be heard at the public hearing. The County Board
must either grant or deny the petition within six months. If the order is granted, the County Auditor
must notify the commissioner of the Dept of Education. The effective date of the order is the date the
County Board approved the petition or a deferred date set by the County Board, not to exceed July 1
following the approval.

If the petition for detachment and annexation is approved, pre-existing bonded debt incurred on the
property must be addressed in one of the two following ways:
    (a) The property is still obligated for all existing debt and the County Auditor must assess to the
        property that portion of the tax liability of the detached school district. The property is not liable
        for any pre-existing debt of the school district to which it is annexed to. But, all debt of the
        school district to which annexation was approved to that is approved on or after the effective date
        of the order is an obligation of the property, or
    (b) The school boards of the district from which the property is being both detached from and
        annexed to agree that the property is relieved from all pre-existing bonded debt liability from the
        detaching district and will be taxed for all bonded debt liability, pre and post effective date, in
        the school district that the property was annexed to.




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Split Residential Annexation
A property that is located within the boundaries of more than one school district and has been
subdivided into multiple parcels due to just the school district boundaries, and that is classified as
residential homestead can be combined into one parcel and adjoined/annexed exclusively into one
school district under this provision only if the County Board approves the petition by the owners of the
property. The following must take place in order for the annexation to be in effect.

The owner must initiate proceedings for annexation by filing a petition with the County Auditor. The
petition must include the following information:
    1. The legal description and location of the property along with proof of title
    2. All affected school districts
    3. The school in which annexation is requested
    4. The school district by which any students residing at the property are attending

The Auditor must bring forward the petition to the County Board. No public hearing, school notification
or posting is required. Within 60 days of the County Auditor receiving the petition, the County Board
must determine which school district the property will be transferred to and issue an order. If the order
is given on or before July 1, the effective date is the next years payable taxes, otherwise, the following
year. Once the parcel is solely included in one school district, for the first payable year the order is in
effect, the parcel is relieved from all prior liability of all school taxes of the school district from which it
was removed and is responsible for all tax liability for the school district from which it was annexed.

The County Auditor must notify the affected school districts, along with the Commissioner of the
Department of Education.




Reference

Minnesota Statutes, Chapter 414
M.S. 123A.45
M.S. 123A.455
4/30/99 DOR Memo




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Chapter       4      

    TAX BASE OVERVIEW AND
    VALUATION OF PROPERTY
                    TABLE OF CONTENTS
     Basic Terms and Concepts           04.01 – 1

     Valuation and Assessment           04.02 – 1

     State Assessed Properties          04.03 – 1

     Review and Equalization Process    04.04 – 1

     Exemptions                         04.05 – 1

     Classification of Property         04.06 – 1

     Manufactured Homes                 04.07 – 1

     Special Valuations and Deferrals   04.08 – 1

     Limited Market Value               04.09 – 1

     Exclusions                         04.10 – 1

     Taxable Market Value               04.11 – 1

     Referendum Market Value            04.12 – 1

     Net Tax Capacities                 04.13 – 1

     Taxable Net Tax Capacity           04.14 – 1

     Tax Bases                          04.15 – 1

     Payment in Lieu of Taxes (PILT)    04.16 – 1




                                                    04.00
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.01 – BASIC TERMS AND CONCEPTS

Overview

The Minnesota property tax system is very complex and contains many unique features that affect how a
property’s value is translated into a taxable base upon which levies are assessed. This section introduces
and outlines the basic terms and concepts, which are addressed in greater detail in the remaining sections
of this chapter.

Property Value

An ad valorem tax system by definition is based on a valuation of property. There are two types of
property—real property and personal property.

Real Property, for the purposes of taxation, includes the land; all buildings, structures, improvements,
or other fixtures on it; all rights and privileges belonging or appertaining to the land; and all mines,
minerals, quarries, trees, etc. on or under it. Expressed otherwise, real property refers to the interests,
and benefits connected with real estate—identified parcels or tracts of land and any improvements—
including the right to occupy the real estate, sell it, lease it, enter it, give it away, borrow against it, or to
exercise any one or all of the rights. (See M.S. 272.03, subd. 1, for further definition.)

Personal Property can be defined by exception in that anything that is not real property is personal
property. The main characteristic of personal property is that it is movable. If it is movable without
causing damage to itself or the real estate, it is considered to be personal property. An even broader
definition may include all tools, equipment, goods, money, effects, stocks, shares, etc., but in Minnesota
personal property is generally exempt and that which is enumerated as being taxable. Taxable personal
property includes certain utility systems, railroad docks and wharves, improvements on federal or
exempt land, leasehold or other property that would be taxable if the lessee or user were the fee owner,
certain manufactured homes, and flight property. (See M.S. 272.02, subd. 9, for further detail.)

Estimated Market Values
The valuation of property starts with local assessors estimating the market value, which means the most
probable selling price obtained in an arm’s length transaction. Section 04.02 reviews some of the basic
components of the valuation process.

State Assessed Property
While local and county assessors establish the market value of most property, certain types of property
are assessed by the state. These are identified in Section 04.03.

Review and Equalization

Although assessors are guided by considerable standards, the somewhat subjective nature of estimating
market value results in a need for a review and equalization process that attempts to minimize inequities
and protect the rights of taxpayers. Section 04.04 describes the various features of this process which
include notification of values, multiple layers of local and state appeals and equalization processes, and

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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



sales ratio studies. These important processes do take time and result in a structure where properties are
assessed in one year but are taxed and payable in the following year. The time and efforts, however, are
well justified, because the integrity of an ad valorem system of taxation rests upon an equitable and
reliable process for establishing values.

Taxable Value

Property taxes, however, are not levied directly on estimated market value. A variety of exemptions,
exclusions, special assessment considerations, and value deferrals can affect the share of value that
becomes taxable. Moreover, each of these special features is applied in limited ways that relies on some
classification of property. Even the establishment of values and their review and equalization relies on
differentiating between the uses of property.

Exempt Property
Conceptually, the first determination that must be made in the process of establishing taxable values is
determining whether the property is taxable or exempt. Section 04.05 explores property tax exemptions.

Classification System
Minnesota has one of the most extensive and formalized classification systems in the country. In fact, a
classification rate is multiplied by the taxable market value of a property to yield the taxable base for
most levies—the net tax capacity. This allows different classes of property to be subject to different tax
burdens. For example, commercial property is taxed at a higher rate than residential property. In
addition to class rates, classification is important, since different classes are eligible for various other
benefits and special features. Section 04.06 reviews the classification system.

Manufactured Homes
The assessment of manufactured homes, which constitute a relatively unique “class” of property that can
be real or personal property, is discussed in Section 04.07. When assessed as real property,
manufactured home values are included in the taxable value used to determine tax rates. When assessed
as personal property, these values, although taxed, are not included in the taxable value used to
determine tax rates.

Special Valuations and Deferrals
Certain property, such as agricultural and recreational property, can often be subject to market pressures
that increase their market value to a level that exceeds its value for its current use, creating pressure to
convert to other uses. Several special value deferral programs, reviewed in Section 04.08, have been
devised to help protect these properties from such market pressures to preserve open space and
agricultural land.

Limited Market Value
Minnesota has established a unique feature called limited market value which attempts to protect various
types of properties from the tax increases associated with rapidly growing market values. The taxable
market value of a property is limited to maximum increases. This leaves a portion of the estimated
market value that is not taxed. As the increases to estimate market value drop below the limited
thresholds, the limited increases will catch up with the full value. This program is discussed in Section
04.09.

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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



Exclusions
Minnesota has a limited amount of exclusion programs (including programs for newly platted lands and
improvements, property damaged by mold or use of lead paint, and old homes and certain businesses)
that explicitly exclude certain amounts of estimated market value from the amount that is taxable.
Section 04.10 reviews these programs.

Taxable Market Value
After sorting through what properties and what value is subject to taxation, the result is a taxable market
value. Section 04.11 reviews the hierarchy of how the various features are applied in getting from
estimated market value to taxable market value. Taxable market value then becomes the basis for
determining tax base values—referendum market value, local net tax capacity, and state net tax capacity.

Base of Taxation

Referendum Market Value
Some voter approved levies are extended against referendum market value, which is the taxable market
value of certain property. This tax base is defined in Section 04.12.

Net Tax Capacity
The majority of property taxes, however, are levied on net tax capacities—the result of multiplying the
taxable market value of a property by its class rate. Net tax capacity is discussed in Section 04.13.

Taxable Net Tax Capacity
Although the net tax capacity of individual properties is the amount to which taxes are extended, some
net tax capacity is excluded from the tax base measure when computing tax rates. The taxable net tax
capacity used for computing tax rates is identified in Section 04.14. The distinction of a taxable net tax
capacity used to calculate rates from the full net tax capacity against which local tax rates are extended
yields extra funds for power line credits and tax increment financing (TIF), and facilitates tax base
sharing under fiscal disparities.

Tax Bases
In addition to the referendum market value and local net tax capacity tax bases, a different net tax
capacity tax base exists for the state general property tax. The existence of the JOBZ program also
creates additional wrinkles in precisely how tax bases are identified for various levies. Section 04.15
reviews the various tax bases and their distinctions.

Alternative Taxation

Certain property that would ordinarily pay property taxes is instead taxed in alternative ways that are
often to be collected and distributed along with, or in similar fashion to, property taxes. A variety of
other payment in lieu of (property) tax provisions, or PILT’s, are summarized in Section 04.16. (Wind
Energy Production Taxes, as found in Section 06.07, are one such example that replaced property taxes
on wind energy systems.)




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.02 – VALUATION AND ASSESSMENT

Basics

All property is valued as of, and classified according to its use on, January 2 of each year. According to
Minnesota law, all property is to be valued at its market value. The market value is to be stated so that
any amount under $100 is rounded up to $100 and any amount exceeding $100 shall be rounded to the
nearest $100.

M.S. 272.03, subd. 8, provides the statutory definition of market value:

“Market value” means the usual selling price at the place where the property to which the term is
applied shall be at the time of assessment; being the price which could be obtained at a private sale or
an auction sale, if it is determined by the assessor that the price from the auction sale represents an
arm’s-length transaction. The price obtained at a forced sale shall not be considered.

The International Association of Assessing Officers (IAAO) defines market value as:

The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other
precisely revealed terms, for which the specified property rights should sell after a reasonable exposure
in a competitive market under all conditions requisite to fair sale, with the buyer and seller each acting
prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.

In summary, market value is the price that would tend to prevail under typical, normal, competitive,
open market conditions.

The assessor must estimate a land value, whether or not the land is improved with structures. The
assessor must value all structures and improvements to the land. (This does not include any crops being
grown on the land.)

If a property is leased, it should be valued at its market value and not at the value of the leasehold
interest. If a property includes a mine or quarry, the value of the property should include the mine or
quarry.

Although valuations are performed annually, Minnesota law also states that all property must be
physically inspected at least once every 5 years. This allows the assessor to update records for changes
in the condition of the property and to capture any improvements that may have been missed for lack of
building permits.

New Construction and Demolition

Each year, the assessor is required to search for new construction. Any improvements that add more
than $1,000 in value are to be included as new construction for that assessment year. Buildings,
structures, and improvements that are under construction as of January 2 should be valued according to
the extent completed as of that date. This will result in a partial value for the new construction. Where

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buildings have been under construction for more than one year, there will be a previous partial value to
be considered. The appraiser must estimate the percentage and value of the construction that has taken
place during the year and add it to the assessment if the value of the improvement exceeds $1,000.

Many repairs are regarded as merely maintaining the structure. They are considered to be expenditures
made to restore items that are worn out because of deterioration to a new or useable condition. For
example, re-shingling a roof, replacing a furnace, or painting are considered to be maintenance items
that do not add value to the property. However, a large-scale repair project with multiple repairs or
updates such as new carpet, new cabinets, updated décor, new furnace, new siding, new roof, etc. can
result in a lower effective age of the property because the property appears to be newer than its actual
age. This can result in better appeal and a higher value of a property.

When buildings or other structures are damaged by fire, flood or are torn down, and the value of the
property is affected by over $100, the decrease in value must be reflected in the value of the property for
that year. (For more information on the Disaster Credit or Local Option Disaster Relief please see
Section 06.06)

Omitted Properties

Omitted properties are those properties that have not been entered onto the assessment or tax rolls and
are escaping all forms of taxation. Real or personal property omitted from the assessment in any year
must be added for the years omitted, and the taxes for those years must be computed and added to the
current tax list. This can be done for up to 6 years after the assessment date of the year of omission.

Undervalued Properties

Undervalued properties are those properties that have been entered on the assessment and tax rolls but
are undervalued due to the omission of the value of a building or other improvements. Real property
assessments, which are undervalued by reason of omission of the value of buildings, or real property that
was erroneously classified as homestead, should be corrected and taxes computed for addition to the
current tax. However, the correction in this case cannot be made after December 1 of the year following
the year in which the erroneous assessment was made.

Timing and Corrections

All real property assessments must be completed two
weeks prior to the date scheduled for the local board of           NOTE
appeal and equalization. Any changes made between the         “Clerical” errors are narrowly defined in that
                                                              they are made by someone doing the work of a
date when valuation/classification notices are sent out       clerk. These include math errors, transposition
and the date of the local board of review should be listed    of numbers, keypunch errors, and coding
and reviewed with the appropriate Board of Appeal and         errors. Clerical errors do NOT include poor
Equalization.                                                 estimations or incorrect data used in making the
                                                              estimations, such as an incorrect record of the
                                                              actual square footage or the number of
No changes in valuation or classification that are intended   bathrooms. These errors would be “errors in
to correct errors in judgment may be made by the              judgment.”


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assessor after the county board of appeal and equalization has adjourned. However, corrections of errors
that are merely clerical in nature, or changes that extend homestead to a property, are permitted after
adjournment until the tax extension date for that assessment year (December 31). Any changes made by
the assessor after boards of appeal and equalization must be fully documented and maintained in a file in
the assessor’s office and should be made available for review by any person. A copy of any changes
made during this period must be sent to the county board no later than December 31 of the assessment
year.

Any changes made after the conclusion of the County Board of Appeal and Equalization must be
handled by abatement. However, a tax amount is not necessary for the abatement to be processed.

Taxable Market Value

Taxable Market Value refers to the amount of value that is used in calculating net tax capacities and
referendum market value. This can differ from Estimated Market Value due to special programs the
property may be involved in such as Green Acres, This Old House, Plat Law, and Limited Market
Value. Taxable Market Value will be explained in greater detail in Section 04.11.

Contamination Values

The contamination value of a parcel of real property is the amount of market value reduction that is
granted for property tax purposes for the assessment year due to the presence of harmful substances as
defined in M.S. 115B.25, subdivision 7a. See Section 06.07 for a complete explanation of
contamination value and contamination tax.

Timeline of Assessment Cycle

Jan 2               Assessment date for both real and personal property.
Jan 15              Last day for owners to submit for class 1c or 4c(5) resort classification.
Feb 1               Last day for local assessors to deliver assessment records to the county assessor.
Feb 1               Last day to file for exemption from taxation with the assessor.
Feb 15              Last day for assessor to notify township and city clerks of Local Board dates.
Mar – Apr           Valuation notices are mailed. (Must be 10 days prior to Local Board meeting.)
Apr 1 – May 31      Local Boards of Appeal and Equalization are convened.
Apr 1               Initial “Spring Mini” abstract of assessment is due to Commissioner of Revenue.
Apr 15 – June 30    State Board of Equalization is convened.
Apr 30              Last day to file Property Tax Refunds for homestead property.
May 1               Last day to file application for Green Acres for the current assessment year.
May 1               Last day for assessor to return manufactured home assessment books to auditor.
May (1st Mon)       Assessor to return assessment books to the auditor.

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May 29             Last day for owners of manufactured homes assessed as personal property to
                   establish and apply to assessor for homestead treatment.
June (or before)   The assessor must notify the Commissioner of Revenue of any changes made to
                   the Spring Mini Abstract within 10 days of the final action of the Local Boards
                   and within 5 days of the County Boards.
June 1             The assessor must notify owners of their property’s contamination value by June 1
                   or within 30 days after the reduction in value is finally granted.
June (3rd Mon)     Assessor sends summaries of assessment to the auditor.
June               County Board of Appeal and Equalization convenes. (Last 10 mtg days in June.)
June 30            Last day for the Commissioner of Revenue to certify changes in assessments as
                   revised by the State Board of Equalization to county auditors unless the abstract
                   was late.
June 30            Last day for the Commissioner of Revenue to certify the assessments for state
                   assessed properties (public utilities, pipelines, transmission/distribution lines
                   outside corporate limits, and railroad operating property) to the county auditors.
July 1             Cut-off date for changes in taxable/exempt status to be effective for the current
                   assessment year.
July 1             All assessments of real and personal property are finalized. No changes, except
                   where authorized, may be made after this date.
July 1             Last day for senior citizens to file for property tax deferral (for the next yr’s tax).
July 31            Last day to file duplicate copy of Property Tax Refund for homestead property.
Aug 5              Last day for assessors in counties with fiscal disparities to certify to their auditors
                   the net tax capacity of commercial-industrial property within each municipality as
                   determined before any adjustments under the Tax Increment Law.
Sept 1             Last day to file in tax court regarding manufactured home valuation or taxes.
Sept 1             Last day for assessors to file the final Abstract of Assessment, the Fall Mini
                   Abstract, and the Market Value (by Parcel) File with the Commissioner of
                   Revenue.
Oct 1              Last day for taxpayers to apply to Revenue for Class 1b (blind & disabled) for
                   current assessment year.
Oct 15             Last day for assessors to certify approval of applications for Open Space for
                   current year.
Nov 1              Commissioner of Revenue provides list of parcels qualifying for Class 1b.
Nov 3              Last day to file application for Open Space for the next assessment year.
Dec 1              Last day for real property owners to establish homestead for the current year, and
                   for the assessor to publish a newspaper notice of the requirement to file an
                   application for homestead by December 15.
Dec 1              County assessor may examine appraisal records of local assessors.

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Dec 15              Last day for taxpayers to file a homestead application with the assessor for the
                    current year’s assessment.
Dec 31              Last day for assessor to file a copy of the corrections of clerical and
                    administrative errors made after Local and County Boards of Appeal and
                    Equalization with the county board of commissioners.
Dec 31              Expiration of terms of county assessors every 4th year beginning with 1972.
Dec 31              Last day to change assessment rolls to remove property that has become tax-
                    forfeited, or add tax-forfeited property that has been repurchased or sold.
Apr 30              Last day to file in tax court on prior year’s assessment.
(Note: “Assessor” generally refers to the county assessor unless otherwise noted.)

Visit www.taxes.state.mn.us for a calendar of the levy and tax cycle.




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04.03 – STATE ASSESSED PROPERTIES

Commissioner Assessed Property

The Commissioner of Revenue is required by law to make the assessment of several types of real and
personal property. These properties include flight property, railroads, and utilities (pipelines and electric
powerlines). These values are assessed via an “Order of the Commissioner”, which in turn, are mailed
to the counties.

Flight Property
The flight property of all air carriers operating in Minnesota are assessed annually by the Commissioner
of Revenue. Aircraft with a gross weight of less than 30,000 pounds that are used intermittently are
excluded. The Commissioner of Revenue calculates the airflight property tax and bills the carriers.
Counties do not receive the values and are not involved in extending or collecting the tax. The airflight
property tax goes directly to the Department of Transportation. Local units of government do not
receive any of this tax.

Railroads
The Commissioner of Revenue is also responsible for
valuing the operating property of railroads. To a             NOTE
certain extent, federal law limits the methods used to    Nonoperating property of railroad companies are
value railroad property. This law is the Railroad         assessed by county or local assessors. The
Revitalization and Regulatory Reform Act which was Commissioner of Revenue determines what is
                                                          operating or nonoperating property.
enacted in 1976 and became fully effective in 1979.
The act prohibits states from taxing railroads any differently or at a higher rate than other commercial-
industrial businesses.

There is an exemption for regional railroad authority operating property. Regional railroad authorities
are owned by government agencies such as counties. They generally own land and track that is being
used by an operating railroad. Typically, the operating railroad is purchasing the rail line on a contract
for deed. In these cases, the land and track are owned by the regional railroad authority and are exempt
from property and income tax.

                                                 Most of the information used to calculate the value is
    NOTE                                         taken from reports prepared by the individual railroad
Railroad property is valued as a whole unit (unitcompanies. These reports are subject to audit by
valuation method) rather than on a parcel by
parcel basis.
                                                 governmental agencies. Cost, income and market
                                                 indicators are all used to determine a value for railroad
property in Minnesota. Once a value is established, a portion is allocated to each of the counties that
have railroad property.

Railroad properties are Class 3a and have a class rate of 2.0% except those qualifying for a class rate of
1.5% on the first $150,000 of market value. Railroad operating property that consists of land, track, rail
yards, microwave sites and buildings will receive the 1.5% rate on one $150,000 amount of market
value per owner, per county. Operating property in multiple taxing jurisdictions within any county may


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be added to arrive at the $150,000 subject to the 1.5% rate. The county must select the parcel to receive
the 1.5% class rate unless notified by the owner that it should apply to a different parcel.

The Department of Revenue certifies railroad values to the county assessor by June 30 of each year.

Utility Property
The Commissioner of Revenue assesses pipelines and transmission and distribution power lines outside
of city limits, and recommends values for electric power and light utilities, based on reporting by the
companies.

Some portions of utility property are exempt and some are assessed locally. Locally assessed property
for utilities includes land, offices, garages and warehouses. In addition, there may be property held for
future use or that is not used for utility purposes. A number of exemptions—some for more general
categories such as pollution control property and some targeting specific facilities—are found in M.S.
272.02. A sliding scale market value exclusion is also provided for in M.S. 272.0211.

The valuation of utility property is based on the cost less depreciation of the property and the income
generated by the property. Typically there is no market indicator of value in utilities due to the very
limited number of sales. Like railroads, utilities are valued using the unit method.

Natural gas and petroleum pipelines and rural transmission lines or rural distribution lines will be
eligible for the first tier rate of 1.5% on the first $150,000 of value. Only one $150,000 amount per
company, per county receives the first tier rate. Multiple parcels within the county may be added to
reach the $150,000. Remaining value over $150,000 has a class rate of 2.0%. If a company has both
Commissioner assessed parcels and recommended value personal property parcels, only one $150,000
amount per company, per county shall be given the first tier rate.

The Department of Revenue certifies utility values to the county assessor by June 30 of each year.

Recommended Values

The Department of Revenue also provides values of certain utility properties as a service to county
assessors. These values are provided to the counties in a report entitled “Notice of Recommended
Valuations of Utilites”.

These recommended values are class 3a, real or personal property or utility machinery, as shown on the
orders. Personal property that is commissioner orders may have to be added to personal property (Item
44d, 44t, 45, 46) that is recommended value to arrive at the $150,000 that is eligible for the 1.5%
preference rate. Note that electric power lines are separated into distribution lines (Item 44d) and
transmission lines (Item 44t). It is the auditor’s responsibility to apply the 1.5% class rate to the
qualifying parcel. Normally, the owning utility may designate which parcel should have this lower rate.

If these recommended values are shown as Struct 3a, they are eligible for the 1.5% class rate on the first
$150,000 of market value. The provisions of M. S. 273.13 subd. 24 as amended by the 1999 legislature
regarding contiguous property for commercial industrial property will apply.


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All class 3a property consisting of tools, implements and machinery has a class rate of 2.0% and is not
eligible for the 1.5% class rate.

State General Tax Implications

The state property tax levy is applied to all railroad and utility property except generation machinery.
Because most generating plants have transmission machinery located on the same parcel, the value of
the generating machinery is separated from other value on the orders. The machinery value on parcels
marked Note Elec Gen Mach must not have the state property tax levy applied. Only local levies apply.
For all other parcels both local levies and the state levy apply.

Wind Energy Production

The Commissioner of Revenue collects reports from owners of wind energy conversion systems and
calculates the in lieu wind energy production tax. The tax amounts are certified to the owners and the
counties by February 28 of each year. The counties collect this tax in similar fashion as personal
property taxes. Section 06.07 further discusses the Wind Energy Production Tax.

References

M.S. 270.071 – 270.079 Airflight Property
M.S. 270.80 – 270.87 Railroads
M.S. 398A Regional Railroad Authorities
M.S. 272.02 Exemptions
M.S. 272.029 Wind Energy Production Tax
M.S. 273.33 – 273.41 Utility and Pipelines




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04.04 – REVIEW AND EQUALIZATION PROCESSES
The integrity of an ad valorem system rests upon an equitable and reliable process for establishing values.
The first step in this process is a formal notification to taxpayers of the value and classification that have
been determined by the assessor. A taxpayer can then engage in an appeals process that includes informal
appeal by contacting the assessor, more organized review at an open book meeting, appeals to local and/or
county boards of appeal and equalization, and a more formal appeal to tax court. In addition to hearing
taxpayer appeals, the county, and local boards to a much lesser extent, review and examine assessments in
general and can make changes of a broader scope. The State Board of Equalization also performs an
important review and equalization function and issues orders to ensure equity across counties. The state
conducts several sales ratio studies to assist in equalization and to aid the tax court. Many county and
local assessors also perform their own in-house sales ratio analyses to aid their own valuation efforts.

Notice of Valuation and Classification

Each year the county assessor is responsible for notifying all property owners of the market value and
classification of their property. The notice must be mailed at least 10 calendar days before the meeting of
the Local Board of Appeal and Equalization. Local boards meet between April 1 and May 31 each year.

The notice must include the following:
       1. The estimated market value for both the current and prior year’s assessment.
       2. The limited market value for both the current and prior year.
       3. The qualifying amount of any improvements under This Old House for the current
          assessment.
       4. The taxable market value after subtracting the amount of any qualifying improvements for
          the current assessment.
       5. The classification of the property for both the current and prior year’s assessment.
       6. A note that if the property is homestead and at least 45 years old, improvements made to the
          property may be eligible for a value exclusion under This Old House.
       7. The assessor’s office address and phone number.
       8. The date, place and time set for the meetings of the Local Board of Appeal and Equalization
          and the County Board of Appeal and Equalization.

The Commissioner of Revenue specifies the form of the notice.

Ideally, valuation notices should be sent separately from tax statements so that they receive independent
attention from taxpayers. However, the notices may be mailed in the same envelope with tax statements
as a cost saving measure, provided that they are not combined on a single document.




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Appeals and Equalization Processes

Although the process of appeals and the process of review and equalization are interrelated and targeted to
the same result of greater equity across properties, there is a fine distinction worth noting. The appeals
process more narrowly refers to taxpayers taking issue with their individual valuations and challenging
the value. Review and equalization refers to a process undertaken to look more broadly, independent of a
particular parcel, at how valuations by class are keeping up with sales, or how much consistency there is
across jurisdictions. The State Board of Equalization, for example, concerns itself mostly with the review
and equalization process while seldom tackling individual appeals. Conversely, Local Boards of Appeal
and Equalization are predominantly focused on hearing appeals and are not authorized to make orders
concerning entire classes of property. The County Board of Appeal and Equalization reviews and
equalizes values across local jurisdictions and also hears taxpayer appeals.

Informal Appeal
Property owners should be encouraged to call the appraiser or assessor whenever they have questions or
concerns about their market value, classification, or the assessment process. Almost all questions can be
answered during this informal type of appeal process. When taxpayers call to question their market value,
every effort should be made by appraisers to make appointments to inspect properties that have not been
previously inspected. If all data on the property is considered to be correct by the appraiser, the appraiser
should be able to show the property owner other sales that have taken place within the market that support
the appraiser’s estimated market value. If errors are found during the inspection, or other factors indicate
a value reduction is warranted, the appraiser can easily make these changes at this time.

Open Book Meetings
This type of meeting is an organized approach to field appeals in a less formal manner than the Local
Board of Appeal and Equalization. The assessor sets aside a time and place to meet with citizens
individually to discuss their specific concerns about their property. These meetings are generally an
alternative to the local board meeting, but can be in addition to local boards. If the taxpayer and the
county cannot reach an agreement after the open book meeting, the taxpayer may proceed to their Local
Board of Appeal and Equalization meeting (if one is held in addition to the open book meeting), or to the
County Board of Appeal and Equalization (if there is no local board meeting).

Local Board of Appeal and Equalization
The Local Board of Appeal and Equalization is typically made up of the city council or township board,
but can also be a specially appointed board if a city charter provides for one. The county assessor sets the
day and time of the local boards, providing notification to the city or town clerk by February 15. The
clerk must give published notice at least 10 days before the date of the meeting, which must be held
between April 1 and May 31. Taxpayers can make their appeal in person, by letter, or through a
representative. The assessor must be present to answer any questions and give evidence supporting their
value. The county assessor, or delegate, must also attend. In order to appeal to the County Board of
Appeal and Equalization, a property owner must first appeal to the Local Board of Appeal and
Equalization if one is held. The powers of the local board, whose assessments are performed by the
county, may be transferred to the county permanently or for a set term of at least three years.

Training and Quorum Requirements
Beginning with 2006 local boards, at least one member of each local board must have attended training
provided by the Department of Revenue within the last four years. If a local board does not meet this
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training requirement or did not obtain a quorum in the current year, their powers are transferred to the
county board for the following assessment year. This transfer of authority for failure to meet these
requirements must be identified on the valuation notice, and some procedure for review of assessments
(such as open book meetings) must be made available. A handbook that details the procedures and
responsibilities of a local board, which is used in the required training, is available on the Department of
Revenue website (www.taxes.state.mn.us).

Powers and Duties
Generally, a local board shall determine whether the taxable property in the town or city has been
properly placed on the assessment list and properly valued by the assessor. Specifically, a local board
may:
       Reduce the value of a property
       Increase the value of a property
       Correct the classification of a property
       Add omitted properties to the assessment list
However, there are several restrictions and limitations placed on the powers of a local board. A local
board:
       Cannot consider any prior year assessments
       Cannot order changes to entire classes of property
       Cannot exempt property or remove it from the assessment list
       Cannot reduce the aggregate assessment by more than 1% (not including reductions to correct
       clerical errors or double assessments)
       Cannot raise a person’s assessment without duly notifying the person of the intent to do so
       Cannot reduce an assessment if the owner refused the assessor acess to inspect the property and
       the interior of structures
       Cannot continue beyond 20 days from the time it convenes (without approval by the
       Commissioner of Revenue)

Assessment Changes
Assessments should be completed two weeks prior to the date scheduled for the local board and while
assessors may receive inquiries after the notice of the local board meeting has been posted and before it
has convened, changes should not be made during this time without bringing the changes to the local
board for action. No changes in valuation or classification may be made by the county assessor after the
local board has been adjourned until the tax extension date, except to correct for clerical errors or to
extend homestead treatment. These changes must be documented and made must be available for review
by any person, and must be sent to the county board by December 31 of the assessment year.

Documentation and Reporting
The local boards must prepare an official record of all actions taken by the board. The Department of
Revenue has a prescribed form for recording these changes that the county assessor will provide to the
local board and take possession of at the conclusion of the meeting. The county assessor is required to
submit any changes to the Commissioner of Revenue within 10 days following the final action of the local
board.

County Board of Appeal and Equalization
The county auditor plays an important part in the County Board of Appeal and Equalization. The board is
made up of the county auditor and the county commissioners, or a majority of them. If a county auditor

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cannot be present, the deputy county auditor, or, if there is no deputy, the court administrator of the
district court, shall serve in the auditor’s place. A county may instead delegate a special board with
alternate membership which must include the county auditor as a nonvoting member who serves as the
recorder for the special board. The board may meet on any ten consecutive meeting days after the second
Friday of June--defined as week days excluding Saturdays and Sundays. No action may be taken after
June 30. If a County Board of Appeal and Equalization completes its work in less than 10 days, it may
adjourn at that time; the statute does not specify that it MUST meet for all 10 days of the session.

Generally, a taxpayer must first appeal to the Local Board of Appeal and Equalization before appealing to
the county board. If the owner does not appear or appeal in person, by representative, or by letter, they
may not appeal to the State Board of Equalization. Decisions of the County Board of Appeal and
Equalization can be appealed to Tax Court.

Powers and Duties
The role of a County Board of Appeal and Equalization is to ensure equalization among individual
assessment districts and between classes of property. Specifically, the board may:
        Reduce the value of a property or classes of property
        Increase the value of a property or classes of property
        Correct the classification of a property
Note that unlike a local board, a County Board of Appeals and Equalization may order changes to entire
classes of property, but may not add properties to the assessment list (although it can recommend that the
auditor do so under their independent authority to add such omissions). However, like local boards, there
are several restrictions and limitations placed on the powers of the county board. The board:
        Cannot consider any prior year assessments
        Cannot exempt property or remove it from the assessment list
        Cannot reduce the aggregate assessment by more than 1%
        Cannot raise a person’s assessment without duly notifying the person of the intent to do so
Statute does not contain the specific provision for county boards that exists for local boards that prohibits
a reduction in value if the owner will not permit the assessor access to the property, but following this
policy would seem to be a reasonable approach for county boards to take.

The county board must also notify taxpayers whose town or city elected to transfer its powers and duties
to the county, and, prior to the meeting of the county board, shall make available to those taxpayers a
procedure, such as an open book meeting, for a review of its assessments.

Assessment Changes
The county assessor shall make the changes determined by the board in the assessment lists. No changes
in valuation or classification may be made by the county assessor after the county board has adjourned
until the tax extension date, except to correct for clerical errors or to extend homestead treatment. These
changes must be documented and made must be available for review by any person.

Documentation and Reporting
The county auditor shall keep an accurate record of the proceedings and orders of the board, to be
published as other proceedings of county commissioners. The county assessor is required to submit any
changes to the Commissioner of Revenue within 5 days following the final action of the county board,
and the changes shall be reflected in the Abstract of Assessment and Fall Mini Abstract.


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State Board of Equalization
The Commissioner of Revenue constitutes the State Board of Equalization. The board meets annually
between April 15 and June 30 to review the assessment for each county. The board reviews the ratios and
local effort for each property class and then makes any necessary changes. These changes can be in the
form of increases or decreases and they are made to land, buildings, or both. In addition, the State Board
can also review individual assessments and make any changes that are warranted.

It should be noted that the County Board cannot “undo” State Board orders. The State Board of
Equalization has the authority to issue orders up to 60 days after the final meeting of the County Board of
Appeal and Equalization.

Auditors are charged with applying the orders of the State Board of Equalization. These orders are mailed
to the auditor on or before June 30, or 30 days after submission of the Spring Mini Abstract, whichever is
later.

Tax Court
Appeals may be made directly to the Minnesota Tax Court, regardless of whether appeals are made to the
local or county boards of appeal and equalization. The Tax Court has statewide jurisdiction. Except for
an appeal to the Supreme Court, the Tax Court shall be the sole, exclusive and final authority for the
hearing and determination of all questions of law and fact arising under the tax laws of the state. There
are two divisions of tax court: the small claims division and the regular division.

The Small Claims Division of the Tax Court only hears appeals involving one of the following situations:
      The assessor’s estimated market value of the property is less than $300,000.
      Only one parcel is included in the petition, the entire parcel is classified as a residential homestead
      (1a or 1b) and the parcel contains no more than 1 dwelling unit.
      The entire property is classified as an agricultural homestead (1b or 2a).
      Appeals involving the denial of a current year application for homestead classification of the
      property.

The proceedings of the small claims division are less formal and property owners often represent
themselves. There is no official record of the proceedings. Decisions made by the small claims division
are final and cannot be appealed further. Small claims decisions do not set precedent.

The Regular Division of the Tax Court will hear all appeals, including those within the jurisdiction of the
small claims division. Decisions made here can be appealed to a higher court.

The principal office for the Tax Court is located in St. Paul. However, the Tax Court is a circuit court and
can hold hearings at any other place within the state so that taxpayers may appear before the court with as
little inconvenience and expense to the taxpayer as possible. Three judges make up the Tax Court. Each
may hear and decide cases independently. However, a case may be tried before the entire court under
certain circumstances.

The fee to file in the regular division of tax court is $235. It is $150 for the small claims division. These
fees went into effect on July 1, 2003. In addition, a county law library fee is required for both divisions.
The fee varies by county. Furthermore, taxpayers are required to pay for the court reporter’s time at
hearings that take place in the Regular Division of Tax Court.
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The petitioner must file in tax court on or before April 30 of the year in which the tax is payable.

Sales Ratios

A key tool in the equalization of values is the sales ratio. Sales ratio studies are used by assessors in
refining their valuation levels, by the tax court in adjudicating assessments, by the State Board of
Equalization in determining orders, and by various aid formulas that utilize measures of equalized values.

In order to obtain an equalized assessment, accurate and acceptable statistical measures are needed. Sales
ratios are used to measure assessment equality or inequality. Sales Ratios show the relationship between
the assessor’s estimated market value of a property and the sale price of the property.

       Sales Ratio     =       Estimated Market Value
                                      Sale Price

Sales prices are collected from documents called Certificates of Real Estate Value, or CRVs.

Certificate of Real Estate Value (CRV)
Whenever any real estate is sold for a consideration in excess of $1000, whether by warranty deed,
quitclaim deed, contract for deed or any other method of sale, a CRV must be filed. The CRV is filed in
the county in which the property is located.

When a property is sold, the assessor must remove the homestead classification for the following
assessment year unless the new owner qualifies and files for the homestead classification under his or her
name. No real estate sold or transferred shall be classified as a homestead unless the required CRV is
filed.

The CRV provides vital assessment and market data and is the foundation of all sales ratio studies.
Because of their importance, county appraisers must examine each certificate when it comes into the
office. If there is a wide difference between the sale price and the assessor’s EMV, the appraiser should
examine that property and the conditions and terms of sale. The appraiser may find that the property,
through improvement and deterioration, may have changed since its last physical inspection. The CRV
may also reflect an anticipated change in use. For example, when agricultural land is sold for
development purposes, the assessor’s EMV may be significantly different than the sale price of the
property that was purchased for development. Sales with various characteristics may be excluded from a
ratio study to prevent distorting sales under more typical conditions.

Statute suggests that CRVs are filed with the county auditor. The auditor then must submit two copies to
the assessor. The assessor forwards one copy to the Department of Revenue. Assessors also submit a file
of market values by parcel to the Department of Revenue, which the state uses to match against the CRVs
in performing its sales ratio studies.

Sales Ratio Studies
While individual assessors may perform their own in-house studies to aid in their assessments, the
Department of Revenue produces three formal sales ratio studies: a twelve-month study for the State

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Board of Equalization for equalization purposes, a nine-month study used by the Tax Court; and a 21-
month study used to produce equalized values for aid calculation purposes.

The sales ratio study used by the State Board of Equalization, and given the most attention by assessors,
spans a twelve-month period from October 1 to September 30. The sales occurring in this period are used
in evaluating the assessments for the assessment date that it spans, which is useful for the equalization of
the next year’s assessment. For example, the 2005 study uses sales occurring from October 1, 2004 to
September 30, 2005 which are compared to the January 2, 2005 assessor’s estimated market values and
could assist assessors in setting, or the State Board in equalizing January 2, 2006 values.

The Tax Court uses a 9-month study of sales occurring from January 1 to September 30 of a given year.
The preference for this timeframe may be an attempt to limit “spearing” or the “chasing of sales.” In
other words, the court may worry that a sale late in the year will cause the assessor to change that
property’s value for the January 2 assessment (which are not initially completed until two weeks prior to
local boards). Spearing could cause ratios to seem better than the assessor’s actual performance for the
majority of properties that did not sell. Studies with a shorter period, however, decrease the chance of
having a sufficient number of sales in local districts.

The 21-month sales ratio study runs from January 1 of one year to September 30 of the following year.
This study is used for determining equalized values which are used for local government aid (LGA),
school aids, and other purposes. In this study, sales taking place in each year are compared to the
assessor’s taxable market values for that year. For example, sales occurring from January 2004 to
December 2004 would be compared to the assessor’s 2004 values; while sales occurring from January
2005 to September 2005 are compared to the assessor’s 2005 values.

Measuring Assessment Levels
The overall level at which properties are appraised (i.e. whether they are high or low) is determined by
various measures of central tendency. In practice, three measures of central tendency are used to measure
the overall level of assessment: the mean ratio, median ratio, and the aggregate (weighted mean) ratio.

After calculating individual ratios for each sale, the mean ratio is calculated as the average of any group
of ratios. It is the arithmetic average of the group. The mean weighs each ratio equally and is easily
affected by one extreme sales ratio. This can lead to significant distortion of the average.

       Mean Ratio     =       Sum of all Ratios
                              Number of Ratios

The median ratio is found by arranging the ratios in order from highest to lowest (or vice versa) and then
selecting the middle ratio in the series. (In a case where there is an even number of ratios, the median is
the midpoint between the two middle ratios.) This is the most widely used measure of central tendency
because it is not affected by extreme ratios. Department of Revenue guidelines indicate that at least six
sales are needed in a jurisdiction to be reflective of actual assessment levels, and the median ratio should
be from 90% to 105% for the level of assessment to be acceptable.

The aggregate mean ratio or weighted mean is computed by dividing the total assessor’s EMV for all
properties sold by the total sale prices of those properties. With the weighted mean, each property sold is
given a weight based on its sale price. Higher priced properties are given more weight than lower priced

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properties. This effect is justified if the number of higher priced properties that were sold represents the
same percentage of higher priced properties in the city. For example, 30% of all property sales for a city
are properties over $400,000. Similarly, 30% of properties in the entire city are valued over $400,000.

       Aggregate Mean Ratio           =      Total Assessor’s EMV
                                              Total of Sale Prices

Measuring Assessment Uniformity
Measures of uniformity measure the quality and uniformity of the assessment. These measures of
uniformity include the range of ratios, the coefficient of dispersion, and the price related differential.

The range is the difference between the smallest and largest ratios. A large range typically indicates poor
uniformity. However, the range is highly susceptible to extreme ratios.

The coefficient of dispersion (COD) is an index by which individual ratios vary from the median ratio.
The COD is calculated by comparing the average difference between each ratio and the median ratio (in
absolute terms) to the median ratio. A low COD, indicating low variation from the median, suggests that
appraisals within a class or area are uniform, while a high COD, indicating larger variation from the
median, suggests that properties are being appraised at inconsistent percentages of market value. IAAO
standards suggest the COD for single family residential should generally be 15 or less (or 10 or less for a
newer, homogeneous area) and for income-producing properties the COD should generally be 20 or less
(or 15 or less in large, urban areas).

       COD =          Average Absolute Deviation x 100
                           Median Ratio

       General interpretation of a COD:
             0 – 10           =      Excellent
             11 – 20          =      Acceptable
             21+              =      Problem

The price-related differential (PRD) measures the relationship between the mean ratio and the aggregate
mean ratio. It is calculated by dividing the mean sale ratio by the aggregate mean sale ratio and then
multiplying the result by 100. Appraisal uniformity is said to be regressive if high-value properties are
under-appraised relative to low-value properties. This would be evident by a PRD of greater than 100. A
progressive assessment, evident by a PRD of less than 100, indicates that lower priced properties are
under-appraised. The PRD, therefore, measures vertical equity, whereas the COD measures horizontal
equity.

       PRD     =          Mean Ratio                 x 100
                      Aggregate Mean Ratio




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Equalized Values

Sales Ratios are used to equalize assessed values throughout the state by dividing the assessed values
(whether market values or net tax capacities) by the sales ratio. Dividing by the ratio essentially identifies
the value at the 100% level for a better comparison of relative values where assessments were equally
determined. For example:

       City            Assessed Value         Median Sales Ratio             Equalized Value
       A               $5,000,000             99.9%                          $5,005,005
       B               $3,500,000             65.0%                          $5,384,615
       C               $4,000,000             81.7%                          $4,895,961

In this example, City B looks to be the property poor city, but if the value in these cities were perfectly
assessed, they are actually the property rich city. State aid, for instance, should not reward poor
assessment performance by giving more aid to the lowest performing assessor’s city. The equalization of
values controls for varying assessment levels.

The 21-month study is used to produce adjusted (equalized) net tax capacities for school aid and state aid
calculations. The median ratio is used for all aid calculations. The adjusted net tax capacity is also used
for levy apportionment. Bonding companies use the adjusted estimated market values of cities and towns
to measure fiscal capacities for bond rating calculations.

About Abatements

Abatements, as provided in M.S. 375.192, are not generally considered to be a part of the process of
appeal, review, and equalization, and should not be relied on as a method for reaching appropriate values.
However, abatements are an administrative method of correcting errors in valuation or classification that
may escape the review process. Because no changes in valuation or classification which are intended to
correct errors in judgment are allowed after the County Board of Appeals and Equalization, except for the
correction of clerical errors and the extension of homestead status, any changes made after the conclusion
of the County Board of Appeal and Equalization must be handled by abatement. A tax amount is not
necessary for the abatement to be processed.

See Section 12.01 for more information on abatements.




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04.05 – EXEMPTIONS
All real and personal property in the state is taxable except Indian lands and such other property as is by
law exempt. Taxation is the rule and exemption is an exception, so all property is presumed taxable and
the burden of proof is on the taxpayer to establish entitlement to the exemption. The basis of tax
exemptions is the accomplishment of public purposes and not the favoring of particular persons or
corporations at the expense of taxpayers generally. Ownership, use, and necessity of ownership are key
elements in determining exemption. Administrative officers should not place property in the category of
tax-exempt property unless the right to exemption is free from doubt.

It is important to note that property that is exempt from property tax is not exempt from special
assessments. Special assessments are not taxes; they are fees for a service or improvement.

Types of Property Eligible for Exemption

Minnesota Statute 272.02 is the main statute defining exemptions. (Some exemptions are identified in
M.S. 272.01 and may be found in other statutes, but these are usually cross referenced in M.S. 272.02.)
The following is a general summary of the types of exemptions. References are provided for those
seeking specific details.

Indian Lands
Indian lands, being property of sovereign entities, are exempt from taxation (M.S. 272.01)

Cemeteries
All public burying grounds are exempt (M.S. 272.02, subd. 2). All private lands of up to 100 acres, or
300 acres if owned and managed by religious corporations, that are laid out and dedicated as a private
cemetery, are exempt (M.S. 272.02, subd. 58).

K-12 Schools
All public schoolhouses are exempt, as is property leased to school districts under certain specific
conditions (M.S. 272.02, subd. 3 and 42). Private schools, where the curriculum parallels that of public
education (such as a parochial school, but not beauty or dance schools), are also exempt as academies or
seminaries of learning (M.S. 272.02, subd. 5). However, property owned, leased or used by any
elementary or secondary school district for a home, residence or lodging house for any teacher, instructor,
or administrator, and any property owned by any public school district which is leased to any person or
organization for a nonpublic purpose for one year or more pursuant to M.S. 123B.51, subd. 4, shall not be
exempt (M.S. 272.02, subd. 36).

Colleges & Universities
All academies, colleges, universities, and seminaries of learning are exempt (M.S. 272.02 subd. 5). A
specific exemption is also provided for property used to provide computing resources to the University of
Minnesota (M.S. 272.02, subd. 21).

Hospitals
All public hospitals are exempt (M.S. 272.02, subd. 4). Rather than being limited to those owned by
public subdivisions, this includes hospitals that are open to the general public and not operated for private
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profit. However, property owned or leased by, or loaned to, a hospital and used principally as a
recreational or rest area for employees, administrators, and medical personnel is not exempt (M.S. 272.02,
subd. 37).

Church Property
All churches, church property, and houses of worship are exempt (M.S. 272.02, subd. 6). This does not
include property that is rented out to private individuals and companies, or to property used for purposes
other than those for which the church was established. Personal and real property that a religious
corporation, formed under M.S. 317A.909, necessarily uses for a religious purpose is exempt to the extent
provided in M.S. 317A.909, subd. 3.

Charitable Institutions and Various Nonprofit Uses
Institutions of purely public charity are exempt (M.S. 272.02, subd. 7). Without getting into all of the
nuances to how “purely public charity” is viewed, this provision is limited to institutions that are
administered wholly or exclusively for the benefit of the public and therefore does not apply broadly to
any nonprofit endeavor. As such, there are a number of more specific exemptions provided for property
used for various nonprofit purposes, including: emergency shelters for victims of domestic abuse (M.S.
272.02, subd. 13); senior citizen facilities (M.S. 272.02, subd. 14); transitional housing facilities (M.S.
272.02, subd. 20); ice arenas and baseball parks owned by nonprofits (M.S. 272.02, subd. 25);
recreational property for disabled veterans (M.S. 272.02, subds. 27 and 81); agricultural historical society
property (M.S. 272.02, subd. 49); children’s homes (M.S. 272.02, subd. 75); and a specific elderly living
facility (M.S. 272.02, subd. 66).

Public Property
All public property exclusively used for any public purpose is exempt (M.S. 272.02, subd. 8). Specific
provisions are also found in statute that declare this public property exemption for, or otherwise extend
exemption to: certain public campgrounds (M.S. 272.02, subd. 18); government property acquired under a
lease purchase agreement or installment purchase contract (M.S. 272.02, subd. 30); property held by
political subdivisions for later resale for economic development or housing purposes (M.S. 272.02, subd.
39), property of the Western Lake Superior Sanitary Board (M.S. 272.02, subd. 59); unfinished sale or
rental projects of municipal or redevelopment agencies (M.S. 272.02, subd. 60); pedestrian systems
(including skyways) and public parking structures (M.S. 272.02, subd. 61); municipal recreation facilities
(M.S. 272.02, subd. 62); property owned by a housing and redevelopment authority or a designated
housing authority (M.S. 272.02, subd. 76); property of projects of housing and redevelopment authorities
(M.S. 272.02, subd. 77); property of a regional railroad authority (M.S. 272.02, subd. 78); and property of
volunteer fire departments (M.S. 272.021). An exemption is also provided for property directly managed,
but not owned by, a housing redevelopment authority or public housing agency; although these properties
do make payments in lieu of taxes (M.S. 272.026). Note, however, that state owned property used to
house officers or employees is subject to assessment and taxation under M.S. 272.011.

Personal Property
Personal property is generally exempt, with the taxable exceptions being enumerated (M.S. 272.02, subd.
9). Taxable personal property includes:
     personal property which is a part of utility systems—electric generating, transmission, or
     distribution systems; pipeline systems for transporting or distributing water, gas, crude oil, or
     petroleum products; or mains and pipes used in the distribution of steam or hot or chilled water for
     heating or cooling buildings or structures—(see M.S. 272.02, subd. 9, clause (a));
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     railroad docks and wharves which are part of the operating property of a railroad company (see
     M.S. 272.02, subd. 9, clause (b) and M.S. 270.80, subd. 3);
     all improvements upon land vested in the United States or any corporation whose property is
     not subject to the same mode and rule of taxation as other property (see M.S. 272.02, subd. 9,
     clause (c) and M.S. 272.03, subdivision 2, clause (3));
     leasehold or other personal property interests that would be taxable if the lessee or user were
     the fee owner (see M.S. 272.02, subd. 9, clause (d) and M.S. 272.01, subdivision 2; M.S. 273.124,
     subdivision 7; or M.S. 273.19, subdivision 1);
     manufactured homes and sectional structures on leased or rented sites, including storage sheds,
     decks and similar removable improvements constructed on the site of a manufactured home,
     sectional structure, park trailer, or travel trailer (see M.S. 272.02, subd. 9, clause (e) and M.S.
     273.125, subdivision 8, paragraph (f)); and
     flight property (see M.S. 272.02, subd. 9, clause (f) and M.S. 270.071, subd. 7).

Although personal property that is a part of electric generating, transmission, or distribution systems is
identified as being taxable, a variety of specific exemptions, notwithstanding this provision, are provided
for a variety of facilities meeting various criteria (M.S. 272.02, subdivisions 29, 33, 43, 44, 45, 47, 48, 51,
52, 53, 54, 55, 56, 67, 68, 69, 70, 71, 72, and 82). In addition, a specific exemption is provided for
electric power distribution lines used primarily for supplying electricity to farmers (M.S. 272.02, subd.
19), for photovoltaic devices used to produce or store electric power (M.S. 272.02, subd. 24), and for
property used to generate electricity to manufacture or produce goods, products, and services (M.S.
272.027).

Also, while manufactured homes and sectional structures on leased or rented sites are taxable as personal
property, residential buildings located on temporary sites (such as the lots of dealers or movers), that are
intended to be moved, are exempt for one assessment year (M.S. 272.02, subd. 46).

The personal property exemption also extends to items identified in the definition of real property in M.S.
272.03, subd. 1, as not being included as real property (M.S. 272.02, subd. 9). These components of
personal property include tools, implements, and certain machinery and equipment; mine shafts, tunnels,
and other underground openings used to extract ores and minerals taxed under M.S. chapter 298; and
attachments or installations that are part of a telephone communication system.

Economic Development Property
Several exemptions are provided for various economic development purposes:
   Business incubator property: Certain property owned by a nonprofit charitable organization and
   used as a business incubator in a high-unemployment county is exempt (M.S. 272.02, subd. 31). This
   exemption is limited to two contiguous parcels not exceeding 40,000 square feet, and expires after
   taxes payable 2011.
   Job opportunity building zone (JOBZ) property: Some improvements to real property (not the
   land itself), and personal property, classified under 273.13, subd. 24 (commercial/industrial), and
   located within a JOB Zone, are exempt. Improvements and tangible personal property in an
   Agricultural Processing Facility Zone—a unique subset of JOBZ—are also exempt. Neither of these
   exemptions applies to levies to pay general obligation bonds or other school district levies included in
   the debt service levy of the district under 123B.55. (See M.S. 272.02, subd. 64.)
   International economic development zone property(IEDZ): Some improvements (not the land
   itself), and personal property, classified under 273.13, subd. 24 (commercial/industrial), and located

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   within an International Economic Development Zone are exempt. The exemption does not apply to
   levies to pay general obligation bonds or levies approved prior to the zone designations under M.S.
   126C.17. (see M.S. 272.02, subd. 83.)
   Border city development zone (BCDZ) property: All class 1, 3, 4, and 5 property that is newly
   constructed in a BCDZ, as specified in M.S. 469.1731, after designation of the zone is exempt from
   all levies except levies for the principle and interest of debt and except for all taxes levied by school
   districts other than school referendum levies under M.S. 126C.17, to the extent and for the duration
   provided for this program. (See M.S. 272.0212.)

Important additional information on the JOBZ, IEDZ, and BCDZ programs are found in Chapter 13.

Pollution Control Property
Several exemptions are also provided for various forms of pollution control property or wastewater
treatment facilities:
    Personal property and certain real property used for the abatement and control of air, water, or
    land pollution is exempt upon application with and order of the commissioner of revenue (M.S.
    272,02, subdivisions 10 and 41.)
    Agricultural containment facilities (containment tanks, cache basins, and the necessary structure)
    used to confine agricultural chemicals as required by the commissioner of agriculture under M.S.
    chapters 18B or 18C, are exempt (M.S. 272.02, subd. 23).
    Manure pits and appurtenances installed and operated in accordance with a permit, order, or
    certificate issued by the Minnesota Pollution Control Agency are exempt (M.S. 272.03, subd. 28).
    A specific wastewater treatment system used to treat effluent from a private potato processing
    facility is exempt (M.S. 272.02, subd. 32).
    Facilities owned by water and wastewater treatment providers who have contracted with a
    municipality to provide services are exempt to the extent provided in M.S. 471A.05 (M.S. 272.02,
    subd. 63).

Wetlands
Wetlands, as defined in statute, are exempt (M.S. 272.02, subd. 11). This exemption does not grant the
public any additional or greater right of access to the wetlands or diminish any right of ownership to it.

Native Prairie
Native prairie lands, which are determined by the commissioner of the Department of Natural Resources,
are exempt (M.S. 272.02, subd. 12). This exemption does not grant the public any additional or greater
right of access to the native prairie or diminish any right of ownership to it.

Utilities
Although the personal property exemptions and exceptions relating to utility systems are noted above
under the personal property category, several other provisions provide both real and personal property
exemptions for various utilities:
   Hydroelectric and hydromechanical power: Real and personal property on public land used for the
   production of hydroelectric or hydromechanical power is exempt as developed and operated under a
   lease pursuant to M.S. 103G.535 (M.S. 272.02, subd. 15).
   Hot water heat: Real and personal property owned and operated by a private, nonprofit corporation
   exempt from federal income tax under 501(c)(3), primarily used in the generation and distribution of
   hot water heat for heating buildings and structures, is exempt (M.S. 272.02, subd. 17).
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   Wind energy conversion systems: All real and personal property of a wind energy conversion
   system, except the land on which the property is located, is exempt (M.S. 272.02, subd. 22).
   (However, a production tax is established for wind energy conversion systems under M.S. 272.029
   and payments in lieu are provided for under M.S. 272.028. See Section 06.07 for more information
   on the wind energy production tax.)

Miscellaneous
Other exemptions are identified in M.S. 272.02 for satellite broadcasting facilities (subd. 16), a major
league baseball park (subd. 50), and Spirit Mountain Recreation Area (subd. 79). Other exemptions may
be provided in uncodified session laws (such as the River Centre exemption under Laws 2005, chapter
152, article 1, section 38); but the extent of such provisions is unknown.

Comparable to some HRA property and Wind Energy Conversion Systems, which are exempt yet subject
to a payment in lieu, real and personal property described in M.S. 298.25 is also exempt for the in lieu tax
on taconite and iron sulfide under M.S. 298.24; likewise, deposits of mineral, metal, or energy resources
are exempt for the in lieu tax under M.S. 298.015. (M.S. 272.02, subd. 73)

Tax Imposed for Private Use for Profit

Tax Imposed
When any real or personal property that is exempt from ad valorem taxes, and taxes in lieu thereof, is
leased, loaned, or otherwise made available and used by a private individual, association, or corporation
in connection with a business for profit, there shall be imposed a tax, for the privilege of so using or
possessing such real or personal property, in the same amount and to the same extent as though the lessee
or user was the owner of the property. (M.S. 272.01, subd. 2, paragraph (a).)

Taxes imposed by this provision shall be assessed to the lessees or users in the same manner as owners
except that such taxes shall not become a lien against the property. These taxes shall be collected in the
same manner as personal property taxes. (M.S. 272.01, subd. 2, paragraphs (c) and (d).)

Exceptions
This tax does not apply to:
   Property leased or used as a concession in or relative to the use in whole or part of a public park,
   market, fairgrounds, port authority, economic development authority, municipal auditorium,
   municipal parking facility, municipal museum, or municipal stadium. (M.S. 272.01, subd. 2,
   paragraph (b), clause (1).)
   Certain property of an airport. (M.S. 272.01, subd. 2, paragraph (b), clauses (2), (3), and (4).)
   Property leased, loaned, or otherwise made available to a private individual, corporation, or
   association under a cooperative farming agreement made pursuant to M.S. 97A.135. (M.S.272.01,
   subd. 2, paragraph (b), clause (5))
   Property leased, loaned, or otherwise made available to a private individual, corporation, or
   association under M.S. 272.68, subd. 4. (M.S.272.01, subd. 2, paragraph (b), clause (6))
   Federal property for which payments are made in lieu of taxes in amounts equivalent to taxes which
   might otherwise be imposed. (M.S. 272.01, subd. 3, paragraph (a).)
   Various property used for power lines, communication lines, pipelines, and cable communications.
   (M.S. 272.01, subd. 3, paragraph (b).)

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   Property presently owned by any educational institution chartered by the territorial legislature (M.S.
   272.01, subd. 3, paragraph (c).)
   Indian lands or property of any corporation organized as a tribal corporation under the Indian
   Reorganization Act of June 18, 1934. (M.S. 272.01, subd. 3, paragraph (d) and (e).)
   Real property owned by the state and leased pursuant certain trunk highway statutes. (M.S. 272.01,
   subd. 3, paragraph (f).)
   Certain property owned by a seaway port authority. (M.S. 272.01, subd. 3, paragraph (g) and (h).)

Taxation of Lessees and Equitable Owners

Tax Treatment
Tax-exempt property held under a lease for a term of at least one year (and not already taxable under the
provisions for private use for profit), or under a contract for the purchase thereof, shall be considered, for
all purposes of taxation, as the property of the person holding it (i.e. it becomes taxable). (M.S. 273.19,
subd. 1.)

For this purpose, a lease includes any agreement, except a cooperative farming agreement pursuant to
M.S. 97A.135, subd. 3, or a lease executed pursuant to M.S. 272.68, subd. 4, permitting a nonexempt
person or entity to use of the property, regardless of whether the agreement is characterized as a lease, and
shall be considered as having a “term of at least one year” if the term is for a period of less than one year
but permits the parties to renew the lease without some form of offering to other bidders (see M.S.
273.19, subd. 1a.).

Exceptions and Special Provisions
This provision does not apply to (1) the airport property identified in M.S. 272.01, subd. 2, paragraph (b),
clauses (2), (3), and (4); and (2) seaway port authority property exempt under M.S. 272.01, subd. 3. (M.S.
273.19, subd. 1 and 2.).

Property located within a federal reservation that has been conveyed to the State of Minnesota by the
federal government, and had been occupied and used by a branch of the armed services shall have a net
tax capacity no greater than the value added to the property by improvements made by the lessee. (M.S.
273.19, subd. 3).

Property located within a national park that was leased back for noncommercial residential purposes to
the person owning the property at the time of acquisition by the United States shall be exempt (unless the
property is subsequently leased or subleased to another person). However, the value of improvements
made to the property to which the lessee has salvage rights shall be taxable. (M.S. 273.19, subd. 4.)

Application and Eligibility

Given the presumption that all property is taxable and the burden on taxpayers to prove their eligibility for
exemption, most property tax exemptions are not automatically extended. Owners of property seeking
exemption from property taxes must file an application for exemption. Applications, which are prescribed
by the commissioner of revenue, are due in the assessor’s office by February 1st of the assessment year in
which exemption is first sought. Typically, exempt properties must reapply for exempt status every third
year after 1983 (1983, 1986, …, 2004, 2007, etc.)

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Application requirements do not apply to the following properties (although the burden to prove
eligibility may still exist):
    Churches and houses of worship
    Property used solely for educational purposes by academies, colleges, universities, or seminaries of
    learning
    Property owned by the State of Minnesota or any political subdivision thereof,
    Exempt personal property
    Pollution control property
    Domestic abuse shelters
    Hydroelectric, hydromechanical power plant on state or local government owned site,
    DNR owned campsite leased land
    Transitional housing facilities
    Wind energy conversion systems
    Agricultural chemical containment facilities
    Photovoltaic devices
    Ice arenas and baseball parks owned by nonprofits

Valuation of Exempt Property

Assessors are required to value exempt property in the same manner that other real property is valued and
assessed. Assessors must value exempt property and prepare an exempt abstract every 6 years. The last
assessment and abstract was completed in 2004 and will be required again in 2010. Acreage and market
values of all natural resources lands for which in-lieu payments are made under M.S. 477A.11 to 477A.14
must also accompany the exempt abstract.

Conversion to Exempt or Taxable Uses

Exempt to Taxable
Any property exempt from taxation on January 2 of any year which, due to sale or other reason, loses its
exemption prior to July 1 of that year shall be placed on the current assessment rolls for that year.

The valuation shall be determined with respect to its value on January 2 of such year. The classification
shall be based upon the use to which the property was put by the purchaser, or in the event the purchaser
has not utilized the property by July 1, the intended use of the property, determined by the county
assessor, based upon all relevant facts. (see M.S. 272.02, subd. 38, paragraph (a).)

Taxable to Exempt
Property subject to tax on January 2 that is acquired before July 1 of the year is exempt for that
assessment year if the property is to be used for an exempt purpose. (see M.S. 272.02, subd. 38, paragraph
(b).)

Tax Forfeited Property
Property that forfeits to the state for nonpayment of real estate taxes on or before December 31 in an
assessment year, shall be removed from the assessment rolls for that assessment year. Forfeited property
that is repurchased or sold at a public or private sale, on or before December 31 of an assessment year
shall be placed on the assessment rolls for that year's assessment. (see M.S. 272.02, subd. 38, paragraph
(c).)
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04.06 – CLASSIFICATION OF PROPERTY
Although the classification of property for purposes of taxation can be thought of as a broad concept
where any feature that differentiates properties in any way is a form of classification, this section
addresses the more specific and overt application of different rates of taxation on different defined types
of property. Many states draw a distinction between market values and assessed values which reflect the
application of different assessment ratios for a limited set of different property types (such as
commercial/industrial, residential, agricultural, etc.). Minnesota, which has a uniformity clause in its
constitution that allows for different classes of property to be taxed at different rates, has perhaps the most
detailed classification system for a wide range of defined classes of property. The class rates, as opposed
to assessment ratios, are applied to taxable market values to yield a measure called net tax capacity, which
is the basis for most taxes. The net tax capacity is a computed, conceptual basis for taxation, as opposed
to the resultant assessed values used in most states. (The focus of this section is on the classifications of
property; see Section 04.13 for further discussion of net tax capacity.)

The assessor, in the process of determining values, also is responsible for determining the classification
(or use) of property. Property is classified according to its use on the assessment date (January 2nd) of
each year. If the property is not currently being used, it is classified according to its most probable,
highest and best use. Property owners do not get to choose or request what they want their property to be
classified; it is the assessor’s job to make this determination.

The classification system starts with the definition of classes and their class rates.

Classifications and Class Rates

Table 04.06-1 summarizes the classes of property and their class rates. While the determination of class
rates is perhaps the most important function served by the definition of classes, many other features of the
system may relate to only certain classifications, so the determinations do have significance beyond the
class rate that is applied to yield net tax capacities. The table, for example, identifies which classes are
subject to the state tax base (as will be discussed in later sections) and notes the alternative class rates
used for the state property tax.

Generally speaking, there are currently five categories of classes, each of which has numerous specific
sub-classifications:
       Class 1 = Variations of Residential Homesteads
       Class 2 = Agricultural Homesteads, Agricultural Lands, and Timber
       Class 3 = Commercial, Industrial, and Public Utility Property
       Class 4 = Rental Housing, Non-Homestead Residential, Agricultural Dwellings, and Seasonal
       Class 5 = Minerals and Other Miscellaneous Property

The classifications and class rates are continually being adjusted and redefined by the legislature, with
seldom a year passing without at least some minor adjustment. The current range of rates is significantly
compressed from what existed in previous years. For example, when the modern classification and net
tax capacity based system was created in the 1988 Legislature, the initial class rates for taxes payable in
1990 ranged from 0.4% for the first $32,000 of value for blind/disabled homesteads to 5.25% for second-
tier commercial/industrial property, vacant land, and other property. Generally, the classification rates are
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Table 04.06-1 - Classification Rates for Assessment Year 2007 (Taxes Payable 2008)
Class    Description                                                     Tiers                Class Rate       State Rate
1a       Residential Homestead                                           First $500,000       1.00%            NA
                                                                         Over $500,000        1.25%            NA
1b       Blind/Disabled Homestead (Both Ag and Non-Ag)                   First $32,000        0.45%            NA
1c       Ma & Pa Resorts (Comm. SRR < 250 days, incl. homestead)         First $500,000        0.55%           NA
                                                                         $500,000 - $2,200,000 1.00%           NA
                                                                         Over $2,200,000       1.25%           1.25%
1d       Migrant Housing (Structures Only)                               First $500,000       1.00%            NA
                                                                         Over $500,000        1.25%            NA
2a       Agricultural Homestead
           House, Garage, One Acre (HGA):                                First $500,000       1.00%            NA
                                                                         Over $500,000        1.25%            NA
            Remainder of Farm:                                           First $790,000       0.55%            NA
                                                                         Over $790,000        1.00%            NA
2b       Timberlands                                                                          1.00%            NA
         Non-Homestead Agricultural Land                                                      1.00%            NA
         Private Airports                                                                     1.00%            NA
3a       Commercial/Industrial and Public Utility                        First $150,000       1.50%            1.50%
                                                                         Over $150,000        2.00%            2.00%
         Public Utility Machinery
           Electric Generating                                                                2.00%            NA
           All Other                                                                          2.00%            2.00%
         Transmission Line Right-Of-Way (Owned in fee by a utility)                           2.00%            2.00%
3b       Employment Property (Border City Zones)                         First $150,000       1.50%            1.50%
                                                                         Over $150,000        2.00%            2.00%
4a       Apartments (4+ units, including private for-profit hospitals)                        1.25%            NA
4b(1)    Residential Non-Homestead (1-3 Units Not 4bb or SRR)                                 1.25%            NA
4b(2)    Unclassified Manufactured Homes                                                      1.25%            NA
4b(3)    Ag Non-Homestead (2 or 3 Units, Garage, One Acre)                                    1.25%            NA
4b(4)    Unimproved Residential                                                               1.25%            NA
4bb(1)   Residential Non-Homestead (Single Unit)                         First $500,000       1.00%            NA
                                                                         Over $500,000        1.25%            NA
4bb(2) Ag Non-Homestead (Single Unit, Garage, One Acre)                  First $500,000       1.00%            NA
                                                                         Over $500,000        1.25%            NA
4c(1)    Seasonal Residential Recreational (SRR)
            Commercial (Resorts)                                         First $500,000       1.00%            1.00%
                                                                         Over $500,000        1.25%            1.25%
            Non-Commercial (Cabins)                                      First $76,000        1.00%            0.40%
                                                                         $76,000 - $500,000   1.00%            1.00%
                                                                         Over $500,000        1.25%            1.25%
4c(2)    Qualifying Golf Courses                                                              1.25%            NA
4c(3)    Non-Profit Community Service Oriented Organization                                   1.50%            NA
4c(4)    Post-Secondary Student Housing                                                       1.00%            NA
4c(5)    Manufactured Home Parks                                                              1.25%            NA
4c(6)    Metro Non-Profit Recreational Property                                               1.25%            NA
4c(7)    Certain Non-Comm Aircraft Hangars and Land: Leased Land                              1.50%            NA
4c(8)    Certain Non-Comm Aircraft Hangars and Land: Private Land                             1.50%            NA
4c(9)    Bed and Breakfasts (up to 5 units)                                                   1.25%            NA
4d       Qualifying Low-Income Rental Housing                                                 0.75%            NA
5(1)     Unmined Iron Ore and Low-Grade Iron-Bearing Formations                               2.00%            2.00%
5(2)     All Other Property Not Otherwise Classified                                          2.00%            NA
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anchored by a rate of 1.00% for the first tier of residential homestead, with other rates set in relation to
this standard.

The specific class “names” such as 4b(3) or 4c, have derived from the paragraphs and clauses under
which they were defined. For example class 4c was defined under the subdivision in M.S. 273.13 that
defined class 4 property, and it was the specific type of property found in paragraph (c) of the statute. As
changes have been made to the statutes over time, however, the construction of the statutes has changed.
Class 4c, for example, is now actually defined in paragraph (d) of the subdivision for class 4 property and
paragraph (c) describes what was labeled class 4bb property. As a result, the class titles have become an
odd assortment of lingo.

Homestead Status

One of the most important distinctions in the various definitions of classes is the distinction of
homesteads from non-homesteads or other sorts of property. Homestead status is a fundamental concept
that has been closely guarded by the legislature. Even though current class rates have largely eliminated
the difference between homesteads and non-homesteads (which once had much different class rates),
homestead status is important for many features of the tax system because it determines eligibility for
programs such as property tax refunds and senior deferrals.

Homestead Determination
Homestead determination is a complex topic when all of the exceptions are considered. Agricultural
homesteads have some special provisions. This manual does not cover all of the exceptions, rules, and
details pertaining to homesteads. The Assessor’s Property Tax Administrator’s (Course A) Manual
located on the Department of Revenue’s website provides greater detail on homestead determination.
Some general rules, definitions, and topics for homestead determination follow.

   Residential real estate that is occupied and used for the purposes of a homestead by its owner is a
   residential homestead. The owner must be a Minnesota resident.
   Agricultural land that is occupied and used as a homestead by its owner is an agricultural
   homestead. The owner must be a Minnesota resident.
   Full-Year Homestead – The property is occupied by its owner on January 2nd of the assessment
   year.
   Mid-Year Homestead – The property must be owned and occupied by its owner on December 1st of
   the assessment year and application must be made by December 15th to qualify for a mid-year
   homestead. Mid-year homesteads result in the same tax as a full-year homestead.
   An owner may not have the benefits of the homestead classification in more than one place. A person
   may have only one homestead and that must be their place of abode on January 2nd. (Exceptions to
   this rule may include a second mid-year homestead in the year of a sale or in cases of divorce.)

Homestead requirements are prescribed by the state. No county or other jurisdiction has the authority to
impose additional requirements.




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Manufactured Homes
In the case of manufactured homes assessed as personal property, the homestead must be established and
application made by May 29 of the assessment year.

Homestead Application and Discontinuation
A person who meets the requirements for the homestead classification must file a homestead application
with the county assessor to initially obtain the homestead classification. The Commissioner of Revenue
prescribes the format and content of the application. After the initial application, owners are not required
to file a new application every year. However, the assessor may, at any time, require a new application to
verify the homestead status.

By law, owners are required to inform the assessor’s office within 30 days that they have vacated the
property. The assessor should reclassify the property as non-homestead as of the next assessment date. If
a homesteaded property sells, the new owners technically have until December 15 of the following year to
file for homestead under their name.

Social Security Numbers
Every property owner applying for homestead classification must furnish to the county assessor the social
security number of each occupant who is listed as an owner of the property on the deed of record, the
name and address of each owner that does not occupy the property, and the name and social security
number of each owner’s spouse who occupies the property. Each owner and their spouse who occupies
the property must sign the application. In the case of a relative homestead, the owner and the qualifying
relative must both sign the application. (Individual Taxpayer Identification Numbers, or ITINs, may
substitute for social security numbers.)

Social security numbers and affidavits of the property owners are considered to be private data on
individuals. However, this private data may be disclosed to the Commissioner of Revenue.

Fraudulent Homesteads/Social Security Match
Each year, counties must provide the Commissioner of Revenue with a list that includes the name and
social security number of each property owner and their spouse that occupies a property or the qualifying
relative that occupies the property. The Commissioner generates a list that states if the same social
security number has been used to homestead more than one property. Counties are required to investigate
these situations to determine if the homestead classifications were property claimed. If the homestead has
been improperly claimed, the county auditor must determine the amount of homestead benefits the owner
received. The owner must reimburse the county for the difference in tax between homestead and non-
homestead and pay a penalty equal to 100% of the homestead benefits.

It should be noted, beginning in 2007, the information provided in the “duplicate homestead” file
mentioned above will also be included in the new Property Tax Refund file.

Relative Homesteads
Residential real estate that is occupied and used for the purposes of a homestead by a qualifying relative
of the owner may be given a relative homestead. A qualifying relative for residential property is a parent,
stepparent, child, stepchild, grandparent, grandchild, brother, sister, uncle, aunt, nephew or niece. This
relationship may be by blood or by marriage. In the case of residential relative homesteads, the owner of


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the property does not have to be a Minnesota resident. The occupying relative has to be a Minnesota
resident. (See M.S. 273.124, subdivision 1, paragraph (c).)

Agricultural homesteads have additional limitations and a different list of a qualifying relatives. A
qualifying relative for agricultural property is a child, grandchild or parent of the owner or the child or
grandchild of the spouse of the owner. In the case of agricultural homesteads, both the owner and the
qualifying relative must be Minnesota residents. The owner of the agricultural property must not receive
the homestead treatment on any other agricultural property in Minnesota and is limited to only one
agricultural homestead per family. (See M.S. 273.124, subdivision 1, paragraph (d).)

Neither the related occupant nor the owner of the property may claim a property tax refund for a
homestead occupied by a relative unless the property is owned jointly and one of the joint owners
occupies the property as their permanent primary residence.

In the case of a residential relative homestead located on agricultural land, only the house, garage, and 1st
acre of land shall be classified as a relative homestead, but an agricultural relative homestead includes the
house garage, other farm buildings and structures, and agricultural land.

Special Ag Homesteads (“Actively Farming”)
The Special Agricultural Homestead provisions extend homestead status to property owners who do not
live on their farm but actively farm their land or who have a spouse, child, or grandchild who actively
farms the land. More details on these homesteads can also be found in the Assessor’s Property Tax
Administrator’s Manual or in fact sheets on the Department of Revenue website. (See Fact Sheet 4A:
Special Agricultural Homestead, Fact Sheet 4B: Special Agricultural Homestead Property Owned or
Leased by a Qualified Entity, and Fact Sheet 4C: Special Agricultural Homestead Property Held Under a
Trust.)

Prohibition on Seasonal Residential Recreational
Property that has been classified as seasonal residential recreational property at any time during which the
current owner or the spouse of the current owner has owned it cannot be reclassified as a relative
homestead. It also cannot be classified as 4bb (non-homestead).

Townhouses and Condominiums
Upon qualification, a total townhouse, condo, or cooperative unit, including its interest in any common
areas shall be awarded the homestead classification. The value of the unit’s interest in the common area
should be included in the total value of the unit. The common areas should not be valued or taxed
separately.

Other Topics
There are many other special cases of homestead determination that are not explained here. Consult the
Assessor’s Property Tax Administrator’s (Course A) Manual or the Homestead Manual that are put out by
the Department of Revenue for details on these topics.
    Doubtful Cases as Homesteads
    Spousal Homesteads
    Social Security Numbers for Aliens
    Nursing Home or Boarding Care Residents
    Property Subject to Jurisdiction of Probate Court
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   Homesteads where a Relative is Required for Financing
   Trust Property as a Homestead – See Fact Sheet 6
   Homesteads Owned by or Leased to a Family Farm Corporation
   Manufactured Home Park Cooperative
   Motels Owned by Corporations or Partnerships
   Leased Buildings or Land
   Homestead of a Member of the Armed Forces, Peace Corp or VISTA
   Church or Non-Profit Corporation Owned Renovated Houses

Certification of 1b Property and Blind Homesteads

One unique subset of homestead property is the Class 1b designation for homesteads of qualifying blind
or disabled persons. This class, which receives a reduced class rate on its first $32,000 of market value,
applies to:

   (1) any blind person who is blind as defined in Minnesota Statute 256D.35, or the blind person and
       the blind person’s spouse
   (2) any “veteran” who:
          i. served in the active military or naval service of the United States; AND
         ii. is entitled to compensation under the laws and regulations of the United States for permanent
             and total service-connected disability due to the loss, or loss of use, by reason of amputation,
             ankylosis, progressive muscular dystrophies, or paralysis of both lower extremities, such as
             to preclude motion without the aid of braces, crutches, canes or a wheelchair; AND
        iii. has required a special housing unit with special fixtures or movable facilities made necessary
             by the nature of the veteran’s disability, or the surviving spouse of the deceased veteran for
             as long as the surviving spouse retains the special housing unit as a homestead.
   (3) any person who is permanently and totally disabled.

Property is classified and assessed under clause (3) only if the government agency or income-providing
source certifies that the homestead occupant satisfies the disability requirements of this paragraph.
Property is classified and assessed pursuant to clause (1) only if the Commissioner of Revenue certifies to
the assessor that the homestead occupant satisfies the requirements of this paragraph.

Previous income requirements for persons who qualify for class 1b were removed beginning with the
2004 assessment.

The Minnesota Department of Revenue awards and maintains the blind and disabled classifications. The
necessary forms need only be filed once in order to qualify for the classification . They must be filed with
the state on or before October 1 to be effective for property taxes payable during the next calendar year.
However, this application must contain the information necessary to verify that the property owner or the
owner’s spouse satisfied the requirements on or before June 30 of the filing year. The Department of
Revenue sends a list of qualifying taxpayers to the County Assessor on November 1 of each year.



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Agricultural Property and the House, Garage, and One Acre (HGA)

Agricultural classifications generally attempt to separate the residence from the remaining farm operation
and farm land by referring to the house, garage, and immediately surrounding one acre. This is often
referred to as the HGA and carries class rates equivalent to residential property whether it is homestead or
non-homestead. The remainder of a farm receives reduced class rates relative to the HGA. County
computer systems create separate records for the HGA to appropriately apply class rates and other
features of the property tax system.

Agricultural Homesteads – First Tier Valuation Limit

Beginning with the 2006 assessment year, amount in which the first tier is eligible to receive the 0.55
percent class rate (previously the first $600,000) will be annually adjusted upon the ratio of the previous
assessment year’s statewide average taxable market value of agricultural property per acre of deeded farm
land to the same measure for assessment year 2004. The limit is to be rounded to the nearest $10,000, and
will be certified annually by the Department of Revenue. See Chart 04.06-1 below for a history of these
amounts.


Chart 04.06-1: Ag Homestead Certified First Tier Valuation Limit Amounts

Assessment Year                                              Valuation Limit
      2006                                                   $     690,000
      2007                                                   $     790,000
      2008                                                   $
      2009                                                   $
      2010                                                   $


Non-Homestead and Multi-Unit Residential Property

With the designation of homestead status for some residential property, comes the counter group of
properties that are non-homestead. The classification system has attempted in different ways to
distinguish between single non-homestead dwellings, duplexes, triplexes, apartments, and other types of
housing or non-commercial property.

Single unit dwellings that are neither homesteads nor cabins are typically 4bb(1), or 4bb(2) if agricultural,
and have class rates the same as for homesteads. A single unit could instead be class 4b(1), if the property
has previously been classed as seasonal recreational residential by the current owner but is no longer used
seasonally. Class 4b(1) and most other class 4 property carries the class rate for the second tier of
homestead property on its entire value (1.25%). Only student housing carries a lower class rate (1.00%),
while non-profit community service organization property and certain non-commercial aircraft hangars
carry a higher class rate (1.50%).

If any unit of a duplex or triplex is homestead, the whole duplex or triplex is treated as homestead.
Duplexes and triplexes that are not homesteads are class 4b(1) non-homesteads, or 4b(3) if agricultural.
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Apartments are generally defined as buildings of four or more units (class 4a). If the owner resides in a
unit of an apartment building, that unit may be homestead. Certain low-income rental property (LIRC) is
classified as class 4d and benefits from a lower class rate of 0.75%. The only other multi-unit
classification is for bed and breakfasts (class 4c(9)), which receive the residential non-homestead standard
rate of 1.25% for the first 5 units, with additional units generally being classes as commercial.

Seasonal Recreational Property

There are three types of seasonal recreational property (SRR), all of which must be devoted to temporary
and seasonal use for not more than 250 days in the year preceding the assessment: “cabins,” “resorts,” and
“ma & pa resorts.”

Noncommercial SRR, or cabins, have the same class rates as for non-homestead 4bb(1) property, which in
turn is the same as for homesteads. However, cabins (class 4c(1)) are subject to the state tax and, of those
classes which are subject to the state tax, only cabins have a different class rate for the state tax in that the
first $76,000 of value has an effective class rate of 0.40%.

Resorts are commercial SRR, other than any property or portion of property that is class 1c. This class
4c(1) property has the same class rates as cabins but does not receive the discounted class rate for the state
tax.

Ma & pa resorts are those resorts that abut lakeshore and include a portion used as a homestead by the
owner. Class 1c is divided into three tiers; up to $500,000 at 0.55%; $500,000 to $2,200,000 at 1.00%;
and over $2,200,000 at 1.25%. Any value in tier three is also subject to the state general property tax.

Other Classification Descriptions and Provisions

For greater detail on all classes of property, see the statutory definitions in M.S. 273.13, or the Assessor’s
Property Tax Administrator’s (Course A) Manual found on the Department of Revenue’s website.

Split Class Properties

Properties that have more than one use are “split class” properties. An example would be a hardware
store with four apartments on the second floor. The hardware store would be classed commercial, and the
second floor would be classed apartment or residential, depending upon if the owner or a relative of the
owner lived in them or if they were rented out to others. The classification of the property is split
between the two uses. The assessor must determine a value for each of the classifications.

Borrowing

Borrowing is a historical term that refers to the shifting of value in a split class property from non-
homestead classes to a homestead class. The provision originated to allow homesteads in a split class
situation to maximize the first tier homestead benefit. If the homestead value was below the tier break,
the non-homestead value would be borrowed to, or converted to, homestead value for the purposes of
calculating net tax capacity. This provision was briefly eliminated for taxes payable 2002, but uproar
over the resulting tax increases prompted the legislature to reinstate it so that it could be phased-out
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between assessment years 2002 and 2004. Borrowing is no longer allowed for the 2005 assessment, taxes
payable 2006, and thereafter

Multiple Owners (Fractional Homestead)

When multiple owners create partial homestead and partial non-homestead classification for a property,
the homestead share is often referred to as a fractional homestead. For example, if two brothers and one
unrelated person own a house, each having a one-third interest, and one of the two brothers lives in the
house and claims it as his homestead, the property is one-third homestead, one-third relative homestead,
and one-third non-homestead.

Chaining or Linking of Parcels

All parcels with property class rates based on value tiers, including but not limited to agricultural parcels,
residential homestead, commercial/industrial, and seasonal residential recreational, are subject to
provisions that require them to be chained, or linked, together for computation of net tax capacity.

The definition of class 3 requires that in the case of contiguous parcels of property owned by the same
person or entity, the “preferred commercial” benefit (i.e. the lower class rate) for the first tier of value can
only be applied once for the group of parcels as a whole. (The exception to this is that each separate
business may receive the first-tier reduced class rate if the contiguous property owned by the same person
or entity contains separate businesses in separate structures.) In order to limit a group of commercial
parcels to the $150,000 first tier limit, they must be chained in the calculation. For example, the first
parcel may be valued at $120,000 and a second parcel may have a value of $70,000. Without chaining,
the restriction would not be able to be enforced and both parcels would all be at the first-tier rate. By
chaining these parcels, only the first $30,000 of the second parcel would receive the first tier class rate.

Agricultural land, as defined in M.S. 273.13, includes contiguous acreage of ten acres or more and may be
on multiple adjacent parcels under the same ownership. Since the remainder of a farm beyond the HGA
has a tier break at $690,000 in value, chaining is also needed to apply this break to the farm as a whole.

Special ag homestead (aka “actively farming” homesteads) also contain a provision that the owners must
live within four townships or cities from the agricultural property that is being farmed. These records
must recognize this link.

Economic Development Zones

Values of property that qualify for benefits in certain economic development zones need to be identified
separately from the non-qualifying values. Although they do not have different class rates, the land and
building on the same parcel may be subject to different tax rates.

Border City Development Zones
These zones can exist in only five cities – Moorhead, Breckenridge, Ortonville, Dilworth, and East Grand
Forks. Certain qualifying properties are exempt from all tax rates except debt rates, special assessments,
and non-equalized school levies.

CLASSIFICATION OF PROPERTY                                                                        04.06 - 9
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Job Opportunity Building Zones and Ag Processing Facility Zones
JOB Zones and Ag Processing Zones were enacted by the 2003 Legislature as a way to stimulate business
activity in Greater Minnesota through various state and local tax incentives. The zones were designated
by the Department of Employment and Economic Development in December of 2003 and will last for up
to 12 years. The qualifying value of these zone properties must be kept separate from the other values on
the parcel as qualifying JOBZ/APFZ values are exempt from all tax rates except general obligation bond
debt and school district rates for other school district levies included in the debt service levy of the district
under M.S. 123B.55. Because the land is always fully taxable, more than one tax rate will exist on the
same parcel.

International Economic Development Zone
The IEDZ provisions were enacted by the 2005 Legislature with the intent of stimulating the development
of a regional distribution center that will increase the capacity and capability to handle international air
freight. The Foreign Trade Zone Authority will determine the boundaries of the zone, as well as the
development and business plans. Like JOBZ, this zone will have a maximum duration of 12 years and
provide many state and local tax incentives. Unlike JOBZ however, the IEDZ does not provide an
exception to general obligation debt or any other rates.

See Chapter 13 for more information on economic development zones.
Reference

M.S. 273.13




CLASSIFICATION OF PROPERTY                                                                         04.06 - 10
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.07 – MANUFACTURED HOMES

Manufactured Homes, Sectional Structures, Park Trailers, and
Travel Trailers, Defined

Manufactured Homes
A manufactured home, as defined for purposes of property taxation in M.S. 273.125, is a structure
transportable in one or more sections, which is built on a permanent chassis, and designed to be used as
a dwelling with or without a permanent foundation when connected to the required utilities, and contains
the plumbing, heating, air conditioning, and electrical systems in it. A manufactured home includes any
accessory structure which is an addition or supplement to the manufactured home and, when installed,
becomes a part of the manufactured home. (M.S. 273.125, subd. 8, paragraph (a).)

For broader purposes, the definition of manufactured home in M.S. 327.31, subdivision 6, is
substantially the same but also incorporates the provision that a manufactured home in traveling mode,
is eight body feet or more in width or 40 body feet or more in length, or, when erected on site, is 320 or
more square feet.

Sectional Structures
A sectional structure is a building or structural unit that has been in whole or substantial part
manufactured or constructed at an off-site location to be wholly or partially assembled on-site alone or
with other units and attached to a permanent foundation. (M.S. 273.125, subd. 8, paragraph (d).)

Park Trailers
Park trailers do not include manufactured homes. The statutory definition of a park trailer is a trailer
that:
   exceeds 8 ½ feet in width in travel mode but is no larger than 400 square feet when the collapsible
   components are fully extended or at maximum horizontal width; and
   is used as temporary living quarters. (M.S. 168.011, subd. 8.)

Travel Trailers
The statutory definition of a travel trailer is a trailer, mounted on wheels, that:
   is designed to provide temporary living quarters during recreation, camping, or travel;
   does not require a special highway movement permit based on its size or weight when towed by a
   motor vehicle; and
   complies with certain size and weight restrictions in M.S. chapter 169. (M.S. 168.011, subd. 8.)

Taxability

Manufactured homes and park trailers are exempt from motor vehicle taxation and are subject to
property taxation as either real or personal property. Travel trailers are subject to motor vehicle taxation
and must be issued a license plate. Travel trailers become subject to property taxes if they are occupied


MANUFACTURED HOMES                                                                              04.07 - 1
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as human dwelling places and do not conspicuously display current registration plates on the assessment
date. Only manufactured homes and park trailers held by a licensed dealer as inventory are exempt.
(M.S. 168.012, subd. 9.)

Sectional structures must be valued and assessed as an improvement to real property if the owner of the
structure holds title to the land on which it is located or is a qualifying lessee of the land under M.S.
273.19. (M.S. 273.125, subd. 8, paragraph (d).)

Assessment as Real Property

A manufactured home that meets each of the following criteria must be valued and assessed as an
improvement to real property, the appropriate real property classification applies, and the valuation is
subject to review and the taxes payable in the manner provided for real property:
   The owner of the unit holds title to the land on which it is situated;
   The unit is affixed to the land by a permanent foundation, or is installed at its location in accordance
   with the Manufactured Home Building Code, or is affixed to the land like other real property in the
   taxing district; and
   The unit is connected to public utilities, has a well and septic system, or is serviced by water and
   sewer facilities comparable to other real property in the taxing district. (M.S. 273.125, subd. 8,
   paragraph (b).)

Assessment as Personal Property

A manufactured home that meets each of the following criteria must be assessed at the rate provided by
the appropriate real property classification but must be treated as personal property, and the valuation is
subject to review and the taxes payable in the manner as provided in M.S. 273.125:
   The owner of the unit is a lessee of the land under the terms of a lease, or the unit is located in a
   manufactured home park but is not the homestead of the park owner;
   The unit is affixed to the land by a permanent foundation; or is installed at its location in accordance
   with the Manufactured Home Building Code; or is affixed to the land like other real property in the
   taxing district; and
   The unit is connected to public utilities, has a well and septic system, or is serviced by water and
   sewer facilities comparable to other real property in the taxing district. (M.S. 273.125, subd. 8,
   paragraph (c).)

Improvements

Improvements such as storage sheds, decks, etc. constructed on property that is leased as a site for a
manufactured home, sectional structure, park trailer, or travel trailer are taxable. In cases where the
property is leased as a site for a travel trailers, improvements are taxable only if its total estimated
market value is over $500. The property is taxable as personal property to the lessee of the site if it is
not owned by the owner of the site. The property is taxable as real estate if it is owned by the owner of
the site. As a condition of permitting the owner of the manufactured home, sectional structure, park

MANUFACTURED HOMES                                                                             04.07 - 2
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trailer or travel trailer to construct improvements on the leased land, the owner of the site must obtain
the permanent home address of the lessee of the site and provide it to the assessor upon request. (M.S.
273.125, subd. 8, paragraph (f).)

Taxation of Manufactured Homes Assessed as Personal Property

Taxes on manufactured homes assessed as personal property are assessed and taxed in current year,
rather than assessed in one year with taxes payable in the following year as is the case for all other
property. Valuation notices must be sent at least ten days before the meeting of the local board of appeal
and equalization. The assessor must supply the assessments to the county auditor on or before May 1.
(M.S. 273.125, subd. 1 and 2.)

The county auditor must determine the taxes by applying the tax rates of the current year (as levied in
the preceding year). As such, taxes levied on manufactured homes as personal property are additional
taxes since the values are not included in determining the tax rates. The auditor must supply the
calculated taxes to the treasurer by May 30. (M.S. 273.125, subd. 2.)

Manufactured home personal property tax statements must be mailed by July 15. If the taxes are greater
than $50, they are due in two equal installments on August 31 and November 15. If the taxes are less
than or equal to $50, they are due in full on August 31. Taxes remaining unpaid after the due date are
delinquent, and a penalty of eight percent must be assessed and collected as part of the unpaid taxes.
(M.S. 273.125, subd. 3.)

Local or county boards may change the assessor’s valuation and must send the changes to the auditor for
immediate recomputation of the tax. The auditor may also reduce the tax if the property is entitled for
homestead classification. (M.S. 273.125, subd. 6.)

Petitions of appeal may be made to the district court, (which may be transferred to the Tax Court), on or
before October 1 of the year in which the tax becomes payable. (M.S. 273.125, subd. 4.)

Taxes Paid Before Transfer of Title

A certificate of title is required for a manufactured home (M.S. 168A.02). The title to a manufactured
home cannot be transferred unless the application for transfer of title is accompanied by a statement
from the county auditor or county treasurer where the manufactured home is presently located, stating
that all manufactured home personal property taxes levied on the unit in the name of the current owner
at the time of transfer have been paid (M.S. 168A.05, subd. 1a). This applies even if the transfer of title
is requested prior to tax statements for the current year since these taxes are considered to be levied as of
January 1 of the payable year. In these cases, the auditor or treasurer shall estimate the taxes that will be
due for the current year and provide the statement of taxes having been paid after receipt of the
estimated tax. This provision does not apply to: 1) a manufactured home which is sold or otherwise
disposed of pursuant to M.S. 504B.271 or 504B.265 by the owner of a manufactured home park (M.S.
168A.05, subd. 1b); 2) to an owner of a manufactured home park as defined in M.S. 327.14, subdivision
3, who provides to the county auditor or treasurer a notarized statement that the manufactured home is
to be destroyed or moved to a site and destroyed (M.S. 168A.05, subd. 1c).


MANUFACTURED HOMES                                                                               04.07 - 3
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04.08 – SPECIAL VALUATIONS AND DEFERRALS

Deferral programs recognize that market value of certain types of property may exceed the value that
would be determined if the property were limited to its current use. For example, a golf course or a piece
of farmland may be highly valued for development as residential property but would carry a much lower
value if preserved as a golf course or farmland. To provide protection from these development pressures,
deferral programs allow the difference in value and the associated taxes to be deferred, generally with
taxes for a number of years being due once the property changes use.

See Table 04.08 - 1, located at the end of this Section 04.08, for a side-by-side comparison of the
programs discussed below.

Minnesota Open Space Property Tax Law

The Minnesota Open Space Property Tax Law (M.S. 273.112) recognizes that development pressures for
residential, commercial, or other uses can jeopardize the supply of private outdoor, recreational, open
space, and park lands whose valuations have increased in excess of their open space uses. This law
allows owners of open space property to apply for the deferment of the market value that exceed the open
space use value, and its associated taxes.

Qualifications
Open space eligible for valuation and tax deferment includes real estate that is actively and exclusively
devoted to:
   golf,
   skiing,
   lawn bowling,
   croquet,
   polo, or
   archery or firearms ranges.

Golf and skiing properties must be 5 acres or more in size to qualify.

Real estate is entitled to the valuation and tax deferment under the Open Space law only if it is:
   operated by private individuals and open to the public,
   operated by firms or corporations for the benefit of employees or guests,
   operated by private clubs having membership of 50 or more or open to the public (provided the club
   does not discrimination the basis of sex or marital status).

The law contains a number of specific provisions pertaining to discrimination and membership of private
golf courses, and provides that private golf courses failing to meet these requirements must be valued and
assessed as if it were platted and available for sale as individual parcels for commercial, industrial,
residential, or seasonal residential use.
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Application
Application for deferment of taxes and assessment shall be made at least 60 days prior to January 2 of
each year. Such application shall be filed with the assessor of the taxing district in which the real property
is located on such form that is prescribed by the Commissioner of Revenue. The assessor may require
proof by affidavit or other written verification that the property qualifies.

Valuation
The value of any real estate that qualifies under the Open Space law is to be determined solely with
reference to its appropriate private outdoor, recreational, open space and park land classification and
value. In determining such value, the assessor is not to consider the value such real estate would have if
converted to commercial, industrial, residential or seasonal residential use.

The assessor is to also make a separate determination of the market value of the real estate. The tax based
upon the appropriate local tax rate applicable to such property in the taxing district shall be recorded on
the property assessment record. The difference between the tax based upon property’s Open Space value
and the tax based upon the property’s market value is the amount of tax that is deferred under the Open
Space law.

Deferred Taxes
The tax imposed by the Minnesota Open Space Property Tax Law is a lien upon the property assessed to
the same extent and duration as other taxes imposed upon property in the state. The tax is to be annually
extended by the county auditor and be collected and distributed in the same manner as for other property
taxes.

When real property that is or has been valued and assessed according to the Open Space law no longer
qualifies, that portion which no longer qualifies is to be subject to additional taxes in the amount equal to
the taxes which were deferred.

The additional taxes are to be extended against the property on the tax list for the current year and are
only to be levied with respect to the last 7 years which the property had been assessed under the Open
Space law. No interest or penalties are to be levied on the additional taxes if they are timely paid.

This does not apply to real property that ceases to qualify because it is acquired by the State of Minnesota
or a political subdivision, agency, or instrumentality of the State, provided that the property continues to
be used for a qualifying purpose for at least 5 years from the date the property was acquired.

When title to real estate that is valued and assessed under the Open Space law is transferred, no additional
taxes are to be extended against the property if the property continues to qualify for Open Space and the
purchaser files an application for the continued deferment of taxes within 30 days of the sale.

Minnesota Agricultural Property Tax Law (Green Acres)

The Minnesota Agricultural Property Tax Law (M.S. 273.111), commonly known as the Green Acres
Law, provides for deferment of assessment and taxes payable on farm lands whose valuations reflect
prices in excess of farm land values due to non-agricultural factors such as potential residential or
commercial development or hunting land. The law is intended to protect agricultural land from
development pressures. The law states that certain property owners, who are engaged in agricultural
SPECIAL VALUATIONS AND DEFERRALS                                                                04.08 - 2
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pursuits, can apply for deferment of higher valuations and associated taxes, including special assessments,
and continue to have the property valued based upon its valuation for agricultural purposes.

Qualifications for Green Acres
Real estate, consisting of at least 10 acres, or a nursery or greenhouse, and qualifying for classification as
class 1b (blind/disabled homestead), 2a (ag homestead), or 2b (non-homestead ag land) is entitled to
valuation and tax deferment under Green Acres only if it is primarily devoted to agricultural use as
specified in statute, and meets the homestead or ownership qualifications as specified in statute.

Application
Application for deferment of taxes and assessment under Green Acres are to be filed with the assessor on
or before May 1 of the year prior to the year in which the taxes are payable. Any application filed and
granted will continue in effect for subsequent years until the property no longer qualifies. The application
is to be filed with the assessor of the taxing district in which the real property is located and is to be in
such a form as prescribed by the Commissioner of Revenue. The assessor may require proof, by affidavit
or otherwise, that the property qualifies.

Valuation
The value of any real estate that qualifies for Green Acres tax deferment is to be determined solely with
its reference to its appropriate agricultural classification. In determining the value for ad valorem tax
purposes, the assessor shall use sales data for agricultural lands located outside the 7 county metropolitan
counties having similar soil types, number of degree days, and other agricultural characteristics.
Furthermore, the assessor shall not consider any added values resulting from non-agricultural forces.

The assessor is to make a separate determination of the market value of the real estate. The tax based on
the classification rate and the market value is to be recorded on the property assessment record. The
difference between the tax based upon the agricultural value and the tax based upon the market value (as
development land) is the amount of tax which is deferred due to Green Acres.

Deferred Taxes and Special Assessments
The tax imposed by the Green Acres Law is a lien against the property assessed to the same extent and
duration as other taxes imposed upon property in the state. The tax is extended by the county auditor and
is collected and distributed in the same manner as other property taxes.

Land that previously qualified for tax deferment no longer qualifies due to the fact that it is not primarily
used for agricultural purposes but would otherwise qualify for a period of at least 3 years will not be
required to make payment of the previously deferred taxes. Sale of the land prior to the expiration of the
3-year period requires payment of deferred taxes as follows:
   Sale in the year the land no longer qualifies requires payment of the current year’s deferred taxes plus
   payment of the deferred taxes for the 2 prior years.
   Sale during the second year the land no longer qualifies requires payment of the current year’s
   deferred taxes plus payment of the deferred taxes for the prior year.
   Sale during the third year the land no longer qualifies requires payment of the current year’s deferred
   taxes.


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In these cases, deferred taxes shall be paid even if the land would continue to qualify under the new
owner. When such property is sold or no longer qualifies, or at the end of the 3-year period, whichever
comes first, all deferred special assessments plus interest are payable in equal installments spread over the
time remaining until the last maturity date of the bonds issued to finance the improvement for which the
assessments were levied. If the bonds have matured, the deferred special assessments plus interest are
payable within 90 days. The provisions of section 429.061, subdivision 2, apply to the collection of these
installments. Penalties are not imposed on any such special assessments if timely paid.

When real property which is or has been valued and assessed according to the Green Acres law otherwise
no longer qualifies, that portion which no longer qualifies is to be subject to additional taxes in the
amount equal to the taxes which were deferred. That is the difference between the tax that is based upon
the agricultural value and the tax that is based on the value as development land. The tax that is based
upon the value as development land is not to be greater than if the actual sale price in an arm’s length
transaction has been used in lieu of the market value. The additional taxes are to be extended against the
property on the tax list for the current year. The additional taxes are only to be levied with respect to the
last 3 years that the property had been valued and assessed under Green Acres. No interest or penalties
are to be levied on the additional taxes if they are timely paid.

The payment of special local assessments levied after June 1, 1967 for improvements made to any real
property under Green Acres together with the interest will, on timely application, be deferred as long as
the property qualifies for Green Acres or is transferred to Agricultural Preserve. If special assessments
are being deferred, the governmental unit is to file a certificate containing the property’s legal description
and the amount deferred with the county recorder of the county in which the property is located. When
the property no longer qualifies for deferment, all deferred special assessments, plus interest, are to be
paid in equal installments spread over the time remaining until the last maturity date of the bonds issued
for the improvements. If the bonds have matured, the deferred special assessments plus interest are to be
paid within 90 days. Penalties are not to be levied on the special assessments if timely paid.

When real property that is valued and assessed under Green Acres is sold, no additional taxes or deferred
special assessments plus interest are to be extended against the property provided the property remains
qualified for Green Acres and the new owner applies for the continued deferment within 30 days of the
sale. (For purposes of meeting the income requirement, the property purchased is to be considered with
other qualifying property owned by the purchaser.)

Metropolitan Agricultural Preserve Act

The Metropolitan Agricultural Preserve Act (M.S. 473H) was designed to encourage agricultural use
retention on land specifically located in close proximity to the Minneapolis-St. Paul Metropolitan Area.
The program was established in 1980 and the structure of the law is very similar to that of Green Acres in
that the valuation is based solely on the land’s agricultural use. However, lands entered into the Ag
Preserve program are protected from substantial tax levy increases by limiting annual tax capacity rate
increases to 105% of the average statewide levy. Farmlands are also protected from special assessments
and eminent domain rights of local governments. Unlike Green Acres, Ag Preserve land is protected from
repayment of any taxes or special assessments when terminating status under this law.



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The eligibility requirements for Ag Preserve land are more restrictive than those of Green Acre farmlands.
Unlike Green Acres, which allows eligibility statewide, Ag Preserve status is granted only to:
   Land located within the 7-county metropolitan area;
   Land that is at least 40 acres in size; and
   Land that is specifically zoned for long-term agricultural use by the planning board.

Therefore, land and not the land owner, determines qualification for use of the law.

Although no penalty is imposed upon withdrawal of the land from this law, land owners are required to
commit the property to provisions of the law for a minimum of 8 years. In addition, an 8-year termination
notice is required before the land can be removed from Ag Preserve tax rolls.

Real property within Ag Preserve is valued and assessed as usual, except as provided in the following
provisions.

All land classified as agricultural and being used for agricultural purposes, exclusive of buildings, shall be
valued solely with reference to its appropriate agricultural classification and value, notwithstanding
sections 272.03, subdivision 8, and 273.11. In determining the value, the assessor should not consider
any added values resulting from non-agricultural factors.

Computation of Tax
   A. After the assessor has estimated the market value of all land valued according to the provisions of
      Ag Preserve, the assessor must compute the net tax capacities of those properties by applying the
      appropriate classification percentages. When computing the rate of tax pursuant to section 275.08,
      the county auditor shall include the net tax capacity of land as proved in this clause.

   B. The county auditor shall compute the tax on Ag Preserve land and non-residential buildings by
      multiplying the net tax capacity by the total local tax rate for all purposes as provided in clause A.

   C. The county auditor shall compute the tax on Ag Preserve land and non-residential buildings by
      multiplying the net tax capacity by the total local tax rate for all purposes as provided in clause A,
      subtracting $1.50 per acre of land in the preserve.

   D. The county auditor shall then compute the maximum property tax on the Ag Preserve land and
      non-residential buildings by multiplying the net tax capacity by 105% of the previous year’s
      statewide average local tax rate levied on property located within townships for all purposes.

   E. The tax due and payable by the owner of the land valued as Ag Preserve land and non-residential
      buildings will be the amount determined in clause C or D, whichever is less. The State of
      Minnesota will reimburse the taxing jurisdictions for the amount of the difference between the net
      tax determined under this clause and the gross tax in clause B.

Residential buildings will continue to be valued and classified as they would be in the absence of this
section, and the tax on those buildings shall not be subject to the limitation contained in this program.


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The county may transfer money from the county conservation account created in section 40A.152 to the
county revenue fund to reimburse the fund for the tax lost as a result of this subdivision or to pay taxing
jurisdictions within the county for the tax lost. The county auditor shall certify to the Commissioner of
Revenue on or before June 1 the total amount of tax lost to the county and taxing jurisdictions located
within the county as a result of this subdivision and the extent that the tax lost exceeds funds available in
the county conservation account. Payment shall be made by the state on December 15 to each of the
affected taxing jurisdictions, other than school districts, in the same proportion that the ad valorem tax is
distributed if the county conservation account is insufficient to make the reimbursement. There is a
sufficient amount annually appropriated from the Minnesota conservation fund under section 40A.151 to
the Commissioner of Revenue to make the reimbursement provided in this subdivision. If the amount
available in the Minnesota conservation fund is insufficient, the balance that is needed is appropriated
from the general fund. (See also the Ag Preserve Credit discussion in Section 06.06.)

Eligibility and Application
Property owners must apply, by March 1 of the assessment year, for their land to be designated as an
agricultural preserve. The owner must provide in a recorded covenant that the land will not be developed
and will be used agriculturally in accordance with the plan. The covenant runs with the land and not the
owner. Therefore, if the property is sold, it must still be used agriculturally, in accordance with the plan.

Commencement of Agricultural Preserve
The land in an agricultural preserve is subject to the benefits and restrictions of the plan beginning 30
days after the application is deemed complete. It continues in existence until either the owner or the
county initiates expiration of the agricultural preserve. The date of expiration must be at least eight years
from the date of notice.

Termination
The agricultural preserve may be terminated by either the owner or the county. If terminated by the
owner, the owner must provide official notice by filling out the termination form provided by the county.
The form must then be recorded.

If the preserve is terminated by the county, the county must notify the owner by registered mail. Prior to
notifying the owner, the county must amend the agricultural land preservation plan and controls so that
the land is no longer designated for long-term agricultural use, and certify the changes in its maps and by
resolution after public notice.

An agricultural preserve may be terminated earlier than required eight year expiration only in the event of
a public emergency upon petition from the owner or the county to the governor.

Transfer From Green Acres
When land which has been under Green Acres treatment becomes an agricultural preserve, the recapture
of deferred tax and special assessments shall not be made. Special assessments, including those not yet
levied at the time of transfer, shall continue to be deferred for the duration of the preserve. All special
assessments so deferred shall be payable within 90 days of expiration unless other terms are mutually
agreed upon by the authority and the owner. Upon early termination, all special assessments plus interest
are due within 90 days of termination unless otherwise deferred or abated by executive order of the
governor. In the event of a taking, all special assessments plus interest are payable within 90 days of the
date the final certificate is filed with the court.
SPECIAL VALUATIONS AND DEFERRALS                                                               04.08 - 6
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Non-Metropolitan Ag Land Preservation (County Conservation Credit)

Non-metro counties are allowed to participate in a similar agricultural land preservation in M.S. chapter
40A. However, from a property tax perspective, this program is significantly different from the
Metropolitan Agricultural Preserve Act. Instead of the valuation and tax reduction approach, with a
reimbursement credit, the non-metro preserve law provides for a simple County Conservation credit of
$1.50 per acre (M.S. 273.119). This credit is further described in Section 06.06. Currently, we are only
aware of three counties: Wright, Waseca, and Winona, which participate in this program.

In order to participate in the program, a county must submit a proposed agricultural land preservation plan
and a proposal for controls in implementing the plan to the Commissioner of Agriculture for approval.
Once the plan and its proposed controls are approved, counties may implement the plan.

Metro Fringe Cities
A city that is located partially within a county in the metropolitan area but is not included in the definition
of the metropolitan area under M.S. 437.121, subd. 2, (Northfield, Hanover, Rockford, and New Prague)
may elect to be governed by either the non-metropolitan Agricultural Land Preservation Program
provisions of M.S. chapter 40A, or may perform the duties of an authority under the Metropolitan
Agricultural Preserve Act of M.S. chapter 473H.

Transfer From Green Acres
When land which has been under Green Acres treatment becomes an agricultural preserve under M.S.
chapter 40A, the recapture of deferred tax and special assessments may not be made. Special assessments
must continue to be deferred for the duration of the preserve. All special assessments so deferred shall be
payable within 90 days of expiration unless other terms are mutually agreed upon by the authority and the
owner. Upon early termination, all special assessments plus interest are due within 90 days of termination
unless otherwise deferred or abated by executive order of the governor. In the event of a taking, all
special assessments plus interest are payable within 90 days of the date the final certificate is filed with
the court.



Reference

M.S. Chapter 40A       Agricultural Land Preservation Program (Non-metro only)
M.S. 273.111           Minnesota Agricultural Property Tax Law (Green Acres)
M.S. 273.112           Minnesota Open Space Property Tax Law (Open Space)
M.S. 273.119           Conservation Tax Credit
M.S. Chapter 473H      Metropolitan Agricultural Preserve Act




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04.09 – LIMITED MARKET VALUE
Limited Market Value was created by the legislature in an effort to protect property owners from the tax
impacts of sharp valuation increases. Limited market value has no effect on estimated market value. It
only affects the amount of value the property is taxed on – the taxable market value.

Under the law (M.S. 273.11, subdivision 1a), assessors continue to estimate the market value of all
properties. The assessor then must compare current year’s estimated market value (EMV) to the
preceding year’s taxable value. The amount of increase between the prior year value and the current
EMV is subject to specified limits and the resulting value is called the limited market value (LMV). The
LMV, rather than the EMV, is then used in the remaining computations of taxable market value (TMV),
on which taxes will be assessed. LMV and EMV can be the same amount if the property value has not
increased in excess of the limits. Limited market value only results from increases in value due to market
conditions. Any new construction added to the property is not subject to the limits and is added into the
measure of limited market value after the reductions are calculated.

Note that LMV refers to the resulting limited value. The difference between EMV and LMV is referred
to here as the limitation value.

History

LMV was enacted by the 1993 Legislature to be in effect for assessment years 1993 through 1997. The
original limits on the amount of value increase were the greater of:
        (1) 10% of the value in the preceding assessment, or
        (2) one-third (33.33%) of the difference between the current assessment and the preceding
        assessment.

In 1997 the Legislature extended LMV through the 2001 assessment year and modified the limits to be
the greater of:
        (1) 10% of the value in the preceding assessment, or
        (2) one-fourth (25%) of the difference between the current assessment and the preceding
        assessment.

The 1999 Legislature gave LMV a boost by significantly reducing the limits to the greater of:
      (1) 8.5% of the value in the preceding assessment, or
      (2) 15% of the difference between the current assessment and the preceding assessment.

The 2001 Legislature, reacting to the extensive limitation of value resulting from the 1999 changes and
the hot real estate market, determined that letting LMV sunset would result in substantial tax shifting onto
homes, which were compiling large amounts of limitation value, and therefore established a four-year
phase-out schedule of LMV limits that would have made the 2007 assessment year the first year LMV
was no longer in effect. The 2001 legislature also added timber as a classification being subject to LMV.

The 2005 Legislature changed the phase-out that had been established in 2001. The changes affected AY
2005 and beyond by freezing the AY 2004 parameters for two additional years and pushing out its
expiration two years.
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



The LMV parameters for 2002 through 2004 were as follows:

For assessment year 2002 (taxes payable in 2003), increases could not exceed the greater of:
       (1) 10% of the value of the preceding assessment (2001), or
       (2) 15% of the difference between the current assessment (2002) and the preceding assessment
           (2001).

For assessment year 2003 (taxes payable in 2004), increases could not exceed the greater of:
       (3) 12% of the value of the preceding assessment (2002), or
       (4) 20% of the difference between the current assessment (2003) and the preceding assessment
           (2002).

For assessment year 2004 (taxes payable in 2005), increases could not exceed the greater of:
       (1) 15% of the value of the preceding assessment (2003), or
       (2) 25% of the difference between the current assessment (2004) and the preceding assessment
           (2003).

As amended by the 2005 Legislature, the current remaining phase-out for LMV is as follows:

For assessment year 2005 (taxes payable in 2006), increases could not exceed the greater of:
       (3) 15% of the value of the preceding assessment (2004), or
       (4) 25% of the difference between the current assessment (2005) and the preceding assessment
           (2004).

For assessment year 2006 (taxes payable in 2007), increases could not exceed the greater of:
       (5) 15% of the value of the preceding assessment (2005), or
       (6) 25% of the difference between the current assessment (2006) and the preceding assessment
           (2005).

For assessment year 2007 (taxes payable in 2008), increases could not exceed the greater of:
       (1) 15% of the value of the preceding assessment (2006), or
       (2) 33% of the difference between the current assessment (2007) and the preceding assessment
           (2006).

For assessment year 2008 (taxes payable in 2009), increases shall not exceed the greater of:
       (1) 15% of the value of the preceding assessment (2007), or
       (2) 50% of the difference between the current assessment (2008) and the preceding assessment
           (2007).

Limited market value will be expired for the 2009 assessment and beyond, barring further changes.

For manufactured homes that qualify for limited market value and that are assessed as personal property
(and therefore assessed and taxed in the same year), the limits apply as specified for the assessment year.




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



LMV applies to all property classified as agricultural homestead or nonhomestead, residential homestead
or nonhomestead, timber, or noncommercial seasonal residential recreational (cabins). These include the
following classes of property:
       1a              Residential Homestead
       1b              Blind/Paraplegic Veteran/Disabled Homestead
       1d              Migrant Housing (Structures Only)
       2a              Agricultural Homestead
       2b              Timber
       2b              Non-homestead Agricultural
       4b(1)           Residential Non-homestead 1-3 units
       4b(2)           Unclassified Manufactured Homes
       4b(3)           HGA on a Non-homestead farm
       4b(4)           Residential Non-Homestead Land – without a structure
       4bb             Residential Non-homestead Single Unit
       4c(1)           Seasonal Recreational Residential -– Non-commercial

Example 04.09-1 demonstrates how LMV is calculated under the most basic circumstances. More
detailed situations and examples follow. Please note that in all cases below, the current EMV is
greater than the limited increase plus the prior year value (the computed LMV). If the current
EMV is less than the computed LMV, then there is no limitation and the full EMV is also the LMV.


Example 04.09-1: Simple LMV Calculation Example

A residential homestead with no other exclusions or special value deferrals had no limitation for
assessment year 2002, but had LMV computed for assessment years 2004 and 2005 as follows:
AY 2003 LMV (& EMV) $100,000

AY 2004 EMV                $120,000

      Increase                EMV – prior year value                             $120,000 - $100,000 =      $20,000
      % increase limit        prior year value x 15%                                 $100,000 x 0.15 =      $15,000
      % difference limit      increase x 25%                                          $20,000 x 0.25 =       $5,000
      Limited increase        greater of limits                                     ($15,000 > $5,000)      $15,000
      LMV                     prior year value + limited increase                $100,000 + $15,000 =      $115,000

AY 2005 EMV                $136,000

      Increase                EMV – prior year value                             $136,000 - $115,000 =      $21,000
      % increase limit        prior year value x 15%                                 $115,000 x 0.15 =      $17,300
      % difference limit      increase x 25%                                          $21,000 x 0.25 =       $5,300
      Limited increase        greater of limits                                     ($17,250 > $5,250)      $17,300
      LMV                     prior year value + limited increase                $115,000 + $17,250 =      $132,300

Note: The prior year value is the limited market value, not the EMV. The prior year amount gets more involved as scenarios
get more complex. If the current EMV is less than the computed LMV, there is no limitation and the full EMV is the LMV.




LIMITED MARKET VALUE                                                                                       04.09 - 3
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Rules When Calculating Limited Market Values
Rounding of Dollar Amounts and Percentages
In determining the amount of the limited market value for a property, round the value to the nearest $100.
This is the same requirement when rounding for the amount of estimated market value.

In computing any percentage used to determine LMV or to apportion LMV to land and buildings, round
the percentage to the nearest 100th of a percent. (Example: $86,800/$103,500=0.838647343, rounds to
0.8386 or 83.86%.)

Determine a Separate Limited Market Value for Each Classification per Parcel of Property
For properties with a single classification, determine the limited market value separately for each parcel.
For example, if an agricultural homestead is comprised of 3 separate parcels, determine the limited market
value separately for each of the 3 parcels of property.

If a parcel of property has more than one eligible classification such as the residential homestead
classification and agricultural non-homestead classification, determine a separate limit for each of the
classifications of property.

If a Property is a Split Class Consisting of Both Qualifying and Non-Qualifying Classes
If a parcel of property has more than one classification, the limit applies only to the assessor’s estimated
market value for the portion of the property in an eligible classification. For example, if a property is
used both for a residence and for a business, the limit applies only to the assessor’s estimated market
value for the residential portion of the property.

If the portion of a property qualifying for limited market value increases in size, taking away space from
the non-qualifying class, the LMV is determined by adding the EMV of the portion that changed in
classification to the LMV calculated for the previously qualifying portion, much in the same manner as
new improvements are treated (see below).

Example 04.09-2: LMV Calculation for a Split-Class Property Where the Qualifying Class
Increases in Size

A residential homestead and commercial split class property had two rooms devoted to the commercial
use, but one room was converted to a bedroom and changed to residential homestead use for the 2005
assessment. The residential homestead portion of the property was $112,000 in 2004 and this same
portion of the property was valued at $136,000 for 2005. The room that converted to residential
homestead adds another $10,000 to the residential homestead value for 2005, giving it a total residential
homestead value of $146,000. The EMV of the commercial share of the property is not relevant.
AY 2004 LMV               $112,000 (Residential Homestead share only)

AY 2005 EMV               $146,000 (Pre-existing Res Hmstd = $136,000; new Res Hmstd = $10,000)

     Increase                Pre-existing Res Hmstd EMV – prior year value    $136,000 - $112,000 =    $24,000
     % increase limit        prior year value x 15%                               $112,000 x 0.15 =    $16,800
     % difference limit      increase x 25%                                        $24,000 x 0.25 =     $6,000
     Limited increase        greater of limits                                   ($16,800 > $6,000)    $16,800
     LMV                     prior yr + ltd incr + new Res Hmstd     $112,000 + $16,800 + $10,000 =   $138,800

LIMITED MARKET VALUE                                                                                  04.09 - 4
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



If the Classification of a Property Changes
If the classification of a property changes from an eligible classification to another eligible classification,
the limit continues in effect. For example, if the classification of a property changes from the residential
non-homestead classification to a residential homestead classification, the limit would remain in effect.

If the classification of a property changes from an eligible classification to a classification that does not
qualify for the limit, the limited market value for the property expires. For example, if the classification
of a property changes from residential homestead to commercial-industrial classification, the limited
market value is no longer in effect.

If the classification of a property changes from a classification which is not eligible to a classification that
does qualify, the property becomes eligible for limited market value in the year following the change in
the property’s classification. For example, if the classification of a property changes from the
commercial-industrial classification for the 2004 assessment to a residential homestead for the 2005
assessment, the property would qualify for limited market value beginning with the 2006 assessment for
property taxes payable in 2007.

If a Property is Exempt from Property Tax Becomes Taxable
If a property is exempt from property tax in the preceding year and becomes taxable for the current year,
it is not eligible for limited market value until the year following the year in which it became taxable. For
example, if a property is exempt for the 2004 assessment, and becomes taxable as a residential homestead
for the 2005 assessment, the property qualifies for limited market value beginning with the 2006
assessment for taxes payable in 2007.

Limited Market Value Does Not Apply to New Improvements
Limited market value does not apply to any increases in value in the current assessment resulting from
physical improvements made to the property which were added after the preceding assessment. In
determining the limit for a property, the value of any new improvement value is excluded when
calculating the limited increase and then is added into LMV after the limited increase is determined. This
adjustment occurs only in the single year in which the new improvements become taxable. In subsequent
years, the value of these improvements is reflected in both the current and preceding year and their
appreciation is included in the total appreciation of the property to which the limits are applied.


Example 04.09-3: Determining LMV for a Parcel With New Improvements

A residential homestead added $10,000 of new improvements for assessment year 2005. The limited
increase is calculated on the pre-existing improvements, adding new improvement value to the result, to
yield LMV, as follows:
AY 2004 LMV               $112,000

AY 2005 EMV               $146,000 (Pre-existing improvements = $136,000; new improvements = $10,000)

     Increase                Pre-existing EMV – prior year value              $136,000 - $112,000 =      $24,000
     % increase limit        prior year value x 15%                               $112,000 x 0.15 =      $16,800
     % difference limit      increase x 25%                                        $24,000 x 0.25 =       $6,000
     Limited increase        greater of limits                                   ($16,800 > $6,000)      $16,800
     LMV                     prior yr + ltd incr + new improvement   $112,000 + $16,800 + $10,000 =     $138,800

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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



When a Qualifying Parcel of Property is Split into 2 or More Parcels
The main rule to remember when splitting or combining parcels is that the total value must equal the sum
of the parts for that assessment year. Value cannot be added or subtracted solely by splitting or
combining the parcel during the assessment year. Any value changes must be changed for the next
assessment.

If a parcel of property with a limited market value has been split into two or more parcels since the
preceding assessment year, a separate limited market value for the preceding assessment year must be
determined for each of the newly split parcels in order to calculate LMV for those parcels in the current
assessment year. The preceding year’s limited market value for each of the newly split parcels is
determined by the apportioning the LMV established for the full parcel to the newly split parcels in the
same proportion as the EMV for the newly split parcels is to the EMV for the full parcel.


Example 04.09-4: Determining the Preceding Year LMV on Split Parcels

Parcel A is a 2 acre piece of vacant residential land. It was valued at $30,000 for the 2004 assessment
with no limitation. It’s EMV for the 2005 assessment was $45,000, giving it a limited market value for
2004 of $34,500. During 2005, Parcel A is split into two 1 acre building sites. The appraiser has
determined that one site, Parcel X, has a value of $20,000 and the other parcel, Parcel Y, has a value of
$25,000. When calculating LMV for 2006, the 2005 LMV amounts will be determined as follows:
                       Full                New             % Share of    New            % Share of
                       Parcel              Parcel          Full Parcel   Parcel         Full Parcel
                       A                   X               (X / A)       Y              (Y / A)

2004 Total EMV         $30,000             --              --            --             --
2005 Total EMV         $45,000             $20,000         44.44%1       $25,000        55.56%2
2005 LMV               $34,500             $15,3003        44.44%        $19,2004       55.56%

       Calculations:
                       1
                        X/A = $20,000/$45,000 = .4444
                       2
                        Y/A = $25,000/$45,000 = .5556
                       3
                        LMV (X) = .4444 x $34,500 = $15,300 (rounded)
                       4
                        LMV (Y) = .5556 x $34,500 = $19,200 (rounded)


If two or more parcels of property are combined into one parcel
If two or more parcels of property are subsequently combined into one parcel of property and one of the
original parcels has and continues to have a qualifying classification, a new limit is determined for the
combined parcel of property.

The limit for the combined parcel of property is determined by adding together the preceding year’s
limited market values for each original parcel of property, which was combined into the one parcel. The
result is the limited market for the combined parcel of property for the preceding year. Use this amount
together with the estimated market value for the current year in determining the LMV, if any, for the
combined parcel of property.



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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-5: Determining LMV for Combined Parcels

Parcel J (AY 2004 LMV = $26,000) and parcel K (AY 2004 LMV = $22,000) are adjacent vacant lots
that were combined in 2004 into parcel Z. The following shows, for parcel Z, how the 2004 values were
combined and how LMV was computed for 2005.
AY 2004 LMV (Z)           $48,000 (Parcel J LMV + Parcel K LMV; $26,000 + $22,000)

AY 2005 EMV (Z)           $65,000

     Increase                EMV – prior year value                           $65,000 - $48,000 =    $17,000
     % increase limit        prior year value x 15%                              $48,000 x 0.15 =     $7,200
     % difference limit      increase x 25%                                      $17,000 x 0.25 =     $4,300
     Limited increase        greater of limits                                  ($7,200 > $4,300)     $7,200
     LMV                     prior year value + limited increase               $48,000 + $7,200 =    $55,200



If a Property was Omitted from the Property Tax
If a property was omitted from the property tax, the limit to the estimated market value for the property, if
any, is to begin with the value determined as of January 2, of the assessment year. Therefore, the omitted
property is not eligible the first year it is added to the assessment. In subsequent years, the limited market
value is calculated the same way as other qualifying property.

If Unplatted Vacant Land Becomes Platted
Under state law, if unplatted vacant land becomes platted, assessors are required to determine the market
value based upon the highest and best use of the property as unplatted land. The typical increase in the
market value of each parcel as platted is phased-in (meaning the remaining increase is excluded from
taxable market value until the phase-in is complete). The period of phase-in for the values is 3 years in
the metro area and 7 years for property located in non-metro counties.

The law governing the phasing-in of the assessor’s initial estimated market value of newly platted
property takes precedence over the law imposing limited market value. Limited market value does not
apply to the assessor’s estimate of the initial increase in the market value for the newly platted
property, which is sometimes referred to as the “1st year increase due to plat.”

However, in any of the phase-in years following the initial year in which the estimated market value of
the newly platted parcels is established, state law permits assessors to increase the market value they
originally estimated for the newly platted property. In turn, the property is then eligible for limited
market value. The entire amount of the limit is added to the platted value.

The following example illustrates the phase-in of increased value due to platting.




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-6: Determining LMV for Platted Parcels

A non-metro parcel is platted during 2004 for AY 2005. The estimated market value as platted is $34,000
and the estimated market value as unplatted is $2,000.

AY 2004 LMV (& EMV) $2,000

AY 2005 EMV               $34,000 ($2,000 as unplatted; difference of $32,000 phases-in at $4,600/yr over 7 years)

     1st year plat increase EMV as platted – EMV as unplatted                             $34,000 - $2,000 =     $32,000
     Value subject to limit EMV – 1st year plat increase                                 $34,000 - $32,000 =      $2,000
     Increase               current year value – prior year value                          $2,000 - $2,000 =          $0
     % increase limit        prior year value x 15%                                          $2,000 x 0.15 =        $300
     % difference limit      increase x 25%                                                      $0 x 0.25 =          $0
     Limited increase       greater of limits                                                    ($300 > $0)        $300
     LMV                    prior yr + limited incr + 1st year plat incr           $2,000 + $300 + 32,000 =     $34,000*
     Plat law exclusion      years remaining x phase-in increment                               6 x $4,600 =  $27,600**
     TMV                    LMV - exclusion                                             $34,000 – $27,600 =       $6,400
     *EMV is less than computed LMV, so LMV = EMV.
     **Because the exclusion amount does not divide evenly into seven years, the increments may be rounded and the odd
     amount ($4,400) can be applied first or last (it is applied first in this example). The exclusion amount also need not be
     rounded as long as the TMV amount is rounded.

AY 2006 EMV               $44,000

     Increase                EMV – prior year value                                  $44,000 - $34,000 =        $10,000
     % increase limit        prior year value x 15%                                     $34,000 x 0.15 =         $5,100
     % difference limit      increase x 25%                                              $10,000 x 025 =         $2,500
     Limited increase        greater of limits                                         ($5,100 > $2,500)         $5,100
     LMV                     prior yr + limited increase                              $34,000 + $5,100 =        $39,100
     Plat law exclusion      years remaining x phase-in increment                           5 x $4,600 =        $23,000
     TMV                     LMV - exclusion                                         $39,100 – $23,000 =        $16,100

AY 2007 EMV               $50,000

     Increase                EMV – prior yr                                          $50,000 - $39,100 =        $10,900
     % increase limit        prior year value x 15%                                     $39,100 x 0.15 =         $5,900
     % difference limit      increase x 33%                                             $10,900 x 0.33 =         $3,600
     Limited increase        greater of limits                                         ($5,900 > $3,600)         $5,900
     LMV                     prior yr + limited increase                              $39,100 + $5,900 =        $45,000
     Plat law exclusion      years remaining x phase-in increment                           4 x $4,600 =        $18,400
     TMV                     LMV - exclusion                                         $45,000 – $18,400 =        $26,600

AY 2008 EMV               $54,000

     Increase                EMV – prior yr                                          $54,000 - $45,000 =         $9,000
     % increase limit        prior year value x 15%                                      $45,000 x 0.15 =        $6,800
     % difference limit      increase x 50%                                               $9,000 x 0.50 =        $4,500
     Limited increase        greater of limits                                        ($6,800 > $4,500) =        $6,800
     LMV                     prior yr + limited increase                              $45,000 + $6,800 =        $51,800
     Plat law exclusion      years remaining x phase-in increment                            3 x $4,600 =       $13,800
     TMV                     LMV - exclusion                                         $51,800 – $13,800 =        $38,000

                                                   Example continues ….

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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




AY 2009 EMV                $58,000

      LMV                     expired                                                                      NA
      Plat law exclusion      years remaining x phase-in increment                    2 x $4,600 =      $9,200
      TMV                     EMV - exclusion                                   $58,000 – $9,200 =     $48,800

AY 2010 EMV                $60,000

      LMV                     expired                                                                      NA
      Plat law exclusion      years remaining x phase-in increment                    1 x $4,600 =      $4,600
      TMV                     EMV - exclusion                                   $60,000 – $4,600 =     $55,400

AY 2011 EMV                $63,000

      LMV                     expired                                                                      NA
      Plat law exclusion      years remaining x phase-in increment                    0 x $4,600 =          $0
      TMV                     EMV - exclusion                                       $63,000 – $0 =     $63,000

Note: see Section 04.11 for a more comprehensive and streamlined hierarchy of market value components that shows how
LMV is calculated relative to various deferrals, valuations, and exclusions, including plat law exclusions.



Properties qualifying for the provisions of the Green Acres Law
If a property is eligible for the provisions of the Green Acres Law and the property also qualifies for
limited market value, the assessor must calculate two limited market values – one based on the
agricultural value (Green Acres value) and one based on its highest and best use (the true market value
which is sometimes called the development value). (See Section 04.08 for more information about Green
Acres.)

The reconciliation of LMV and Green Acres has been a confusing subject. The original and first revision
of DOR instructions on this issue were problematic. The current methodology was released in August
2002. The new procedure recognizes that Green Acres (GA) does not impact the house, garage, and one
acre (HGA) component of an agricultural property. Therefore the GA LMV for the HGA will always be
the same as the LMV that is calculated based on the EMV for the HGA. This alleviates the previous
problems of calculating higher taxes using Green Acres values.

There are 2 sets of basic calculations – the limited market value based on the agricultural value and the
limited market value based on the development value or estimated market value. If either of the values
are entitled to limited market value, they must then be apportioned back to the HGA and the remaining
(non-HGA) values.




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-7: LMV with Green Acres (Simplified Example)

A full example of the LMV calculations for Green Acres is found under the section on apportioning LMV
between land and buildings since this apportionment will be done whenever LMV is calculated for a
Green Acres parcel. This simplified example ignores the land and building apportionment issues and
shows the key Green Acres elements, which are that separate LMV amounts are calculated based on the
GA values and that the LMV for the house, garage, and one acre (HGA) is not affected by Green Acres.
Part 1 – Calculate LMV for the parcel based on its full EMV (not the GA value).
         Step 1 - Calculate the total LMV.
         Step 2 - Calculate the LMV of the HGA.
Part 2 – Calculate LMV for the parcel based on its Green Acres value.
         Step 3 - Calculate the total GA LMV.
         Step 4 - Set the GA HGA LMV equal to the HGA LMV from Part 1 since GA status does not change the HGA LMV.

                                       2004 LMV         2005 EMV    2005 LMV
                                            A               B           C
Part 1 - Calculations on Highest and Best Use (full EMV)
Total (HGA & Remainder)        1       $620,000          $860,000   $713,000     Step 1 (calc LMV, if any)
HGA only                       2         $70,000         $100,000    $80,500     Step 2 (calc LMV, if any)

Part 2 - Calculations on Agricultural Use (GA Values)
Total (HGA & Remainder)        3        $210,000        $270,000    $241,500     Step 3 (calc LMV, if any)
HGA only                       4          $70,000       $100,000     $80,500     Step 4 (=C2)



In the event that the property sells, the limited market value determined based on its full EMV (not the
LMV based on its Green Acres Value) is to be used in calculating the amount of deferred taxes due.


Homes That Qualify for This Old House
This Old House is a program where all or part of the value of improvements made to older homes (at least
45 years old) could be excluded from property tax. (See Section 04.10 for more information on This Old
House). This program expired for new entrants to the extent that the improvements had to be made prior
to January 2, 2003, however, application can be made within three years of the issuance of the building
permit or the commencement of work if no permit was required, so some new entrants may still make
application until July 2006. The program, though, continues in effect for existing participants until their
exclusions expire and are fully phased-in. The exclusions are applied after limited market value is
determined, meaning that assessors must use the value of the improvements in order to determine the
limited market value of a property. As the exclusions expire and value returns to the taxable market
value, the returning value does not affect the calculation of LMV because it represents a diminishing
exclusion being applied after LMV is set. The LMV of a property with an exclusion will be greater than
the TMV.




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-8: LMV with This Old House

Parcel T has a 2004 LMV of $110,000 which included an addition that was appraised as adding $20,000
of new improvement value. The improvement qualified for This Old House, but the application to the
assessor was not made until September 2004. Having missed the July 1 cutoff to be included in the 2004
assessment year, the This Old House exclusion of $20,000 will begin for assessment year 2005 and will
be deferred for 9 years. The 2005 EMV is $140,000 and the LMV (and TMV) are calculated as follows:

AY 2004 LMV               $110,000

AY 2005 EMV               $140,000

     Increase                EMV – prior year value                    $140,000 - $110,000 =    $30,000
     % increase limit        prior year value x 15%                        $110,000 x 0.15 =    $16,500
     % difference limit      increase x 25%                                 $30,000 x 0.25 =     $7,500
     Limited increase        greater of limits                            ($16,500 > $7,500)    $16,500
     LMV                     prior year value + limited increase       $110,000 + $16,500 =    $126,500
     TOH exclusion           remains constant                                                   $20,000
     TMV                     LMV – exclusions                           $126,500 - $20,000 =   $106,500



If the EMV of a Property for a Prior Year is Reduced
If the EMV of a property for a prior year is reduced due to the approval of an application for abatement by
the county board, a court order, or due to the terms of a settlement approved by the county attorney, the
limited market value must be recomputed for that year and all subsequent years. In addition, the county
auditor is required to recalculate the tax for the property for each year in which the taxable value is
reduced and issue a refund to the property owner for the difference.

Apportioning the Limited market Value to Land and Buildings

Because the limited market value is determined by using the total value of a parcel, assessors will need to
apportion the resulting limited market value to the land and buildings of the parcel. This is especially
important for properties receiving the agricultural classification. Example 04.09-9 (next page) shows that
this apportionment is made by taking the ratio of the calculated total LMV to the total EMV and applying
that ratio to the land and buildings values.




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-9: Simple Apportionment Between Land and Buildings

AY 2005 EMV’s             Total = $140,000         Land = $40,000            Buildings = $100,000

AY 2005 LMV’s             Total = $128,000         Land = ?                  Buildings = ?

1.   Divide the EMV for the land by total EMV for the parcel, and the EMV for the buildings by the total EMV, to determine
     the relative shares between the land and building components to the total.

         Land:        $40,000/$140,000 = 28.57%
         Building:   $100,000/$140,000 = 71.43%

2.   Multiply the percentages in step 1 by the current year’s total LMV. The results are the amounts of the limited market
     value apportioned to the land and buildings.

         Land:           $128,000 x .2857 = $36,570 rounds to $36,600
         Building:       $128,000 x .7143 = $91,430 rounds to $91,400



The apportionment between land and buildings can get particularly involved for agricultural and Green
Acres properties, which should also distinguish between house, garage and 1 acre (HGA), the house and
garage (HG), and the 1 acre. The methodology begins the same (steps 1 thru 3) regardless of whether
Green Acres applies. Some additional steps (4 thru 6) apply for Green Acres parcels.

Note: If the current EMV is less than a computed LMV then the EMV is the LMV.

Part 1 – Calculating LMV based on the current year EMV (as opposed to the Green Acre values)

Step 1 - Calculate LMV on the total value of the parcel. If there is a limitation, then initially
apportion between land and buildings based on the relationship between the EMV values. (Land EMV /
Total EMV x Total LMV and Building EMV / Total EMV x Total LMV). If there is no limitation then
skip steps 2 and 3, making the LMV equal to the EMV for the HGA and each land and building split.
(The HGA cannot be limited, even if a limitation would calculate, if the parcel as a whole is not limited).

Step 2 - Calculate LMV on the HGA. If there is a limitation, then apportion between land (the 1 acre)
and buildings (the house and garage) based on the relationship between the EMV values. (Land EMV /
Total EMV x Total LMV and Building EMV / total EMV x total LMV).

Step 3 - Compare and reapportion, if necessary, between the total land and buildings as follows:
   If the HG LMV is greater than the total Building LMV, then change the total Building LMV to be
   equal to the HG LMV and fix the total Land LMV to equal the difference between the total LMV
   and the corrected Building LMV.
   Otherwise, if the 1 Acre LMV is greater than the total Land LMV, then change the total Land LMV to
   be equal to the 1 Acre LMV and fix the total Building LMV to equal the difference between the
   total LMV and the corrected Land LMV.




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



Part 2 – Calculate LMV based on the Green Acres Value (if Green Acres applies)

Step 4 - Calculate LMV on the total Green Acres values. If there is a limitation, then initially
apportion between land and buildings based on the relationship between Green Acres values. (Land GA
Value / Total GA Value x GA Total LMV and Building GA Value / Total GA Value x GA Total
LMV). If there is no limitation then skip steps 5 and 6, making the LMV equal to the EMV for the HGA
and each land and building split. (The HGA cannot be limited, even if a limitation would calculate, if the
parcel as a whole is not limited).

Step 5 - The HGA LMV and the breakouts for the HG and 1 Acre are simply carried down from the
LMV calculations based on EMV with no Green Acres. Since Green Acres does not affect the HGA, the
HGA on the Green Acres value is the same. However, if there is no limitation on the parcel at its total
market value under step 1, but there is a limitation computed for the GA values under step 4, then these
values must be computed rather than carried down.

Step 6 - Compare and reapportion, if necessary, between the total land and buildings as follows:
   If the GA HG LMV is greater than the total GA Building LMV, then change the total GA Building
   LMV to be equal to the GA HG LMV and fix the total GA Land LMV to equal the difference
   between the total GA LMV and the corrected GA Building LMV.
   Otherwise, if the GA 1 Acre LMV is greater than the total GA Land LMV, then change the total GA
   Land LMV to be equal to the GA 1 Acre LMV and fix the total GA Building LMV to equal the
   difference between the total GA LMV and the corrected GA Land LMV.

The following five examples show LMV calculations for agricultural parcels experiencing a variety of
growth scenarios. In each case the first part applies even if there is no Green Acres and the second part
applies if there is Green Acres.




LIMITED MARKET VALUE                                                                         04.09 - 13
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-10: LMV and Land Building Apportionment on Agricultural Parcels with Green
Acres: Increasing Ag Land Values

This example demonstrates calculations where ag land values are increasing but building values remain
constant. Part 1 applies even if the parcel is not subject to Green Acres.
                                     2004 LMV           2005 EMV           2005 LMV
                                         A                  B                  C

Part 1 - Calculations on Highest and Best Use (full EMV)

Total (HGA & Remainder)       1        $192,200            $226,100         $221,000    Step 1a (calc LMV, if any)
   Land                       2        $111,600            $145,500         $142,200    Step 1b (=B2/B1 x C1)
   Buildings                  3         $80,600             $80,600          $78,800    Step 1c (=B3/B1 x C1)

HGA                           4        $155,000            $155,000         $155,000    Step 2a (calc LMV, if any)
  1 Acre (Land)               5         $74,400             $74,400          $74,400    Step 2b (=B5/B4 x C4)
  HG (Buildings)              6         $80,600             $80,600          $80,600    Step 2c (=B6/B4 x C4)

Revised Total (HGA & Rem.) 7                                                $221,000    Step 3a (=C1)
  Land                     8                                                $140,400    Step 3b (see below)
  Buildings                9                                                 $80,600    Step 3b (see below)
                                     If C6>C3,                              then     C9=C6 and C8=C7-C9
                                     If C6<C3,      and      if C5>C2,      then    C8=C5 and C9=C7-C8
                                     If C6<C3,      and      if C5<C2,      then    C8=C2 and C9=C3

Part 2 - Calculations on Agricultural Use (GA Values)

Total (HGA & Remainder)       10       $164,400            $171,300         $171,300    Step 4a (calc LMV)
   Land                       11        $83,800             $90,700          $90,700    Step 4b (=B11/B10 x C10)
   Buildings                  12        $80,600             $80,600          $80,600    Step 4c (=B12/B10 x C10)

HGA                           13       $155,000            $155,000         $155,000    Step 5a (=C4)
  1 Acre (Land                14        $74,400             $74,400          $74,400    Step 5b (=C5)
  HG (Buildings)              15        $80,600             $80,600          $80,600    Step 5c (=C6)

Revised Total (HGA & Rem.) 16                                               $171,300     Step 3a (=C10)
  Land                     17                                                $90,700     Step 3b (see below)
  Buildings                18                                                $80,600     Step 3b (see below)
                                     If C15>C12,                            then     C18=C15 and C17=C16-C18
                                     If C15<C12,    and      if C14>C11,    then     C17=C14 and C18=C16-C17
                                     If C15<C12,    and      if C14<C11,    then     C17=C11 and C18=C12




LIMITED MARKET VALUE                                                                                          04.09 - 14
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-11: LMV and Land Building Apportionment on Agricultural Parcels with Green
Acres: Increasing House and Garage Values

This example demonstrates calculations where the house and garage (HG) values are increasing but land
values remain constant. Part 1 applies even if the parcel is not subject to Green Acres.
                                     2004 LMV           2005 EMV           2005 LMV
                                         A                  B                  C

Part 1 - Calculations on Highest and Best Use (full EMV)

Total (HGA & Remainder)       1        $192,200            $219,200         $219,200   Step 1a (calc LMV, if any)
   Land                       2        $111,600            $111,600         $111,600   Step 1b (=B2/B1 x C1)
   Buildings                  3         $80,600            $107,600         $107,600   Step 1c (=B3/B1 x C1)

HGA                           4        $155,000            $182,000         $182,000   Step 2a (calc LMV, if any) *
  1 Acre (Land)               5         $74,400             $74,400          $74,400   Step 2b (=B5/B4 x C4)
  HG (Buildings)              6         $80,600            $107,600         $107,600   Step 2c (=B6/B4 x C4)

Revised Total (HGA & Rem.) 7                                          $219,200    Step 3a (=C1)
  Land                     8                                          $111,600    Step 3b (see below)
  Buildings                9                                          $107,600    Step 3b (see below)
                                   If C6>C3,                          then     C9=C6 and C8=C7-C9
                                   If C6<C3,    and if C5>C2,         then    C8=C5 and C9=C7-C8
                                   If C6<C3,    and if C5<C2,         then    C8=C2 and C9=C3
*Because there is no LMV for the total EMV, no LMV is calculated for the HGA even though it has increased greater than
would-be limits.

Part 2 - Calculations on Agricultural Use (GA Values)

Total (HGA & Remainder)       10       $164,400            $191,400         $189,100   Step 4a (calc LMV)
   Land                       11        $83,800             $83,800          $82,800   Step 4b (=B11/B10 x C10)
   Buildings                  12        $80,600            $107,600         $106,300   Step 4c (=B12/B10 x C10)

HGA                           13       $155,000            $182,000         $178,300   Step 5a (=C4)
  1 Acre (Land                14        $74,400             $74,400          $72,900   Step 5b (=C5)
  HG (Buildings)              15        $80,600            $107,600         $105,400   Step 5c (=C6)

Revised Total (HGA & Rem.) 16                                               $189,100     Step 3a (=C10)
  Land                     17                                                $82,800     Step 3b (see below)
  Buildings                18                                               $106,300     Step 3b (see below)
                                     If C15>C12,                            then     C18=C15 and C17=C16-C18
                                     If C15<C12,    and      if C14>C11,    then     C17=C14 and C18=C16-C17
                                     If C15<C12,    and      if C14<C11,    then     C17=C11 and C18=C12




LIMITED MARKET VALUE                                                                                       04.09 - 15
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-12: LMV and Land Building Apportionment on Agricultural Parcels with Green
Acres: Increase in Both Ag Land and House and Garage Values

This example demonstrates calculations where the ag land values and house and garage (HG) values are
increasing. Part 1 applies even if the parcel is not subject to Green Acres.
                                     2004 LMV           2005 EMV           2005 LMV
                                         A                  B                  C

Part 1 - Calculations on Highest and Best Use (full EMV)

Total (HGA & Remainder)       1        $192,200            $226,200         $221,000    Step 1a (calc LMV, if any)
   Land                       2        $111,600            $128,600         $125,600    Step 1b (=B2/B1 x C1)
   Buildings                  3         $80,600             $97,600          $95,400    Step 1c (=B3/B1 x C1)

HGA                           4        $155,000            $172,000         $172,000    Step 2a (calc LMV, if any)
  1 Acre (Land)               5         $74,400             $74,400          $74,400    Step 2b (=B5/B4 x C4)
  HG (Buildings)              6         $80,600             $97,600          $97,600    Step 2c (=B6/B4 x C4)

Revised Total (HGA & Rem.) 7                                                $221,000    Step 3a (=C1)
  Land                     8                                                $123,400    Step 3b (see below)
  Buildings                9                                                 $97,600    Step 3b (see below)
                                     If C6>C3,                              then     C9=C6 and C8=C7-C9
                                     If C6<C3,      and      if C5>C2,      then    C8=C5 and C9=C7-C8
                                     If C6<C3,      and      if C5<C2,      then    C8=C2 and C9=C3

Part 2 - Calculations on Agricultural Use (GA Values)

Total (HGA & Remainder)       10       $164,400            $205,400         $189,100    Step 4a (calc LMV)
   Land                       11        $83,800            $107,800          $99,200    Step 4b (=B11/B10 x C10)
   Buildings                  12        $80,600             $97,600          $89,900    Step 4c (=B12/B10 x C10)

HGA                           13       $155,000            $172,000         $172,000    Step 5a (=C4)
  1 Acre (Land                14        $74,400             $74,400          $74,400    Step 5b (=C5)
  HG (Buildings)              15        $80,600             $97,600          $97,600    Step 5c (=C6)

Revised Total (HGA & Rem.) 16                                               $189,100     Step 3a (=C10)
  Land                     17                                                $91,500     Step 3b (see below)
  Buildings                18                                                $97,600     Step 3b (see below)
                                     If C15>C12,                            then     C18=C15 and C17=C16-C18
                                     If C15<C12,    and      if C14>C11,    then     C17=C14 and C18=C16-C17
                                     If C15<C12,    and      if C14<C11,    then     C17=C11 and C18=C12




LIMITED MARKET VALUE                                                                                          04.09 - 16
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-13 LMV and Land Building Apportionment on Agricultural Parcels with Green
Acres: Increase in Both HGA and Ag Land Values

This example demonstrates calculations where the HGA and ag land values are increasing. Part 1 applies
even if the parcel is not subject to Green Acres.
                                     2004 LMV           2005 EMV           2005 LMV
                                         A                  B                  C

Part 1 - Calculations on Highest and Best Use (full EMV)

Total (HGA & Remainder)       1        $536,100            $690,100         $616,500    Step 1a (calc LMV, if any)
   Land                       2        $142,500            $241,500         $215,700    Step 1b (=B2/B1 x C1)
   Buildings                  3        $393,600            $448,600         $400,800    Step 1c (=B3/B1 x C1)

HGA                           4        $429,100            $495,400         $493,500    Step 2a (calc LMV, if any)
  1 Acre (Land)               5         $52,500             $63,800          $63,600    Step 2b (=B5/B4 x C4)
  HG (Buildings)              6        $376,600            $431,600         $429,900    Step 2c (=B6/B4 x C4)

Revised Total (HGA & Rem.) 7                                                $616,500    Step 3a (=C1)
  Land                     8                                                $186,600    Step 3b (see below)
  Buildings                9                                                $429,900    Step 3b (see below)
                                     If C6>C3,                              then     C9=C6 and C8=C7-C9
                                     If C6<C3,      and      if C5>C2,      then    C8=C5 and C9=C7-C8
                                     If C6<C3,      and      if C5<C2,      then    C8=C2 and C9=C3

Part 2 - Calculations on Agricultural Use (GA Values)

Total (HGA & Remainder)       10       $462,900            $552,500         $532,300    Step 4a (calc LMV)
   Land                       11        $69,300            $103,900         $100,100    Step 4b (=B11/B10 x C10)
   Buildings                  12       $393,600            $448,600         $432,200    Step 4c (=B12/B10 x C10)

HGA                           13       $429,100            $495,400         $493,500    Step 5a (=C4)
  1 Acre (Land                14        $52,500             $63,800          $63,600    Step 5b (=C5)
  HG (Buildings)              15       $376,600            $431,600         $429,900    Step 5c (=C6)

Revised Total (HGA & Rem.) 16                                               $532,300     Step 3a (=C10)
  Land                     17                                               $100,100     Step 3b (see below)
  Buildings                18                                               $432,200     Step 3b (see below)
                                     If C15>C12,                            then     C18=C15 and C17=C16-C18
                                     If C15<C12,    and      if C14>C11,    then     C17=C14 and C18=C16-C17
                                     If C15<C12,    and      if C14<C11,    then     C17=C11 and C18=C12




LIMITED MARKET VALUE                                                                                          04.09 - 17
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.09-14 LMV and Land Building Apportionment on Agricultural Parcels with Green
Acres: Increase in HGA Values

This example demonstrates calculations where the HGA values are increasing. Part 1 applies even if the
parcel is not subject to Green Acres.
                                     2004 LMV           2005 EMV           2005 LMV
                                         A                  B                  C

Part 1 - Calculations on Highest and Best Use (full EMV)

Total (HGA & Remainder)       1        $536,100            $637,600         $616,500    Step 1a (calc LMV, if any)
   Land                       2        $142,500            $154,000         $215,700    Step 1b (=B2/B1 x C1)
   Buildings                  3        $393,600            $483,600         $400,800    Step 1c (=B3/B1 x C1)

HGA                           4        $429,100            $530,600         $493,500    Step 2a (calc LMV, if any)
  1 Acre (Land)               5         $52,500             $64,000          $63,600    Step 2b (=B5/B4 x C4)
  HG (Buildings)              6        $376,600            $466,600         $429,900    Step 2c (=B6/B4 x C4)

Revised Total (HGA & Rem.) 7                                                $616,500    Step 3a (=C1)
  Land                     8                                                $186,600    Step 3b (see below)
  Buildings                9                                                $429,900    Step 3b (see below)
                                     If C6>C3,                              then     C9=C6 and C8=C7-C9
                                     If C6<C3,      and      if C5>C2,      then    C8=C5 and C9=C7-C8
                                     If C6<C3,      and      if C5<C2,      then    C8=C2 and C9=C3

Part 2 - Calculations on Agricultural Use (GA Values)

Total (HGA & Remainder)       10       $462,900            $564,400         $532,300    Step 4a (calc LMV)
   Land                       11        $69,300             $80,800          $76,200    Step 4b (=B11/B10 x C10)
   Buildings                  12       $393,600            $483,600         $456,100    Step 4c (=B12/B10 x C10)

HGA                           13       $429,100            $530,600         $493,500    Step 5a (=C4)
  1 Acre (Land                14        $52,500             $64,000          $59,500    Step 5b (=C5)
  HG (Buildings)              15       $376,600            $466,600         $434,000    Step 5c (=C6)

Revised Total (HGA & Rem.) 16                                               $532,300     Step 3a (=C10)
  Land                     17                                                $76,200     Step 3b (see below)
  Buildings                18                                               $456,100     Step 3b (see below)
                                     If C15>C12,                            then     C18=C15 and C17=C16-C18
                                     If C15<C12,    and      if C14>C11,    then     C17=C14 and C18=C16-C17
                                     If C15<C12,    and      if C14<C11,    then     C17=C11 and C18=C12




LIMITED MARKET VALUE                                                                                          04.09 - 18
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.10 – PROPERTY TAX EXCLUSIONS

Property tax exclusions are features of the property tax system that, true to their name, exclude value
from taxation. The three most common exclusions are for increases in value associated with platting
property, decreases in value due to damage from mold or lead paint, and for increases in value due to
improvements to older homes participating in the “This Old House” program. A couple of additional
exclusions apply in more limited circumstances to business property affected by the floods of 1997 and
2002 and are sometimes referred to as “This Old Business” exclusions.

Plat Law

Vacant Land Platted in Metropolitan Counties
M.S. 273.11, subdivision 14a, provides a property tax              NOTE
exclusion for vacant land platted on or after August 1, 2001   Vacant land platted on or after August 1, 2001
in a metropolitan county.                                      is subject to different phase-in provisions
                                                               depending on whether it is in a metropolitan
“Metropolitan County” means the counties of Anoka,             or non-metropolitan county.       Vacant land
                                                               platted before August 1, 2001 was all subject
Carver, Dakota, Hennepin, Ramsey, Scott, and                   to the 3-year phase in as provided in M.S.
Washington.                                                    273.11, subdivision 14.

The law provides that all land platted and not improved with a permanent structure shall be assessed as
follows: the assessor shall determine the market value of each individual lot based upon the highest and
best use of the property as un-platted land. In establishing the market value of the property, the assessor
shall consider the sales price of the un-platted land or comparable sales of un-platted land of similar use
and with similar availability of public utilities.

The market value determined in the above paragraph shall be increased as follows for each of the 3
assessment years immediately following the final approval of the plat:

       1/3 of the difference between the property’s unplatted market value as determined above and the
       market value based upon the highest and best use of the land as platted property shall be added in
       each of the 3 subsequent assessment years.

Any increase in market value after the first assessment year following the plat’s final approval shall be
added to the property’s market value in the next assessment year.

Notwithstanding the above market value limitation, if construction begins before the expiration of the 3-
year period, that lot shall go to full market value in the next assessment year. The market value of a
platted lot shall not exceed the value of that lot based upon the highest and best use of the property as
platted land.

Vacant Land Platted in Non-Metropolitan Counties
M.S. 273.11, subdivision 14b, provides a property tax exclusion for vacant land in nonmetropolitan
counties platted on or after August 1, 2001. All land platted on or after August 1, 2001 and located in a
county other than a metropolitan county is given a 7-year phase-in period.

PROPERTY TAX EXCLUSIONS                                                                         04.10 - 1
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.10-1: Plat Law Valuation for Metropolitan Counties

Bowling Green subdivision is a new residential subdivision located in Carver County. The developers
are platting the 100 lot subdivision from a 45 acre piece of agricultural property. The date of the plat is
September 25, 2004. The value of the agricultural parcel for the 2004 assessment is $100,000.

The agricultural piece is subdivided into 100 lots. When splitting a property, the value and classification
cannot change during the year of the split. Therefore, the agricultural piece of property is subdivided
into 100 lots, each with an agricultural classification and each valued at $1,000 ($100,000 / 100 =
$1,000) for the 2004 assessment.

For the 2005 assessment, each lot is given an estimated market value of $50,000. The value is to be
phased-in over a 3-year period. Therefore the platted value of each lot would be as follows:
        $50,000 - $1,000 = $49,000

        $49,000/3 = $16,333 (rounds to $16,300)


                 EMV               PY TMV           Plat Phase-In     EMV Increase      TMV       Remaining Exclusion
        AY05     $50,000           $1,000           $16,300           No 1st Yr Inc     $17,300   $32,700
        AY06     $55,000           $17,300          $16,300           $5,000            $38,600   $16,400
        AY07     $60,000           $38,600          $16,400*          $5,000            $60,000   $0

*This is the remaining deferral which may differ from prior year amounts due to rounding.

See Section 04.09 for an example where LMV would apply.




Example 04.10-2: Plat Law Valuation for Non-Metro Counties

Using the same assumptions from the previous example, except that Bowling Green Subdivision is now
located in Olmsted County, the 7-year phase-in period would be used to calculate the values and
exclusions as follows:
        $50,000 - $1,000 = $49,000

        $49,000/7 = $7,000

                 EMV               PY TMV           Plat Phase-In     EMV Increase      TMV       Remaining Exclusion
        AY05     $50,000           $1,000           $7,000            No 1st Yr Inc     $8,000    $42,000
        AY06     $55,000           $8,000           $7,000            $5,000            $20,000   $35,000
        AY07     $60,000           $20,000          $7,000            $5,000            $32,000   $28,000
        AY08     $65,000           $32,000          $7,000            $5,000            $44,000   $21,000
        AY09     $70,000           $44,000          $7,000            $5,000            $56,000   $14,000
        AY10     $75,000           $56,000          $7,000            $5,000            $68,000   $7,000
        AY11     $80,000           $68,000          $7,000            $5,000            $80,000   $0




PROPERTY TAX EXCLUSIONS                                                                                   04.10 - 2
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Valuation Exclusion for Certain Improvements (This Old House)

The provisions of M.S. 273.11, subdivision 16, commonly referred to as “This Old House,” allow for
certain improvements to older homestead property to be fully or partially excluded from the value
assessed for property taxes. This program has expired for new entrants to the extent that the
improvements had to be made and assessed as new construction for the January 2, 2003, assessment.
Despite this expiration for new entrants, the program continues in effect for existing participants until
their exclusions expire and are fully phased-in. The exclusions run for ten years, unless sold or
reclassified, and are phased-in over the following two or five years.

“This Old House” was enacted in 1993 and is designed to provide owners of older homes with an
incentive to renovate them so as to preserve and revitalize older neighborhoods. This exclusion first
affected taxes payable in 1995 and as of 2004 there was about $667 million excluded for about 57,000
properties in 86 counties.

Property Eligible for the Exclusion
In order to have qualified for the exclusion a property had to have met the following criteria:
    Age Limit - The property had to be at least 45 years old (or 35 years old for improvements made
    prior to July 1, 1999) at the time the improvements commenced. The age of a structure is the
    number of years since the original year of its construction.
    Homesteads Only - The property had to be homesteaded (full or mid-year) in the year the
    improvement commenced. (This includes property in Class 1a, 1b, and 2a.)
    Value Limit - The total estimated market value of the property on January 2nd of the assessment
    year in which the improvements were made could not exceed $400,000 (or $150,000 or $300,000
    depending on certain criteria for improvements made prior to July 1, 1999). (For residential
    property this includes the land and buildings; for agricultural property it includes the house, garage,
    and 1st acre.)

Qualifying Value for Exclusion
The total qualifying value is dependent upon the age of the residence.
   Houses 45-69 years old at the time of the improvement qualify for exclusion of one-half of the value
   of the qualifying improvements up to a maximum of $25,000.
   Houses that were 70 years of age or older at the time of the improvement qualify for exclusion of the
   total value of any qualifying improvements up to a maximum of $50,000.

The qualifying value may result from multiple improvements to the homestead. The assessor
determines the qualifying value of the improvements. Note that the qualifying value may be more or
less than the cost of the improvements. Once the exclusion amount is established by the assessor, it
remains frozen during the time period of the exclusion.

Improvements That Qualify for Exclusion
Several limitations determine the improvements that could have qualified for exclusion:
   Only improvements made to the residence and garage (such as additions, the construction of a new
   garage, adding a porch or deck, and remodeling or upgrading existing improvements) were eligible
   for the exclusion.



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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



   Only improvements that add at least $5,000 in value to a property in any one-year, qualify for the
   exclusion from property tax. (The minimum for improvements prior to July 1, 1999 was $1,000.)
   The qualifying value may have resulted from multiple improvements.
   If the improvements increased the size of the structure by 100 percent or more, the valuation
   increase attributable to the portion of the improvement that caused the structure’s size to exceed 100
   percent does not qualify for exclusion.
   If 50 percent or more of the square footage of a structure was voluntarily razed or removed, the
   valuation increase attributable to any subsequent improvements to the remaining structure does not
   qualify for the exclusion.
   Property in a jurisdiction which is subject to a building permit process must have received a building
   permit prior to commencement of the improvement to qualify.
   In the case of a duplex or triplex that is a homestead, the improvement is eligible regardless of which
   portion of the property was improved.

Homes Damaged by a Natural Disaster
If a home was damaged as a result of a natural disaster such as a flood, tornado or fire, the value of
improvements made to restore the property to its initial value do not qualify for exclusion. If a house
was completely destroyed, it was not eligible for the exclusion. However, any improvements made to
the damaged property that increased the value of the home above its value prior to the natural disaster
would have qualified for the exclusion.

A house could have received a local option abatement under M.S. 273.123, subdivision 7, and such an
abatement would not have disqualified the property from participating in This Old House.

Homes Relocated to a Property
If a residence was relocated to a site, the relocation must be from within the state and the only
improvements that are eligible for exclusion are those for which building permits were issued after the
residence was relocated to the present site, and those undertaken beyond the basic improvements
necessary to install the residence on the present site. The age of a structure that has been relocated is the
age of the actual structure – not the amount of time the structure has been located on its present site.

Application for Value Exclusion
All homeowners must apply to the county assessor in order to qualify for exclusion from property tax
under This Old House. Applications must be received by July 1 of any year in order to be effective for
taxes payable in the following year. If an application is filed after the first assessment date for which an
improvement would have qualified for the value exclusion, the 10-year period during which the value is
subject to exclusion is reduced by the number of years that have elapsed since the property would have
initially qualified.

No exclusion for an improvement may be granted by the Local Board of Appeal and Equalization or by
the County Board of Appeal and Equalization. The County Board of Appeal and Equalization is not
permitted to reduce or abate property taxes due to the failure of a homeowner to file an application for
the exclusion.

Relationship to Market Value Changes
Although the amount excluded from taxation is frozen for 10-year duration, changes in the market value
of the property, including the qualifying improvements, continue to be applied to the property. The

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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



exclusion is applied after the calculation of limited market value (LMV) to yield the taxable market
value (TMV). See example 04.09-8 in Section 04.09 and Section 04.11 for more on how This Old
House factors into computing TMV.

Duration, Phase-In, and Termination of the Exclusion
The exclusions remain in effect for 10 years beginning with the initial assessment year in which the
value (of at least the $5,000 or $1,000 minimums) was added to the property. After the 10-year period
has expired, the amount of the excluded value is added back in one of the following ways:
    If the qualifying amount is less than or equal to $10,000, the value is added back in equal
    installments in each of the next 2 years.
    If the qualifying amount is greater than $10,000, 20% of the value is added back over a period of 5
    years.

If an improvement spans assessment years, the 10-year exclusion begins with the initial assessment year
that the minimum value is added to the property and there is no extension of the 10-year period for the
subsequent completion of the improvements even as additional value is added.

The valuation exclusion shall terminate whenever the property is sold, or the property is reclassified to a
class which does not qualify for the exclusion.

Sale or Transfer of the Property
M.S. 273.11, subdivision 18, requires that sellers must disclose to prospective buyers that the market
value of improvements made to the home is excluded from the property tax, and that the exclusion will
terminate when the property is sold.

Valuation Exclusion for Improvements                                   to    Certain        Business
Property (This Old Business)

Two separate but similar market value exclusion provisions are contained in M.S. 273.11, subdivisions
19 and 20, that exclude the value associated with improvements for certain business property. The first
set of these provisions in subdivision 19 was created in 1997 and is commonly dubbed “This Old
Business” for its similarity to “This Old House” in that it provides an exclusion for improvements to
older business properties. 1997 was also a year in which significant flooding occurred in several cities
and these provisions were also made available to flood damaged business properties without any
building age requirement. The second set of provisions in subdivision 20 came in response to floods in
2002. While quite similar to the earlier provisions of subdivision 19, there are some differences,
including the dropping of the “old” option. (Perhaps this set of provisions is also loosely referred to as
being a “This Old Business” provision although the monikers lack any real significance.)


Similar Basic Provisions
For both provisions, the assessor is to estimate the market value in the assessment year following the
year that a building permit is taken out or the taxpayer notified the assessor that an improvement was to
be made. The assessor shall note the increase over the prior year’s assessment (or the 2002 assessment
in the case of the subdivision 20 provisions) and shall exclude this amount for each of the next five
years. After the five years of full exclusion, the value will be added in 20 percent increments in each of

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the next five years. The maximum value of the exclusions from any property is $50,000. Application to
the assessor is required.

M.S. 273.11, Subdivision 19 Conditions
The exclusion under this subdivision applies to property classified under 273.13, subdivision 24, which
is eligible for the preferred class rate on the market value up to $150,000, provided that all of the
following conditions below were met:
    The building must have been at least 50 years old at the time of the improvement, or damaged by the
    1997 floods.
    The building must be located in a city or town with a population of 10,000 or less and be outside of
    the seven county metropolitan area.
    The total estimated market value of the land and buildings must have been $100,000 or less prior to
    the improvement and prior to the damage caused by the 1997 floods.
    The current year’s estimated market value of the property (at the time of application) must have been
    equal to or less than its market value in each of the two previous year’s assessments.
    A building permit must have been issued prior to the commencement of the improvement, or if the
    building is located in a city or town which does not have a permit process, the property owner must
    notify the assessor prior to the commencement of the improvement.
    The property, including its improvements, has received no public assistance, grants or financing
    except, that in the case of property damaged by the 1997 floods, the property is eligible to the extent
    that the flood losses are not reimbursed by insurance or any public assistance, grants, or financing.
    The property is not receiving a property tax abatement under M.S. 469.1813.
    The improvements were made from July 1, 1997 through January 1, 1999.
The exclusion under this subdivision could apply to no more than two improvements. Application must
have been made prior to July 1 of any year to be effective for taxes payable in the following year.

M.S. 273.11, Subdivision 20 Conditions
The exclusion under this subdivision applies to property classified under 273.13, subdivision 24,
provided that all of the following conditions below were met:
    The building must have been damaged by the 2002 floods.
    The building must be located in a city or town with a population of 10,000 or less that is located in a
    county in the area included in DR-1419.
    The total estimated market value of the land and buildings must have been $150,000 or less for
    assessment year 2002.
    A building permit must have been issued prior to the commencement of the improvement, or if the
    building is located in a city or town which does not have a permit process, the property owner must
    have notified the assessor prior to the commencement of the improvement.
    The property is not receiving a property tax abatement under M.S. 469.1813.
    The improvements were made before January 1, 2004.
Applications must have been received by December 31, 2002, or December 1, 2003, in order to be
effective for taxes payable in the following year.

Valuation Reduction for Homestead Property Damaged by Mold

M.S. 273.11, subdivision 21, provides for a reduction in market value for homestead properties that have
been damaged by mold.

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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




In order for the property to receive this reduction, the owner of the homestead property may apply in
writing to the assessor. The written request to the assessor must include the estimated cost to repair the
mold damage and a licensed contractor must provide the estimate. The estimated cost of the repairs
must be at least $20,000. There is no maximum.

Upon completion of the repair work, the owner must file an application (form prescribed by the
commissioner of revenue) along with a copy of the contractor's estimate to the county assessor. When
these requirements have been met, the county board must grant a reduction in the market value equal to
the estimated cost of repairing the mold damage. If the county board denies the reduction, the denial
may be appealed to the tax court. If the county board takes no action on the application within 90 days
after its receipt, the application is considered approved.

Because it may require more that one year from the time that the presence of mold is identified and the
work is completed, the assessment may already partially reflect loss in value due to the presence of
mold. Because of this scenario, it is important to remember that the value of the affected structure
should be calculated as if the mold is not present before subtracting the amount of the estimate.

If the property owner applies for a reduction between January 1 and June 30 of any year, the reduction
applies for taxes payable in the following year. If the property owner applies for a reduction between
July 1 and December 31 of any year, the reduction applies for taxes payable in the second following
year. In the assessment year following the assessment year when a valuation reduction has occurred,
any market value added by the assessor as a result of the repaired mold damage must be considered an
increase in value due to new construction, and therefore it is not eligible for limited market value.

Valuation Reduction for Properties determined to be a Lead
Hazard

M.S. 273.11, subdivision 22, provides for a reduction in market value for owners of the following
classes of property due to a lead hazard:

       Class 1a – Residential Homestead,
       Class 1b – Blind/Disabled Homestead,
       Class 1c – Ma & Pa Resorts,
       Class 2a – Agricultural Homestead,
       Class 4b/Class 4bb – Certain Non-Homestead properties, or
       Class 4d – Qualifying Low-Income Rental Housing.

In order to qualify for this reduction, the property must be located in a city that has authorized valuation
reductions for this purpose. A city that authorizes reductions must establish guidelines for qualifying
lead hazard reduction projects and must designate an agency within the city to issue certificates of
completion of qualifying projects.

The property owner must obtain a certificate from the agency stating that the project has been completed
and that the total cost incurred by the owner was at least $3,000. The maximum amount of valuation
reduction is $20,000. The project must have originated after July 1, 2005 and must be completed before

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REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



July 1, 2010. The property owner must then apply to the county assessor (on a form prescribed by the
assessor) and include a copy of the certificate of completion from the city agency.

If the property owner applies for a reduction between January 1 and June 30 of any year, the reduction
applies for taxes payable in the following year. If the property owner applies for a reduction between
July 1 and December 31 of any year, the reduction applies for taxes payable in the second following
year. The reduction is a one-year valuation reduction equal to actual costs. In the assessment year
following the assessment year when a valuation reduction has occurred, any additional market value
added by the assessor because of the lead hazard removal must be considered an increase in value due to
new construction, and therefore it is not eligible for limited market value.

Examples

Examples illustrating how these exclusions impact the calculation of market value can be found in the
next section, Section 04.11.




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.11 – TAXABLE MARKET VALUE
Taxable Market Value (TMV) refers to the amount of value that is used in calculating taxes for a
property. Due to a variety of special features in the property tax system, TMV may often differ from
Estimated Market Value (EMV) and Limited Market Value (LMV). The table below summarizes and
illustrates the hierarchy of market value components, indicating how and where each factor comes into
the calculations.

Hierarchy of Market Value Components

                                                                        (a)                    (b)
                                                                    Prior Year             Current Year
  1.    Market Value Irrespective of Contaminants                        #                        #
  2.    Contamination Value                                              #                        #
  3.    Estimated Market Value (EMV)                                   1a-2a                   1b-2b
  4.    Green Acres Deferment                                            #                        #
  5.    Open Space Deferment                                             #                        #
  6.    Market Value Subject To Limitation                         3a-4a-5a-8a              3b-4b-5b-8b
  7.    Limited Market Value Reduction*                                  #           6b minus the greater of:
        (Formula shown is for assessment year 2004.)               (calculated in        9a x 115% or
                                                                     prior year)       (6b-9a) x 25% + 9a
  8.    Additional Value: (New construction, 1st year                    #                        #
        increase due to plat, increases when ceasing to qualify
        for Green Acres or Open Space)

  9.    Limited Market Value (LMV)                                   6a-7a+8a                6b-7b+8b
  10.   Platted Vacant Land Exclusion                                    #                        #
  11.   “This Old House” Exclusion                                       #                        #
  12.   “This Old Business” Exclusion                                    #                        #
  13.   Mold Damage Reduction                                            #                        #
  14.   Lead Hazard Reduction                                            #                        #
  15.   Taxable Market Value (TMV)                                9a-10a-11a-12a         9b-10b-11b-12b
  *If the current year computation yields a negative number, this indicates that the current value is less than the
limit and the reduction should be zero.

Generally speaking, everything starts with Estimated Market Value. If there is contamination value
present, there is a theoretical higher market value that is irrespective of contaminants that would be a
higher level of value.


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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




After EMV, the special valuation deferrals and programs (Green Acres and Open Space) are applied to
get closer to the taxable market value. These valuation treatments are applied prior to computing LMV.

Next in sequence are limited market value calculations which create some complexity. Note that the
market value subject to limitation must first subtract out the additional value in an assessment year for
new construction, first year increases in value due to plat law, and increases for ceasing to qualify for
Green Acres or Open Space. These increases are not subject to limitation by limited market value
provisions. After subtracting out these increases, the limited increase is then computed on the value that
is subject to limitation. This allows for the determination of the limited market value reduction. The
additional value can then be added back in to yield Limited Market Value. Note, that if the 7b formula
would yield a negative number, this indicates that the current value subject to limitation is already less
than the limit, and the reduction should be zero.

After LMV is computed, any exclusions that apply to the property are subtracted to yield the Taxable
Market Value. These exclusions come last in order so that as they are phased back in (by reducing the
amount that is excluded), these increases are not subjected to LMV.

Following are several examples of TMV for parcels subject to various circumstances. In these
examples, all of the prior year data is given and the formulas refer to the current year computations.
Although only the prior year LMV is relevant for current year calculations, the prior year amounts for
most cells are shown for comparison. The prior year LMV-related cells are shaded-out to avoid
confusion.

The first two examples look at an extreme (perhaps absurd) scenario for calculations in AY 2004 and
AY 2005, where as much that can apply is coming into play. Assume this is a split class agricultural
homestead and commercial property that is participating in Green Acres, This Old House, and This Old
Business, and has some contamination value. The This Old House exclusion is starting to phase back in.
There is even some new construction for AY 2005 for a small shed. (Unfortunately, Open Space, Plat
Law exclusions, Mold Damage and Lead Hazard reductions are not in play for this parcel.)

The next three examples relate to a more normal scenario where a parcel is subject to a plat law
exclusion AY 2004-AY 2006 in a metro county. Being in a metro county the first year increase is
phased-in over three years (in this case at $15,000 each year). In these examples there is also some
limitation that applies due to growth in the value starting in AY 2005.

The final four examples demonstrate the high and low extremes of the Mold Damage and Lead Hazard
reductions, respectively. The Mold Damage reduction examples include a small amount of LMV
reduction whereas the Lead Hazard reduction examples do not.

Taxable market values become the foundation for computing net tax capacities, upon which most
property taxes are levied.




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REVISION DATE: FEBRUARY, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.11-1: Extreme Scenario AY 2006
                                                                     (a)               (b)
                                                                   AY 2003           AY 2004
 1.    Market Value Irrespective of Contaminants                   $400,000          $450,000
 2.    Contamination Value                                         120,000            120,000
 3.    Estimated Market Value (EMV)                [1b – 2b]       280,000            330,000
 4.    Green Acres Deferment                                        50,000             50,000
 5.    Open Space Deferment                                          NA                 NA
 6.    Market Value Subject To Limitation     [3b-4b-5b-8b]                           280,000
 7.    Limited Market Value Reduction                                                   21,200
         [6b – (the greater of 9a x 115% or (6b-9a) x 25% + 9a)]              [280,000-(225,000x115%)]
 8.    Additional Value: (none)                                                          0
 9.    Limited Market Value (LMV)               [6b-7b+8b]         225,000            258,800
 10.   Platted Vacant Land Exclusion                                 NA                 NA
 11.   “This Old House” Exclusion                                   15,000             12,000
 12.   “This Old Business” Exclusion                                15,000             15,000
 13.   Mold Damage Reduction                                         NA                 NA
 14.   Lead Hazard Reduction                                         NA                 NA
 15.   Taxable Market Value (TMV) [9b-10b-11b-12b-13b-14b]         $195,000          $231,800

Example 04.11-2: Extreme Scenario AY 2007
                                                                     (a)               (b)
                                                                   AY 2004           AY 2005
 1.    Market Value Irrespective of Contaminants                   $450,000          $480,000
 2.    Contamination Value                                         120,000            120,000
 3.    Estimated Market Value (EMV)                [1b – 2b]       330,000            360,000
 4.    Green Acres Deferment                                        50,000             50,000
 5.    Open Space Deferment                                          NA                 NA
 6.    Market Value Subject To Limitation     [3b-4b-5b-8b]                           305,000
 7.    Limited Market Value Reduction                                                   7,400
         [6b – (the greater of 9a x 115% or (6b-9a) x 33% + 9a)]              [305,000-(258,800x115%)]
 8.    Additional Value: (new construction)                                            5,000
 9.    Limited Market Value (LMV)               [6b-7b+8b]         258,800            302,600
 10.   Platted Vacant Land Exclusion                                 NA                 NA
 11.   “This Old House” Exclusion                                   12,000             9,000
 12.   “This Old Business” Exclusion                                15,000             15,000
 13.   Mold Damage Reduction                                         NA                 NA
 14.   Lead Hazard Reduction                                         NA                 NA
 15.   Taxable Market Value (TMV) [9b-10b-11b-12b-13b-14b]         $231,800          $278,600




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REVISION DATE: FEBRUARY, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.11-3: Plat Law Exclusion Example AY 2006
                                                                           (a)             (b)
                                                                         AY 2004         AY 2005
 1.    Market Value Irrespective of Contaminants                         $5,000           $50,000
 2.    Contamination Value                                                 NA               NA
 3.    Estimated Market Value (EMV)                    [1b – 2b]          5,000           50,000
 4.    Green Acres Deferment                                               NA               NA
 5.    Open Space Deferment                                                NA               NA
 6.    Market Value Subject To Limitation          [3b-4b-5b-8b]                           5,000
 7.    Limited Market Value Reduction                                                         0
         [6b – (the greater of 9a x 115% or (6b-9a) x 25% + 9a)]                   [5,000-(5,000x115%)]
 8.    Additional Value: (1st year increase due to plat)                                  45,000
 9.    Limited Market Value (LMV)                    [6b-7b+8b]           5,000           50,000
 10.   Platted Vacant Land Exclusion                                       NA             30,000
 11.   “This Old House” Exclusion                                          NA               NA
 12.   “This Old Business” Exclusion                                       NA               NA
 13.   Mold Damage Reduction                                               NA               NA
 14.   Lead Hazard Reduction                                               NA               NA
 15.   Taxable Market Value (TMV) [9b-10b-11b-12b-13b-14b]               $5,000           $20,000

Example 04.11-4: Plat Law Exclusion Example AY 2007
                                                                           (a)             (b)
                                                                         AY 2004         AY 2005
 1.    Market Value Irrespective of Contaminants                         $50,000          $65,000
 2.    Contamination Value                                                 NA               NA
 3.    Estimated Market Value (EMV)                [1b – 2b]              50,000          65,000
 4.    Green Acres Deferment                                               NA               NA
 5.    Open Space Deferment                                                NA               NA
 6.    Market Value Subject To Limitation    [3b-4b-5b-8b]                                65,000
 7.    Limited Market Value Reduction                                                       7,500
               [6b – (the greater of 9a x 115% or (6b-9a) x 33% + 9a)]             [65,000-(50,000x115%)]
 8.    Additional Value: (none)                                                              0
 9.    Limited Market Value (LMV)              [6b-7b+8b]                 50,000          57,500
 10.   Platted Vacant Land Exclusion                                      30,000          15,000
 11.   “This Old House” Exclusion                                          NA               NA
 12.   “This Old Business” Exclusion                                       NA               NA
 13.   Mold Damage Reduction                                               NA               NA
 14.   Lead Hazard Reduction                                               NA               NA
 15.   Taxable Market Value (TMV) [9b-10b-11b-12b-13b-14b]               $20,000          $42,500




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.11-5: Plat Law Exclusion Example AY 2008
                                                                     (a)             (b)
                                                                   AY 2005         AY 2006
 1.    Market Value Irrespective of Contaminants                   $65,000          $70,000
 2.    Contamination Value                                           NA               NA
 3.    Estimated Market Value (EMV)                [1b – 2b]       65,000           70,000
 4.    Green Acres Deferment                                         NA               NA
 5.    Open Space Deferment                                          NA               NA
 6.    Market Value Subject To Limitation    [3b-4b-5b-8b]                          70,000
 7.    Limited Market Value Reduction                                                 3,900
         [6b – (the greater of 9a x 115% or (6b-9a) x 50% + 9a)]             [70,000-(57,500x115%)]
 8.    Additional Value: (none)                                                        0
 9.    Limited Market Value (LMV)              [6b-7b+8b]          57,500           66,100
 10.   Platted Vacant Land Exclusion                               15,000              0
 11.   “This Old House” Exclusion                                    NA               NA
 12.   “This Old Business” Exclusion                                 NA               NA
 13.   Mold Damage Reduction                                         NA               NA
 14.   Lead Hazard Reduction                                         NA               NA
 15.   Taxable Market Value (TMV) [9b-10b-11b-12b-13b-14b]         $42,500          $66,100




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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.11-6: Low Mold Damage Reduction Example AY 2006
                                                    (a)                                (b)
                                                  AY 2005                            AY 2006
 1.    Market Value Irrespective of Contaminants                   $400,000          $465,000
 2.    Contamination Value                                           NA                 NA
 3.    Estimated Market Value (EMV)                [1b – 2b]       400,000            465,000
 4.    Green Acres Deferment                                         NA                 NA
 5.    Open Space Deferment                                          NA                 NA
 6.    Market Value Subject To Limitation    [3b-4b-5b-8b]                            465,000
 7.    Limited Market Value Reduction                                                   5,000
         [6b – (the greater of 9a x 115% or (6b-9a) x 25% + 9a)]              [465,000-(400,000x115%)]
 8.    Additional Value: (none)                                                          0
 9.    Limited Market Value (LMV)              [6b-7b+8b]          400,000            460,000
 10.   Platted Vacant Land Exclusion                                 NA                 NA
 11.   “This Old House” Exclusion                                    NA                 NA
 12.   “This Old Business” Exclusion                                 NA                 NA
 13.   Mold Damage Reduction                                         NA                20,000
 14.   Lead Hazard Reduction                                         NA                 NA
 15.   Taxable Market Value (TMV) [9b-10b-11b-12b-13b-14b]         $400,000          $440,000

Example 04.11-7: High Mold Damage Reduction Example AY 2006
                                                     (a)                               (b)
                                                   AY 2005                           AY 2006
 1.    Market Value Irrespective of Contaminants                   $400,000          $465,000
 2.    Contamination Value                                           NA                 NA
 3.    Estimated Market Value (EMV)                [1b – 2b]       400,000            465,000
 4.    Green Acres Deferment                                         NA                 NA
 5.    Open Space Deferment                                          NA                 NA
 6.    Market Value Subject To Limitation    [3b-4b-5b-8b]                            465,000
 7.    Limited Market Value Reduction                                                   5,000
         [6b – (the greater of 9a x 115% or (6b-9a) x 25% + 9a)]              [465,000-(400,000x115%)]
 8.    Additional Value: (none)                                                          0
 9.    Limited Market Value (LMV)              [6b-7b+8b]          400,000            460,000
 10.   Platted Vacant Land Exclusion                                 NA                 NA
 11.   “This Old House” Exclusion                                    NA                 NA
 12.   “This Old Business” Exclusion                                 NA                 NA
 13.   Mold Damage Reduction                                         NA               200,000
 14.   Lead Hazard Reduction                                         NA                 NA
 15.   Taxable Market Value (TMV) [9b-10b-11b-12b-13b-14b]         $400,000          $260,000




TAXABLE MARKET VALUE                                                                            04.11 - 6
REVISION DATE: FEBRUARY, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.11-8: Low Lead Hazard Reduction Example AY 2006
                                                     (a)                        (b)
                                                   AY 2005                    AY 2006
 1.    Market Value Irrespective of Contaminants                   $155,000   $165,000
 2.    Contamination Value                                           NA         NA
 3.    Estimated Market Value (EMV)                [1b – 2b]       155,000    165,000
 4.    Green Acres Deferment                                         NA         NA
 5.    Open Space Deferment                                          NA         NA
 6.    Market Value Subject To Limitation    [3b-4b-5b-8b]                    165,000
 7.    Limited Market Value Reduction                                            0
         [6b – (the greater of 9a x 115% or (6b-9a) x 25% + 9a)]
 8.    Additional Value: (none)                                                  0
 9.    Limited Market Value (LMV)              [6b-7b+8b]          155,000    165,000
 10.   Platted Vacant Land Exclusion                                 NA         NA
 11.   “This Old House” Exclusion                                    NA         NA
 12.   “This Old Business” Exclusion                                 NA         NA
 13.   Mold Damage Reduction                                         NA         NA
 14.   Lead Hazard Reduction                                         NA        3,000
 15.   Taxable Market Value (TMV) [9b-10b-11b-12b-13b-14b]         $155,000   $162,000

Example 04.11-9: High Lead Hazard Reduction Example AY 2006
                                                      (a)                       (b)
                                                    AY 2005                   AY 2006
 1.    Market Value Irrespective of Contaminants                   $155,000   $165,000
 2.    Contamination Value                                           NA         NA
 3.    Estimated Market Value (EMV)                [1b – 2b]       155,000    165,000
 4.    Green Acres Deferment                                         NA         NA
 5.    Open Space Deferment                                          NA         NA
 6.    Market Value Subject To Limitation    [3b-4b-5b-8b]                    165,000
 7.    Limited Market Value Reduction                                            0
         [6b – (the greater of 9a x 115% or (6b-9a) x 25% + 9a)]
 8.    Additional Value: (none)                                                  0
 9.    Limited Market Value (LMV)              [6b-7b+8b]          155,000    165,000
 10.   Platted Vacant Land Exclusion                                 NA         NA
 11.   “This Old House” Exclusion                                    NA         NA
 12.   “This Old Business” Exclusion                                 NA         NA
 13.   Mold Damage Reduction                                         NA         NA
 14.   Lead Hazard Reduction                                         NA        20,000
 15.   Taxable Market Value (TMV) [9b-10b-11b-12b-13b-14b]         $155,000   $145,000




TAXABLE MARKET VALUE                                                                    04.11 - 7
REVISION DATE: FEBRUARY, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.12 – REFERENDUM MARKET VALUE
Referendum levies for school districts under M.S. 126C.17 and for other local governmental
subdivisions under M.S. 275.61 are levied against Referendum Market Value (RMV) as defined under
M.S. 126C.01, subdivision 3. (Note: this section does not attempt to inventory the levies that are applied
against RMV as much as to describe RMV for those levies that are applied to market value.)

Definition

Referendum Market Value means the market value of all taxable property, excluding property classified
as:
    Class 2a - Agricultural Homestead Remainder of Farm
    Class 2b - Timberlands and Non-Homestead Agricultural Land
    Noncommercial Class 4c (1) - Noncommercial Seasonal Residential Recreational (cabins)
    Class 4c (4) - Post-Secondary Student Housing

The portion of class 2a and 2b agricultural property consisting of the house, garage, and surrounding one
acre of land (HGA) is included in referendum market value.

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 class rate of less than 1% shall have a referendum market value
equal to its net tax capacity multiplied by 100. This affects class 1b (Blind/Disabled Homesteads) which
has a class rate of 0.45%, the first tier of class 1c (the first $500,000 of Commercial Seasonal
Residential Recreational) which has a class rate of 0.55%, and class 4d (Low Income Rental Housing)
which has a class rate of 0.75%.

The market value used for Referendum Market Value is the Taxable Market Value, not the Estimated
Market Value.

The example on the following page illustrates for various properties, the amounts that are defined as
Referendum Market Value.

History

For governmental subdivisions other than school districts, the market value based referendum tax
provision (M.S. 275.61) was enacted by the 1991 Legislature and became effective in payable year
1993. Therefore, certain referendum levies (voter approved taxes), were based upon taxable market
value rather than net tax capacity for the years 1993 through 1996.

For school districts, effective for taxes payable in 1995, operating school district referendum levies that
had been based on taxable market value were based on “school district referendum market value.”
School district referendum market value was a modified market value where property with a class rate of
less then one percent had a school district referendum market value equal to its class rate times 100
times its market value. All other properties had a school district referendum market value equal to their
taxable market value.

REFERENDUM MARKET VALUE                                                                        04.12 - 1
REVISION DATE: MARCH, 2006
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Beginning with taxes payable in 1997, the provisions for non-school local governments adopted the the
same definition of referendum market value that was used by school districts for referendum levies. The
term “school district referendum market value” came to be simply referred to as “referendum market
value.”

Beginning with taxes payable in 2002, the following properties became exempt from referendum market
value levies:
    Class 2a - Agricultural Homestead Remainder of Farm
    Class 2b - Timberlands and Non-Homestead Agricultural Land
    Noncommercial Class 4c (1) - Noncommercial Seasonal Residential Recreational (cabins)
    Class 4c (4) - Post-Secondary Student Housing

Starting with taxes payable in 2004, there are two school levies that are spread on referendum market
value - equity levies and transition levies - even though neither of these new levies are voter approved.
The total of these two levies is certified separately to the county auditor.



Example 04.12-1: Sample Referendum Market Values for Various Properties

The following breakouts of estimated market value (EMV) and taxable market value (TMV) would yield
Referendum Market Values (RMV) as follows. Note, EMV is not used. TMV determines RMV. EMV
is displayed to show that when EMV and TMV are different, the TMV is used.

                                                 EMV            TMV                 RMV
1. An Agricultural Homestead
    House, Garage, & 1st Acre                   $60,000        $60,000             $60,000
    Farm Buildings and Land:
      First $690,000                           $690,000       $690,000                  $0
      Over $690,000                            $ 10,000       $ 10,000                  $0
    Total                                      $760,000       $760,000             $60,000

2. A Homestead Qualifying for Class 1b
    Residential Hmstd (class 1a)               $153,000       $128,000            $128,000
    Blind/Disabled Hmstd (class 1b)             $32,000        $32,000             $14,400
    Total                                      $185,000       $160,000            $142,400

3. A Cabin (Noncomm. SRR)                      $220,000       $211,800                 $0

4. An Office Building (Commercial)             $750,000       $750,000            $750,000

5. A Residential Homestead (Class 1a)          $165,000       $148,600            $148,600




REFERENDUM MARKET VALUE                                                                      04.12 - 2
REVISION DATE: MARCH, 2006
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.13 – NET TAX CAPACITIES
As discussed at the outset of Section 04.06, property taxes in Minnesota are primarily levied on a
measure called net tax capacity, which is simply the taxable market value of a property multiplied by the
class rates discussed in that section. Net tax capacities were created in legislation in 1988 and first
effective for taxes payable in 1990. (A transitional “gross tax capacity” measure was the primary basis
of taxes for taxes payable in 1989.) The original notion behind the net tax capacity concept was that the
class rates represented the approximate tax burden a property of each classification should be expected
to carry assuming a tax rate of 100%. In other words, a modestly valued homestead should pay about
1% of its value in tax (therefore the 1% class rate on the first tier). This expectation has not necessarily
carried on, but the class rates continue to reflect what policymakers view as the appropriate relative
burdens between classes of property.

As assessors value property they also classify property, thereby determining the class rates that will
generate net tax capacity. M.S. 275.08, subdivision 1a, states, “For taxes payable in 1990 and
subsequent years, the county auditor shall compute the net tax capacity for each parcel according to the
class rates specified in section 273.13. The net tax capacity will be the appropriate class rate multiplied
by the parcel’s market value.” The formula, therefore, is simply:

       Net Tax Capacity (NTC) = Taxable Market Value (TMV) x Class Rate

Properties With Multiple Classes or Tiers
If the property has more than one classification, the taxable values of each portion are multiplied by their
respective class rates and then summed to find the net tax capacity of the property. Several
classifications also have more than one class rate for different tiers of value. A residential homestead,
for example, has a class rate of 1% for the first $500,000 of TMV and a rate of 1.25% for value over
$500,000.

Local Net Tax Capacity vs. State Net Tax Capacity
Beginning with taxes payable in 2002, there are actually two slightly different sets of net tax capacities:
a local net tax capacity and a state net tax capacity. The 2001 Legislature created a state general
property tax to apply only to certain property types, including cabins, but a new tier with a lower class
rate was set for determining the net tax capacity of cabins for the state general property tax. For the
most part, however, references to net tax capacity are synonymous with the local net tax capacity used
by all other jurisdictions. (See Section 04.15 for more on the different tax bases.)

The following page contains a few examples of net tax capacity calculations. The Department of
Revenue’s online Tax Calculation Course is also a good resource for working through example
calculations of net tax capacities.




NET TAX CAPACITIES                                                                              04.13 - 1
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Example 04.13-1: Net Tax Capacity Calculation for an Agricultural Homestead

The following illustrates the net tax capacity calculation for a 650 acre agricultural homestead with a
total TMV of $760,000.

                                                   Local         Local           State        State
                                       TMV     Class Rate        NTC        Class Rate        NTC
Agricultural Homestead (Class 2a)
    House, Garage, and 1st Acre
         First $500,000              $60,000       1.00%         $600             NA           NA
         Over $500,000                    $0       1.25%           $0             NA           NA
    Remainder of Farm
         First $600,000             $600,000       0.55%        $3,300            NA           NA
         Over $600,000              $100,000       1.00%        $1,000            NA           NA
    Totals                          $760,000                    $4,900                         NA




Example 04.13-2: Net Tax Capacity Calculation for a Cabin

The following illustrates the net tax capacity calculation for a cabin (Non-Commercial Seasonal
Residential Recreational) with a total TMV of $270,000.

                                                   Local         Local           State        State
                                       TMV     Class Rate        NTC        Class Rate        NTC
Cabin (Class 4c1)
        First $76,000                $76,000       1.00%         $760          0.40%         $304
        $76,000 - $500,000          $194,000       1.00%        $1,940         1.00%        $1,940
        Over $500,000                     $0       1.25%            $0         1.25%            $0
    Totals                          $270,000                    $2,700                      $2,244




Example 04.13-3: Net Tax Capacity Calculation for a Split Class Res Hmstd / Commercial

The following illustrates the net tax capacity calculation for a property that has a residential homestead
above a commercial retail space with a total TMV of $195,500, split into $155,000 for the commercial
space and $40,500 for the residential homestead portion.

                                                   Local         Local           State        State
                                       TMV     Class Rate        NTC        Class Rate        NTC
Residential Homestead (Class 1a)
        First $500,000               $40,500       1.00%         $405             NA           NA
        Over $500,000                     $0       1.25%           $0             NA           NA
Commercial (Class 3a)
        First $150,000              $150,000       1.50%        $2,250         1.50%        $2,250
        Over $150,000                 $5,000       2.00%          $100         2.00%          $100
    Totals                          $195,500                    $2,755                      $2,350



NET TAX CAPACITIES                                                                            04.13 - 2
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.14 – TAXABLE NET TAX CAPACITY
Although taxes are levied on “net tax capacity,” a measure called “Taxable Net Tax Capacity” is the
value used in determining initial tax rates for local taxing jurisdictions. The distinction at a parcel level
between taxable net tax capacity and net tax capacity is not generally significant since it is used in the
aggregate and the differences affect how rates are calculated and how various taxes are utilized, rather
than how much value for a parcel is subject to taxes. The taxable net tax capacity is the net tax capacity
minus certain values. When the local tax rates are applied to those deducted values, the revenues are
utilized in specific ways. Values that are deducted are as follows.

Power Line Net Tax Capacity Value
Ten percent of the net tax capacity of electrical transmission lines over 200KV in organized townships
and cities is excluded from the value used in determining initial tax rates. After local tax rates are
determined, the revenue produced by applying the prevailing local tax rate to the excluded 10% of value
is then used to finance the power line credit for cities and organized townships (see Power Line Credit in
Section 06.06).

Fiscal Disparities
Fiscal Disparities is a tax base sharing feature of the property tax system that was created in 1971 for the
seven metropolitan counties of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott and Washington, and
adopted in 1996 for the taconite relief area, (known as the “Iron Range Fiscal Disparities” program),
which affects the counties of Aitkin, Cook, Crow Wing, Itasca, Koochiching, Lake and St. Louis. These
programs are summarized in Section 13.04.

Under fiscal disparities, each taxing jurisdiction contributes a portion of its net tax capacity--
representing the aggregate growth in commercial / industrial tax base since the base years (1971 and
1995)--to an abstract areawide tax base. This contribution net tax capacity is subtracted from the total
net tax capacity of the jurisdiction in determining the taxable net tax capacity. Section 13.04 explains
how value is distributed to jurisdictions from the area wide tax base and how commercial / industrial
property has portions of value taxed using the local tax rate and portions taxed at the areawide tax rate.
The end result of fiscal disparities is that the jurisdictions receive what they levy but the taxpayers in the
jurisdiction may be net beneficiaries or net contributors in the tax dollars that they must pay versus what
their jurisdiction receives.

Tax Increment Financing Values
Tax increment financing (TIF) provides a means of financing development projects. Section 13.01
discusses tax increment financing in greater detail. What is important here is that TIF captures value
and uses the funds that are generated when tax rates are applied to that captured value--the tax
increments--to fund development costs.

Taxable Net Tax Capacity, therefore, is the measure of a jurisdiction’s tax base in determining initial tax
rates. The subtractions facilitate tax base sharing and allow the additional revenues to fund TIF and
Power Line Credits. It can be expressed as:

  Taxable NTC = Total NTC - Power Line NTC - FD Contribution NTC - TIF Captured NTC


TAXABLE NET TAX CAPACITY                                                                          04.14 - 1
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.15 – TAX BASES

Summary of Tax Bases

The culmination of this chapter’s discussion of values, classifications, exemptions, exclusions,
limitations, net tax capacities, and the various other concepts is to define the tax bases upon which
property taxes are actually levied.

Referendum Market Value and Net Tax Capacity
At the most basic level, there are two types of bases upon which property taxes are levied in Minnesota:
referendum market value (as described in Section 04.12) and net tax capacity (as described in Section
04.13).

State NTC vs Local NTC Tax Bases
In addition, as discussed earlier in this chapter, there are really two different types of net tax capacity-
based tax bases: the local net tax capacity tax base for levies by local jurisdictions and the state net
tax capacity tax bases for the state general property tax. The state net tax capacity tax bases differ from
the local net tax capacity tax base in that they are limited to certain classifications and one of the two
state net tax capacity bases (the seasonal residential recreational tax capacity) has an additional
classification tier that applies for cabin properties.

Two State NTC Tax Bases: Commercial-Industrial and Seasonal Residential Recreational
Statute defines a “commercial-industrial tax capacity” and a “seasonal residential recreational tax
capacity” to define the property that is subject to the state general property tax. Originally a uniform
rate applied to the combined base of the two definitions. The 2005 Legislature , responding to the
phenomenon where seasonal residential recreational values were greatly outpacing the growth in CI
values, split the state levy into separate rates on the separate tax base measures.

The commercial-industrial state NTC base includes the tax capacity of all taxable property classified as
class 3 (commercial, industrial, and public utility property) or class 5(1) (unmined iron ore property),
except for electric generation attached machinery under class 3 and property described in M.S. 473.625
(property of the Minneapolis-St. Paul International Airport and Holman Field in St. Paul).

The seasonal residential recreational state NTC base includes the tax capacity of tier III of class 1c (Ma
& Pa resort value over $2.2 million) and all class 4c(1) property (cabins and resorts) except that the first
$76,000 of market value of each noncommercial class 4c(1) property (cabins) has a tax capacity for the
this purpose equal to 40 percent of its tax capacity under M.S. 273.13.

Fully Taxable vs JOBZ Values and Exception Levy Tax Bases
Beginning with taxes payable in 2005, the creation of Job Opportunity Building Zones (JOBZ) created a
wrinkle that has further split the local net tax capacity tax base and the referendum market value tax base
into two additional tax bases. JOBZ provide a property tax exemption with a complicating exception.
Levies for general obligation debt are not exempt under this program, meaning the local net tax capacity
tax base for these levies includes additional tax base that is exempt from other levies. Likewise, other
school district levies included in the debt service levy of the district under M.S. 123B.55 are also an
TAX BASES                                                                                       04.15 - 1
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



exception to the JOBZ exemption and the referendum market value tax base for these levies is broader
than for other referendum market value levies. (It should be noted that prior to taxes payable 2008, this
changed where previously the school district operating referendum levies that were in existence prior to
the establishment of JOBZ – adopted prior to January 1, 2004 – were an exception to the JOBZ
exemption.) The general obligation debt levies and pre-existing school operating referendum levies are
often referred to as the “exception levies.”

The taxable net tax capacity that is always taxable--because it is either not in a JOBZ, or it is in a zone
but it is the value of land or non-qualifying structures (and therefore not exempt from any levy)--is
referred to as the “fully taxable net tax capacity.” Likewise, the referendum market value that is always
taxable is the “fully taxable referendum market value.” The fully taxable net tax capacity and fully
taxable RMV are the common local tax bases for all local levies other than the exception levies.

The net tax capacity in a JOBZ that is only subject to the general obligation debt levies is the “JOBZ net
tax capacity.” Similarly, the RMV in a JOBZ or that is only subject to the other school district levies
included in the debt service levy of the district under M.S. 123B.55 is the “JOBZ referendum market
value.” The sum of the JOBZ NTC plus the fully taxable NTC is the tax base for general obligation debt
levies. Likewise, the sum of the fully taxable RMV and the JOBZ RMV is the tax base for the pre-
existing school operating referendum levies.

Agricultural Processing Zones are considered a subset of JOB Zones for this discussion and the same
conditions apply. Note also that Border City Development Zones (See Section 13.05) contain a similar
feature where property is exempt with exceptions for certain levies and would utilize these same
distinctions.

TIF and Fiscal Disparities
Some might consider the retained captured value with a TIF district, or the areawide tax base of fiscal
disparities (as described in Section 04.14) to be additional tax bases. However, these values are not
subject to specific levies and are more ancillary features of the property tax system and are generally not
regarded to be formal tax bases.

Tax Base Summary Table

The following table summarizes the five major tax base components. Column A is the Fully Taxable
Local Net Tax Capacity that is the major tax base for local levies. Column A combined with Column B
(the JOBZ Local NTC) is the tax base for general obligation debt levies. Column C summarizes the
State Net Tax Capacity bases for the state general property tax (reference marks identify which of the
two separate state bases each item is associated with). Column D is the Fully Taxable Referendum
Market Value that is the basis for voter approved levies (with possible exceptions). Column D
combined with Column E (JOBZ RMV) is the tax base for pre-existing school operating levies.

A version of this table is updated each year and provided as part of the Abstract of Assessment
instructions. The table shows the value breakouts reported on the abstract and to which tax base
components they apply, and at what level of taxable market value (i.e. the class rate that applies). (Note
that the personal property breakouts are not always broken out to each tier and “varies” is noted rather
than a specific class rate.)
TAX BASES                                                                                      04.15 - 2
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



Table 04.15-1: Tax Base Component Table, Items Included from the 2007 Assessment
Abstract

        TMV = Taxable Market Value                      A            B              C             D                  E
                                                       Fully                    State NTC        Fully
 AA                                                   Taxable                   Tax Base        Taxable          JOBZ
 Item                                                Local NTC      JOBZ         (# = C/I )   Referendum      Referendum
  #                        Description               Tax Base     Local NTC     (@ = SRR)     MV Tax Base     Market Value
                   Agricultural Homestead:
 100    Blind/Dsbld HGA to $32,000                  .45% x TMV       0               0        45% x TMV              0
 102    Ag Hmstd HGA to $76,000                     1.00% x TMV      0               0        100% x TMV             0
 104    Ag Hmstd HGA $76,000-$413,778               1.00% x TMV      0               0        100% x TMV             0
 105    Ag Hmstd HGA $413,778-$500,000              1.00% x TMV      0               0        100% x TMV             0
 106    Ag Hmstd HGA over $500,000                  1.25% x TMV      0               0        100% x TMV             0
 110    Blind/Dsbld Remainder- Land to $32,000      .45% x TMV       0               0        45% x TMV              0
 160    Ag Hmstd Remainder up to $115,000           .55% x TMV       0               0            0                  0
 170    Ag Hmstd Remainder up to $115,000 - $345K   .55% x TMV       0               0            0                  0
 220    Ag Hmstd Remainder $345,000 to $790,000     .55% x TMV       0               0            0                  0
 235    Ag Hmstd Remainder over $790,000            1.00% x TMV      0               0            0                  0

                      Ag Non-Homestead:
 250    Non-Hmstd Ag Land and Bldgs                 1.00% x TMV      0               0            0                  0
 252    Private Airports (2b)                       1.00% x TMV      0               0            0                  0
 254    Migrant Housing to $500,000                 1.00% x TMV      0               0        100% x TMV             0
 258    Migrant Housing over $500,000               1.25% x TMV      0               0        100% x TMV             0
 260    Timberlands                                 1.00% x TMV      0               0            0                  0

          Cabins (Non-Comm Seasonal Res Rec):
 270    Cabins (Non-Comm SRR) to $76,000            1.00% x TMV      0        0.40% x TMV @       0                  0
 272    Cabins (Non-Comm SRR) $76,000 to $500K      1.00% x TMV      0        1.00% x TMV @       0                  0
 280    Cabins (Non-Comm SRR) over $500,000         1.25% x TMV      0        1.25% x TMV @       0                  0

                       Non-Ag Property:
 330    Blind, Para Non-Ag Hmstd to $32,000         .45% x TMV       0               0        45% x TMV              0
 340    Non-Ag Hmstd to $76,000                     1.00% x TMV      0               0        100% x TMV             0
 350    Non-Ag Hmstd to $76,000 - $413,778          1.00% x TMV      0               0        100% x TMV             0
 355    Non-Ag Hmstd from $413,778 to $500,000      1.00% x TMV      0               0        100% x TMV             0
 360    Non-Ag Hmstd over $500,000                  1.25% x TMV      0               0        100% x TMV             0

              Res Non-Hmstd Single Unit (4bb):
 365    Res Non-Hmstd - Single unit to $76,000      1.00% x TMV      0               0        100% x TMV             0
 366    Res Non-Hmstd - Single unit $76K to $500K   1.00% x TMV      0               0        100% x TMV             0
 367    Res Non-Hmstd - Single unit over $500,000   1.25% x TMV      0               0        100% x TMV             0

                    Other Res Non-Hmstd:
 370    Res Non-Hmstd 1-3 units (4b)                1.25% x TMV      0               0        100% x TMV             0
 380    Apartment 4 or More Units (4a)              1.25% x TMV      0               0        100% x TMV             0
 415    Low Income Housing Rental Housing (4d)       .75% TMV        0               0        75% x TMV              0
 425    Non-Profit, Community Service               1.50% x TMV      0               0        100% x TMV             0
 428    Student Housing                             1.00% x TMV      0               0            0                  0
 430    Manufactured Home Parks                     1.25% x TMV      0               0        100% x TMV             0

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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




        TMV = Taxable Market Value                         A             B               C             D                  E
                                                          Fully                      State NTC        Fully
 AA                                                      Taxable                     Tax Base        Taxable          JOBZ
 Item                                                   Local NTC       JOBZ          (# = C/I )   Referendum      Referendum
  #                        Description                  Tax Base      Local NTC      (@ = SRR)     MV Tax Base     Market Value


               Commercial Seasonal Res Rec:
 440    Commercial SRR Class 1c to $500,000            .55% x TMV        0                0        55% x TMV              0
 441    Commercial SRR Class 1c $500K to $2,200K       1.00% x TMV       0                0        100% x TMV             0
 442    Commercial SRR Class 1c over $2,200,000        1.25% x TMV       0         1.25% x TMV @   100% x TMV             0
 460    Commercial SRR Class 4c to $500,000            1.00% x TMV       0         1.00% x TMV @   100% x TMV             0
 462    Commercial SRR Class 4c over $500,000          1.25% x TMV       0         1.25% x TMV @   100% x TMV             0
 464    Bed and Breakfast up to 5 Units                1.25% x TMV        0               0        100% x TMV             0
 470    Qualifying Golf Courses                        1.25% x TMV        0               0        100% x TMV             0
 480    Metro Non-profit Indoor Space                  1.25% x TMV       0                0        100% x TMV             0


                          Commercial:
 500    Fully Taxable Comm to $150,000                 1.50% x TMV       0         1.50% x TMV #   100% x TMV             0
 520    Fully Taxable Comm over $150,000               2.00% x TMV       0         2.00% x TMV #   100% x TMV             0
 590    Fully Taxable EZ Comm Border to $150,000       1.50% x TMV       0         1.50% x TMV #   100% x TMV             0
 610    Fully Taxable EZ Comm Border over $150K        2.00% x TMV       0         2.00% x TMV #   100% x TMV             0
 611    JOBZ Comm Bldg to $150,000                          0        1.50% x TMV          0            0           100% x TMV
 612    JOBZ Comm Bldg over $150,000                        0        2.00% x TMV          0            0           100% x TMV
 615    JOBZ EZ Comm Border Bldg to $150,000               0         1.50% x TMV          0            0           100% x TMV
 616    JOBZ EZ Comm Border Bldg over $150K                0         2.00% x TMV          0            0           100% x TMV


                           Industrial:
 630    Fully Taxable Indust to $150,000               1.50% x TMV       0         1.50% x TMV #   100% x TMV             0
 650    Fully Taxable Indust over $150,000             2.00% x TMV       0         2.00% x TMV #   100% x TMV             0
 720    Fully Taxable EZ Indust Border to $150,000     1.50% x TMV       0         1.50% x TMV #   100% x TMV             0
 740    Fully Taxable EZ Indust Border over $150,000   2.00% x TMV       0         2.00% x TMV #   100% x TMV             0
 741    JOBZ Indust Bldg to $150,000                        0        1.50% x TMV          0            0           100% x TMV
 742    JOBZ Indust Bldg over $150,000                     0         2.00% x TMV          0            0           100% x TMV
 745    JOBZ EZ Indust Border Bldg to $150,000              0        1.50% x TMV          0            0           100% x TMV
 746    JOBZ EZ Indust Border Bldg over $150K              0         2.00% x TMV          0            0           100% x TMV


                          Public Utility:
 750    Public Utility Land and Bldgs to $150,000      1.50% x TMV       0         1.50% x TMV #   100% x TMV             0
 755    Public Utility Land and Bldgs over $150,000    2.00% x TMV       0         2.00% x TMV #   100% x TMV             0
 765    Public Utility Electric Generating Machinery   2.00% x TMV       0                0        100% x TMV             0
 770    Public Utility- All Other Machinery            2.00% x TMV       0         2.00% x TMV #   100% x TMV             0


                  Railroad, Minerals, and Other:
 780    Railroad Property to $150,000                  1.50% x TMV       0         1.50% x TMV #   100% x TMV             0
 790    Railroad Property over $150,000                2.00% x TMV       0         2.00% x TMV #   100% x TMV             0
 795    Non-Commercial Aircraft Hangars - Private      1.50% x TMV       0                0        100% x TMV             0
 800    Mineral                                        2.00% x TMV       0         2.00% x TMV #   100% x TMV             0
 810    All other Class 5 Property                     2.00% x TMV       0                0        100% x TMV             0


TAX BASES                                                                                                     04.15 - 4
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




        TMV = Taxable Market Value                          A              B               C              D                  E
                                                          Fully                        State NTC         Fully
 AA                                                      Taxable                       Tax Base         Taxable          JOBZ
 Item                                                   Local NTC        JOBZ           (# = C/I )    Referendum      Referendum
  #                        Description                  Tax Base       Local NTC       (@ = SRR)      MV Tax Base     Market Value
                      Personal Property:
 850    Item 3f Total Net Tax Cap                      varies x TMV        0                0         100% x TMV             0
 854    Non-Commercial Aircraft Hangars                1.50% x TMV         0                0         100% x TMV             0
 870    Item 31 Tools and Machinery                    2.00% x TMV    2.00% x TMV    2.00% x TMV #    100% x TMV      100% x TMV
 880    Item 32 (leased rural) - Non-C/I, Non-NCSRR    varies x TMV        0                0         100% x TMV             0
 882    Item 32 (leased rural) - NCSRR to $76,000      1.00% x TMV         0         0.40% x TMV @        0                  0
 883    Item 32 (leased rural) - NCSRR $76K to 500K    1.00% x TMV         0         1.00% x TMV @        0                  0
 884    Item 32 (leased rural) - NCSRR over $500,000   1.25% x TMV         0         1.25% x TMV @        0                  0
 885    Fully Taxable Item 32 (leased rural) - C/I     varies x TMV        0         varies x TMV @   100% x TMV             0
 886    JOBZ Item 32 (leased rural) - C/I                   0         varies x TMV          0             0           100% x TMV
 890    Item 33 Ag Leased Real Estate                  varies x TMV        0                0             0                  0
 910    Fully Taxable Item 41 (leased urban) - C/I     varies x TMV        0         varies x TMV #   100% x TMV             0
 911    JOBZ Item 41 (leased urban) - C/I                   0         varies x TMV          0             0           100% x TMV
 912    Item 41 (leased urban) - NCSRR to $76,000      1.00% x TMV         0         0.40% x TMV @        0                  0
 913    Item 41 (leased urban) - NCSRR 76K to 500K     1.00% x TMV         0         1.00% x TMV @        0                  0
 914    Item 41 (leased urban) - NCSRR over $500K      1.25% x TMV         0         1.25% x TMV @        0                  0
 915    Item 41 (leased urbn) - Non-C/I, Non-NCSRR     varies x TMV        0                0         100% x TMV             0
 920    Fully Taxable Item 41 EZ Border City           varies x TMV        0         varies x TMV #   100% x TMV             0
 925    JOBZ Item 41 EZ Border City                         0         varies x TMV          0             0           100% x TMV
 940    Fully Taxable Item 42 Structures on RR ROW     varies x TMV        0         varies x TMV #   100% x TMV             0
 945    JOBZ Item 42 Structures on RR ROW                   0         varies x TMV          0             0           100% x TMV
 950    Fully Taxable Item 42 EZ Border City           varies x TMV        0         varies x TMV #   100% x TMV             0
 955    JOBZ Item 42 EZ Border City                         0         varies x TMV          0                         100% x TMV
 970    Item 43 Other Leased Real Estate - Non-C/I     varies x TMV        0                0         100% x TMV             0
 975    Fully Taxable Item 43 Other Leased RE - C/I    varies x TMV        0         varies x TMV #   100% x TMV             0
 978    JOBZ Item 43 Other Leased RE - C/I                  0         varies x TMV          0             0           100% x TMV
 980    Item 44T Electric Transmission Lines           varies x TMV        0         varies x TMV #   100% x TMV             0
 985    Item 44D Electric Distribution Lines           varies x TMV        0         varies x TMV #   100% x TMV             0
 990    Item 45 Gas Utilities                          varies x TMV        0         varies x TMV #   100% x TMV             0
 1000   Item 46 Water Utilities                        varies x TMV        0         varies x TMV #   100% x TMV             0
 1010   Item 48 Other Taxable Personal Property        varies x TMV        0                0         100% x TMV             0


Note: In addition to the distinctions noted for the State Net Tax Capacity Tax Base (column C), this tax base also
excludes airport property exempt from city and school district property taxes under M.S. 473.625. (MSP
International Airport and St. Paul’s Holman Field are exempt under this provision.)

“Varies” indicates multiple tiers apply. The sum of these NTCs are reported in the item on the abstract.




TAX BASES                                                                                                        04.15 - 5
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




Tax Bases Identified

The following figure identifies how the various components or distinctions result in six distinct taxes
bases. Initially there are two major types of values upon which levies are spread: 1) referendum market
value (RMV), and 2) net tax capacity (NTC). The NTC component must be further split between: 1) a
measure of local net tax capacity (LNTC), and 2) the more narrowly defined (with one class rate
difference) state net tax capacity (SNTC). The levy for the state tax is actually divided into two parts
and spread on separate bases: 1) the commercial-industrial net tax capacity (CI SNTC), and 2) the
seasonal residential recreational net tax capacity (SRR SNTC). The JOBZ exemptions and exception
levies create the final distinctions where there are “fully taxable” (FT) RMV and LNTC tax bases for
most levies and “fully taxable plus JOBZ” (FT+JOBZ) RMV and LNTC bases for the exception levies.


Figure 04.15-1: Tax Base Taxonomy

                                                                                           Tax
                                                                                          Base
                                                                                          Count

          RMV                                           NTC                                  2



          RMV                           LNTC                            SNTC                 3



          RMV                           LNTC                  CI SNTC        SRR SNTC        4



    FT           FT+JOBZ         FT           FT+JOBZ         CI SNTC        SRR SNTC        6
   RMV             RMV          LNTC           LNTC




TAX BASES                                                                                    04.15 - 6
REVISION DATE: NOVEMBER, 2007
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY




04.16 – PAYMENT IN LIEU OF TAXES (PILT)
Payments in lieu of tax are payments that are typically made by one unit of government to the local unit
of government instead of paying property tax.

State PILT Programs

The following is a partial list of state PILT programs that are currently in operation.

Consolidated Conservation Areas (Con-Con Land)
Payment is made by the DNR to the county. The amount is equal to 50% of the income received from
land in the county (mainly from timber sales) during the past fiscal year.

Public Hunting and Game Refuges
M.S. 97A.061, subd. 1, para. (a) provides that payment is made by the DNR to the county in an amount
equal to the greatest of:

   a. 35% of the gross receipts from all special use permits and leases of land acquired for public
      hunting and game refuges within the county, OR
   b. $.50 per acre on land purchased within the county that is actually used for public hunting or
      game refuges; OR
   c. 0.75% of the appraised value of purchased land within the county actually used for public
      hunting or game refuges. The appraised value for the first 5 years after purchase is the purchase
      price. After that, it is the appraised value as determined by the county assessor. The county
      assessor is to determine the appraised value every 5th year after the year of purchase.

DNR considers land acquired by gift as “purchased” land. The payment under this law is reduced by the
amount paid on any such lands consisting of croplands managed for wild geese. (M.S. 97A.061, Subd. 1,
para. (c)) The payment made under this law is reduced by the amount paid under M.S. 477A.12 (see
natural resources land later in this section) for the same land in the same year. (M.S. 97A.061, subd. 4)

For land in a county that is owned by another state agency for military purposes and designated as a
game refuge under M.S. 97A.085, the payment shall be fifty percent of the dollar amount adjusted for
inflation as determined under M.S. 477A.12, subd. 1, para. (a), clause (1), multiplied by the number of
acres (see natural resources land, guideline (a) later in this section). (M.S. 97A.061, Subd. 1, para. (b))

Goose Management Croplands
Payment is made by the DNR to those counties in which the state owns more than 1,000 acres of
cropland for wild goose management purposes. The payment is equal to the real property taxes assessed
on comparable, privately owned, adjacent land. It should be noted that lands for which payments in lieu
are made pursuant to this provision (M.S. 97A.061, subd. 3) are not eligible for payments under M.S.
477A.12, subd. 2 (see natural resources land later in this section).




PAYMENT IN LIEU OF TAXES (PILT)                                                                04.16 - 1
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CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



Excess Real Estate Acquired for Trunk Highway Purposes
Payment is made by MnDOT in an amount equal to 30% of the rent received on the leasing of excess
real estate within the county that was acquired for trunk highway purposes.

Property Acquired by the State or Local Units of Government and Then Rented
Payment is made by the state (primarily DNR or MnDOT) or by a local unit of government to the
county treasurer in an amount equal to 30% of the annual rent received. This provision applies to
taxable property acquired by the state or a local unit of government prior to forfeiture. The state or local
unit of government must charge a reasonable rent to the occupant of the property.

HRA Low Income Housing Projects
Payment is made by a Housing and Development Authority (HRA) to the county treasurer in an amount
equal to 5% of the shelter rentals of the low income housing project collected during the preceding
calendar year. However, the governing body or bodies for which the HRA was created may enter into
agreement with the HRA for the payment of a service
                                                                 “Housing Project"
charge in excess of 5% aggregate shelter rentals. Such
higher amount may be based on shelter rentals or some This is any work or undertaking to provide
other agreed upon basis. The HRA must file with the decent, safe, and sanitary dwellings for
assessor annually, on or before April 15, a statement of the persons of low income and their families.
aggregate shelter rentals of each low-income housing
project collected during the preceding calendar year.

Since the payment in lieu of property taxes is to be collected in the same manner provided by law for the
assessment and collection of taxes, if an HRA is late in making its payment, or if it fails to pay, it will be
subject to the same penalty, interest, property tax delinquency, and tax forfeiture proceedings as taxable
real property.

The exemption from property taxes for an HRA housing project terminates when:

       a. the obligations issued by the HRA to assist in
          financing the project have been retired and               NOTE
          federal contributions have been discontinued;        Property located within the exterior boundaries
                                                               of the White Earth Indian Reservation that is
          OR                                                   owned by the tribe’s designated housing entity,
       b. the authority is no longer obligated by              and that is a housing project or housing
          contracts with the federal government to             development project, is exempt from real and
          maintain the project as a low income housing         personal property taxes, but is subject to the
          project, whichever is later.                         PILT payment requirement (5% of shelter
                                                               rentals).


Natural Resources Land
In order to help offset the expenses incurred by counties and towns in support of natural resources lands,
M.S. 477A.12 provides that payment is made by the Department of Revenue to the County treasurer
(DNR made these payments through calendar year 2000) according to the following guidelines:

   a. $3, as adjusted for inflation under M.S. 477A.145, multiplied by the total number of acres of
      acquired natural resources land for acquired natural resources land (land previously privately


PAYMENT IN LIEU OF TAXES (PILT)                                                                    04.16 - 2
REVISION DATE: MAY, 2006
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



      owned and acquired by DNR by purchase, condemnation, or gift), or, at the county's option
      three-fourths of one percent of the appraised value of all acquired natural resources land in the
      county, whichever is greater; OR
   b. 75 cents, as adjusted for inflation under M.S. 477A.145, multiplied by the total number of acres
      of county-administered other natural resources land (including tax-forfeited land in townships
      and tax-forfeited unplatted land within cities), OR
   c. 75 cents, as adjusted for inflation under M.S. 477A.145, multiplied by the total number of acres
      of land utilization project land, OR
   d. 37.5 cents, as adjusted for inflation under M.S. 477A.145, multiplied by the total number of
      acres of DNR-administered other natural resources land.

The Department of Revenue makes the distributions to the counties based on the number of acres and
appraised values certified by the DNR to the Department of Revenue by March 1 of the payment year.
Part of the payment is deposited in the county general revenue fund to be used for property tax
reduction.

Federal PILT Programs

The following is a partial list of federal payment in lieu of tax programs.

Forest Service Timber Payments
Payment is made by the U.S. Forest Service to the state for distribution to the counties where timber
harvesting occurred in National Forests.

Entitlement Lands
Payment is made by the Bureau of Land Management to counties containing entitlement lands in the
National Forest System and the National Park system, lands administered by the Bureau of Land
Management, lands dedicated to the use of federal water resource development projects, as well as other
federally owned land.

Fish and Wildlife Service Fee Payments
Payment is made by the U.S. Fish and Wildlife Service to counties based on an appropriation of a
specific amount of the fees collected from special use permits for trapping, hunting, timber harvesting,
grazing animals, etc. The amount paid to each county relates to the fees collected from the county.

Waterfowl Production Area Land
Payment is made by the U.S. Fish and Wildlife Service to counties to compensate for a property tax loss
on lands acquired by the Service under its Waterfowl Production Area program. The payment is a one-
time payment and cannot exceed 10% of the value of the property acquired.

Reference

M.S. 84A.51 (Con-Con Land)
M.S. 97A.061, subdivisions 1, 2 (Public Hunting and Game Refuges)
M.S. 97A.061, subdivision 3 (Goose Management)


PAYMENT IN LIEU OF TAXES (PILT)                                                             04.16 - 3
REVISION DATE: MAY, 2006
CHAPTER 4 – TAX BASE OVERVIEW AND VALUATION OF PROPERTY



M.S. 161.23 (Trunk Highway)
M.S. 272.68 (Property acquired by State or Local)
M.S. 469.040 (HRA projects)
M.S. 469.002, subdivision 13 (HRA projects)
M.S. 477A.11 to 477A.145 (Natural Resource Land)




PAYMENT IN LIEU OF TAXES (PILT)                           04.16 - 4
REVISION DATE: MAY, 2006
Chapter      5      

      TAX LEVIES AND THE
      BUDGETING PROCESS


                       TABLE OF CONTENTS

      Taxing Authorities and Districts     05.01 - 1

      Levies and Aids                      05.02 - 1

      Truth-in-Taxation                    05.03 - 1

      Levy Certification                   05.04 - 1

      Levy Limitations                     05.05 - 1




                                                       05.00
CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS




05.01 – TAXING AUTHORITIES AND DISTRICTS

Taxing Authorities

For the purposes of property taxation, a “taxing authority” includes all home rule and statutory cities,
towns, counties, school districts, and special taxing districts as defined in M.S. 275.066. As will be
elaborated below, a special taxing district can really include any other political subdivision of the state
of Minnesota that has the power to adopt and certify a property tax levy to the county auditor, as
determined by the Commissioner of Revenue.

Beginning with taxes payable in 2002, and the implementation of the state general property tax, the state
itself is also a taxing authority. The state had not levied a property tax for many years, preferring to
leave property taxes to local governments, but the 2001 Legislature adopted the tax as one piece of some
larger reforms.

Property tax levy authority is scattered throughout Minnesota statutes and can be difficult to
exhaustively enumerate, although most are identified in M.S. 275.066. The terms “taxing authority” and
“taxing district” can also be confusing. Many entities have direct levy authority and are special taxing
districts. However, some entities do not have direct taxing authority but can essentially levy through a
city or county. Since the ultimate discretion remains with the true taxing authority (the county or city),
these entities are not taxing authorities and may not necessarily be special taxing districts.

Taxing Districts

A taxing district may be distinguished from a taxing authority in that “district” describes the territory of
the levy and “authority” references the power to levy. These are not statutorily defined distinctions and
both refer to the associated entity to some degree. They are also largely synonymous for counties, cities,
towns, and school districts. Some differences can be meaningful, however, when it comes to special
taxing districts.

Special Taxing Districts
For the purposes of property taxation and property tax state aids, the term “special taxing districts”
includes the following entities (per M.S. 275.066):
(1) watershed districts (M.S. 103D)
(2) sanitary districts (M.S. 115.18 – 115.37; 115A.554)
(3) regional sanitary sewer districts (M.S. 115.61 – 115.67)
(4) regional public library districts (M.S. 134.201)
(5) park districts (M.S. Chapter 398)
(6) regional railroad authorities (M.S. Chapter 398A)
(7) hospital districts (M.S. 447.31 – 447.38)
(8) St. Cloud Metropolitan Transit Commission (M.S. 458A.01 – 458A.15)
(9) Duluth Transit Authority (M.S. 458A.21 – 458A.37)
(10) regional development commissions (M.S. 462.381 – 462.398)
(11) housing and redevelopment authorities (M.S. 469.001 – 469.047)
(12) port authorities (M.S. 469.048 – 469.068)

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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS



(13)   economic development authorities (M.S. 469.090 – 469.1081)
(14)   Metropolitan Council (M.S. 473.122 – 473.249)
(15)   Metropolitan Airports Commission (M.S. 473.601 – 473.680)
(16)   Metropolitan Mosquito Control Commission (M.S. 473.701 – 473.716)
(17)   Morrison County Rural Development Financing Authority (Laws 1982, Chap. 437, Sec. 1)
(18)   Croft Historical Park District (Laws 1984, Chap. 502, Art. 13, Sec. 6)
(19)   East Lake County Medical Clinic District (Laws 1989, Chap. 211, Sec. 1 – 6)
(20)   Floodwood Area Ambulance District (Laws 1993, Chap. 375, Art. 5, Sec. 39)
(21)   Middle Mississippi River Watershed Management Organization (M.S. 103B.211 and 103B.241)
(22)   Emergency Medical Services Special Taxing Districts (M.S. 144F.01)
(23)   A county levy for watershed management purposes under M.S. 103B.241; 103B.245; or 103B.251
(24)   Southern St Louis County Special Taxing District; Chris Jensen Nursing Home (M.S. xxx)
(25)   Any other political subdivision of the state of Minnesota, excluding counties, school districts,
       cities, and towns, that has the power to adopt and certify a property tax levy to the county
       auditor, as determined by the Commissioner of Revenue

Special Taxing Districts Determined by the Department of Revenue per M.S. 275.066 (25)
Item (25) of the defined list provides a catch-all that is open to any other political subdivision with the
power to levy as determined by the Department of Revenue. The following entities qualify as special
taxing districts on the basis that (a) they are deemed to be political subdivisions of the state of Minnesota
by the statute or law that created them, and (b) they have the power to adopt and certify a property tax
levy to the county auditor.
(1) City of Minneapolis levy for the Minneapolis Teachers Retirement Fund Association (M.S.
      354A.12, Subd. 3b)
(2) Park Museum Fund of the Minneapolis Park and Recreation Board (M.S. 450.25)
(3) Nashwauk Area Ambulance District (Laws 1994, Chap. 587, Art. 9, Sec. 10)
(4) Cross Lake Area Water and Sewer Board (Laws 1994, Chap. 587, Art. 10, Sec. 1 – 19)
(5) Virginia Area Ambulance District (Laws 1997, Chap. 231, Art. 2, Sec. 56)
(6) Becker County Economic Development Authority (Laws 1997, Chap. 15)
(7) Chisholm/Hibbing Airport Authority (Laws 1994, Chap. 587, Art. 11, Sec. 1 – 14; after Laws
      1998, Chap. 389, Art. 3, Sec. 33 clarified the political subdivision status)
(8) Cedar Lake Area Water and Sanitary Sewer District (Laws 1999, Chap. 243, Art. 14, Sec. 1 – 19)
(9) Banning Junction Area Water and Sanitary Sewer District (Laws 1999, Chap. 243, Art. 14, Sec. 20
      – 38)
(10) Moose Lake Fire Protection District (Laws 1987, Chap. 402, Sec. 2)

Implications of Authority vs Special Taxing District Distinctions
Note that item (23) of the statutory list exemplifies a situation in which a special taxing district has been
defined for what is not a taxing authority that is separate from the county. The implication of this
distinction is that this levy would be certified and represented on proposed notices and tax statements as
a levy of a special taxing district, where absent its incorporation in this definition, it would have been
reflected as part of the county levy. By defining this levy as a special taxing district, however, there
may be confusion as to whether this levy would be included in measuring a county’s levy when it comes
to calculating aid formulas or enforcing levy limits. These determinations will be made by the
Department of Revenue as questions arise.



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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS




Other (Non-Taxing) “Districts”

Service Districts
The focus of this section is to describe taxing authorities and taxing districts to identify the entities that
levy property taxes. There are other types of districts, that are not defined as special taxing districts
under M.S. 275.066, that allow a county, city, or town to levy at different levels for separate defined
areas that may be subject to different service levels for particular services. To the extent they are not
specifically included in the definition of special taxing districts in M.S. 275.066, these districts are not
considered “taxing districts” independent of the county, city, or town for this discussion because they
affect the allocation of levies more they than they describe a separate levying entity. (The following are
described in greater detail in Section 06.04 as exception rates in the tax rate calculation process.)

M.S. 272.67 allows cities to divide their area into an urban service district and a rural service district
and where the county auditor would allocate levies (other than those for payment of bonds and
judgments) between the areas in amounts proportionate to benefits ratios determined for the separate
districts.

M.S. 365A allows towns, and M.S. 375B allows counties, to establish subordinate service districts in
which additional services or additions to townwide/countywide services are provided and revenues are
secured from within the district. The revenues can come in the form of an additional property tax levy
for the district or from service charges, or a combination of both.

There are a variety of other similar service districts, including (but perhaps not limited to):
Towns - fire protection districts (M.S. 368.85)
Towns - ambulance service districts (M.S. 471.476)
Cities or Towns - storm sewer improvement districts (M.S. 444.16 to M.S. 444.21)
Counties - lake improvement districts (M.S. 103B.501 to M.S. 103B. 581)

Non-Property Tax Service Districts
There are also service districts that only allow a fee or service charge that do not represent property tax
levies, even though some may have a basis on net tax capacity. Most notably, M.S. 428A allows cities
to establish special service districts where special services are rendered and paid from revenues
collected from service charges. The key difference between this provision and the subordinate service
districts for counties and towns is that these are service charges, not property tax levies, even though
they are based on NTC and payable and collected in the same manner as property taxes. The service
charges are not included in computations of tax increments, fiscal disparities, or any other law that
applies to general ad valorem levies. The establishment of a new special service districts after June 30,
2009 requires special legislation. (M.S. 428A.01 to 428A.101)

Another example of a non-property tax service district is housing improvement districts. The
establishment of a new special service districts after June 30, 2009 requires special legislation. (M.S.
428A.11 to 428A.21)

Miscellaneous “Districts”
Another miscellaneous “district” is found in M.S. 469.1791, which allows cities to create a special
taxing district within a TIF district to address deficits in the TIF district. While labeled a “special taxing

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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS



district,” these districts are not included in the definition of a special taxing district under M.S. 275.066.
The provisions, however, discuss their relationship to other laws (they are not subject to Truth-in-
Taxation and are excluded in calculating other levies and limits) enough to hopefully avoid potential
confusion as to their status. TIF districts, incidentally, are not taxing districts in the context of this
chapter.

Special Taxing Districts vs. Special Levies

It should be noted that “special taxing districts” are not the same as “special levies” which are a defined
set of levies that are not subject to levy limits. However, special taxing districts have not been subject to
general levy limits (which have mostly applied to counties and cities of 2,500 or more). (See Section
05.05 for more on levy limits.)

Special Taxing Districts; Organization Date

Special taxing districts as defined in M.S. 275.066 organized on or before July 1 in a calendar year may
certify a levy to the county auditor in that same year for property taxes or special assessments to be
payable in the following calendar year to the extent the special taxing district is authorized by statute or
special act to levy taxes or special assessments. Special taxing districts organized after July 1 in a
calendar year may not certify a levy of property taxes or special assessments to the county auditor under
the powers granted to them by statute or special act until the following calendar year.

Overlapping, or Cross-County, Jurisdictions

When a taxing authority spans county boundaries, a home county auditor is determined to calculate
levies for the taxing authority. In the case of school districts the home county is the county in which the
administrative offices of the school district are located. For other cross-county jurisdictions there is no
statutory direction for determining the home county, but it is usually the county with the most value for
that taxing district or where offices are located. The counties may come to an agreement or the
Department of Revenue will assign a home county. Levies should be certified by the jurisdictions to the
home county auditor. The home county auditor certifies proposed and final levies and local tax rates to
the other county auditor(s). The county auditors that are not the home county auditor must supply
values and other information necessary to calculate rates to the home county auditor.

For proposed tax notices (Truth-in-Taxation), the home county auditor must estimate the levy or rate if
the other county has not certified the appropriate information, and the other county auditor must furnish
an estimate to the home county auditor, if requested by the home county auditor.

For final levies, if, by January 15, the county auditor has not received from another county auditor the
local tax rate or net tax capacity, the county auditor who has not received the necessary information may
levy taxes for the overlapping district by estimating the local tax rate or the net tax capacity. A county
auditor who has not furnished the local tax rate or net tax capacity by January 15 shall, on request,
furnish the county auditor of a county in the overlapping district an estimate of the tax capacities or the
local tax rate. The auditor may request the assistance of the county assessor in determining the estimate.



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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS



Subsequent adjustments must be made after the correct local tax rate or net tax capacity has been
certified.

Auditors to Verify Tax Authority

Auditors are responsible for verifying the levy authority for each levy. In addition, if any authority
certifies a greater amount than is permitted by any limitation, the auditor shall extend only such amount
of tax as limited.

As a resource to assist county auditors in this function, the Department of Revenue has periodically
issued a “blue book” summarizing the levy authority provisions that it has found in statutes and
uncodified laws. However, it is recommended that county auditors prompt the certifying jurisdiction to
provide the auditor with the authority under which the levy is being assessed. Auditors may then be able
to verify the authority and check for any limitations that may apply.

State Codes

The Department of Revenue prescribes the codes to be used for state reporting for each taxing authority
and district. When a new special taxing district or any other taxing district is organized, the county
should contact the Department of Revenue to be assigned the code that the district will use for reporting
proposed and final levies and for the state abstracts. The Department should also be contacted for the
proper assignment of a code when taxing districts are merged or consolidated. State codes are not
reused and are very important when certifying state aids and credits.




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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS




05.02 – LEVIES AND AIDS

Overview of the Budget Process

Local governments, do not, obviously, set their levies in a vacuum. The property tax levy, being the
major source of revenues for local governments, is basically equal to the total budget amount for a
district minus its other sources of revenue. One of the most significant categories of other revenues for
many jurisdictions is state aids. Additional aid can offset property tax levies, while cuts in aid may
cause levies to increase. Limitations on property tax levies, whether formal statutory limits or more
driven by political acceptability, will constrain budget amounts or force local governments to find other
revenues.

While Section 05.01 identified taxing authorities and districts, this section will briefly overview the levy
certification process and summarize some of the various aids that have the most direct relationships to
property taxes. Subsequent sections will, in turn, detail the Truth-in-Taxation requirements, describe the
levy certification process, and summarize levy limitations.

The Levy Process

The fiscal year of most local governments follows the calendar year. School districts follow the state
fiscal year of July 1 to June 30. With assessments being set in one year and taxes payable in the
following year, final levies must be set by the end of a calendar year so tax statements can be prepared
and mailed for first half payment in May. The levy process in Minnesota is unique, however, in that the
legislature has also created a process, called “Truth in Taxation,” of certifying and reviewing proposed
levies. After proposed levies are established, parcel specific notices are sent to taxpayers showing the
taxes that would be due on their property if the proposed levies are adopted. Public hearings follow the
proposed notices to allow for public feedback before final budgets and levies are adopted.

Timing by Type of Jurisdiction
Counties, cities, and special taxing districts generally begin their early budgeting process early in the
summer. At this point in time the legislature should have completed its work, setting the landscape of
mandates, levy authority, levy restrictions, and aid funding. Assessments are also largely known (but
not completely free of changes) at this point, setting the tax base variable. Most aids affecting budget
decisions are certified in July or August. Counties, cities, and special taxing districts must then certify
their proposed levies by September 15. Proposed notices are sent in November (following the general
election date) to be received after November 10 and on or before November 24. Truth in Taxation
hearings are held in late November and December. The final levy certification is then set five business
days after December 20.

School districts follow a different budgeting schedule and process because of their fiscal year
differences and because much of there levies are dictated more directly by equalization and aid factors
as determined by the state. For a school district, proposed levies are not set until September 30 due to
the timing of levy limits and aid determination performed by the state. The Truth in Taxation hearings
are more informational and feedback oriented and have no impact on determining the final levy.


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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS



Towns follow much of the levy timing and processes of counties and cities, except that townships set
their levies and budgets at their annual meetings in March and they are not required to hold Truth in
Taxation hearings. The March timing reflects the agricultural orientation of most townships, where
summer and fall meetings would conflict with harvesting and other farming activities. Towns do have
an opportunity to call a special meeting to at which their levies may be changed, but absent such a
meeting, the levy determined in March will become the proposed levy certified by September 15 and the
final levy certified five business days after December 20. Statute in fact refers to the September 15
certification as the final levy for a town but also allows for recertification of the final levy in December
if it is changed at a special meeting. (M.S. 275.07)

The state levy amount and structure is set by the legislature. The Department of Revenue certifies a
preliminary rate (by October 1) for Truth in Taxation purposes, but this is not a proposed levy and the
final rate (set by January 1) will differ only in that more updated tax base data becomes available.

Levy in Specific Amounts
All taxes shall be levied or voted in specific amounts and the rates percent shall be determined from the
amount of property as equalized by the State Board of Equalization each year, except such taxes as may
be definitely fixed by law (M.S. 275.01).

(No) Accounting for Manufactured Home Tax Revenues
Generally, local taxing districts do not account for taxes on manufactured homes taxed as personal
property in setting their levies. As noted in Section 04.07, these taxes are assessed and taxed in the same
year and the county auditor determines taxes by applying the tax rates of the current year (as levied in
the preceding year). As such, these are additional taxes above the levy amount that determined the tax
rates. For most jurisdictions this is a marginal source of revenue and for counties, the administration
costs can consume much of the tax receipts. Some communities that have a concentration of
manufactured homes may, however, informally account for expected manufactured home tax receipts in
setting their levy.

Accounting for Wind Energy Production Tax Revenues
As will be discussed in Section 06.07, wind energy production taxes (WEPT) are an alternative to the
property tax for wind energy conversion systems. In some townships especially, and in a few counties,
this can be a substantial source of revenue that will affect levy determinations. The total amount of
production taxes is not determined by the Department of Revenue until February 28 of the payable year,
meaning production tax revenues must be projected when setting levies in the prior year. Beginning
with taxes payable in 2006, the taxes are distributed 80% to counties, 14% to towns, and 6% to school
districts.

Historical note: The distribution of production taxes for taxes payable 2004 and 2005 were dependent
on tax rates, creating a confusing circular interaction where the amount of the levy affected the amount
of WEPT distributions (by changing the tax rates), but the anticipated WEPT revenues affected the
setting of the levy. Projecting the appropriate balance was difficult, especially when total WEPT
amounts must also be projected. This was especially difficult for towns setting levies in March because
the reporting of total WEPT was a month later for taxes payable 2004 and 2005, which made projecting
total WEPT amounts even more difficult.



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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS




Aids

There are two basic types of aids to consider in setting levies: general purpose aids that the legislature
intends to supplant property taxes, and specific purpose aids tied to a particular purpose or mandate that
are perhaps less directly tied to property tax levies. A third category of aids are direct replacements for
levied dollars that ease burdens on taxpayers. This last category is NOT a factor in setting levies, and to
do so would be erroneous, except to the extent that they may ease otherwise stronger resistance to levies
by taxpayers.

General purpose aids include:
      Local Government Aid (LGA)
      County Program Aid (CPA)

Specific purpose aids paid by the Department of Revenue include:
       PERA Aid
       State Peace Officer Aid
       State Fire Aid
       Teachers Retirement Amortization Aid
       Amortization Aid, Supplement Amortization Aid, and Additional Amortization Aid
       Taconite Aid
       Wetland Preservation Area Aid

Other major specific purpose aids (not described herein) may include:
       Education Aid
       Human Services Aid
       Highway Aid

Aid that directly offsets levies and should NOT be considered in setting levies is limited to:
       Disparity Reduction Aid (DRA)

State paid credits are not aids and do not affect the levy and budgeting process except when these
promised reimbursements are cut by the legislature, leaving a hole in a jurisdiction’s levy. Credits are
discussed in Section 06.06.

Further explanation of select aids follows.

Local Government Aid
Local Government Aid (LGA) is a general purpose aid that can be used for any lawful expenditure. It is
also intended to be used for property tax relief. While the specific calculation is quite complex and
includes a variety of variables, regression coefficients, and other details, the basic formula can be
expressed as:

   LGA = City Aid Base + City Formula Aid, subject to limitations




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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS



Prior to aids payable in 2004, the city aid base had included significant grandfathered dollars reflecting
past aid levels. While such “off-formula” amounts were substantially reduced for aids payable in 2004,
the city aid base amounts do allow for such off-formula additions as the legislature may see fit. For
example, the 2005 legislature gave cities under 5,000 population a increase equal to $6 multiplied by
the population.

The city formula aid component is a “need” minus “capacity” formula that can be expressed as:

   City Formula Aid = (Fiscal Need - Fiscal Capacity) x a need increase percentage to adjust to
       the appropriation limit

For cities with a population of less than 2,500, fiscal need takes into account the city’s population,
percent of pre-1940 housing stock, population decline, and the percent of total market value that is
classified as commercial/industrial. For cities with a population of 2,500 or more, fiscal need takes into
account the city’s percent of pre-1940 housing stock, population decline, vehicle accidents per capita,
and average household size. A city's fiscal capacity factor is its equalized net tax capacity multiplied by
the average city tax rate, plus taconite aids for some cities (under a phase-in for aid payable 2005 to
2008).

For aids payable in 2006 and thereafter, the maximum aid is the sum of the city's previous year LGA
plus 10% of its net levy for the previous year. Cities with a population of 2,500 or more may not have
their aid decrease by more than 5% of its 2003 certified aid amount. The general fund appropriation for
aids payable in 2006 and thereafter is $485,052,000. Because of the limit to the appropriation, the aid
distribution for each city is affected by the aid distributions for the other cities. An aid increase for one
city comes at the expense of the other cities. There are also aid offsets for state costs.

County Program Aid
County Program Aid is a general purpose aid that consists of three components. The three components
are:

County Need Aid – A total of $100,000,000 is distributed (after costs are retained) to counties based on
need. $40M is distributed based on households receiving food stamps, $40M is distributed based in
population weighted percent of people 65 and over, and $20M is distributed based on part I crimes.

County Tax Base Equalization Aid – For aids payable in 2006 and thereafter, a total of $105,000,000
is appropriated to be apportioned among the counties according to each county’s tax base equalization
aid factor. A reduction of $214,000 is made for state costs. The tax base equalization factor is equal to
the amount by which $185 times the county’s population exceeds 9.45 percent of the counties net tax
capacity. This factor is then adjusted for population.

County Transition Aid – If a county’s relative share of 2005 county program aid is less than its relative
share of 2004 program aid (before cuts), then its transition aid equals the amount of difference which is
greater than three percent of its adjusted net tax capacity. The transition aid for 2006 is 2/3 of the 2005
amount and the transition aid for 2007 is 1/3 of the 2005 amount. No transition aid will be paid after
2007.



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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS



County Program Aid replaced County Criminal Justice Aid, Family Preservation Aid, HACA (see
below), Manufactured Home HACA, and Attached Machinery Aid.

PERA Aid
PERA aid is paid to any county, city, town or special taxing district with an account or accounts in the
Public Employees Retirement Association (PERA), which as of 2005 totaled 1,133 entities. It is
intended to offset the cost of the increase to the PERA employer contribution rates that were effective
beginning in fiscal year 1998. It is calculated as indicated below.

   PERA Aid Formula = 0.7% of the jurisdiction’s fiscal year 1997 PERA payroll.

The amounts will remain the same from year to year. This aid could potentially decrease in the future if
the current PERA payroll drops significantly below the fiscal year 1997 level as determined by the
Minnesota Department of Revenue. This aid is appropriated from the general fund and the program will
terminate on June 30, 2020.

State Peace Officer Aid
The purpose of this aid is to subsidize the pension costs of local units of government for their peace
officers. Basically it reimburses them for the payments they make to PERA.

Local units apply for this aid by submitting a Form PA-1 to DOR. Each police department certifies the
name, POST license number, pension fund, employment data, and number of months worked in the
previous year for each licensed full-time peace officer employed by the department. DOR reviews these
aid applications and determines the total number of peace officer months for each department. The total
amount of aid available for distribution is divided by the total number of peace officer months to
determine the aid per officer month.

The total number of officer months for each department multiplied by the aid per officer month equals
its initial aid. This amount is compared with the department's prior year PERA retirement obligation,
and it receives the lesser of the two amounts. The total amount available for distribution is certified by
the Special Taxes Division, and is based on the collection of insurance premium taxes relating to auto
insurance coverage. This amount is reduced by State Auditor costs prior to distribution. A portion of
the excess police aid (initial aid minus the retirement obligation) is transferred to the additional
amortization aid program.

State Fire Aid
This aid subsidizes the pensions of both salaried and volunteer firefighters. The amount paid in regard
to firefighters who are members of the Police and Fire Fund of PERA is to be remitted to PERA rather
than to the local relief association.

Municipal fire departments and independent nonprofit firefighting corporations apply for this aid by
submitting a Form FA-1 to DOR. This form certifies that they maintain at least the minimum equipment
and manpower to qualify for the aid. Also required are certifications of service areas for the prior year,
current fire service contracts, and current apportionment agreements with other fire departments. Two
formula distributions are involved.



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Under the initial formula, 50% of the aid available for distribution is distributed on the basis of the
market value of the service areas of the qualifying fire departments and 50% of the aid is distributed on
the basis of the population of the service areas of the qualifying fire departments. "Market value"
includes the market value of exempt property as well as the market value of taxable real and personal
property, including manufactured home market value.

Additional aid, available only to volunteer fire departments, is distributed on a per firefighter basis, to
bring them up to a minimum aid level. The aid available under the initial formula is certified by the
Special Taxes Division, and is based on the collection of insurance premiums taxes relating to fire
insurance. This amount is reduced by State Auditor costs. The additional fire aid is funded by
redirected amortization aid (30% of the unused amortization aid and unused supplementary amortization
aid from a benchmark level).

Amortization Aid, Supplemental Amortization Aid,                  Additional Amortization Aid,           and
Teacher’s Retirement Amortization Aid
The purpose of these aids is to amortize the unfunded accrued liability (deficit) of the local police or
salaried firefighter pension fund or the unfunded accrued liability of a police or salaried firefighter
consolidation account in PERA. When a pension fund or consolidation account becomes fully funded, a
unit no longer qualifies for these aids. Unused amortization and supplementary amortization aid is
redirected to Teacher’s Retirement Amortization Aid and the minimum state fire aid. State peace officer
aid in excess of actual employer contributions to the police and fire fund of PERA is redirected to
additional amortization aid.

Taconite Aid
Taconite mining companies pay production taxes directly to six Minnesota counties (Cook, Lake, St.
Louis, Itasca, Crow Wing, and Aitkin). Each county auditor from these counties is responsible for
making the taconite aid payments to the various jurisdictions within the county. St. Louis County is
designated as the fiscal agent for the taconite property tax relief account and is responsible for issuing
taconite property tax relief checks to the other counties. The Mineral Tax Office in the Department of
Revenue makes all computations regarding the amount paid by the mining companies, and the aid
payments to the counties, cities, towns, and school districts within the counties.

Wetland Preservation Area Aid
M.S. 275.295 provides for the payment of revenue loss associated with exemptions due to the creation
of Wetland Preservation Areas. (Note this is a specific form of wetland exemption.) The county auditor
must report the revenue loss amounts with the Abstract of Tax Lists (an addendum is included in the
instruction material for this purpose). This provision was adopted in 1991 but was first utilized for taxes
payable in 2004 and currently applies to a very limited number of parcels.

Disparity Reduction Aid
Disparity Reduction Aid is not a general or specific purpose aid and should not affect levies and
budgeting. DRA started for aids payable in 1989 as part of the conversion from mill rates and assessed
values to net tax capacities. It was designed to prevent tax rates from being disparately high for
individual unique taxing areas. (Note that it is not calculated at a jurisdictional level—see Section 06.02
for discussion of unique taxing areas). Its amounts have been grandfathered since their initial
calculation but have been adjusted for changes in class rates. While initially paid to all jurisdictions, the


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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS



city amounts were folded into LGA for taxes payable in 1994 and amounts for special taxing districts
were folded into the county amounts for taxes payable in 1995. DRA works by directly reducing the tax
rate in a unique taxing area (UTA) so that the levies in that UTA are paid in part by DRA rather than
coming completely from taxpayers. As such, DRA is part of the taxes levied and therefore is ignored
when setting levies. (See more discussion in Section 06.03.)

What Was HACA?
HACA, which stood for Homestead and Agricultural Credit Aid, was an aid first paid in 1990 to replace
homestead credits and agricultural credits that had previously existed. Originally this aid was directly
deducted by the county auditor from the levy certified by taxing districts, but later changed to a general
purpose aid that taxing districts had to account for in setting their levies. The aid was paid to all taxing
districts through 2001 but was then limited to counties. Beginning with aid paid in 2004, County
Program Aid replaced HACA and other aids. HACA was often used to facilitate changes made by the
legislature (increasing HACA when class rate reductions caused a loss in tax base, or reducing HACA to
offset state takeovers of expenditures such as court administration costs).




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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS




05.03 – TRUTH-IN-TAXATION

Overview

M.S. 275.065 establishes a process, generally referred to as “Truth-in-Taxation,” for establishing and
communicating proposed levies for the purpose of engaging the public in the budgeting and levy
process. Truth-in-Taxation (often referred to as “T-in-T,” “T-n-T,” or “TNT”) encompasses four broad
components:
     Certification of proposed levies
     Preparation and delivery of parcel-specific notices of proposed taxes
     Public advertisement
     Public hearings

This section details the specific requirements for each of these components after first reviewing the
applicability of or exemptions from the requirements, and a calendar highlighting the timing of the
various pieces of these components. This section concludes with a discussion of penalties for non-
compliance with these provisions.

Application of Requirements

All taxing authorities are subject to the requirement to certify proposed levies, and parcel-specific
notices are sent by the county to all taxpayers. The publication requirement generally applies to cities
with a population of more than 2,500, counties, metropolitan special taxing districts, regional library
districts, and school districts. The public hearing requirement generally applies to cities with a
population over 500, counties, metropolitan special taxing districts, regional library districts, and
school districts. Towns, cities with populations under the 2,500 or 500 thresholds, and special taxing
districts other than metropolitan special taxing districts and regional library districts, are not subject to
the public advertisement and hearing requirements.

“Metropolitan special taxing districts” are defined as the following special taxing districts in the seven-
county metropolitan area that levy a property tax levy for any of the specified purposes as listed:
   Metropolitan Council under Minnesota Statutes section 473.132, 473.167, 473.249, 473.325,
   473.446, 473.521, 473.547, or 473.834.
   Metropolitan Airports Commission under Minnesota Statutes sections 473.667, 473.671, or
   473.672.
   Metropolitan Mosquito Control Commission under M.S. 473.711.

Exemption from the Public Hearing and Publication Requirement
A county, city over 500 population, school district, or metropolitan special taxing district is exempt
from the Truth-in-Taxation public hearing requirement if its total proposed property tax levy does not
exceed its previous year final property tax levy by more than the percentage increase in the implicit
price deflator (IPD). This exemption would also apply to the requirement to publish (or post) a notice
of a Truth-in-Taxation public hearing. The levy amounts compared to determine this exemption must
be the taxing authority’s total levy, both net tax capacity and market value based, as well as debt and
non-debt. The IPD is for government consumption expenditures and gross investment for state and
local governments prepared by the Bureau of Economic Analysis of the U.S. Department of Commerce
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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS



for the 12-month period ending March 31 of the levy year. A taxing authority’s exempt status under
this provision is to be determined annually.
                                                                   NOTE
For the purpose of the Truth-in-Taxation parcel specific       A taxing authority that is exempt from the
                                                               Truth-in-Taxation public hearing requirement
notices, the county auditor will need to verify the exempt     for a year may still choose to hold this
status of the county, each school district within the          hearing.
county, each city over 500 population within the county,
and the metropolitan special taxing districts (if However, if the exempt taxing authority
applicable). The Department of Revenue provides the chooses to hold a Truth-in-Taxation hearing,
information needed to make this determination on its web they must follow all hearing and publication
                                                               requirements.
site, including final levies for the current year and the
maximum proposed property tax levy that would still qualify for the exemption. For school districts,
this information is also on the district's Levy Limitation and Certification report.

Even if a taxing authority is exempt qualifies for the exemption from the public hearing and
advertisement requirements, it should be noted that:

   A school district must still certify to the county auditor by August 10, a date that it has selected for
   its Truth-in-Taxation public hearing, and a date for a continuation hearing in case a continuation
   hearing will be necessary, even if the school district believes that it will be exempt from the
   hearing requirement.

   A city over 500 population must still certify to the county auditor by September 15, a date that it
   has selected for its Truth-in-Taxation public hearing, and a date for a continuation hearing in case a
   continuation hearing will be necessary, even if the city believes that it will be exempt from the
   hearing requirement.

   Each taxing authority must still certify its proposed property tax levy for the next payable year to
   the county auditor by September 15 (September 30 for school districts).

   Each taxing authority must still certify its final property tax levy for the next payable year to the
   county auditor on or before five working days after December 20.

   Each county, school district, city, and metropolitan special taxing district is still subject to the
   restriction that the final levy of the taxing authority may not exceed its proposed levy except for the
   very few allowable add-on levies discussed below. (Towns and special taxing districts, except the
   metropolitan special taxing districts and regional library districts, are not subject to this restriction.)

   Each taxing authority other than special taxing districts may still be assessed a portion of the
   county auditor’s costs of preparing Truth-in-Taxation parcel specific notices and other county
   auditor services under the Truth-in-Taxation Law.

Calendar of Truth-in-Taxation Provisions

Table 05.03-1 summarizes the timing of various pieces of the Truth-in-Taxation process, categorized
by the four major components.

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CHAPTER 5 – TAX LEVIES AND THE BUDGETING PROCESS




Table 05.03-1: Calendar of Truth-in-Taxation

                         Certification of           Parcel-Specific           Public
Dates                    Proposed Levies            Notices                   Advertisement               Public Hearings
On or before Aug. 10                                                                                      Schools certify the
                                                                                                          dates for public
                                                                                                          hearing
On or before Aug. 20                                                                                      County auditor
                                                                                                          notifies cities of
                                                                                                          school district hearing
                                                                                                          dates
On or before Sept. 15                                                                                     Cities certify the dates
                                                                                                          for public hearing
On or before Sept. 15    All taxing authorities
                         certify proposed levy
                         (except school
                         districts)
On or before Sept 30     School districts certify
                         proposed levies
On or before Oct. 5      Deadline for home
                         county auditor to
                         certify rates to other
                         counties
On or before Oct. 10     Deadline for proposed
                         levies to be amended
                         due to sharing,
                         merger, or
                         consolidation of
                         services
After Nov. 10,                                      Auditor and treasurer
Thru Nov. 24                                        prepare and deliver
                                                    parcel-specific notices
Not less than two bus.                                                        Timeframe in which
days nor more than                                                            counties, school
six bus. days prior to                                                        districts, and cities are
Public Hearing                                                                required publicly
                                                                              advertise hearing
Nov. 29 thru Dec. 20                                                                                      Timeframe for
                                                                                                          holding public hearing
At least five but no                                                                                      Timeframe for the
more than 14 bus.                                                                                         continuation hearing
days after public
hearing
One or more days                                                                                          Deadline to adopt
after the public                                                                                          final payable property
hearing and prior to                                                                                      tax levy
Dec. 28

On or before 5 business days after Dec. 20 all taxing authorities must certify their final adopted levies to the auditor.

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Certification of Proposed Levies

Counties and Cities
The county board and the governing body of each city (including cities with a population of 500 or
less) must adopt its proposed property tax levy for the taxes for the next payable year and certify that
amount to the home county auditor on or before September 15. No extension of this deadline will be
granted. The proposed property tax levy certified should be the levy for all purposes, including debt
service.

The proposed levies of regional rail authorities within the counties of Anoka, Carver, Dakota,
Hennepin, Ramsey, Scott, or Washington under M.S. Chapter 398A must be included with the county's
proposed levy and must be discussed at that county's public hearing.

School Districts
Each school district must adopt its proposed property tax for the next taxes payable year and certify
that amount to the home county auditor on or before September 30. No extension of this deadline will
be granted, except for revised levy limitations certified by the Department of Education. The proposed
property tax levy certified should be the school district's proposed property tax levy for all purposes,
including debt service. The school district must certify its proposed levy as either (1) a specific dollar
amount by school district fund, broken down between voter-approved and non-voter-approved levies
and between referendum market value and tax capacity levies, or (2) the maximum levy limitation
certified by the commissioner of education according to section 126C.48, subdivision 1. “Voter
approved levies” means school district taxes approved at referendums for both (a) operating purposes,
and (b) debt.

It is important for counties to compare the school
                                                                  NOTE
district's certified levy with levy limits as posted on the
                                                              Intermediate school districts (Nos. 287,
Department of Education's web site. Levy Limitation and       916, and 917) that levy a tax under M.S.
Certification reports are first posted to the Department of   Chapter 136D, joint powers boards
Education's web site in early September. To ensure levy       established under M.S. 123A.44 to
limits accurately reflect the latest estimates of student     123A.446, and common school districts No.
counts, expenditures, and other data that drives the levy     323 (Franconia) and No. 815 (Prinsburg)
                                                              are to be considered as school districts for
formulas, school districts have until September 30th to       the purpose of certifying their proposed
submit data changes to the Department of Education. For       property tax levies, but otherwise they are
both the Truth-in-Taxation Notice and the preliminary         treated as special taxing districts since they
levy survey, counties should wait until October 1st to        are exempt from the public hearing and
access these reports on the Department of Education's         publication requirements under Truth-in-
                                                              Taxation.
web site.

Levy Limitation and Certification Reports submitted by school districts may show different limits than
those shown on the Department of Education's web site for the following reasons:

   Some school districts may estimate their levy limitations for purposes of certifying their proposed
   levy by adjusting an early version of the Levy Limitation and Certification Report by the amount of
   any anticipated corrections.


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   The option to certify "maximum" levy rather than a specific dollar amount enables school districts
   with late changes in levy limitations to avoid the need for a special board meeting to certify the
   revised proposed amounts. Under this option some school districts may use a preliminary version
   of the Levy Limitation and Certification Report when certifying their levy to the county.

   The Department will revise Levy Limitation and Certification Reports in the first week of October
   for any districts making data changes on September 30th or just prior.

   Districts occasionally request changes after September 30th and the Department of Education will
   process these requests only if the home county has agreed to accept the late change.

Towns
All townships must have their proposed property tax levies certified to the county auditor on or before
September 15, but they are exempt from the public hearing and publication requirements under Truth-
in-Taxation. No extension of this deadline will be granted. In most cases this certification will be the
certification of the levy that was adopted at the annual town meeting in March, and will be the final
levy as well as the proposed levy for the township. Statute in fact refers to the September 15
certification as the final levy for a town but also allows for recertification of the final levy in December
if it is changed at a special meeting.

Special Taxing Districts
All special taxing districts must have their proposed property tax levies certified to the county auditor
on or before September 15, but they are exempt (except for the three metropolitan special taxing
districts and regional library districts) from the public hearing and publication requirements under
Truth-in-Taxation. No extension of this deadline will be granted.

Market Value Based Referendum Taxes
Market value based referendum levies must be certified separately from net tax capacity levies for all
taxing districts.

Sharing, Merger, or Consolidation of Services
If two or more taxing authorities are negotiating an agreement for the sharing, merger, or consolidation
of services at the time that the proposed levy is to be certified, each of the authorities must certify its
proposed levy to the county auditor and include a notification of the specific service or services
involved in the agreement that is not yet finalized. Each of these taxing authorities may amend the
portion of its proposed property tax levy relating to the specific service or services involved until
October 10 of the levy year to reflect the result of the negotiated agreement.

When the county auditor sends the preliminary levy survey under M.S. 275.07, subdivision 4, (see
Section 05.04), to the Department of Revenue, a copy of the notices from the taxing authorities
negotiating an agreement should accompany the levy survey. Then when the amended proposed levies
have been certified by these taxing authorities, the county auditor is to certify the amended proposed
levies for these taxing authorities to the Department of Revenue as soon as possible after October 10.

Cross-County Jurisdictions
In the case of a school district, city, or special taxing district located within two or more counties, the
home county auditor must certify the proposed levy and the proposed local tax rate to the other county

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auditor(s) by October 5. (M.S. 275.065, Subd. 1a provides a September 20 deadline for this
certification but because of the September 30 deadline for school districts to certify their proposed
levies to the home county auditor this is impossible and October 5 allows for the five days intended by
the statute.) The home county auditor must estimate the rate if another county has not certified the
appropriate information. If requested by the home county auditor, the other county auditor must
furnish an estimate of the appropriate information to the home county auditor.

JOBZ Detail
Because of JOBZ, levy certifications must separately identify levies for general obligation debt and
other school district levies included in the debt service levy of the district under M.S. 123B.55, as
described in Section 13.02. This practice should be implemented by all counties, even if there is no
JOBZ present, to facilitate cross-county certifications and to prepare for future JOBZ properties.

Preparation and Delivery of Parcel Specific Notices

Requirement and Mailing Dates
Parcel specific notices of proposed property taxes must be prepared by the county auditors in all 87
counties, and must be mailed by the county treasurers by first class mail to the property owners in each
county so that the property owners do not receive the notices until after November 10, and mailed no
later than November 24.

General Form and Content of Notices
The Commissioner of Revenue prescribes the form of the notice which is posted on the DOR website
annually. The notice must inform taxpayers that it contains the amount of property taxes each taxing
authority proposes to collect for taxes payable in the following year. In the case of taxing authorities
required to hold a public hearing, the notice must clearly state the districts that will be holding a public
meeting to hear public testimony on the proposed (or current for school districts) budget and proposed
(or final for towns) property tax levy.

The parcel specific notices must show, for each taxing authority required to hold a Truth-in-Taxation
public hearing, the date, time, and place for the hearing. The date, time, and place for a Truth-in-
Taxation public hearing will not be shown on the parcel specific notice for a taxing authority whose
proposed property tax levy for the next payable year is equal to or less than the amount shown on the
listing from the Department of Revenue, unless the taxing authority notifies the county auditor that it
has chosen to hold a Truth-in-Taxation public hearing in spite of its exemption.

The parcel specific notices must show telephone numbers and addresses for the county, the city or
town, the school district, and the Metropolitan Council (if applicable) in case taxpayers have questions
related to the notice or want to comment on the proposed taxes.

The taxable market values for taxes payable in both the current and following payable years must be
shown on the notices. These should be the values as appearing on the records of the county assessor as
of November 1 of the current year. Each parcel specific notice must clearly inform the taxpayers of the
years to which the taxable market values apply, and that these market values are final values.

Each parcel specific notice prepared for residential property and agricultural property must state
whether the property is classified as homestead or nonhomestead. Providing this information may
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prompt taxpayers who receive notices identifying their property as nonhomestead, to challenge or
apply for homestead status. Taxpayers have until December 1 to establish use of a property as a
homestead and until December 15 to provide documentation to the county assessor. If satisfactory
documentation is provided, the county assessor must reclassify the property to the appropriate
homestead classification for taxes payable in the following year.

The actual taxes for the current payable year and the proposed tax amounts must be shown net of
the residential and agricultural homestead credits in separate columns on the notice by the following
breakouts:
    County;
    City or town;
    State general tax;
    Voter approved school levies;
    Other local school levies;
    The sum of special taxing districts;
    Tax increment tax;
    Fiscal disparity tax; and
    The total of all taxing authorities.

The percentage change in the total taxes payable from the current year to the proposed, must also be
shown on the notice. Percentage changes for each breakout should not be shown.

Exceptions to the General Tax Breakouts
There are some exceptions to these general breakouts. In the metropolitan area, the total for
metropolitan special taxing districts should be shown separate from the total for all other special taxing
districts.

For a county levying for a lake improvement district (under M.S. 103B.501 to 103B.581), this levy
must be stated separately from the remaining county levy amount.

In Minneapolis, the levy for the Minneapolis Library Board and the levy for Minneapolis Park and
Recreation shall be listed separately from the remaining amount of the city’s levy.

In St. Paul, the levy for the St. Paul Library Agency must be listed separately from the remaining
amount of the city’s levy.

In Ramsey County, the levy for library purposes may be listed separately from the remaining amount
of the county’s levy.

If a county incurs debt pursuant to M.S. 373.47 (part of the Minnesota Anti-Terrorism Act of 2002),
the levy to pay the principal and interest on the capital improvement bonds or capital notes issued
under this law may be shown separately from the remaining county levy on the parcel specific notice.
This is not mandatory; it is a county option. The debt incurred under this law would be for public
safety communication system infrastructure and equipment for use on the statewide, shared public
safety radio system.

Anoka County may choose to show its levy for bonds or notes issued to finance the cost of certain
communication system infrastructure and equipment under Laws 2002, Chapter 390, Section 27 as a
separate line item on the parcel specific notice between the county tax and the city or town tax.

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Amounts Noted as NOT Being Included in Proposed Taxes
The notice must clearly state that the proposed taxes do NOT include the following:
   Special assessments;
   Levies approved by voters after the date the proposed levies are certified, including bond referenda
   and school district levy referenda;
   Levy limit increases as approved at the November election;
   Amounts to pay cleanup or other costs due to a natural disaster occurring after the date the
   proposed levies are certified;
   Amounts necessary to pay tort judgments against the taxing authority that became final after the
   date the proposed levies are certified; and
   The contamination tax imposed on properties which received market value reductions for
   contamination. (This note should not be printed for a parcel that is not subject to contamination
   taxes.)

School District Referendum
If the school district has certified under M.S. 126C.17, subdivision 9, that it will be holding a
referendum on a proposed amount at the November general election, a note must be printed directly
under the school tax amounts stating that a referendum is pending and that, if approved by the voters,
the school tax amount may be higher than the amount shown on the notice. This notification must
NOT be pre-printed on the parcel specific notices.

Relationship Between Tax Amounts and Abatements/Deferrals
For an eligible county that has a pending county economic development tax abatement (county tax
rate differential abatement) under M.S. 375.194 to one or more eligible parcels of commercial and/or
industrial property within the county for the taxes payable in the next year, the proposed tax rates for
all affected taxing jurisdictions must be calculated without regard to the potential county tax abatement
which is pending. The potential value affected by the pending abatement agreement must be included
in the tax base of the affected taxing jurisdictions. The proposed property taxes shown for the parcel(s)
of commercial and/or industrial property affected by the pending abatement agreement must also be
the proposed tax amounts before any potential abatement.

The proposed property taxes of a county, city, town, or school district must include the estimated
amount of all current year economic development tax abatements granted under M.S. 469.1812 to
469.1815. The tax amounts shown on the parcel specific notice are to be before the reduction for any
economic development tax abatements that will be granted on the property.

The amount of tax shown on the parcel specific notice for homesteads qualifying under the senior
citizens’ property tax deferral program is the total amount of property tax before subtraction of the
deferred property tax amount.

Supplemental Information
Historically, no additional information has been mailed with the notice. Current law, however,
provides the exception that a governing body of a county, city, or school district may, with the consent
of the county board, include supplemental information with the statement of proposed property taxes
about the impact of state aid decreases and on the level of services provided in the jurisdiction. The
information may pertain to the following year, current year, and as many preceding years as deemed


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appropriate by the jurisdiction. The supplemental information may only include information
regarding:

    1) The impact of inflation as measured by the implicit price deflator for state and local government
      purchases

    2) Population growth and decline
    3) State or federal government action

    4) Other financial factors that affect the level of property taxation and local services.

    The information may be presented using tables, written narrative, and graphs and may contain
    instruction toward further sources of information or opportunity for comment.

    If a jurisdiction chooses to include supplemental information with the statement of proposed
    property taxes a copy of the supplemental information must also be sent to the Department of
    Revenue. (M.S. 275.065, subd. 3, para. (j))

Apportionment of Costs
The law allows a county auditor to apportion the cost of preparing and mailing parcel specific notices
(as well as the costs of other county auditor services under the Truth-in-Taxation Law) between the
taxing jurisdictions as follows:
    One-third of these costs is allocated to the county.
    One-third of these costs is allocated to the cities and towns within the county, including the cities
    of 500 population or less. These costs are also to be apportioned among the cities and towns based
    upon the number of parcels within each city or town within the county.
    One-third of these costs is allocated to the school districts within the county. These costs are to
    be apportioned among the school districts based upon the number of parcels within each school
    district within the county.

When apportioning costs to school districts or cities and towns within the county, the school districts
and cities that are partially within the county as well as those that are entirely within the county are to
be included in the apportionment.

The law does not provide for allocating any of these costs to special taxing districts (including the
metropolitan special taxing districts).

Delivery or Posting of Notice by Owners of Rental Housing
Owners of class 4 residential property used as a residence for lease or rental periods of 30 days or
more) are required to deliver a copy of their parcel specific notice to their tenants or post a copy in a
conspicuous place on the premises occupied by the tenants. This must be done by November 27, or
within three calendar days of the receipt of the notice from the county, whichever is later. Owners of
rental property are allowed to notify the county treasurer of the address of the taxpayer, agent,
caretaker, or manager of the premises to which the parcel specific notice should be mailed. However,
the law does not require county treasurers to comply with such requests.



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The purpose of this requirement is to notify tenants of proposed increases or decreases in the property
tax on the premises they occupy which may effect their rent payments, and to provide an opportunity
for tenants to voice their opinions to public officials about the proposed increases or decreases.

Failure to Provide Notice
Failure to substantially comply with the parcel specific notice requirement can result in penalties for
the county as described later in this section. However, failure of the county auditor to prepare or the
county treasurer to deliver the notice (for a parcel or in a more limited sense) does not invalidate the
proposed or final tax levy or the taxes payable pursuant to the tax levy.

Public Advertisement

Requirement and Timeframe
Each taxing authority (county, school district, city with a population over 500, metropolitan special
taxing district, or regional library district) that is required to hold a Truth-in-Taxation public hearing
must advertise in a newspaper a notice of the public hearing and its proposed budget and property
taxes, except that cities with a population of over 500 but not more than 2,500, must instead advertise
by posted notice.
                                                                   NOTE
The notice must be published not less than 2 business         The term "posted notice," (as defined in
days and not more than 6 business days before the public      M.S. 645.12, subd. 1) means the posting, at
hearing.                                                      the beginning of the prescribed period of
                                                              notice, of a copy of the notice or document
                                                              referred to, in a manner likely to attract
A taxing authority may be exempt from this requirement,       attention, in each of three of the most public
as described earlier in this section, if the total proposed   places in the town, city, district, or county to
property tax levy for the next payable year does not          which the subject matter of the notice
exceed its previous year final property tax levy by more      relates, or in which the thing of which notice
                                                              is given is to occur or to be performed.
than the percentage increase in the implicit price deflator
(IPD).

Form and Content of Advertisement
The Commissioner of Revenue, subject to the approval of the chairs of the house and senate tax
committees, prescribes the form and format of the advertisement, which is also largely prescribed
specifically in statute. As such, the published notice is subject to specific requirements regarding the
text and size of the notice, which must not deviate from the text and format of the sample notice
provided by the Department of Revenue (except perhaps in font style and size). The size of the
advertisement must be at least one-eighth page in size (of a standard-size or tabloid-size newspaper).
The format of the advertisement for school districts, metropolitan special taxing districts, and regional
library districts, and the posted notice for cities over 500 but not more than 2,500, is a different format
with more limited content than the advertisement for cities and counties.

The published notices for school districts, metropolitan           NOTE
special taxing districts, regional library districts, and     The taxing authority may not include its
                                                              own commentary or explanation in its
the posted notice for cities over 500 population but not
                                                              published notice. However, a companion
more than 2,500 population is a simple notice that (1)        article in the newspaper could provide
announces the public hearing, (2) invites the residents of    additional explanations or commentary on
the taxing authority to attend the public hearing, and (3)    the notice.
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provides the date, time, and place of the public hearing along with the taxing authority’s mailing
address. The sample notices provided by the Department of Revenue on the Department’s web page
show the language to be used by a school district, metropolitan special taxing district, regional library
district, or city over 500 population but not more than 2,500 population for its notice.

The published notices for counties and cities over 2,500 population must contain the same
information regarding the public hearing but must also contain additional budget, property tax, and tax
rate information. The additional information required on the published notices for counties and cities
for the next payable year includes: (1) the total budget for the current tax year, the proposed budget for
the next payable year, and the percentage change; (2) the final certified property tax levy for taxes
payable in the current year, the proposed property tax levy for taxes payable in the next tax year, and
the percentage change; and (3) the current year local tax rate of the county or city, the proposed local
tax rate that the county or city would have if there were no tax increase, and the proposed local tax rate
that the county or city would have if the proposed levy is adopted. (See discussion of “tax rates”
below.) The sample notices provided by the Department of Revenue on the Department’s web page
show the language to be used by a county or city over 2,500 population for its notice.

Cities of 500 population or less (as well as towns and other special taxing districts) will neither publish
nor post a notice of a Truth-in-Taxation public hearing since they are exempt from the Truth-in-
Taxation hearing requirement.

Definition of “Budget” for Counties and Cities
For counties, “budget” means the total government fund expenditures, as defined by the State Auditor
under M.S. 375.169 for the summary budget publication, less any expenditures for direct payments to
recipients or providers for the following human services aids:
     (i) Minnesota family investment program under M.S. Chapters 256J and 256K;
     (ii) medical assistance (MA) under M.S. 256B.041, Subd. 5, and 256B.19, Subd. 1;
     (iii) general assistance medical care (GAMC) under M.S. 256D.03, Subd. 6;
     (iv) general assistance (GA) under M.S. 256D.03, Subd. 2;
     (v) emergency assistance under M.S. 256J.48;
     (vi) Minnesota supplemental aid under M.S. 256D.36, Subd. 1;
     (vii) preadmission screening under M.S. 256B.0911, and alternative care grants under M.S.
          256B.0913;
     (viii) general assistance medical care (GAMC) claims processing, medical transportation, and
          related costs under M.S. 256D.03, Subd. 4;
     (ix) medical transportation and related costs under M.S. 256B.0625, Subds. 17 to 18a;
     (x) group residential housing under M.S. 256I.05, Subd. 8, transferred from programs in items (4)
          and (6) listed above; and
     (xi) any successor programs to those listed above.

For cities, “budget” means the total government fund expenditures, as defined by the State Auditor
under M.S. 471.6965, less any expenditures for improvements or services that are specially assessed or
charged under M.S. Chapters 429, 430, 435, or the provisions of any other law or charter.

Explanation of Tax Rate Information for Counties and for Cities over 2,500 Population
The published notices for counties and for cities over 2,500 population must contain specified tax rate
information. The tax rate information required on the published notices for counties and for cities over
2,500 population includes: the current year local tax rate of the county or city, the proposed local tax
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rate that the county or city would have if there were no tax increase, and the proposed local tax rate
that the county or city would have if the proposed levy is adopted. These tax rates are determined by
dividing the county’s or city’s net tax capacity levy by its taxable net tax capacity. Referendum market
value levies and referendum market values are not used to determine these tax rates.

For the published notices, the tax rate for the current taxes payable year is determined by dividing the
county’s or city’s net tax capacity levy for the current taxes payable year by its taxable net tax capacity
used for the current taxes payable year. The tax rate for the no levy increase scenario is determined by
dividing the county’s or city’s net tax capacity levy for the current taxes payable year by the taxable net
tax capacity to be used for the proposed taxes payable year. The proposed local tax rate is determined
by dividing the county’s or city’s proposed levy by the taxable net tax capacity to be used for the
proposed taxes payable year. In a fiscal disparity county, the levy amounts used for this tax rate
calculation are after the deduction of the fiscal disparity distribution tax. The taxable net tax capacity
used in this calculation is the county’s or city’s total net tax capacity minus the power line credit, tax
increment, and fiscal disparity contribution net tax capacities. This is the same definition of the
“taxable net tax capacity” that is used in determining local tax rates for tax extension purposes.

The computed tax rates are average tax rates for the county or city, but adjusted for Disparity
Reduction Aid (DRA). This adjustment is done at the county or city level rather than at the UTA level,
and as such would, in many cases, not reflect actual tax rates used to extend taxes. Average tax rates
for the entire city are still determined even when a city has rural/urban service districts or differential
tax rates reflecting an annexation.

The county auditor supplies the cities with a population over 2,500 with all three of the tax rates. The
cities will not be able to compute these tax rates on their own. The cities will need this information by
early November. A city holding a Truth-in-Taxation public hearing on November 29, the earliest date
possible, could publish its notice of the hearing as early as November 18.

An example of the tax rate calculations for a county is shown on the following page.




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Example 05.03-1: Published Notice Tax Rate Calculations for a County

1. Payable 2004 Property Tax Levy Data
   a. Total Net Tax Capacity Levy                                      $10,000,000
   b. Total Market Value Levy                                            $500,000
   c. Total Final Certified Levy (a + b)                               $10,500,000

2. Payable 2005 Property Tax Levy Data
   a. Total Net Tax Capacity Levy                                      $11,000,000
   b. Total Market Value Levy                                            $500,000
   c. Total Final Certified Levy (a + b)                               $11,500,000

3. County Share of Fiscal Disparity Distribution Tax (If Applicable)
   a. Payable 2004                                                      $2,000,000
   b. Payable 2005                                                      $2,100,000

4. Taxable Net Tax Capacity
   a. Payable 2004                                                     $16,000,000
   b. Payable 2005                                                     $17,000,000

5. Disparity Reduction Aid
   a. Payable 2004                                                       $100,000
   b. Payable 2005                                                       $105,000

6. Determination of the Payable 2004 Tax Rate
   a. Adjusted Net Tax Capacity Levy (1a – 3a)                          $8,000,000
   b. Initial Local Tax Rate (6a / 4a)                                    50.000%
   c. Disparity Reduction Aid Rate (5a / 4a)                               0.625%
   d. Payable 2004 Tax Rate (6b – 6c)                                     49.375%

7. Determination of the Payable 2005 No Levy Increase Tax Rate
   a. Adjusted Net Tax Capacity Levy (1a – 3b)                          $7,900,000
   b. Initial Local Tax Rate (7a / 4b)                                    46.471%
   c. Disparity Reduction Aid Rate (5b / 4b)                               0.618%
   d. Payable 2005 No Levy Increase Tax Rate (7b – 7c)                    45.853%

8. Determination of the Payable 2005 Proposed Tax Rate
   a. Adjusted Net Tax Capacity Levy (2a – 3b)                          $8,900,000
   b. Initial Local Tax Rate (8a / 4b)                                    52.353%
   c. Disparity Reduction Aid Rate (5b / 4b)                               0.618%
   d. Payable 2005 Proposed Tax Rate (8b – 8c)                            51.735%




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Selection of Newspaper and Location of Notice
The notice must be published in an official newspaper of general circulation throughout the taxing
authority. Publication in more than one newspaper may be necessary to reach the public in all areas of
the taxing authority. The newspaper must be one:
    Which publishes local and/or state news articles, although it may publish other types of articles as
    well. The subject matter of the newspaper must appeal to a general audience. The newspaper must
    not be one which has a limited subject matter or which appeals to a limited audience.
    Which is published at least once a week.
    Which is mailed or hand delivered to its readers.

It is not necessary for a taxing authority within the seven-county metropolitan area (other than one of
the three "metropolitan special taxing districts") to publish its notice in the Minneapolis Star Tribune or
in the St. Paul Pioneer Press if there is a local newspaper (or a set of local newspapers) that meets the
publishing requirements. However, the three metropolitan special taxing districts (Metropolitan
Council, Metropolitan Airports Commission, and Metropolitan Mosquito Control District) are required
to advertise in both the Minneapolis Star Tribune and the St. Paul Pioneer Press.

The notice must NOT be printed on any page of the newspaper where legal notices and classified
advertisements are published.

Ramsey County, the city of St. Paul, and Independent School District No. 625
These entities are authorized, but not required, to publish a joint advertisement in lieu of separate
published notices.

Using the Sample Notice
On the sample notice available on the Department of Revenue website, you should draw a line through
the example name, date, time, and address and print the correct information for your taxing authority
nearby. The revised sample notice should then be given to the newspaper that your taxing authority
has chosen for the publication of its notice. Finally, the chosen newspaper must be given the
instructions which are located under "Instructions to Newspaper."

Public Hearings

“Initial,” “Continuation,” and “Subsequent” Hearings
There are actually three types of Truth-in-Taxation hearings, defined and described as follows:

   "Initial hearing" means the first and primary hearing held to discuss the taxing authority's proposed
   budget and proposed property tax levy for taxes payable in the following year, (or, for school
   districts, the current budget and the proposed property tax levy for taxes payable in the following
   year). At the initial hearing, the percentage increase in property taxes proposed by the taxing
   authority, if any, and the specific purposes for which property tax revenues are being increased
   must be discussed. During the discussion, the governing body shall hear comments regarding a
   proposed increase and explain the reasons for the proposed increase. The public shall be allowed
   to speak and ask questions. At its public hearing, the school district must also provide and discuss
   information on the distribution of its revenues by revenue source, and the distribution of its
   spending by program area. Initial hearing dates must be designated on the parcel specific notices.

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   "Continuation hearing" means a hearing held to complete the initial hearing, if the initial hearing is
   not completed on its scheduled date. The continuation hearing must be held at least 5 business
   days but no more than 14 business days after the initial hearing and may not be held after
   December 20. The date, time, and place for the continuation hearing must be announced at the
   initial hearing prior to its adjournment. Continuation hearings need not be stated on parcel specific
   notices.

   "Subsequent hearing" means the hearing held to adopt the taxing authority's final property tax levy,
   and, in the case of taxing authorities other than school districts, the final budget, for taxes payable
   in the following year. At a subsequent hearing, each county, school district, city over 500
   population, and metropolitan special taxing district may amend its proposed property tax levy
   (downward) and proposed budgets (except school districts). The final property tax levy must be
   adopted prior to adopting the final budget. Subsequent hearings must be held on a date subsequent
   to the date of the taxing authority’s initial public hearing. If a continuation hearing is held, the
   subsequent hearing must either immediately follow the continuation hearing or be held on a
   subsequent date. Subsequent hearings must be held prior to five working days after December 20
   and the date, time, and place must be announced at the initial or continuation hearing.

Selection of Hearing Dates and Times
All counties (except Ramsey County) are required to hold their initial Truth-in-Taxation public
hearings on the first Thursday of December (also see joint hearing exceptions for Aitkins and Nobles
counties below). Counties may hold additional initial hearings on later dates prior to December 20 if
necessary for the convenience of county residents. County continuation hearings, if needed, must be
held on the third Tuesday in December (unless it falls on December 21 in which case the continuation
hearing shall be held on Monday December 20). Only one continuation hearing date is allowed.

The metropolitan special taxing districts shall hold a joint initial hearing on the first Wednesday of
December. The continuation hearing of a metropolitan special taxing district, if needed, must be held
on the second Wednesday of December. The location of the joint public hearing is determined by the
three metropolitan special taxing districts. The continuation hearings for these districts may, but are
not required to be, held jointly.

The county auditor is responsible for the coordination of the selection of Truth-in-Taxation hearing
dates for the school districts and for the cities within the county. This includes both initial hearing
dates and continuation hearing dates. All of the initial and continuation hearing dates selected by the
school districts and cities must fall within the time period of November 29 through December 20.

By August 10, each school district and regional library district must certify to the county auditor(s)
of the county(ies) in which the districts are located the date that each has selected for its public hearing
and the date for a continuation hearing in case a continued hearing becomes necessary. If not certified
by this date, the county auditor (or home county auditor in the case of school districts located in two or
more counties) will assign both the initial hearing date and the continuation hearing date for the school
district or regional library district. The dates elected or assigned must not conflict with the initial or
continuation hearings of the county or of the metropolitan special taxing districts (if applicable).

By August 20, the county auditor must notify the clerks of cities with a population over 500 of the
dates on which the school districts and regional library districts will be holding their public hearings,
as well as their selected dates for continuation hearings in case continued hearings become necessary.
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On or before September 15 the governing body of each city with a population over 500 must certify to
the county auditor(s) of the county(ies) in which the city is
located the date that it has selected for its public hearing, as    NOTE
well as a date for a continuation hearing in case a continued Cities with a population of 500 or less are
hearing becomes necessary. If not certified by this date, the exempt from the Truth-in-Taxation hearing
county auditor (or home county auditor in the case of cities requirement. Therefore, only the cities with
located in two or more counties) will assign the hearing dates a population over 500 are involved in this
                                                                 hearing date selection process. Towns and
for the city. The date for the city initial hearing must not special taxing districts (except the
conflict with the initial hearing dates (and to the extent metropolitan special taxing districts and
possible, the continuation hearing dates) of the county, regional library districts) are also exempt
metropolitan special taxing districts (if applicable), regional from the Truth-in-Taxation hearing
library districts, or school districts located within the city.  requirement.


Since the county auditor of each county must coordinate the hearings held within his or her county to
prevent conflicts, it is not sufficient for a taxing authority located in two or more counties to notify just
the home county auditor. The county auditor of each of the counties in which the authority is located
must be notified.

Until September 15, the first and second Mondays of December are reserved for the use of cities. If a
city does not select one of these two dates for its initial hearing or its continuation hearing, the
unselected date becomes available for the school district in which the city is located, provided that no
other city within the school district has selected that date. For example, a school district could select
Monday, December 6, 2004, as the date for its initial hearing, with a backup date of Friday, December
10, for its initial hearing. If no city within the school district selects December 6, 2004, for its initial or
continuation hearing, the school district could have December 6, 2004, for its initial hearing.
Otherwise, it would have to hold its initial hearing on December 10, 2004.

The subsequent hearing of an authority does not have to be coordinated by the county auditor to
prevent a conflict with an initial hearing, a continuation hearing, or a subsequent hearing of any other
taxing authority. All subsequent hearings must be held prior to five working days after December 20
of the levy year.

Initial and continuation hearings can be held on any day of the week except Sunday, and must be held
after 5:00 pm if scheduled on a day other than Saturday.

Special Election Conflict
In the case of a school district and a city with a population over 500 whose boundaries overlap, the
initial or continuation hearing of the school district or the city should not be scheduled for the same
day that a special election will be held within the school district or the city. If this conflict occurs, the
school district's or city's hearing would either have to begin at 5:00 PM, run until 6:00 PM and then
adjourn until 8:00 PM, or else not begin until 8:00 PM. This is because state law provides that public
meetings cannot be held between the hours of 6:00 PM and 8:00 PM on the day that an election is
conducted if there would be a conflict between the public hearing and the election.

Rule if Hearing Held on Same Date as a Regularly Scheduled Meeting
The public Truth-in-Taxation hearings (initial or continuation) of a school district or a city with a
population over 500 may be held on the same day as a regularly scheduled meeting (subject to the
restrictions mentioned above), but must be handled as a separate hearing. County Truth-in-Taxation
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hearings (initial or continuation), and metropolitan special taxing district Truth-in-Taxation hearings
(initial or continuation), must also be kept separate from any other county or metropolitan special
taxing district meetings. A subsequent hearing may be held at a regularly scheduled board or council
meeting or at a special meeting scheduled for the purpose of the subsequent hearing.

Metro Counties Discuss Regional Rail Levies
The proposed levies of regional rail authorities within the counties of Anoka, Carver, Dakota,
Hennepin, Ramsey, Scott, or Washington under M.S. Chapter 398A must be included with the county's
proposed levy and must be discussed at that county's public hearing. (These amounts will be listed
separately on tax statements.)

Joint Public Hearings
Any city with a population of 10,000 or more may conduct a more comprehensive Truth-in-Taxation
public hearing by including a board member from the county, a board member from the school district
in which the city is located, and (if applicable) a member or designee from the Metropolitan Council.

If the governing body of the city adopts a resolution to hold a joint Truth-in-Taxation public hearing in
a year, the city must notify the county, school district, and (if applicable) the Metropolitan Council and
request the attendance of the official or designee mentioned above. If the city is located in more than
one county, the city may choose to request a county board member from each of the counties, or just a
board member from the county containing a majority of the city’s market value. If the city is located
in more than one school district, the city may choose to request a board member from each of the
school districts, or just a board member from the school district containing a majority of the city’s
market value. The city may also invite each state senator and representative who represents the city to
attend the joint hearing.

The main purpose of the joint hearing is to discuss the city’s budget and property tax levy. However,
the visiting representatives of the other taxing authorities must be prepared to answer questions relating
to their budgets and levies, and the effect that their levies will have on the property owners in the city.

The joint hearing is in lieu of the city’s initial hearing, but the city is still required to hold a subsequent
hearing to adopt its final property tax levy. The joint hearing does not relieve the county, school
district, or Metropolitan Council of its requirement to hold its own initial public hearing.

Ramsey County, the city of St. Paul, and Independent School District No. 625 are authorized and
required to hold a joint public hearing. The hearing must be held on the second Tuesday in December.
The published notice may be a joint advertisement. The hearing is otherwise subject to general TNT
requirements, including those continuation or subsequent hearings. Ramsey County may schedule
additional initial hearings for the convenience of the citizens of the county, but if only one initial
hearing is held (the joint hearing), it must be held in a St. Paul location convenient to all of the
residents of Ramsey County.

Aitkin County, the city of Aitkin, and Independent School District No. 1 are authorized to hold a
joint public hearing. The hearing must be held on the second Tuesday in December. The published
notice may be a joint advertisement. The hearing is otherwise subject to general TNT requirements,
including those continuation or subsequent hearings.


TRUTH-IN-TAXATION                                                                                   05.03 - 17
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Nobles County, the city of Worthington, and Independent School District No. 518 are authorized
to hold a joint public hearing. The hearing must be held on the second Tuesday in December. The
published notice may be a joint advertisement. The hearing is otherwise subject to general TNT
requirements, including those continuation or subsequent hearings.

Final Levy Restrictions
The final property tax levy by a city of any population, county, metropolitan special taxing district,
regional library district, or school district must not exceed the proposed levy, with specific exceptions.
The following levies by statutory authorization may be "added-on" to the county's, school district's,
city's, metropolitan special taxing district's, or regional library district’s proposed property tax levy and
result in a final levy that is greater than the proposed levy:

    (1)    Voter Approved Operating or Capital Expenditure Levies: School district, county, or
          city levy increases for operating costs or capital expenditures approved by the voters at a
          referendum held after the proposed levy was certified.

    (2)    Bond Referendums: The amount of a levy to pay the principal and interest on bonds
          approved by the voters under M.S. 475.58 after the proposed levy was certified. This
          allowance does NOT apply to bonds issued after the proposed levy was certified if the bonds
          were issued without voter approval in accordance with M.S. 475.58.

    (3) Natural Disaster Costs: The amount of a levy to pay the repair and clean-up costs due to a
        natural disaster that occurred after the proposed levy was certified, if the taxing authority
        appeals to the Commissioner of Revenue for the authorization to make this additional levy
        and receives the Commissioner's approval. The Commissioner's approval may be in the
        amount requested or in a lesser amount determined by the Commissioner based upon the
        information submitted in support of the appeal. The Commissioner's decision is final.

    (4) Tort Judgment Costs: The amount of a levy to pay the costs of a tort judgment that became
        final after the proposed levy was certified, if the taxing authority appeals to the
        Commissioner of Revenue for the authorization to make this additional levy and receives the
        Commissioner's approval. The amount requested cannot exceed the lesser of $50,000 or ten
        percent of the taxing authority's proposed property tax levy. The Commissioner's approval
        may be in the amount requested or in a lesser amount determined by the Commissioner based
        upon the information submitted in support of the appeal. The Commissioner's decision is
        final.

    (5)    Non-School Levy Limitation Increase: The amount of an increase in the levy limitation
          (for whatever purpose) for a county or a city over 2,500 population or for a metropolitan
          special taxing district, certified by the Commissioner of Revenue after the proposed levy was
          certified.

    (6) School District Levy Limitation Increase: The amount of an increase in a school district
        levy limitation (for whatever purpose) certified by the Commissioner of Education after the
        proposed levy was certified.

    (7)    School Districts; Default Avoidance: The amount necessary in accordance with M.S.
          126C.55 to pay for a potential default in payments on school district tax anticipation
TRUTH-IN-TAXATION                                                                                 05.03 - 18
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         certificates of indebtedness, aid anticipation certificates of indebtedness, or general obligation
         bonds.
Penalty for Violation of Truth-in-Taxation

Certification of Compliance
At the time the taxing authority certifies its final tax levy under M.S. 275.07 (on or before five working
days after December 20), it shall certify to the Commissioner of Revenue its compliance with Truth-in-
Taxation requirements. The Department of Revenue provides the forms for this certification on its
website.

Examples of Serious TNT Violations
Examples of serious violations include, but are not limited to: (a) failure to publish a notice prior to the
public hearing when publication is required, (b) failure to hold a public hearing when a public hearing
is required, (c) failure to allow the public to speak at the public hearing, and (d) failure to complete and
submit a Truth-in-Taxation compliance form (Form TNT) to the Department of Revenue when a TNT
public hearing was required.

Explanation of Penalty
If the commissioner determines that the taxing authority has failed to substantially comply with the
requirements of Truth-in-Taxation, the Commissioner of Revenue shall notify the county auditor and
when fixing the tax rates under M.S. 275.08 for the taxing authority that has not complied, the county
auditor must use the taxing authority’s previous year’s levy (plus any additional amounts necessary to
pay principal and interest on general obligati