Wednesday, June 2, 2010

Changes to Property Tax Laws


As expected, the legislature cleared up the current mess in the Tax Court
that prohibited Assessors from being expert witnesses. This confusion was
the result of a couple challenges by attorneys and caused delays in the tax
court process due to the uncertainty. There was a period of suspense whether
the Governor would sign the bill, as it was passed around the fishing
opener. But Governor Pawlenty came back in time to sign the bill. Assessors
can again testify in property tax court as expert witnesses. That was a high
profile one in the property tax community, these other 2 changes slipped
through more or less unnoticed.

The lowest tax rate is for vacant land classified as Agricultural Homestead,
taxed at the .50 rate for up to $1,400,000. John and Mary hadn't used up the
full $1,400,000 and they owned another farm as part of an LLC. So they
called their legislator and asked for the law to be changed so the LLC land
can count toward the $1,400,000 and be taxed at the lowest rate.

The Minnesota Revenue Department Property Tax Division got wind of this and
attempted to rally the assessors to fight the bill. "I already do it that
way now", replied some of the assessors. So the Revenue Department really
couldn't fight the bill on the basis that it would be too hard to
administer. And the bill passed.

A similar situation occurred with the taxation of Federally leased land.
Some counties taxed it, some didn't. So now they are all tax exempt.

These real life examples raises three issues with our property tax system:

1) Even though all assessors are working with state law, different counties
administer it differently.

2) Every time someone whines to their legislator, and with the ag
homestead/LLC thing it really just one couple, the legislature can change
the rules. This diverts the time of the assessors and the legislators and
raises costs for every one to implement the change.

3) The big one that affects all of us: every time one property class is
taxed less the rest of us have to make up the difference. Remember the
assessors don't set taxes, they just cut up the pie. So when someone else
pays less, each of us pay more.

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