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Staff Riper’s Series
Staff Raper
I%3ptemkler 1977
1>77-21
PROVISIONS FOR U~E-vAL f-JEA$=E~~MENT
OF AGRICULTURAL
AND CN?EN SI?ACE
LAND IN hlINNESOTA
by
Arley
D, Waldo and Camle
B. Yoho
lDePatimeut of Agriculturaland ApphedEconomical
Uniwmlty of Minnesota
Institute of Agricxdhne, Forestry wld Home Economics
St. Paul. Minneso[~ 55108
ArWy 13. WaMQ M aprafessar
and extension economist
inpubllc
policy
educatmn and Cart31e I% Yuha is an a~sociate prafesaor
and extension
speciabs t m public policy education in the Department of Agricultural
and Applied Eccmomies,
Ihuversity
of Minnesota--Twin
C~ties.
This paper was prepared as a part of the public policy education and
research
program @ the IJnivers ity of Minnesota Agricultural
Extension
Service and Agricultural
ExperWent
Staticm. Single copies are available
on request from:
Pubiic Policy Education Program
917 Classroom
(X,fice Building
University of Minnesota
St. Fault Minnesota
55108
#
Staff papers are pubhshed w lthout formal
of Agrumltural
and Applied Economics.
review
within the 13epar tment
PROVISIONS FOR USE-VALUE ASSESSMENT
OF AGRICULTURAL
AND OPEN SPACE
LAND IN MINNESOTA
by
Arley
Two Minnesota
agricultural
Agricultural
both laws provide
of use-value
of local
property
rather
Property
value assessment
farmland.
be assessed
assessment
tax purposes.
of qualified
These laws
Tax Law (often called
Open Space Property
than actual market
the “Green
Tax Law.
In
real estate on the
value and a partial
deferral
taxes.
The Minnesota
property
for use-value
for taxation of eligible
The Minnesota
of local
B. Yoho
land for property
Law) and the Minnesota
general,
basis
laws provide
and open space
are the Minnesota
Acres”
D. Waldo and Carole
Agricultural
Agricultural
of qualified
Property
agricultural
taxes,
and deferral
1 Agricultural
real estate
on the basis
to nonagricultural
factors
Property
Tax Law provides
real estate,
of certain
special
that qualifies
of its value in agricultural
that may affect
Tax Law
for use-
a partial
deferral
assessments
for the program
on
is to
use without regard
the actual market
value of the
property.
The purpose
owners
of farmland.
lM. S. 273.111.
of the law is to provide
The law is based
property
tax relief
to eligible
on the idea that this will reduce
2
the economic
pressure
land to nonfarm
on farmland
uses as property
owners
values
to sell or convert
agricultural
above the level
that agricul-
rise
tural use can justify.
It is hoped that this will encourage,
time,
of agricultural
the maintenance
equitable
taxation of farmland
“open space”
at least for a
and provide
more
owners.
Background
The Minnesota
in 1967.
2
Agricultural
The law originally
in 1968 for taxes payable
July 1, 1967.
and 1977.
Qualifying
in 1969 and for special
assessments
levied
after
in 1969,
1973,
1976,
is one of approximately
40 states
that have some
type
assessment
provisions
or more
Property
for agricultural
of livestock,
dairy products,
horticultural
and bees
C
60
S
Tax Law applies
that is “actively
use. “ Agricultural
Ex 1967
assessments
land.
Real Estate
of 10 acres
2
for property
amended
The Agricultural
grain,
effective
enacted
3
of differential
animals,
became
Tax Law was initially
The law was subsequently
Minnesota
cultural
Property
and nursery
and apiary
and exclusively
use is defined
poultry
products,
to farm real estate
as the production
and poultry
stock,
devoted
fruit,
Woodland
products,
to agrifor sale
fur bearing
vegetables,
forage,
and was teland that is
1-13.
31969 C 1039 S 1-9; 1973 C 322 S 25; 1973 C 450 S 1; 1973
1976 c 2 s 94-95; 1976 c 134 s ’78; 1977 c 423 art 3 s 4.
C
582
S
3;
3
a part of real estate
devoted
to agricultural
is under the same ownership
production
is included
if it
and management.
Eligibility
To be eligible
for use-value
assessment,
tural use must meet one of the following
Be the homestead
1.
the owner);
2.
3.
spouse,
Be farmed
together
homestead
of the owner;
corporation;
of the following
10
2.
parents,
for meeting
farming
brothers
farm
income
this income
(or the
or sisters,
or
for at least seven
listed
for at least one-third
of the applicant;
above,
one
from
agricultural
test.
themselves.
of the total
or
—
use of the property
must
acre.
the rental of real estate for agricultural
operations
the
must be met:
must account
The income
from
in a family
one of the requirements
be $300 plus $10 per tillable
Income
of
to application.
conditions
family
that includes
of the applicant
of these persons)
to meeting
Farming
or sibling
or
—
of the shareholder
spouse,
prior
In addition
the home-
.or
any combination
years
child,
with real estate
Have been in the possession
applicant’s
(or become
or
—
Be the homestead
4*
to agricul-
conditions:
of the owner
stead of the surviving
land devoted
Applicants
use is sufficient
are not required
to conduct
any
4
Valuation
of Qualifying
Farmland
For land that qualifies
the county assessor
is to determine
One valuation
is to be based
In determining
this value,
tural factors
second
of the property
poses
assessment
two different
and tax deferral,
values
for the property.
on the value of the land for agricultural
the assessor
is to disregard
that may add to the market
valuation
value.
for use-value
any nonagricul-
value of the property.
The
is the assessor’s
estimation
of the actual market
taking into account
all factors
that influence
In some
areas,
the potential
may add significantly
use of farmland
to the market
use.
value
market
for nonfarm
pur-
value of the property.
Tax Deferral
Qualified
cultural
farmland
use-value
owners
of their property.
amount of the tax actually
levied
would have been if the property
The difference
deferred.
between
The assessor
against
purposes
remains
of the agri-
is to record
the property
had been assessed
these two figures
This tax deferral
used for agricultural
gibility
are to be taxed on the basis
both the
and what the tax
at actual market
value.
is the amount of tax that is
in effect
as long as the land is
and the owner meets
the necessary
eli-
requirements.
If the property
owner otherwise
is sold or converted
becomes
taxes that were deferred
the property.
ineligible
over
This additional
for the program,
the pas t three years
tax becomes
sold even if the property
continues
There
or penalties
will be no interest
to nonfarm
use,
or if the
the amount of
is to be levied
due on real estate
to be used for agricultural
on the additional
against
that is
purposes.
tax if the additional
5
tax is paid at the time taxes for the next year are due.
estimated
market
of the property,
value of the property
the sale price
the amount of additional
market
exceeds
of the property
tax due rather
If the assessors
the bona fide sale price
is to be used to calculate
than the assessors
estimated
value.
Qualified
assessments
all special
farmland
against
of water
or sewer
assessments,
except
systems
of 10 percent
area)
or district
areas.
courts
4
to
(outside
for the provision
Deferred
use,
or if the owner otherwise
If the deferred
special
assessments
the amount of these assessments
not paid within 90 days,
applies
special
are to be paid within 90 days if the property
to nonfarm
for the program.
of special
those levied by county boards
in unincorporated
plus interest,
for deferral
This deferral
real estate.
metropolitan
is sold or converted
ineligible
are also eligible
agricultural
assessments
of the seven-county
owners
is to be added to the current
becomes
are
plus a penalty
tax list by the county auditor.
Application
Applications
for agricultural
use-value
ral are to be filed with the county assessor
assessment
by May 1 of the year prior
to the year in which the taxes will be payable.
proof
that the property
has been approved,
qualifies
qualifies
it continues
for the program.
4As authorized
by M. S. 116A.
may require
Once an application
until the property
It is not necessary
year.
Assessors
for the program.
in effect
and tax defer-
no longer
to file an application
each
6
The Minnesota
The Minnesota
value assessment
deferral
estate
of local
Open Space Property
of certain
property
used for golfing
and tax deferral.
recreational
equitable
Open Space Property
recreational
5
taxes.
Tax Law provides
establishments,
In general,
private
owners
for use-value
of the law is to encourage
maintain
taxation of the owners
for use-
and park land and a partial
or skiing are eligible
The purpose
Tax Law
open space,
of recreational
of real
assessment
private
and provide
outdoor
more
real estate.
Background
The Minnesota
Open Space Property
in 1969, 6 The law originally
in 1970 for taxes payable
The objectives
in 1973.7
of the Minnesota
Qualifying
acres
in 1971.
effective
assessments
The law was subsequently
and provisions
Agricultural
for property
Property
enacted
of the law are similar
amended
to those
Tax Law.
Real. Estate
The Open Space Property
Tax Law applies
or more
and exclusively
recreational
that is “actively
use or uses and other recreational
golf or skiing establishments.
To be eligible
ments
became
Tax Law was initially
61969
C
1135
71973
C
582
S 1.
S
3.
devoted
to golf or skiing
uses carried
out at such
“
for use -value
assessment,
must meet one of the following
5M. S. 273.112.
to real estate of five
conditions:
golf or skiing establish-
7
10
Be privately
operated
2.
Be operated
by a business
employees
or guests;
and open to the public;
Be operated
by a private
Valuation
of Qualifying
Real Estate
deferral,
the property.
estate
that qualifies
the county assessor
One valuation
residential,
is to disregard
commercial,
is the assessor’s
taking into account
for use-value
purposes.
or industrial
all factors
assessment
two different
and tax
values
for
is to be based on the value of the real
In determining
the potential
estimation
of its
club with at least 50 members.
is to determine
in its use for recreational
the assessor
firm for the benefit
or
—
3.
For real estate
.or
this value,
value of the property
The second
uses.
of the actual market
that influence
for
valuation
value of the property
market
value.
Tax Deferral
The property
to be based
assessor
on the value of the property
is to record
the property
assessed
tax paid on qualifying
to its actual market
proper ty.
The difference
as long as the property
If the property
otherwise
in recreational
use.
both the amount of the tax actually
the amount of tax that is deferred.
effect
real estate is
The
levied
and what the tax would have been if the property
according
recreational
recreational
becomes
value rather
between
ineligible
is used for qualified
for use -value
had been
than its value as
these two figures
This tax deferral
is sold or converted
against
remains
in
recreational
to nonrecreational
assessment,
is
use,
purposes.
or
the amount of
8
taxes deferred
over
This additional
property.
even if the property
If the deferred
are due,
the past seven years
tax becomes
continues
against
due on real estate
the
that is sold
to be used for recreational
purposes.
taxes are paid at the time when taxes for the next year
there will be no interest
If the assessor’s
estimated
bona fide sale price
estimated
market
on the additional
value of the property
the sale price
the amount of additional
market
tax.
exceeds
the
of the property
tax due rather
than the
value.
This law does not provide
on recreational
or penalties
of the property,
to be used to calculate
assessor’s
is to be levied
for the deferral
of special
assessments
property.
Application
Applications
and tax deferral
for use -value
of recreational
are to be filed with the county assessor
days before
January
each year.
Assessors
for the program.
assessment
2 each year.
may require
Applications
proof
property
at least 60
must be submitted
that the property
qualifies
9
APPENDIX
MINNESOTA
The following
1977,
AGRICULTURAL
PROPERTY
Minnesota Statutes 273.111
is the complete
of the Minnesota
A
Agricultural
text,
including
Property
TAX LAW
amendments
Tax (“Green
through
Acres”)
Law:
273.111
AGRICULTURAL
PROPERTY
TAX.
Subdivision 1. This
“Minnesota
Agricultural
Property
Tax Law.
section may be cited as the
Subd. 2. The present gene:ral system of ad valorem property taxation in the state of Minnesota does not provide an equitable basis for the
taxation of certain agricultural
real property and has resulted in inadequate
taxes on some lands and excessive
taxes on others.
Therefore,
it is
hereby declared to be the public policy of this state that the public interest
would best be served by equalizing tax burdens upon agricultural
property
within this state through appropriate
taxing measures.
Subd. 3. Real estate consisting of ten acres or more shall be
entitled to valuation and tax deferment under this section only if it is
actively and exclusively
devoted to agricultural
use as defined in subdivision
6 and either (1) is the homestead or thereafter becomes
the homestead of a
child, or sibling of the said owner or is real estate which
surviving spouse,
is farmed with the real estate which contains the homestead property,
or
(2) has been in possession
of the applicant, his spouse, parent, or sibling,
or any combination
thereof, for a period of at least seven years prior to
application for benefits under the provisions
of Laws 1969, Chapter 1039,
or (3) is the homestead of a shareholder
in a family farm corporation,
notwithstanding
the fact that legal, title to the real estate may be held in
“Family farm corporation”
for
the name of the family farm corporation.
the purpose of this subdivision means a corporation
founded for the pur pose of farming and owning agricultural
land, in which all of the stockholders are members
of a family related to each other within the third
degree of kindred according to the rules of civil law.
Subd. 4. The value of any :real estate described
in subdivision
3
shall upon timely application by the owner, in the manner provided in
subdivision
8, be determined solely with reference
to its appropriate
agricultural classification
and value notwithstanding
sections 272.03,
subdivision
8 and 273.11.
In determining
such value for ad valorem tax purposes the
assessor
shall not consider any added values resulting from nonagricultural
factors.
shall, however,
make a separate determination
Subd. 5. The assessor
The tax based upon the appropriate
of the market value of such real estate.
mill rate applicable
to such property in the taxing district shall be recorded
on the property assessment
records.
Subd. 6. Real property shall be cons~dered to be in agricultural
use provided that annually:
(1) at least 33 1/ 3 percent of the total family
or the total production income
income of the owner is derived therefrom,
including rental from the property is $300 plus $10 per tillable acre; and
(2) it is devoted to the production for sale of livestock,
dairy animals,
dairy products,
poultry and poultry products,
fur bearing animals, horticultural and nursery stock which is under sections 18.44 to 18.61, fruit
grains, bees and apiary products by the
of all kinds, vegetables,
forage,
and woodland contiguous to or surrounded by
owner, slough, wasteland,
land described
in subdivision
3 shall be considered
to be in agricultural
use if under the same ownership and management.
Subd.
7.
[Repealed,
1969 c 1039 s 10]
under
Subd. 8. Application
for deferment of taxes and assessment
this section shall be filed in the year 1969 by Jul,y 1 and thereafter by May 1
Any
of the year prior to the year in which said taxes became payable.
application filed hereunder and granted shall continue in effect for subse quent years until the proper t-y no longer qualifies.
Such application shall
be filed with the assessor
of the taxing district in which the real property is
located on such form as may be prescribed
by the commissioner
of revenue.
The assessor
may require proof by affidavit or otherwise that the property
qualifies under subdivisions
3 and 6.
Subd. 8a. Notwithstanding
the provisions
contained in this subdivision,
applications
for agricultural
tax assessment
and deferment with respect to
the assessment
of January 2, 1968, may be made prior to July 1, 1969, and
payment of any taxes otherwise due on May 31, 1969, shall be deferred without penalty until 30 days after notice or rejection of application or after
notice of taxes as determined under the new assessment
made in accordance
with subdivision
4. Any reduction in taxes resulting from the application of
this section shall be processed
in accordance
with section 270.07.
Notwithstanding the time limits contained in section 278.01 and section 271.06,
subdivision
1, as the case may be, an appeal may be taken to the district
court or the tax court of appeals within 30 days of any order denying applications filed as provided in this subdivision for reduction in the January 2,
1968 valuations or assessments
or of any valuations or assessments
made
after June 7, 1969.
Subd. 9. When real property which is being, or has been valued and
assessed
under this section is sold or no longer qualifies under subdivisions
3 and 6, the portion sold shall be subject to ~dditionai taxes, in the amount
equal to the difference between the taxes determined in accordance
with
subdivision
4, and the amount determined under subdivision
5, provided,
however,
that the amount determined under subdivision
5 shall not be
greater than it would have been had the actual bona fide sale price of the
real property at an arms length transaction been used in lieu of the market
value determined under su.bdj.vision 5. Such additional taxes shall be extended against the property on the tax list for the current year, provided,
however,
that no interest or penalties shall be levied on such additional
taxes if timely paid, and provided further,
that such additional taxes shall
only be levied with respect to the last three years that the said property
has been valued and assessed
under this section.
11
Subd. 10. The tax imposed by this section shall be a lien upon
the property assessed
to the same extent and for the same duration as
other taxes imposed upon property within this state.
The tax shall be
annually extended by the county auditor and if and when payable shall be
collected
and distributed in the manner provided by law for the collection
and distribution
of other property taxes.
levied after
Subd. 11. The payment of special local assessments
the date of Extra Session Laws 1967, Chapter 60, for improvements
made
to any real property described
in subdivision
3 together with the interest
thereon shall, on timely application as provided in subdivision
8, be
deferred as long as such property meets the conditions contained in subdivisions 3 and 6. When such property is sold or no longer qualifies under
subdivisions
3 and 6, all deferred special assessments
plus interest shall
Penalty shall not be levied on any such special
be payable within 90 days.
assessments
if timely paid. If not paid within such 90 days, the county
auditor shall include such deferred special assessments
plus a 10 percent
penalty on the tax list for the current year.
Subd. 12. This section shall be broadly construed to achieve its
purpose.
The invalidity of any provision shall be deemed not to affect
the validity of other provisions.
Subd. 13. This section
made in 1968 and thereafter.
shall apply to assessments
for tax purposes
Subd. 14. This section shall apply to special local assessments
levied after July 1, 1967, and payable in the years thereafter,
but shall
not apply to any special assessments
levied at any time by a county or
district court under the provisions
of chapter 116A.
[Ex1967 C 60 S 1-13; 1969 C 1039 S 1-9; 1973 C 322 S 25; 1973 C
450 S 1; 1973 C 582 S 3; 1976 C 2 S 94,95; 1976 C 134 S 78; 1977 C 423
art 3 s 4]
12
APPENDIX
MINNESOTA
‘The following
1977,
OPEN SPACE PROPERTY
Minnesota Statutes 273.112
is the cornple te text,
of the Minnesota
B
including
Open Space Property
TAX LAW
amendments
through
Tax Law.
273.112
PRIVATE OUTDOOR RECREATIONAL,
OPEN SPACE
AND PARK LAND TAX.
Subdivision 1. This section may be cited as
the “Minnesota Open Space .Property Tax Law. “
Subd. 2. The present general system of ad valorem property
taxation in the state of Minnesota does not provide an equitable basis
for the taxation of certain private outdoor recreational,
open space and
park land property and has resulted in excessive
taxes on some of these
lands.
Therefore,
it is hereby declared that the public policy of this
state would be best served by equalizing tax burdens upon private outdoor, recreational,
open space and park land within this state through
appropriate
taxing measures
to encourage private development of these
lands which would otherwise have to be provided by governmental
authority.
Subd. 3. Real estate shall be entitled to valuation and tax deferment under this section only if it is:
(a) actively and exclusively
devoted to golf or skiing recreational
use or uses and other recreational
uses carried on at such golf or skiing
establishment;
(b) five acres in size or more; and
(c)
(1) operated
by private individuals and open to the public; or
(2) operated by firms or corporations
for the benefit of employees
or guests; or
(3) operated by private clubs having a membership
of 50 or more.
Subd. 4. The value of any real estate described
in subdivision
3
shall upon timely application by the owner, in the manner provided in
subdivision
6, be determined
solely with reference
to its appropriate
private outdoor, recreational,
open space and park land classification
and value notwithstanding
Minnesota Statutes 1967, Sections 272.03,
Subdivision 8, and 273.11.
In determining such value for ad valorem
tax purposes the assessor
shall not consider the value such real estate
would have if it were converted to commercial,
industrial,
residential
or seasonal residential
use.
Subd. 5. The assessor
shall, however,
make a separate determination of the market value of such real estate.
The tax based upon the
appropriate
mill rate applicable
to such property in the taxing district
13
shall be recorded
on the property
assessment
records.
Subd. 6. Application for deferment of taxes and assessment
under
this section shall be made at least 60 days prior to January 2 of each
Such application shall be filed with the assessor
of the taxing dis year.
trict in which the real property is located on such form as may be pre The assessor
may require
scribed by the commissioner
of revenue.
proof by affidavit or otherwise
that the property qualifies under subdivisicm
Subd. 7. When real property which is being, or has been, valued
and assessed
under this section is sold or no longer qualifies under subdivision 3, the portion sold or the portion which no longer qualifies under
subdivision
3 shall be subject to additional taxes, in the amount equal to
the difference between the taxes determined in accordance
with subdivision
4, and the amount determined under subdivision
5, provided,
however,
that the amount determined under subdivision
5 shall not be greater than
it would have been had the actual bona fide sale price of the real property
at an arms length transaction been used in lieu of the market value determined under subdivision
5. Such additional taxes shall be extended
against the proper ty on the tax list for the current year, provided,
however,
that no interest or penalties shall be levied on such additional
taxes if timely paid, and provided further,
that such additional taxes shall
only be levied with respect to the last seven years that the said property
has been valued and assessed
under this section.
Subd. 8. The tax imposed by this section shall be a lien upon the
property assessed
to the same extent and for the same duration as other
taxes imposed upon property within this state.
The tax shall be annually
extended by the county auditor and shall be collected and distributed in
the manner provided by law for the collection
and distribution of other
property taxes.
Subd. 9. This section shall apply to assessments
made beginning in 1970 used to determine taxes payable
[1969 C 1135 S 1; 1973 C 582 S 3]
for tax purposes
in 1971.
3,
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