Property Tax Relief

State Aids to Local Governments

Since 1972, state aids to local governments have been a critical lifeline for local units of government to provide important services without having to rely solely on property tax payers to support local budgets. During the decade of budget deficits facing Minnesota, state aids suffered dramatic cuts and property taxes skyrocketed.

The legislature has spent the last two years rebuilding this important state-local partnership, investing more than $140 million into state aids and $110 million more into direct property tax relief to taxpayers. The tax committees have considered a variety of bills that would further increase these totals. The governor’s budget does not contain any straight aid increases, instead providing significant local government tax relief through his transportation plan. Specific proposals heard this session include:

  • Increasing Local Government Aid (LGA) payments by $45.6 million and returning the total LGA appropriation to 2002 levels, before the decade of massive budget cuts (and property tax increases) began. (F. 874)
  • Providing more stability to local budgets by modifying the County Program Aid formula to better recognize land value fluctuations and limiting how much aid can decrease from year to year. (F. 1640)
  • Allowing counties to receive Township Aid on behalf of any unorganized territories within the county borders. (F. 944)

STATUS: The bills were laid over for possible inclusion in the omnibus bill.

Property Tax Refunds

In addition to the income-based property tax refunds offered to homeowners and renters, Minnesota also offers a Targeting Property Tax Refund based on the increase in property taxes from one year to the next. Unlike the other property tax refunds, this targeted refund is not subject to income limits but is available to homeowners whose property taxes have increased at least 12% or $100 in one year. A bill was heard in the Tax Committee to change the threshold to a 10% increase in property taxes. Another bill would create a similar program for farmers, helping those Minnesotans who have been dealing with rapidly increasing property taxes on agricultural land..

STATUS: The bills were laid over for possible inclusion in the omnibus bill. (S.F. 129/S.F. 921)

Scholarship and Fellowship Grants

Scholarships and fellowship grants are currently two of several nontaxable items that must be added back into household income in order to determine Minnesota property tax refund eligibility. A Tax Committee proposal would remove that requirement and reduce the reported household income for filers with scholarships or fellowship grant income. This would expand the number of people who qualify and could increase the amount of refunds for which they qualify.

STATUS: The bill was laid over for possible inclusion in the omnibus bill. (S.F. 226)

Agricultural Land

Property values – and, as a result, property taxes – on agricultural land have been increasing rapidly. Tax Committee conversations this session have focused on levy burdens, property tax relief, and estate tax changes. Specific proposals include:

  • Treating construction bond levies the same as operating levies and only taxing the house, garage, and one acre of land. (F. 576)
  • Increasing the small business and farm property estate tax subtraction in order to make it easier to pass on the family farm or business. (F. 554)
  • Creating a new tax credit for agricultural land whose taxable market value increases more than 10% and more than $1,000 over the previous year. (F. 921)

STATUS: The bills were laid over for possible inclusion in the omnibus bill.   

This Old House and This Old Shop

A proposal to resurrect and add to a property tax exclusion first enacted in 1993 – commonly referred to as “This Old House” – would allow certain improvements to be fully or partially excluded from a home or commercial property’s value for assessment purposes. The credits were originally created as an incentive for owners of older homes to renovate them and preserve or revitalize older neighborhoods. The exclusions would exist for 10 years or until the property is sold.

STATUS: The bills were laid over for possible inclusion in the omnibus bill. (S.F. 208/S.F. 319)

NEXT IN TAXES: Governor’s Budget Proposal

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