the assessment of agricultural land and rural … assessment of agricultural land and rural vacant...
TRANSCRIPT
The Assessment ofAgricultural Land and
Rural Vacant Land
Property Tax Working Group
March 11, 2011
What is Ag Land?
Minnesota Statutes 273.13, subd. 23
o Class 2a property (agricultural land) consists of parcels (or portions) that are agricultural land and buildings…
o Agricultural land is a contiguous acreage of 10 acres or more used during the preceding year for agricultural purposes…
o Agricultural purposes means the raising, cultivation, drying, or storage of agricultural products for sale…
o Agricultural products are defined by statute
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What is Rural Vacant Land?
Minnesota Statutes 273.13, subd. 23
o Class 2b rural vacant land consists of parcels of property (or portions) that are:
o Unplatted real estate
o Rural in character
o Not used for agricultural purposes
o Not improved with a structure (unless it is minor, ancillary, and non-residential)
o Parcels of 20 acres or more of rural vacant land with a non-minor structure get “split classified”
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How Do Ag Land and Rural Vacant Land Interact?
Minnesota Statutes 273.13, subd. 23
o Class 2a agricultural land is eligible for agricultural homestead treatment
o Class 2b rural vacant land that is contiguous to and under the same ownership as class 2a land is also eligible
o Class 2a and 2b lands that are part of a homestead are treated the same for tax purposes
o Class 2a and 2b lands that are not part of a homestead are treated the same for tax purposes
o “Impractical to separate” provisions
o Allows for certain nonfarmed land to be labeled as class 2a land
o Accounts for inherent land characteristics and general farming practices
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Parcel 1
6 ac
9ac
3 ac
9ac
Parcel 1
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85 Acres:
61 tilled
17.9 non-till
4.5 floodplain
0.4 wetland
1.2 road
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160 Acres:
143.5 tilled
11.5 woods/waste
1 road
4 building site
There Are Always Wrinkles…
Intensive or exclusive agricultural uses on parcels less than 10 acres may qualify as class 2a land
Split Classification when there is more than one use on a property
Non-contiguous parcels may still qualify as class 2a land (and be linked to ag homestead) under certain circumstances
Special Agricultural Homesteads
Farming Entities Excess 1st Tier class rate extension
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Why Do 2a and 2b Matter?
A property must have enough class 2a ag land before it can become eligible for ag homestead
o Ag homestead entitles the property to lower class rate of 0.50% on first $1,210,000 (AY 2011) and additional credit
o Ag homestead is a requirement for special programs
o Different treatment for tax delinquency
o Ag homestead changes what amount of land is used for the “homesite”
o Different tax payment due dates
o The agricultural classification is tied to having enough class 2a land rather than just having enough land
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Why Do 2a and 2b Matter?
Ag homestead property vs Res homestead property
o Ag homestead homesite = House, Garage, 1 acre (HGA)
o Res homestead homesite = HG and no limit on acres*
o Two houses on an agricultural property
o If a house on an agricultural property becomes non-
homestead, its homesite is treated differently
o Property Tax Refund calculations
* = only acres used residentially; 20 acre 2b split class requirement, etc.
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5.48 acresIncludes a residence
119.7 acres (extends beyond image)
Includes a residence
5.48 acresResidential Class
1.00 acre“Residential Class”
118.7 acresAgricultural Class orRural Vacant Land
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10.00 acresIncludes a residence
36.52 acresIncludes a residence
10.00 acresResidential Class
1.00 acre“Residential Class”
35.52 acresAgricultural Class
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33.90 acresIncludes a residenceAll excess land is 2b
10.00 acres“Residential Class”
23.90 acresRural Vacant Land Class
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80.00 acres(extends beyond image)
Includes 2 residences
8.27 acresIncludes a residence
8.27 acresResidential Class
2 - 1.00 acre“Residential Class”
78.00 acresAgricultural Class
Special Agricultural Homesteads
Homestead Property - refresher
o Ownership
o Occupancy
o Minnesota Residency
o Relative homesteads
o Qualifying RES relatives: parents, stepparents, children, …nephews, or nieces; (by blood or marriage) – owner need not be a MN resident
o Qualifying AG relatives: siblings, parents, children, or grandchildren of owner or siblings, children, or grandchildren of owner’s spouse;
o owner cannot homestead any other property and there can only be one ag homestead per family;
o owner and relative must be MN residents
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Special Agricultural Homesteads
Special Ag Homestead Property –
o A WHOLE NEW BALLGAME
o Ask three questions:
o Who owns the property?
o Who lives on the property?
o Who farms the property?
o Questions seem simple – the difficulty is in the details…
o Many special exceptions
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Special Agricultural Homesteads
Ag Homestead Flow Chart – 2009
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Special Agricultural Homesteads
Special Ag Homestead History
o 1997: in response to Red River Valley flooding(six counties in Northwest MN)
o Expanded ever since (now statewide)
o General Rules
o Live within four cities, townships, or combo thereof
o Owner (or qualifying person or relative) must actively farm the land (or be actively engaged in the farming)
o Some sort of MN resident (depends on situation)
o No other ag homestead in MN (depends on situation)
o Farm at least 40 acres (or correctional 40’s)
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Special Agricultural Homesteads
Terms and Policieso Actively engaged in farming
o Actively farming
o Authorized entities
o Grantor
o Owner
Guidelines and Policies
o Linking property – same ownership (with some exceptions)
o Non-contiguous land – ag class; four cities/townships
o “50% Rule” – applies when no one lives on the property
o Over 50% of the farmable land must be actively farmed by person receiving homestead
o Initial Application (12 options), and annual reapplication
o Mid-year potential, FSA reporting, income documentation, based on current crop year
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o Qualifying Person(of an entity)
o Qualifying Relative (for homestead)
o Trust / Trustee
Special Agricultural Homesteads
Ag Homestead Flow Chart – 2009
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1 2 3 4 5 6 7 8 9 10
Special Agricultural Homesteads
Complexities in administering special ag homesteadso Fee ownership change of 2a acreage – assessors need to
receive deeds
o Natural person –
∘ Do they have an agricultural homestead?
∘ Do they have a residential homestead?
o Assessor contacts owner regarding special ag homestead
o Is the property physically occupied?
o If yes, by whom (actively engaged)
o If no, who will be farming (actively farming)
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Special Agricultural Homesteads
Complexities in administering special ag homesteads
o Entity -
∘ Assessor needs to contact principals of the entity
o Assessor contacts owner regarding special ag homestead
o Is the property physically occupied?
o If yes, by whom (actively engaged)
o If no, who will be farming (actively farming)
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Special Agricultural Homesteads
Complexities in administering special ag homesteads
o Trust -
∘ Assessor needs to contact Grantor of the trust
o Assessor contacts owner regarding special ag homestead
o Is the property physically occupied?
o If yes, by whom (actively engaged)
o If no, who will be farming (actively farming)
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Special Agricultural Homesteads
Complexities in administering special ag homesteads
o Once ownership and use is established by assessor, the required application is provided to the property owner for completion. Upon receipt of application assessor must verify all required documentation is included.
o 12 different special ag homestead applications
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Where do we go from here?
Questions for consideration by the Group
o If a house is a house, is a homesite a homesite?
o Should all sites be 1 acre? 10 acres? X acres?
o What are the impacts of making a change?
o Homesteads
o What makes property homestead?
o Different homesteads (agricultural, residential, and special agricultural)
o Linking, ownership, and other considerations
o The cost vs. benefit of Special Ag homesteads) – is there a simpler way?
Questions?
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