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The legislative property tax working group presented their report to the House tax committee on Wednesday.
(Published Feb 7, 2013)
On Wednesday evening, the House Property and Local Tax Division received the report by the legislative Property Tax Working Group. The Working Group was established by the 2010 legislature to review the state’s property tax and make recommendations on ways to streamline and simplify the system. The report was presented by Dakota County Commissioner Kathleen Gaylord.
According to Gaylord, the Property Tax Working Group examined Minnesota’s property tax system with the goal of developing recommendations on how to make the system more simple, understandable, transparent, accountable, and efficient.
The Working group membership included four legislators as well as citizen members, agriculture and business representatives and appointees of local units of government. Luayn Murphy, City Administrator of the City of Mayer was the appointee of the League of Minnesota Cities.
Many of the recommendations of the Working Group relate to technical property tax assessment and administration issues and involve aspects of the property tax system. Below is a brief summary of the recommendations of the Property Tax Working Group.
1. Reduce the number of classifications: Consolidate the number of classifications from 55 to four (residential, agricultural, commercial, other). Do not target benefits to specific properties through micro classification.
2. Homestead benefits – Expand the Property Tax Refund (PTR) program: Expand the Property Tax Refund program as the primary method of homestead benefit. Standardize the definition of a homestead for both residential and agricultural properties.
3. Avoid or eliminate tiers and parcel-linkage: Eliminate value tiers to avoid needing to chain parcels based on ownership, thereby reducing confusion, complexity, and administrative costs.
4. Revamp the agricultural homestead classification process: Enact Recommendations 1-3 (condense classifications, standardize the homestead definition, eliminate tiers/parcel linkage) to greatly simplify the agricultural homestead process.
5. Establish an agreed upon relationship (“ratio”) between classification rates: Do not use classification rates to provide benefits to narrow groups. Establish and maintain consistent ratios; recognize that ratio changes shift burdens to other properties.
6. Consolidate reporting, application, and effective dates: Consolidate the property tax calendar around a few key dates to increase understandability, predictability, and compliance.
7. Base assessments on the most current economic conditions: Support recent sales analysis efforts that make the system more responsive. Encourage the transition to eCRV. Use a larger geographic area for sales comparisons.
8. Make improvements to the Truth in Taxation (TNT) process: Show basic budget information or provide links on TNT notices and direct the public to websites with more detailed information. Modernize the process and engage taxpayers electronically.
9. Make improvements to notices and statements: Give notices consistent branding and distribute electronically. Include websites and email contacts. Improve timing and coordination. Show estimated and taxable market values. Note: LMC policy is silent on specific notice and statement changes.
10. Investigate and plan for an eventual statewide computer system: Explore the creation of a centralized tax system to support local administration of the tax, save total state and local costs, and improve accountability.
11. Convert the tax capacity system to an assessed value system: Use assessed values and mill rates to make Minnesota’s property tax system more understandable, transparent, and competitive across the nation.
12. Eliminate the use of property taxes for state funding: Eliminate the state tax to restore property taxes as a local tax and reduce complexity. If not eliminated, designate revenues directly for local governments, not the general fund.
13. Avoid limits, caps, and freezes: Do not impose limits, caps, or freezes on values, tax amounts or levies. This undermines budgeting and causes inequities. Let local governments be accountable to local voters.
14. Exclusions: The state should not use exclusions to avoid paying for benefits it thinks are important, nor for short-term or one-time benefits. If used, tie exclusions to properties, not owners.
15. Credits: Eliminate/phase out power line credit and agricultural homestead credit. Keep disaster and disparity reduction credits.
16. Exemptions: Be selective--exemptions must accomplish public purposes, not serve special interests. Impose automatic review/sunset dates to improve accountability and verify success. See full report for recommendations on specific exemptions.
17. Aids: Allow Utility Valuation Transition Aid to naturally phase out.
18. Special Valuations and Deferrals: These programs increase complexity and decrease efficiency, transparency, and account-ability. Impose sunset dates on all current/future programs to prompt review.
19. Refunds: Expand the homeowner Property Tax Refund (PTR) program. Keep special targeting PTR as a tool to ease impacts of other reforms.
The full report can be found here.
Questions? Contact Gary Carlson at (651) 281-1255 or firstname.lastname@example.org.
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