At the close of the Minnesota legislative special session, the balanced budget approved included cuts to a variety of programs.While many of those cuts were very prominent, others flew below the radar.
One of those not so visible cuts is to a program known as the residential homestead market credit.
As part of funding the $5 billion balance, state funding for the program was repealed saving the state in excess of $500 million over the biennium.While the state is no longer paying its share of the tax under the market tax credit, it did not fully repeal the homeowners tax break.What it did was create a new program called the market value exclusion.
What that program does in essence is keep the tax break in place for many residential properties. It just shifts who is paying for it.According to Kathy Hillmer, Redwood County assessor, the program as it exists today allowed cities, counties and school districts to collect those funds from the state, but under the new exclusion rule those dollars are not going to be collected and if those entities want to maintain that level of funding they are going to have to raise taxes on other property classifications.The exclusion law closely mirrors the calculations used for the homestead market value credit. That credit was based on 40 percent of the estimated market value for a home of $76,000, and homes over that estimated market value experience a lessened rate of percentage.In the past the difference between the estimated market value and the homestead market value credit was what is known as the next tax capacity.On a tax statement for 2012, the new law not only includes the estimated market value but also that amount of the exclusion that helps to determine the net tax capacity and therefore the taxable market value for tax purposes.In other words, with the exception of an “exclusions” line on the tax statement those whose property wasunder the residential homestead market value credit through 2011 really are not going to see a change in how the tax statement reads.However, those whose properties do not fall under that classification are likely going to make up the difference and likely are going to see a higher tax amount to be paid in 2012.In other words, even though the county approved a preliminary tax levy for 2012 that is the same as it has been in 2011 those with commercial property and other non-residential properties are still likely to see a tax increase.Some argue the local units of government do not have to raise the taxes, but under that concept the county would have to decrease its levy below zero for it to balance.While the residential homestead market value credit was repealed, Hillmer said the existing agricultural homestead market value credit is not changing. That credit is going to be reimbursed by the state.Hillmer said those properties deemed a homestead with more than 10 tillable acres as part of the property qualify for the ag homestead classification.She added, however, some under the 10-acre rule which are using property for a substantive ag pursuit may also qualify.The residential homestead market value credit amount the county qualified to receive in 2011 from the state was $524,000 with that amount now being made up by the county property owners. Property owners can expect their 2012 property tax statements in late November.A move has already been made to repeal the law during the 2012 legislative session, but for now the rule ap-proved by the legislature and signed by the governor is in effect.

 http://www.house.leg.state.mn.us/hrd/issinfo/hmvexclusion.pdf

Jen Forliti ~ Realtor
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