Background
During the 2001 legislative session, Minnesota enacted
a state property levy. The tax is only on certain properties
and is part of a new property tax reform law. Revenue from
the new tax will be deposited in the state general fund
with some of the money earmarked specifically for education
funding.
What properties are affected?
There are three types of
property that must pay the state general tax:
- Class 3 – commercial, industrial,
and public utility.
- Class 4c(1) – seasonal recreational
property, including cabins.
- Class 5(1) – unmined iron ore property.
How much is the tax
The tax for noncommercial cabins are calculated a little
differently than taxes on other affected properties.
The first $76,000 in market value
of a cabin will be taxed at 0.40%, while the tax rate for
cabins with
a market value
of $76,000-$500,000 will be 1.00%. The tax rate for
cabins with a market value of over $500,000 is 1.25%.
For
example, if you have a cabin valued at $100,000 the first
$76,000 of market value would be subject
to a tax
rate of 0.40%, while the remaining $24,000 market
value would be taxed at 1.00%.
The Minnesota Department of Revenue will calculate the
tax rate annually. The rate is determined by the relative
amount of statewide commercial/industrial, public utility,
seasonal recreational, and unmined iron ore property value
in relation to the expenditure needs have been established.
For the year 2002, $592 million needed to be raised from
the state tax. Under law each subsequent year’s amount
will be increased from the previous year’s amount
by using the inflation index.
What is the tax used for?
The money raised will not go directly to local governments
even though it will be collected with other property
taxes. Instead, money raised by the tax will be deposited
in the state general fund. Beginning in 2004, the money
raised beyond the 2003 tax amount will be deposited
in education reserve account. The state legislature will
decide specifically how this money will be spent.
