SF4999

Purpose

• The bill changes how land is taxed in Minnesota by adjusting classification rules for agricultural land and by clarifying what counts as market farming. It adds new land categories (airports and aggregate deposits) and expands or refines existing definitions to determine tax rates more precisely. The goal is to better reflect how land is actually used for farming, forestry, transportation, or resource extraction while updating the rules assessors use to value land for property tax.

Main Provisions

• Class 2a agricultural land (homesteads and nearby land)

  • An agricultural homestead includes class 2a land plus any contiguous class 2b rural vacant land owned together. The house and the immediately surrounding one acre are taxed like class 1a/1b property.
  • The rest of the land up to the first tier valuation limit is taxed at 0.5% of market value; land beyond the first tier is taxed at 1%.
  • If part of a parcel is used for agricultural purposes, the assessor can classify that portion as class 2a and the rest as appropriate to its use.

• Class 2b rural vacant land

  • Parcels of land that are rural, unplatted, not used for agricultural purposes, and not improved with a structure (except minor ancillary nonresidential structures) are class 2b at 1% of market value.
  • For large parcels (20 acres or more) with a structure, special split-classification rules apply (at least ten acres are treated with the structure; further rules apply if enrolled in certain forest programs).

• Class 2c managed forest land

  • Requires 20 to 1,920 acres per taxpayer, managed under a forest plan (chapter 290C) but not enrolled in the Sustainable Forest Incentive Program (SFMP).
  • Tax rate is 0.65% of market value.
  • Property owners must apply to qualify, with deadlines (an application by May 1 qualifies the current year; after May 1, it would take effect the next year). The Minnesota Department of Natural Resources (DNR) must concur, and assessors receive annual verification information.

• Class 2d airport landing area

  • Consists of a landing area or public access area of a privately owned public-use airport, taxed at 1%.
  • Qualifications include licensed public airport status and specific definitions of landing areas and public access areas.

• Class 2e commercial aggregate deposit

  • Applies to land of at least 10 contiguous acres not actively being mined and not in counties that opt out of the aggregate preservation program.
  • Tax rate is 1%.
  • Owners must file an affidavit describing the property, including legal description, presence of a commercial aggregate deposit, and evidence of local permits and a conditional-use approval.
  • The affidavit must include a statement from a registered professional (geologist/engineer/soil scientist) describing the deposit.
  • If mining begins on any portion of the property, the owner must file a supplemental affidavit within 60 days, the affected acres must be revalued and reclassified in the next assessment year, and those acres may be removed from the aggregate preservation program.

• Expanded definitions and uses of agricultural land (new and clarified use rules)

  • The bill broadens what can be considered agricultural land, including smaller parcels in certain circumstances and specific farm activities, such as intensive grain drying/storage, nursery operations, and market farming.
  • Market farming is defined as growing fruits/vegetables or producing livestock/poultry for sale through direct or indirect channels (farmers markets, on-farm sales, CSAs, wholesale, retail, or online sales).
  • Agricultural use can include land enrolled in local, state, or federal conservation programs (e.g., CRP) and certain environmental or buffer projects.
  • Enrollment in conservation programs must be verified via required documentation and may be a factor for classification, but income or revenue from agricultural activity should not drive the classification decision.
  • Agricultural land can be classified as agricultural even if it is leased to others.
  • The classification rules trump local land-use policies that set minimum or maximum farm acreage in determining eligibility.

• Specific small-parcel provisions for agricultural classification

  • Some parcels smaller than 10 acres (or under certain thresholds like 11 or 15 acres) may qualify for agricultural classification if they meet particular use criteria, such as intensive farming activities or market farming, and, in some cases, specific income documentation (e.g., Schedule F form showing gross income thresholds).
  • For parcels with residences, certain criteria allow continued agricultural classification when the land is used for particular agricultural purposes or to support other agricultural parcels operated by the same farming entity.
  • The definition of agricultural products includes a wide list (livestock, dairy, bees, fiddle products, aquaculture, maple syrup, and other farm products) and can include nonprofit equestrian activities or game birds/waterfowl under licensed operations if associated with agricultural activity.

• Other notes on use and administration

  • Land used for agricultural purposes may be classified as agricultural even if part of the land is used for commercial/industrial activities (with the agricultural portion classified accordingly).
  • The agricultural classification is not solely based on the market value of residential structures on the parcel.
  • The agricultural classification can supersede some locally administered agricultural policies when determining minimum or maximum farm acreage.

Notable Changes to Existing Law

• Creates new tax classifications (2d and 2e) for airports and aggregate deposits, each with its own rate (1%).
• Reconfigures and expands class 2a, 2b, and 2c definitions and the allocation of land within a parcel to different classifications based on actual use and ownership patterns.
• Introduces a first-tier valuation structure for 2a agricultural land linked to agricultural homestead rules.
• Tightens and clarifies the process and timing for forest land (2c) enrollment, including May 1 application deadlines and DNR concurrence requirements.
• Establishes detailed affidavit and reporting requirements for aggregate deposits (2e), including ongoing reporting if mining occurs and removal from certain programs.
• Expands what qualifies as agricultural land (including smaller parcels and various farming activities) and clarifies that income levels do not determine eligibility for classification.
• Provides explicit definitions and conditions around local conservation programs and CRP enrollment as part of agricultural use considerations.

Administration, Implementation, and Timing

• Applications for 2c (managed forest land) must be submitted by May 1 to qualify in the current year; late applications shift eligibility to the next year.
• DNR must concur with the forest land qualification and provide timely verification to assessors.
• For 2e (aggregate deposits), owners must file initial and supplemental affidavits with multiple agencies within specified timeframes if mining activities begin or expand.
• Several provisions reference existing statutes (e.g., SFMP, CRP) and require compliance with local zoning and state program standards.

Potential Impacts

• Landowners with agricultural operations may see changes in how their land is classified and taxed, especially for parcels associated with homesteads or mixed-use parcels.
• The creation of new 2d and 2e categories may shift tax burden for some properties (airports and mineral deposits).
• Expanded definitions of agricultural use could broaden eligibility for agricultural classification on smaller parcels or for diverse farming activities, potentially lowering tax bills for more land under agricultural use.
• The changes emphasize verification and documentation (applications, affidavits, schedules), which may increase administrative workload for assessors, DNR, and landowners.

Examples (illustrative)

• A homestead with a 2a land parcel could have the house and 1-acre area taxed at class 1 rates, with the remainder of the land taxed at 0.5% up to the first tier and 1% beyond that tier.
• A 25-acre parcel with a suitable structure and no active mining could be classified partly as rural vacant land (2b) and partly as agricultural land (2a) depending on use and ownership.
• A forest land owner with 400 acres could seek 0.65% tax rate if they qualify under the 2c program by filing by May 1 and obtaining DNR concurrence.
• A privately owned public-use airport meeting the licensing requirements could be taxed at 1% for its landing area (2d).
• A 12-acre parcel containing a mineral deposit not actively mined and meeting affidavit requirements could be taxed at 1% under 2e, with ongoing reporting if mining begins.

Relevant Terms - Class 2a agricultural land - Class 2b rural vacant land - Class 2c managed forest land - Class 2d airport landing area - Class 2e commercial aggregate deposit - Agricultural homestead - Market farming - First tier valuation - Agricultural use - Agricultural products - Sustainable Forest Management Incentive Program (SFMP) - Conservation Reserve Program (CRP) - Local conservation program - Enrollment (in conservation programs) - Schedule F Form 1040 - Affidavit of deposit (aggregate aggregate deposit) - Actively mined (aggregate deposits) - Dimensional rates (0.5%, 1%, 0.65%) - DNR concurrence - Assessor classification and partnering with zoning rules