SF5139

Purpose

This bill amends Minnesota property tax law to change how agricultural land and related property are classified for tax purposes. A key aim is to expand agricultural classifications to include farm wineries, and to clarify how different kinds of land connected to farming are valued and taxed.

Main Provisions

• Expansion to farm wineries

  • Adds farm wineries (licensed under section 340A.315) to the types of agricultural land that can be classified under the agricultural categories. This means land used for producing wine on a farm could qualify for lower tax rates available to agricultural land.

• Subdivision 23: Class 2a and related classes

  • Class 2a (agricultural land tied to homesteads) and Class 2a land that is part of an agricultural homestead can receive preferential rates for the land beyond the house and the surrounding one acre.
  • The first tier (up to a valuation limit) for the homestead portion uses rates similar to Class 1a/1b; the land beyond the first tier in the agricultural homestead area is taxed at 0.5% for the first tier and 1% for land above that tier.
  • Class 2a also includes land that is agricultural but interspersed with land that would otherwise be Class 2b, where separate valuation would be impractical or not feasible, allowing the assessor to classify portions accordingly.

• Class 2b: Rural vacant land

  • Class 2b covers rural vacant land not used for agricultural purposes and not platted as development land.
  • It remains generally taxed at 1% of market value, unless it qualifies for other classifications (like 2a or 2c through specific conditions).
  • Certain 20-acre parcels with structures must be split-classified, with 10 acres assigned to the parcel containing the structure. If 20+ acres are enrolled in certain forest programs, the split parcel rules adjust how many acres with structures are counted.

• Class 2c: Managed forest land

  • Managed forest land (2c) must be between 20 and 20 acres statewide per taxpayer and be managed under a forest management plan (per chapter 290C) and not enrolled in the sustainable forest incentive program.
  • It carries a reduced classification rate of 0.65% if the owner applies to the assessor with the required information and the land qualifies. The timing of the application matters (before May 1 qualifies in the current year; after April 30, next year). The Minnesota Department of Natural Resources must concur and provide verification annually.

• Class 2d: Airport landing area

  • Class 2d applies to the landing area of privately owned public-use airports that are licensed as public airports and are not used for residential or commercial purposes.

• Class 2e: Commercial aggregate deposits

  • Class 2e covers land with a commercial aggregate deposit that is not actively mined, with a minimum size of 10 contiguous acres.
  • Requires an affidavit describing the deposit, mapping, and validation by a professional geologist/engineer.
  • If any portion becomes actively mined, that acreage is re-valued and may be removed from a special aggregate preservation program if applicable. Supplemental affidavits must be filed after each active mining event (with minimum acreage changes specified).

• Agricultural land definitions and scope

  • Agricultural land is defined as contiguous acreage of at least 10 acres used for agricultural purposes, or for intensive livestock/poultry confinement, with certain exclusions (land used only for pasturing/grazing does not qualify under some provisions).
  • Agricultural purposes include growing, cultivation, drying, or storage of agricultural products for sale, and storage of equipment used for agricultural production by the same farm entity.
  • The bill enumerates a long list of eligible agricultural products and activities (livestock and dairy, horticultural and nursery stock, floriculture, fruits/vegetables, grains, bees, aquaculture, commercially boarding horses, game birds, raising insects for animal feed, trees grown for sale, maple syrup, and wine produced on a farm winery).
  • The inclusion of wine production on a farm winery is specifically noted as qualifying agricultural activity.
  • The definition also includes enrollment in local conservation programs or the Reinvest in Minnesota program, or the federal Conservation Reserve Program, as qualifying agricultural use if the land previously qualified as agricultural land.

• Interaction with other uses

  • If a parcel is used for agricultural purposes but also used for commercial or industrial activities (like processing, storage, or office use), the assessor must classify the portion used for agriculture with the appropriate class (1b, 2a, or 2b) and classify the remainder by its use.
  • Property classifications should not be based on the market value of residential structures on the parcel, and the agricultural classification supersedes local agricultural policies or land-use restrictions in determining tax status.

• Additional clarifications and rules

  • The term “agricultural products” includes a wide range of products and purposes, including specific allowances for certain nursery operations, equestrian activities, and certain forest-related products.
  • Greenhouses used primarily for growing agricultural products (not merely for showroom display) can be classified as agricultural; display-only use does not qualify.
  • The bill sets separate record-keeping requirements for homestead land and farm buildings on homesteaded acres, excluding the value of farm buildings from the separate homestead land value determination.

• Exemption and rulemaking note

  • The definitions for certain provisions are exempt from standard rulemaking, meaning they are not treated as formal rules under chapter 14.

Implementation & Timing (Key Administrative Details)

• Applications and approvals

  • For 2c (managed forest land), the applicant must apply with the required information before May 1 in the assessment year to qualify in that year; later filings qualify in the next year, and the Department of Natural Resources must concur.
  • For aggregate deposits (2e), affidavits are filed with the assessor and other authorities; supplemental affidavits are required if mining activity begins on a portion of the land, with specific timing and acreage thresholds.

• Oversight and verification

  • The Department of Natural Resources must provide verification information to county assessors annually for 2c eligibility.

• Separation of agricultural value from residential structures

  • The assessor must separately list the market value of the homestead dwelling and the one-acre surrounding land; if farm buildings exist on that acre, their value is not included in the separate dwelling land calculation.

Significant Changes at a Glance

• Farm wineries become eligible for agricultural land classification under the new rules.
• New or updated classifications (2a, 2b, 2c, 2d, 2e) with specific rates and eligibility criteria.
• Expanded list of what counts as agricultural land and agricultural purposes, including wine production on a farm winery.
• Detailed rules for how mixed-use parcels (agriculture plus commercial/industrial) are taxed.
• Specific procedures for forest land, airport land, and aggregate deposits, including application windows, required documentation, and oversight by the DNR.

Potential Impacts

• Property tax treatment for farms with wineries may become more favorable, affecting owners’ tax bills.
• Land with multiple uses (agriculture plus other uses) will require careful parcel-by-parcel classification.
• Landowners pursuing forest management, airport operations, or mineral/aggregate deposits will follow new documentation and compliance steps.

Relevant Terms - Class 2a, Class 2b, Class 2c, Class 2d, Class 2e - Agricultural homestead - First tier valuation limit - Farm winery - Winery license under section 340A.315 - Agricultural purposes - Agricultural products - Local conservation program - Reinvest in Minnesota program (103F.501–103F.535) - Conservation Reserve Program (CRP) - Schedule F Form 1040 - Sustainable Forest Management Incentive Program (chapter 290C) - Contiguous acreage - 10 acres / 20 acres thresholds - Aggregrate deposit (commercial aggregate deposit) - Kentucky? (Note: Not applicable; refer to Minnesota statutes) - Department of Natural Resources (DNR) - Public-use airports licensed under section 360.018 - Minor ancillary nonresidential structure - Rulemaking exemption (section 8)