SF5284

Purpose

This bill updates Minnesota property tax rules to redefine how homesteads are treated, expand who can qualify for homestead status, allow some noncontiguous properties to receive homestead treatment, and prohibit local rental licensing requirements for homesteads occupied by relatives.

Main Provisions

• General framework for homestead classification

  • Residential homestead: property used as a home by a Minnesota resident owner qualifies.
  • Agricultural homestead: farm property used as a home by a Minnesota resident owner can qualify as an agricultural homestead.
  • A property held by a trust can qualify if it meets the requirements.
  • Assessor can require proof to determine ongoing eligibility; the Department of Revenue can verify residency in some cases.

• Noncontiguous property eligibility

  • Property used for homestead purposes but separated from the main homestead by roads, water, or other property can qualify as part of the homestead if the owner uses it for homestead purposes and applies within set deadlines.
  • After initial qualification, ongoing eligibility for the noncontiguous property may continue without yearly reapplication.

• Relative occupancy and rental licensing

  • A home occupied and used as a homestead by a relative of the owner can qualify as a homestead to the extent that the owner would receive if they lived there.
  • Local cities/counties cannot require rental licenses, registrations, occupancy certificates, or inspections for a homestead occupied by a relative.
  • Relative is defined broadly (e.g., parent, child, grandparent, sibling, aunt/uncle, nephew/niece, etc., by blood or marriage).

• Relative occupancy restrictions and refunds

  • If property has previously been classified as seasonal or recreational, it won’t be reclassified as a homestead unless occupied as a homestead by the relative.
  • Neither the relative occupant nor the owner may claim a property tax refund for a homestead occupied by a relative under these rules.

• Agricultural property specific rules

  • Relative-owned agricultural property can be a homestead only to the extent it would be if the related owner lived there and only if certain criteria are met.
  • Criteria include: the occupying relative must be a specified relation to the owner, the owner must be a Minnesota resident, the owner must not receive homestead treatment on any other agricultural property in Minnesota, and the owner may have only one agricultural homestead per family under this provision.
  • No property tax refunds under chapter 290A for those qualifying under this relative-occupancy rule.
  • The house, garage, and surrounding one acre are included unless otherwise stated.

• Special circumstances and exemptions

  • If both spouses own the property but only one occupies it due to divorce, separation, or employment in another location, homestead treatment must not be denied if certain distance criteria are met (e.g., jobs at least 50 miles apart).
  • If one owner is absent due to residence in a nursing home or similar facility, homestead treatment must not be denied in certain scenarios.
  • If a co-owner is buying with a relative on the deed for a first-time purchase, full homestead classification may be allowed.
  • If a child of a deceased owner is occupying property under probate jurisdiction, they receive relative homestead treatment until probate ends.
  • For property used for licensed child care, the portion used for child care can be classified as part of the homestead.

• Definitions and terminology

  • Clarifies terms such as “homestead,” “residential homestead,” “agricultural homestead,” “relative,” and “agricultural property.”

How it changes current law

• Prohibits local rental licensing/inspection requirements for homesteads occupied by relatives, reducing local regulatory burden for these properties.
• Expands what can qualify as a homestead, including noncontiguous property and certain relative-occupied scenarios.
• Creates tighter controls on agricultural homesteads (one per family) and adds specific relative-occupancy criteria.
• Introduces verification roles for assessors and the Department of Revenue, plus new documentation rules for ongoing eligibility.
• Adds special provisions for probate, first-time co-ownership purchases, and child care use to align with homestead benefits.

Key Takeaways

• The bill broadens who can qualify for homestead status and how property can be used to receive it.
• It introduces or reinforces restrictions on when local rental licensing or inspections are required (specifically for relative-occupied homesteads).
• It allows noncontiguous land to be included in a single homestead under certain conditions.
• It places limits on agricultural homesteads per family and adds eligibility rules tied to relatives and residency.
• It adds scenarios around absent owners (marital separation, nursing home) and probate, with corresponding rules for continued homestead treatment.

Relevant Terms homestead, residential homestead, agricultural homestead, relative, noncontiguous property, assessor, Department of Revenue, Minnesota resident, license, registration, certificate of occupancy, inspection, occupancy, ownership by a trust, seasonal property, agricultural property, coowner, first-time purchaser, probate, licensed child care, property tax refund, chapter 290A, family, distance requirement, spanning multiple properties, and one agricultural homestead per family.