Minnesota Law provides for the exemption from property taxes of certain properties owned and used for public purpose, education, or religious or charitable ministration. In order to obtain tax-exempt status, a property owner must make application with the assessor and show that the property qualifies. Generally, an exemption requires both
ownership by a qualifying entity
and
a qualifying exempt use of the property.
A property owner filing for a property tax exemption must make available to the assessor all necessary books and records relating to the ownership and use of the property, which will be used to verify whether or not the property qualifies for exemption. Documents helpful in making this determination are:
- State Application for Property Tax Exemption Form. This form is available by contacting your assessor, and is required for exemption.
- Copies of:
- Articles of Incorporation and Bylaws
- IRS determination letter indicating tax-exempt status under section 501(c)(3) of the Internal Revenue Code
- IRS Form 990 Return
- Income and expense statements
- Property deed(s) and sale documents indicating ownership
- Pamphlets, brochures, and/or letters explaining the function of the enitity, its mission, and how the property is being used and intended for future use
- Tenant leases, rent rolls, and/or other information relating to occupancy of the property
- Any other documents and records relating to unique or specific properties
In 1975, the Minnesota Supreme Court, in North Star Research Institute vs. County of Hennepin, established five factors that have been cited numerous times as guidelines for determining if an organization qualifies as an institution of public charity. These five factors have been expanded to six and are referred to as the “Northstar Factors”. Any property applying for exemption under an institution of purely public charity should, in addition to supplying the above materials, review and respond to these guidelines:
1. Whether the stated purpose of the undertaking is to be helpful to others without immediate expectation of material reward;
2. Whether the entity involved is supported by donations and gifts in whole or in part;
3. Whether the recipients of the “charity” are required to pay for the assistance received in whole or in part;
4. Whether the income received from gifts and donations and charges to users produces a profit to the charitable institution;
5. Whether the beneficiaries of the “charity” are restricted or unrestricted and, if restricted, whether the class of persons to whom the charity is made available is one having a reasonable relationship to the charitable objectives; and
6. Whether the dividends, in form or in substance, or assets upon dissolution are available to private interests.
A property owner must acquire and use the property for exempt purposes prior to July 1st to qualify for an exempt classification for that same assessed year for general property taxes payable the following year. Conversely, if a property loses its exempt status prior to July 1st, it will be assessed as taxable for the same year for general property taxes payable the following year.
A property which receives a property tax exemption does not pay general property taxes, but may be required to pay for special assessments and services, and, in certain instances, may be required to pay a portion of the income from the property in lieu of the general property tax.
The County Assessor’s office has the authority to approve or deny an applicant’s request for property exemption. The assessor’s decision to deny a property exemption may be appealed to the Minnesota Tax Court. Additionally, if an exemption is granted and subsequently the property or any part thereof is not used for specified purposes, the exemption is to be reviewed, and the ineligible parcel or portion thereof is to be assessed.
Any questions relating to the eligibility of a property for exemption should be directed to the County Assessor's Office.