Exempt Property

In Minnesota law, taxation is the rule and exemption is the exception. Ownership, use, and necessity of ownership are the three key elements in determining exemption. Absence of any of the three elements would likely disqualify a property from exemption unless specifically allowed by law. For example, a property may be owned by a church (an exempt institution), but if it is not used for church purposes, exemption should be denied.

Whenever property is removed from the tax rolls, the other taxpayers of that jurisdiction pay a higher share of the tax burden. Therefore, burden of proof is on the one seeking exemption to prove to the assessor that they are entitled to the exemption. The assessor has an extremely important responsibility in extending exemptions only to properties that meet the qualifications under law. In terms of property taxation, lawmakers have decided that various types of property, or properties owned by specific organizations, are exempt from property taxes if they meet certain criteria.

Most exempt property is defined in Minnesota Statutes, section 272.02 and the treatment of exempt properties has been addressed over time by Minnesota Tax Court, the Minnesota Supreme Court, and the Department of Revenue.

It is required that all ownership entities seeking exemption must file an initial application with the county assessor, and each entity should include enough information to help the assessor to grant or deny the exemption. Initial applications for exemption are due to the assessor in the district where the property is located on or before February 1 of the assessment year in which the exemption is first sought.  For most properties, owners or authorized representatives must reapply for exemption every three years.

Every sixth year (2010, 2016, 2022, etc.), the county auditor must prepare an abstract of exempt property. The abstract must contain the description of each tract of real property exempt by law from taxation, along with the name of the owner. The assessor is required to value and assess the exempt property in the same manner that other real property is valued and assessed. The assessor must also designate in each case the purpose for which the property is used.

The 2009 legislation required that for an institution of purely public charity to meet requirements for exemption, it must first be exempt from federal income taxation under section 501(c)(3) of the Internal Revenue Code. Any institution of purely public charity which is not a 501(c)(3) organization is ineligible for property tax exemption. However, being granted 501(c)(3) status by the IRS does not automatically qualify an organization for Minnesota property tax exemption.