Tax Bill Changes for Lake Shore Property Owners

Property Taxes

High property taxes on lakeshore property puts the dream of owning a lake place out of reach for many Minnesotans, makes it far more difficult to pass heirloom properties from one generation to the next, and increases development pressure on some shoreline that would be best left undeveloped as riparian wildlife habitat.

Property tax levies are driven largely by local schools, roads, and other infrastructure needs. Since different communities have different property tax bases due to the value of homes, the number of businesses and industries, and amount of agricultural land, the state provides equalization payments to areas with lower tax base.

But from 2003 to 2011, when Minnesota budgets ran in the red, the legislature and Governor Pawlenty rolled back these state equalization payments to cities, counties and school districts in order to balance budgets without increasing income and other taxes. Property taxes in many areas of the state rose to make up this lost equalization support.

This year, with a surplus, MLR joined many other groups to advocate for a restoration of these City, County and School District aid programs. The legislature passed and Governor Walz signed into law a budget that restores this equalization aid, which should have the effect of relieving some of the upward pressure on local property tax levies.

State General Tax - In the closing hours of the 2002 Legislative session, during the Gov. Ventura Tax reform negotiations, policy makers created a new tax, the State Business Property Tax. This property tax is the only state property tax and while a portion of the revenue was originally designated for local schools, the first year after passage the Legislature and Governor Pawlenty redirected it to the general fund. This property tax on commercial industrial property and cabins, provides no revenue for local communities. Last year the state general tax on cabins was about $42 million statewide.

MLR has worked for years to reduce or repeal the State General Tax, successfully capping the percentage cabin properties must pay, removing the inflator which drove the tax higher every year.

This year MLR advocated for a reduction in the State General Tax. The Tax Bill signed into law last week reduced the state general tax on cabins by about 6%.

Sales Taxes

Lake Associations spend over $6.2 million annually on lake projects and commit 1.25 million volunteer hours annually to the public good of clean and healthy lakes.

This year MLR advocated for the state to help lake associations leverage this incredibly work. Much of this expense and time is spent treating lakes for aquatic invasive species.

The 2019 tax bill provides for a sales tax exemption for herbicides used under an invasive aquatic plant management permit by lakeshore property owners, an association of lakeshore property owners, or by a contractor hired to provide the invasive aquatic plant management. The exemption applies only to chemicals registered with the Department of Agriculture for use on invasive aquatic plants.

When a lake becomes infested with Aquatic Invasive Species, the cost to treat the lake for those species is not paid by the Department of Natural Resources. Most typically the cost for managing the public waters falls on lakeshore property owners.

Economic Development

In repeated surveys of lake home and cabin owners, lack of reliable, high speed internet connection is given as a primary obstacle to economic development in greater Minnesota.

In 2019 MLR advocated for, and the Legislature passed and Governor Walz signed into law a state investment of $40 million to bring high speed internet to underserved areas of the state. This will greatly enhance the jobs and economic activity of all of the lakes districts.

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