2002 Changes to the Delinquent Personal Property Tax Manual

Transcription

1 2002 Changes to the Delinquent Personal Property Tax Manual Notes: (1) A number of the pages of the updated manual show 1ST REVISION: 2002 at the bottom of the page. Many of these changes are minor corrections, minor organizational changes, or reflect text shifting due to new entries or revised entries on previous pages. Others merely delete references to the 1991 legislature and/or insert a statute reference, update a statute reference, or update a property classification reference. The changes that are significant and need further explanation are listed below. (2) One of the law changes anticipated from the 2003 Legislative Session is a change providing that all Notices of Tax Liens relating to personal property would be filed in the Secretary of State s office, including the Notices of Tax Liens for individuals who are residents of Minnesota. This is how state tax liens relating to personal property are handled. However, the updated manual does not reflect this anticipated change. It reflects the wording of Minnesota Statutes 2002, Section , Subd Section 7020, page 2. The definition of property taxed under the manufactured home personal property tax law is updated to include (1) park trailers, (2) travel trailers, and (3) storage sheds, decks, or similar improvements constructed on property leased or rented as a site for a manufactured home, park trailer, or travel trailer. 2. Section 7020, page 2. Updated statistics concerning the numbers of manufactured homes and their location is provided here. 3. Section 7040, pages 1 and 2. Updated information on the net tax capacity of personal property by major property types, and a comparison with the net tax capacity of real property, is provided here. 4. Section 7050, page 1. The reference to offsetting a taxpayer s lottery winnings under Revenue Recapture is corrected to reference lottery winnings over $600. Previously the reference was to lottery winnings over $1, Section 7060, page 2. The reference to offsetting a taxpayer s lottery winnings under Revenue Recapture is corrected to reference lottery winnings over $600. Previously the reference was to lottery winnings over $1,000. The fact that certain other refunds besides tax refunds are subject to Revenue Recapture is acknowledged. 6. Section 7110, page 2. Obsolete paragraphs concerning interest on payable 1992 and prior year s property taxes have been removed. In addition, the August 31 taxes due date for manufactured home personal property taxes is qualified by adding or 20 calendar days after the postmark date on the envelope containing the property tax statement. 7. Section 7150, all pages. Obsolete paragraphs concerning interest on payable 1992 and prior year s property taxes have been removed. In addition, the schedule of interest rates is updated to include the rates for the years after

2 8. Section 7220, pages 8 and 9. The two notices of delinquent taxes (one for manufactured homes and the second for other types of personal property) are corrected to reference lottery winnings over $600. Previously the reference was to lottery winnings over $1,000. The fact that certain other refunds besides tax refunds are subject to Revenue Recapture is acknowledged. 9. Section 7230, pages 3 and 4. The listed telephone numbers and mailing addresses are updated for the Department of Public Safety and the Secretary of State. 10. Section 7310, page 2. A sentence implying (erroneously) that the county treasurer distributes sale revenue to junior creditors has been removed, and replaced by a reference to Section Section 7320, page 2. The telephone numbers and mailing address for the Secretary of State have been updated. 12. Section 7320, page 6. The example Notice of Tax Lien is corrected to show the county treasurer s signature rather than the county auditor s signature. 13. Section 7340, page 4. The example Notice of Transcription of Tax Lien is corrected to show the county treasurer s signature rather than the county auditor s signature. 14. Section 7350, page 4. The example Notice of Release of Tax Lien is corrected to show the county treasurer s signature rather than the county auditor s signature. 15. Section 7360, pages 5 and 6. The example Partial Release of Tax Lien as to Specific Individual and the example Partial Release of Tax Lien as to Specific Property are modified to include the address of the taxpayer as well as the taxpayer s name. 16. Section 7380, pages 1 3. The list of personal property exempt from the tax lien is corrected to: (a) Separately list personal apparel, one watch, utensils, and food of the taxpayer and taxpayer s family without any dollar limit (item 4 in the listing). (b) State the separate dollar limit for a motor vehicle modified to accommodate a physical disability (item 12 in the listing). (c) Eliminate a reference to AFDC and add references to MFIP and work first in the relief based on need (item 13 in the listing). (d) Add a reference to a Roth IRA for present or future payments based on illness, disability, death, age, or length of service. (e) Add a separate item for the proceeds of payments received by a person for labor, skill, material, or machinery contributing to an improvement to real estate (item 18 in the listing). (f) For those items subject to dollar limits indexed by the implicit price deflator (IPD) for Gross National Product, show the current limits as of April Section 7380, page 3. The adjustment to the dollar limits for personal property exemptions based on the implicit price deflator (IPD) for Gross National Product is given further explanation, along with the current web page location to find this information. 18. Section 7410, page 1. The reference to offsetting a taxpayer s lottery winnings under Revenue Recapture is corrected to reference lottery winnings over $600. Previously the reference was to lottery winnings over $1,000. The fact that certain other refunds besides tax refunds are subject to Revenue Recapture is acknowledged. 2

3 19. Section 7410, page 2. The names of the contact persons in the Revenue Recapture Unit of the Department of Revenue, the telephone numbers, the mailing address, and the directions for in-person visits to the Recapture Unit have all been updated. 20. Section 7420, page 1. The listing of types of refunds that may be offset under Revenue Recapture is amended to include sustainable forest tax payments to claimants, and amounts granted to persons by the legislature on the recommendation of the joint Senate-House of Representatives Subcommittee on Claims. It is also amended to reference lottery winnings over $600. Previously the reference was to lottery winnings over $1, Section 7420, page 2. The minimum amount of refund that may be offset by Revenue Recapture is corrected to $15 (previously it read $25) and the maximum debt is corrected to $25 (previously it read $15). The paragraph instructing the county treasurer to add the $10 Revenue Recapture fee to the delinquent tax amount has been deleted. Actually, these corrections were a subject of a letter from our office to the county treasurers dated April 1, Section 7420, page 2. Number 6 is amended to include the requirement that the county treasurer notify the Revenue Recapture Unit within 30 days when a debt subject to Revenue Recapture has been satisfied or reduced at least $200 dollars by other means. 23. Section 7420, page 2. Number 7 is amended to include criminal restitution in the third order of priority when more than one creditor has applied for revenue recapture. 24. Section 7430, page 1. This page is amended to clarify that the application for a special Minnesota tax identification number for Revenue Recapture is done by telephone. The previous page 2 of Section 7430 is eliminated by this change. 25. Section 7440, page 1. The reference to offsetting a taxpayer s lottery winnings under Revenue Recapture is corrected to reference lottery winnings over $600. Previously the reference was to lottery winnings over $1,000. The fact that certain other refunds besides tax refunds are subject to Revenue Recapture is acknowledged. 26. Section 7440, pages 2 4. The references to magnetic computer tape have been changed to tape cartridge since as of July 1, 2002, reel-to-reel tapes will no longer be accepted by the Department of Revenue for Revenue Recapture. 27. Section 7440, page 2. A county may access the State of Minnesota mainframe computer system via the internet for Revenue Recapture purposes, as this page now states. 28. Section 7440, page 4. A note is added stating that a county treasurer may now choose to submit a modification of a Revenue Recapture claim for reductions that are less than $ County treasurers are still required to submit modifications for reductions of $ or more. 29. Section 7450, pages 1 3. The reference to offsetting a taxpayer s lottery winnings under Revenue Recapture is corrected to reference lottery winnings over $600. Previously the reference was to lottery winnings over $1,000. The fact that certain other refunds besides tax refunds are subject to Revenue Recapture is acknowledged. 30. Section 7460, page 1. The reference to offsetting a taxpayer s lottery winnings under Revenue Recapture is corrected to reference lottery winnings over $600. Previously the reference was to lottery winnings over $1,000. The fact that certain other refunds besides tax refunds are subject to Revenue Recapture is acknowledged. 3

4 31. Section 7460, page 1. The reference to the first date of issuance for property tax refunds paid to renters is corrected to August 2. Previously it read August Section 7460, page 2. The references in number 4 to reports titled Annual Report of Claims to be Reviewed, Aged Claims Report, and Annual Report of Claims Activity by Claimant have been deleted since these reports from the Department of Revenue no longer exist. 33. Section 7520, page 1. This page is updated to include the statute references for the additional levy and seizure powers granted to the Department of Revenue that are also granted to the county treasurers. 34. Section 7620, pages 3 and 4. The suggested form of the Notice of Bank Levy is revised to include a statement that the bank is obligated to return the Levy Questionnaire. 35. Section 7630, pages 2 and 4. Reference is made to returning the Levy Questionnaire in the selfaddressed and stamped envelope. 36. Section 7640, page 2. The list of programs that are included in the definition of relief based on need for the purpose of a 60-day exemption from a bank levy is updated to reflect the current programs available. The listing of the sources of money for which there is no time limit on the exemption from a bank levy is amended to include the earnings of a minor child of the taxpayer and any child support paid to the taxpayer. (See M.S , Subd. 3 and , Subds. 14 and 15.) 37. Section 7640, pages 5 and 6. The example of an exemption notice is updated to show: (1) the calendar year 2002 dollar limits on the exemptions for (a) accident, disability, or retirement pensions or annuities, and (b) life insurance proceeds; (2) the current list of programs for relief based on need; and (3) the current federal minimum wage. A note is included on page 6 to provide more information on these limits and on the federal minimum wage. 38. Section 7690, page 4. The erroneous reference to wage levy in the Reduction of Bank Levy form is corrected to read bank levy. 39. Section 7705, pages 1 and 2. The statute references for the additional levy and seizure powers granted to the county treasurers have been updated, and unneeded verbiage in support of the argument for this additional authority has been deleted. 40. Section 7705, page 4. Under current law the notice and demand for payment and the notice of intent to levy on wages are effective for one year, and can be renewed for another year. Under previous law they were effective for 180 days and could be renewed for another 180 days. 41. Section 7720, page 1. Under current law the notice and demand for payment and the notice of intent to levy on wages are effective for one year, and can be renewed for another year. Under previous law they were effective for 180 days and could be renewed for another 180 days. 42. Section 7730, page 1. The list of programs that are included in the definition of relief based on need for the purpose of an exemption from a wage levy is updated to reflect the current programs available. 43. Section 7740, page 1. A note is added to clarify that state and federal wage levies to recover taxes are continuous. They are not subject to the 70-day limit. Therefore, the county treasurer's wage levy does not have priority over an earlier filed state or federal wage levy after the 70-day grace period expires and the state or federal wage levy has not yet been satisfied. 44. Section 7740, page 5. A sentence is added to the Notice of Wage Levy to clarify that state and federal wage levies to recover taxes are not subject to the 70-day limit. 4

5 45. Section 7750, page 2. The information regarding the current federal minimum wage is updated. 46. Section 7750, pages 5 to 7. The Wage Disclosure Form is updated to reflect the current federal minimum wage. 47. Section 7780, pages 1, 2, and 4. An employer who fails to honor a wage levy is now subject to an assessment equal to the wage levy plus a 25% penalty rather than an assessment equal to the wage levy plus accrued interest. This change reflects the 1995 repeal of language in M.S , Subd. 23, clause (3). 48. Section 7785, pages 1, 2, 3, and 5. An employer who fails to honor a wage levy is now subject to an assessment equal to the wage levy plus a 25% penalty rather than an assessment equal to the wage levy plus accrued interest. This change reflects the 1995 repeal of language in M.S , Subd. 23, clause (3). 49. Section 7785, page 6. The address for the Minnesota Tax Court has been updated. 50. Section 7810, pages 1 3. These pages are updated to include the statute references for the additional levy and seizure powers granted to the Department of Revenue that are also granted to the county treasurers, and to eliminate erroneous language stating that the county treasurer cannot seize and sell a taxpayer s personal and real property without first recording a tax lien. 51. Section 7850, page 1. Number 3 on this page is amended to state that there may be a fee for recording and releasing a tax lien if a notice of tax lien is on record before a seizure and sale is performed. Previously it read (erroneously) that there would always be this fee because there would always be a tax lien recorder prior to seizure and sale. 52. Section 7850, page 2. This page is amended to clarify that the total delinquent tax amount listed on the warrant, as part of the proceeds from the sale of personal and/or real property seized by the county sheriff, is sent to the county treasurer. 53. Section 7860, page 1. A note is added to clarify that a county treasurer s warrant can be served on the county sheriff of any county in the state of Minnesota where property of the taxpayer is located. The county treasurer is not limited to the county sheriff of his/her own county. Erroneous language concerning the requirement of a Notice of Tax Lien has been deleted. 54. Section 7880, page 1. Language concerning the county treasurer s Notice of Tax Lien has been qualified by the phrase, if one was recorded. 55. Section 7890, page 1. This page is updated for the current deadlines of October 1 (manufactured homes) and April 30 (other personal property) for filing an appeal of personal property taxes with the tax court. 56. Section 7920, page 2. The list of states that have enacted the Uniform Enforcement of Foreign Judgments Act is updated to reflect the current list of 46 states plus other jurisdictions. Previously, this section listed 37 states. 57. Section 7900, Table of Contents. The Table of Contents for manufactured home taxes is revised to add a section for Property Taxes Paid Before Title Transfer. 58. Section 7920A, page 2. The list of financial institutions defined as lenders is updated to the current list in M.S , Subd. 1. 5

6 59. Section 7930A, pages 2 and 3. These pages are revised to clarify the next taxes payable year involved in the escrow payments. 60. Section 7930A, page 3. Step 4 is corrected to read that the number of months for the escrow payments is determined through the next month of October rather than the next month of November (M.S , Subd. 2). 61. Section 7930A, page 7. The warning in the Notice of Escrow Payments concerning failure to make the monthly payments, talking about taking over the taxpayer s lottery winnings over $1,000, has been corrected to read lottery winnings over $ Section 7940A, page 5. More information has been added regarding the statutory basis for the interest rate that applies to the unpaid balance under a confession of judgment. 63. Section 7940A, pages 7 and 11. The reference to taking over the taxpayer s lottery winnings over $1,000 has been corrected to read lottery winnings over $ Section 7940A, page 8. The previous number 3 action, reinstate the original tax judgment for the balance of the total delinquent tax amount not paid under the confession of judgment, has been deleted since it does not apply to personal property taxes. 65. Section 7940A, page 11. Language is added to clarify the deadline for payment of the overdue installment under a confession of judgment to avoid default and subsequent enforced collection actions. 66. Section 7960A, page 2. A note is added to clarify that the personal and real property taxes that must be paid before an oversized load permit may be issued are the personal or real property taxes on the manufactured home itself. 67. Section 7970A. A new section has been added for the new requirement that all personal property taxes levied on a manufactured home that are due from the current owner at the time of transfer must be paid before the Department of Public Safety may issue a certificate of title. The new section also discusses the related notice that must be printed on the property tax statements for manufactured homes. 68. Section 7900B, pages 1 3. The description of the distribution of delinquent tax collections is amended to include the distributions made to the state relating to the state general tax. 3/7/03 6

7 Delinquent Personal Property Tax Manual List of Pages with a 2002 Update Section Number Page Number(s) Section Number Page Number(s) , , , , , , , , 5, , , , , , , , , , , , A Table of Contents A 2, , A A 1, A 1, A 1, B , 4 Note: Dashes mean inclusive and everything in between. 8

8 TABLE OF CONTENTS Table of Contents Section Number Introduction: Delinquent Personal Property Taxes Overview of Delinquent Personal Property Taxes Types of Taxable Personal Property Method of Assessing Personal Property Taxes Comparison of Personal and Real Net Tax Capacity Outline of Current Collection Methods Suggested Sequence of Collection Actions Total Delinquent Tax Amount Chart of Major Collection Actions Dates, Penalties, Interest Introduction: Dates, Penalties, Interest Manufactured Homes Leased Government Property All Other Personal Property Interest Special Cases Mailing/Planning/Phoning Introduction: Mailing/Planning/Phoning Notice of Delinquent Taxes Collection Plan Telephone Contact Tax Lien Introduction: Tax Lien General Tax Lien Information Guidelines for Filing a Tax Lien Notice of Tax Lien Renewal of Tax Lien Transcription of Tax Lien Release of Tax Lien Partial Release of Tax Lien Cost of Filing + Releasing Tax Lien Property Exempt from Tax Lien Notice of Foreclosure or Cancellation Lien Search Certificate ST REVISION: 2002

9 TABLE OF CONTENTS Table of Contents (Continued) (Page 2) Revenue Recapture Introduction: Revenue Recapture General Information County Applies for Tax ID County Files Claim with Revenue County Notifies Taxpayer Revenue Processes County Claim Levy and Seizure Authority Introduction: Levy and Seizure Authority General Information County Shares State's Authority Three Levy and Seizure Methods Property Subject to Levy + Seizure Property Exempt from Levy + Seizure Maximum Amount of Levy + Seizure Notice and Demand for Payment Jeopardy Collection or Assessment Discovery of Taxpayer Assets Levy on Bank Accounts Introduction: Levy on Bank Accounts Notice of Bank Levy Levy Questionnaire Exemption Notice Bank's Responses to Levy Warning of Bank's Liability Order Assessing Bank's Liability Bank's Setoff Rights Reduction/Release of Bank Levy Levy on Wages Introduction: Levy on Wages Verification of Employment Notice of Intent to Levy on Wages Exemption Claim Form Notice of Wage Levy Wage Disclosure Form Wage Withholding Form Employer Honors Wage Levy Treasurer Monitors Employer's Compliance Warning of Employer's Liability Order Assessing Employer's Liability Reduction/Release of Wage Levy ST REVISION: 2002

10 TABLE OF CONTENTS Table of Contents (Continued) (Page 3) Seizure and Sale of Property Introduction: Seizure + Sale of Property Methods of Seizure + Sale Property Subject to Seizure + Sale Guidelines for Seizure + Sale Maximum Amount of Seizure + Sale Treasurer's Warrant to Sheriff Sheriff's Seizure and Sale Treasurer's Management of Sale Revenue Restrictions on Seizure + Sale Other Collection Methods Introduction: Other Collection Methods Court Judgment County Central Collection Agency Cancellation of Delinquent Taxes Manufactured Home Taxes A Introduction: Manufactured Home Taxes A Notice to Lender A Tax Escrow Accounts A Confession of Judgment A Alternative Monthly Payment Plan A Oversized Load Moving Permit A Property Taxes Paid Before Title Transfer A Distribution of Collections B Index C 1ST REVISION: 2002

11 INTRODUCTION TABLE OF CONTENTS SECTION HEADING SECTION NUMBER Overview of Delinquent Personal Property Taxes Types of Taxable Personal Property Method of Assessing Personal Property Taxes Comparison of Personal and Real Net Tax Capacity Outline of Current Collection Methods Suggested Sequence of Collection Actions Total Delinquent Tax Amount Chart of Major Collection Actions

12 INTRODUCTION OVERVIEW OF DELINQUENT PERSONAL PROPERTY TAXES SECTION 7010 There are some interesting differences between delinquent personal property taxes and delinquent real property taxes. First of all, the county auditor is responsible for collecting delinquent real property taxes. The responsibility of collecting delinquent personal property taxes is in the hands of the county treasurer. Secondly, real property taxes that are not paid on time are considered to be "late" for the remainder of the year in which they are due. A penalty is charged for paying the taxes late. Real property taxes do not become delinquent until the January following the year in which they are due. Interest is charged on the unpaid tax and penalty beginning with that same January. In contrast, personal property taxes become delinquent the day after they are due. The term, "delinquent," applies to all of the steps in the collection of the unpaid personal property taxes; i.e., from the day after they are due to the time when they are collected or canceled. A penalty is charged on the unpaid taxes on the day when they become delinquent. Interest is charged on the delinquent tax, penalty, and costs beginning with the January after the year when the taxes were due and became delinquent. The most important difference between personal and real property taxes has to do with the tax lien. When real property taxes become delinquent, the county auditor files the list of delinquent taxes with the court administrator, notifies the taxpayers of the delinquency, and warns the taxpayers of the expiration of the time period for paying them. Once these passive tasks have been completed, the specific parcel of real property on which the taxes were assessed automatically forfeits to the state in trust for the local taxing districts when the time period expires. This automatic forfeiture is possible because a real property tax lien is in rem. This means that the tax lien attaches to the specific parcel of real property that has been assessed regardless of who owns it. It does not attach to the taxpayer and all of the property owned by the taxpayer. (M.S ) When the payment period expires, the specific parcel of real property automatically forfeits and can be sold with the revenues going to the local taxing districts. With personal property taxes, there is no automatic forfeiture of a specific parcel of property at the end of a designated time period. This is true because a personal property tax lien attaches to the taxpayer and all of the personal and real property owned by the taxpayer. This is called in personam. The tax lien follows the person and not the specific parcel of property on which the taxes were originally assessed.

13 INTRODUCTION OVERVIEW OF DELINQUENT PERSONAL PROPERTY TAXES SECTION 7010 (Continued) (Page 2) Because there is no automatic forfeiture, the county treasurer must take an active role in the collection of delinquent personal property taxes. If the county treasurer does not take direct action to collect the delinquent taxes by having the taxpayer's money or property confiscated, nothing will happen. The taxes will remain unpaid, and no property will automatically be available to sell in order to reimburse the local taxing districts for their lost tax revenue. To assure that action is taken, M.S , Subd. 1 gives the following mandate to the county treasurer: "If a tax assessed on personal property or manufactured homes and collectible under this chapter is not paid when due, the county treasurer shall, as soon as practicable, take action the county treasurer considers necessary and reasonable to collect the delinquent tax." This Manual is an attempt to outline and explain the "necessary and reasonable" actions that the county treasurer may take to collect delinquent personal property taxes, including manufactured homes. 1ST REVISION: 2002

14 INTRODUCTION TYPES OF PERSONAL PROPERTY TAXES SECTION 7020 Since 1972, most of the personal property in Minnesota has been exempt from property taxes. This general exemption applies to the major types of property listed below. 1. Inventories, stocks of merchandise, manufacturers material, and manufactured articles, including the inventories of manufacturers, wholesalers, retailers, and contractors. 2. Office equipment and furnishings of a home, room, apartment, hotel, or motel. 3. Tools and machinery that are defined as personal property and are used or usable in the construction of buildings or highways or in the manufacture, processing, production, sale, or distribution of marketable products. There is very little property that remains subject to personal property taxes in Minnesota. It usually involves a leasehold interest in personal or real property or both. It can also involve easement right-of-ways. In most cases, an individual or organization owns property that was constructed on leased land. In some cases, both buildings and land are leased. In only a few cases does the taxpayer own all of the property. Most of the property which is still subject to personal property taxes in Minnesota may be categorized under the following four major types: (1) manufactured homes located on leased land, (2) property owned by non-municipal utility companies and located on leased land or easement right-of-ways, (3) leasehold interests in government-owned property, and (4) elevators and warehouses located on leased railroad right-of-way land. The four types are outlined below. TYPE #1: MANUFACTURED HOMES The term, "manufactured home," is the official name in the statutes for what is commonly called a mobile home. A manufactured home is defined as a structure that is transportable in one or more sections, built on a permanent chassis, and designed to be used as a dwelling with or without a permanent foundation. (M.S , Subd. 8) Manufactured homes which meet all of the following conditions are valued and taxed as personal property: (1) affixed to the land, (2) connected to public utilities, (3) contain water and sewer facilities, and (4) are located on land leased by the owner of the home. If the owner of the home holds title to the land on which it is located, the home is treated as real property for tax purposes. Manufactured homes that are located on leased land are subject to personal property taxes in the name of the homeowner. The leased land is taxed as real property in the name of the landowner. Both the personal and real property values are set by the local assessor, and the taxes are imposed by the counties. 1ST REVISION: 2002

15 INTRODUCTION TYPES OF PERSONAL PROPERTY TAXES SECTION 7020 (Continued) (Page 2) Park trailers are taxed as manufactured homes. Travel trailers not conspicuously displaying current registration plates on the property tax assessment date are also taxed as manufactured homes if occupied as human dwelling places. A park trailer means a trailer that: (1) exceeds 8-1/2 feet in width in travel mode but is no larger than 400 square feet when the collapsible components are fully extended or at maximum horizontal width, and (2) is used as temporary living quarters. A travel trailer means a trailer mounted on wheels that: (1) is designed to provide temporary living quarters during recreation, camping, or travel, (2) does not require a special highway movement permit based on its size or weight when towed by a motor vehicle, and (3) complies with M.S , Subd. 2 and M.S , Subd. 2. (M.S , Subd. 8; , Subd. 9) Storage sheds, decks, or similar improvements constructed on property that is leased or rented as a site for a manufactured home, sectional structure, park trailer, or travel trailer are taxed under the manufactured home personal property tax law. (M.S , Subd. 8(f)) In 2000, there were 56,957 manufactured homes assessed as personal property in Minnesota. Anoka County had the largest number, 4,790, and Cottonwood County had the lowest number, 19. Of the statewide total, 41,204 manufactured homes (72.3%) were located in Greater Minnesota with the remaining 15,753 (27.7%) located in the seven-county metropolitan area. For more detailed information about personal property taxes and manufactured homes, see Series 7100 and 7900A of this Manual. TYPE #2: NON-MUNICIPAL UTILITY COMPANIES All personal and real property owned by a municipal utility company is exempt from property taxes. The term, "municipal," usually refers to a city government. Most property owned by a non-municipal utility company is assessed as real property by the state and is subject to real property taxes imposed by the counties. However, some property is subject to personal property taxes. This is usually personal property that is located on leased land or easement right-of-ways. The term, "non-municipal," usually refers to a private, taxable company or corporation. It can include a cooperative. The properties owned by a non-municipal utility company that are subject to personal property taxes are outlined below. 1ST REVISION: 2002

16 INTRODUCTION TYPES OF PERSONAL PROPERTY TAXES SECTION 7020 (Continued) (Page 3) 1. NON-MUNICIPAL ELECTRIC LIGHT AND POWER COMPANIES The power lines that are part of a non-municipal electric light and power company's operational system for generating, transmitting, and/or distributing electricity are valued as personal property by the state and are subject to personal property taxes imposed by the counties. This includes the power line owned by a cooperative when the lines run through a city. (M.S , Subd. 9(a); , Subd. 2(5)) The power lines usually run over leased land or easement right-of-ways. Some of them pass over land owned by the company or cooperative itself. Exception: The power lines that are used by non-cooperative electric light and power companies for supplying electricity to farmers at retail are exempt from taxation. (M.S , Subd. 19). Exception: The power lines that are used by cooperative electric light and power companies for supplying electricity to rural areas are assessed a special membership tax in lieu of personal property taxes. (M.S ) The structural parts of generating, transforming, and switching substations that are located on leased railroad right-of-way land or on land leased from the state for a term of less than three years are treated as personal property. The taxable values are recommended by the state, and the taxes are imposed by the counties. 2. NON-MUNICIPAL GAS, CRUDE OIL, AND PETROLEUM COMPANIES The pipelines that are part of a non-municipal company's operational system for transporting and/or distributing natural gas, crude oil, and petroleum products are valued as personal property by the state and are subject to personal property taxes imposed by the counties. (M.S , Subd. 9(a); , Subd. 2(5)) The structural parts of town border stations and measuring stations that are located on leased railroad right-of-way land or on land leased from the state for a term of less than three years are treated as personal property. The taxable values are recommended by the state, and the taxes are imposed by the counties. 1ST REVISION: 2002

17 INTRODUCTION TYPES OF PERSONAL PROPERTY TAXES SECTION 7020 (Continued) (Page 4) 3. OTHER NON-MUNICIPAL UTILITY COMPANIES The pipelines that are part of a non-municipal company's operational system for transporting and/or distributing the following products are subject to personal property taxes: (a) steam or hot or chilled water for heating or cooling buildings and structures, (b) water, and (c) sewage. The taxable values are recommended by the state, and the taxes are imposed by the counties. (M.S , Subd. 9(a); , Subd. 2(5)) Exception: The pipelines that are owned and operated by a private nonprofit corporation exempt from federal income taxes and which are used for generating and distributing hot water for heating buildings and structures are exempt from personal property taxes. (M.S , Subd. 17) TYPE #3: LEASED GOVERNMENT-OWNED PROPERTY In general, real property (buildings and land) owned by a governmental unit is exempt from property taxation as long as it is used for a public purpose. If the governmental unit leases, rents, or loans the property to a party who is subject to taxation, the property loses its tax exempt status. In most cases, the lessee (the party who is granted the lease) is required to pay personal property taxes on the property. The term, "governmental unit," refers to the federal and state governments and all state political subdivisions. 1. GOVT-OWNED PROPERTY LEASED FOR BUSINESS PROFIT All buildings and/or land that are owned by a governmental unit and are leased, rented, or loaned to a taxable party for the purpose of conducting a business for profit are valued as personal property by the local assessors and are subject to personal property taxes imposed by the counties. (M.S , Subd. 2) An example where both buildings and land are leased is the Metropolitan Airports Commission that leases tower space to a private business. The leasing business is required to pay personal property taxes on its tower space and the portion of the land allocated to its tower space. Another example where both buildings and land are leased would be a city that leases office space to private businesses in an old city hall building. Each of the leasing businesses would be required to pay personal property taxes on its office space and portion of the land allocated to its office space. 1ST REVISION: 2002

18 INTRODUCTION TYPES OF PERSONAL PROPERTY TAXES SECTION 7020 (Continued) (Page 5) This type of personal property also includes privately owned buildings (improvements) which are constructed on leased government-owned land and are used for business profit. An example is the Metropolitan Airports Commission that leases land at the Crystal Airport to a private business that builds a hangar on the land for its business plane. The private business is required to pay personal property taxes on its hangar and the leased land. Another example is an individual or organization that leases state-owned land to build a commercial resort. The party who is leasing the land is required to pay personal property taxes on its resort property and the leased land. (Note: If the property were leased from the Department of Natural Resources under M.S , it would be exempt from property taxes.) See M.S , Subd. 2-3, for examples of leased government-owned property that are exempt from personal property taxes. 2. GOVT-OWNED PROPERTY LEASED FOR OTHER THAN BUSINESS PROFIT All buildings and land that are owned by a governmental unit and are leased, rented, or loaned to a taxable party for a purpose other than business profit are valued as personal property by the local assessors and are subject to personal property taxes imposed by the counties. (M.S , Subd. 1-1a)) An example where government-owned buildings and land are leased is a lakeshore cabin that is owned by the federal government. The federal government leases the cabin and land to a family to be used as a vacation retreat. The family has the option to purchase the property at a later time. Until that time when the property would be subject to real property taxes, the family is required to pay personal property taxes on the leased cabin and land. This type of personal property also includes privately owned buildings (improvements) which are constructed on leased government-owned land. An example is four friends who lease an 80-acre piece of wooded land from the federal government and build a hunting cabin on the land. The hunting party is responsible for paying personal property taxes on their cabin and the leased land. See M.S , Subd. 2-5, for examples of leased government-owned property that is exempt from personal property taxes. 1ST REVISION: 2002

19 INTRODUCTION TYPES OF PERSONAL PROPERTY TAXES SECTION 7020 (Continued) (Page 6) TYPE #4: ELEVATORS + WAREHOUSES ON LEASED RAILROAD LAND Railroad property can be divided into two categories: operating property and non-operating property. 1. "Operating property" is defined as all property owned or used by a railroad company in the performance of railroad transportation services. This includes franchises, right-of-ways, bridges, trestles, shops, docks, wharves, buildings, and other structures. All railroad operating property is valued by the state. 2. "Non-operating property" simply means all railroad property that is not operating property. It includes all property that is not used for railroad transportation services. All railroad property is subject to real property taxes that are assessed and levied in the name of the railroad with only one exception. The exception is outlined below. All privately owned elevators and warehouses that are located on leased railroad right-of-way land are valued and taxed as personal property in the name of the lessee (the party who is granted the lease). The land on which the elevators and warehouses are located is assessed and taxed as real property in the name of the railroad. (M.S ) Example #1: A farmer's organization leases right-of-way land from a railroad and builds a grain elevator on the site. The farmer's organization pays personal property taxes on the grain elevator, and the railroad pays real property taxes on the land. Example #2: A manufacturing company leases right-of-way land from a railroad and builds a warehouse on the site. The manufacturing company pays personal property taxes on the warehouse, and the railroad pays real property taxes on the land. 1ST REVISION: 2002

20 INTRODUCTION METHOD OF ASSESSING PERSONAL PROPERTY TAXES SECTION 7030 Although the tax lien and the collection methods are different from real property taxes, the personal property taxes themselves are determined exactly the same way as real property taxes. The major steps in the process of determining personal property taxes are outlined below. Step #1: Step #2: The market value of a parcel of personal property is based on the property's highest and best use and on the average sale price of similar property in the area. The market values are determined by the local assessor or the state, depending on the type of personal property. The market values are listed by parcel in the county assessment rolls. The local assessor determines the net tax capacity of a parcel of personal property by using the real property classification system. The property's highest and best use determines which classification and class rate is used. The net tax capacities are also listed by parcel in the county assessment rolls. Example #1: A manufactured home that is located on leased land and serves as the owners homestead is assessed at the class rates used for class 1a, residential homestead property in the name of the homeowner. The leased land is assessed as real property in the name of the landowner. Example #2: Power lines that run over an easement right-of-way on land owned by a city are assessed at the class rates used for class 3a, systems of electric utilities in the name of the electric light and power company. The land is exempt from property taxes. Example #3: A vacation cabin that is located on leased federal-owned land is assessed along with the land at the class rates used for class 4c(1), non-commercial, seasonal, recreational, residential property in the name of the party who owns the cabin and is leasing the land. Example #4: A grain elevator located on leased railroad right-of-way land is assessed at the class rates used for class 3a, commercial-industrial property in the name of the elevator owner. The land is assessed by the state as real property in the name of the railroad. In some cases, the land is assessed by the county. Step #3: The county auditor applies the local tax rates to the net tax capacity to determine the personal property tax for each parcel listed in the county assessment rolls. The same process is used to determine the real property taxes. The personal property taxes are recorded in the county tax rolls along with the real property taxes. 1ST REVISION: 2002

21 INTRODUCTION METHOD OF ASSESSING PERSONAL PROPERTY TAXES SECTION 7030 (Continued) (Page 2) Step #4: The county treasurer uses the county tax rolls to prepare and mail the personal property tax statements. The personal property tax statements are prepared the same way as the real property tax statements with the following exceptions: (1) The statement should be identified as a personal property tax statement in the title or above the columns listing the tax amounts for both years. (2) The penalty schedule listed on the back of the statement should contain the penalty rates for unpaid personal property taxes, including manufactured homes. (3) The stubs should show the due dates for the personal property taxes depending on their specific payment schedule. See Series 7100 of this Manual for detailed information about the three different payment schedules and due dates.

22 INTRODUCTION COMPARISON OF PERSONAL AND REAL NET TAX CAPACITY SECTION 7040 The statewide net tax capacities listed in the table below serve two purposes: (1) to compare the relative importance of personal property and real property for raising tax revenue, and (2) to compare the relative importance of each major type of personal property. Net tax capacities are used for these comparisons because a breakout of personal property taxes by major type of personal property is not available. The figures in the table are taken from the Department of Revenue's bulletin entitled Property Taxes Levied in Minnesota: 2000 Assessments, Taxes Payable in TYPE OF PROPERTY 2000 NET TAX CAPACITY 1. Manufactured Homes.. $ 7,582, Non-Municipal Utilities... $ 102,505, Leased Property Including Govt and Railroad Right-of-Way Property $ 21,414, All Other Personal Property $ 7,847, Total Personal Property (Line 1 + Line 2 + Line 3 + Line 4). $ 139,350, Total Real Property.. $ 4,135,617, Total Personal and Real Property (Line 5 + Line 6).. $ 4,274,968,489 1ST REVISION: 2002

23 INTRODUCTION COMPARISON OF PERSONAL AND REAL NET TAX CAPACITY SECTION 7040 (Continued) (Page 2) The first fact that jumps out from the table is that the total personal property net tax capacity is only a small percentage (3.3%) of the total real and personal property net tax capacity (Line 5 divided by Line 7). Another glaring fact relates more directly to the collection of delinquent personal property taxes. The personal property taxes on manufactured homes are only a small percentage of the total personal property taxes levied statewide. Using the net tax capacities for comparison, the actual percentage is 5.4% (Line 1 divided by Line 5). This wide discrepancy between manufactured home taxes and all other personal property taxes is interesting because most of the personal property taxes that become delinquent are levied on manufactured homes. In contrast, personal property taxes levied on non-municipal utility property (73.6% of the total personal property NTC) seldom become delinquent. This means that the methods of collecting delinquent personal property taxes apply to only a small percentage of personal property taxes (manufactured homes) and to an even smaller percentage of all property taxes levied in Minnesota. However small the total amount may be, the county treasurer must make every effort to collect delinquent personal property taxes in order to comply with the mandate contained in M.S , Subd. 1, and to be fair to those who do pay their property taxes on time. To let taxpayers get by without paying personal property taxes just because the total amount is small may set a precedent for more and more people to refuse to pay their property taxes. The result would be increased taxes for those who do pay or a decrease in local services financed by property taxes. Neither one serves the general welfare of the community. 1ST REVISION: 2002

24 INTRODUCTION OUTLINE OF CURRENT COLLECTION METHODS SECTION 7050 Under the current provisions, the county treasurer is given the flexibility to use whatever methods are "necessary and reasonable" to collect delinquent personal property taxes (M.S , Subd. 1). With flexibility as the key, the county treasurer is encouraged to use some of the same methods that the Department of Revenue uses to collect delinquent state taxes. Any one or any combination of the collection methods may be used. The current methods of collecting delinquent personal property taxes, including manufactured homes, are outlined below. All of the methods are modeled on similar methods used by the Department of Revenue except number Billing the taxpayer by mail and telephone. (Series 7200) 2. Filing a Notice of Tax Lien against the taxpayer's real and personal property without court judgment. (Series 7300) 3. Requesting the Department of Revenue to withhold the taxpayer's state tax refunds and lottery winnings over $600 through the process of "Revenue Recapture." (Series 7400) 4. Levying on the taxpayer's bank accounts or wages without court judgment. (Series 7500, 7600, and 7700) 5. Seizing and selling the taxpayer's personal and real property without court judgment. (Series 7500 and 7800) 6. Filing a court judgment against the taxpayer's property. (Series 7900) 7. Using the county's central collection agency. (Series 7900) 8. Accepting payments under an alternative monthly payment plan. (Series 7900A) 9. Writing-off the total delinquent tax amount as uncollectible. (Series 7900) In addition to the above methods, the 1991 and 1992 Minnesota Legislature also set up three special methods for collecting delinquent personal property taxes on manufactured homes. They are outlined below. 1. The county treasurer may send a letter to the individual or organization that is financing the manufactured home, requesting help in collecting the delinquent taxes. (Series 7900A) 2. The county treasurer may require the taxpayer to pay the delinquent and current taxes due on the manufactured home under an escrow account. (Series 7900A) 1ST REVISION: 2002

25 INTRODUCTION OUTLINE OF CURRENT COLLECTION METHODS SECTION 7050 (Continued) (Page 2) 3. The county treasurer must accept payment of delinquent personal property taxes under a confession of judgment plan if the manufactured home is homesteaded. (Series 7900A) For more detailed information about these three special provisions for collecting delinquent personal property taxes on manufactured homes, see Series 7900A in this Manual. None of the other collection methods can be used by a county treasurer to collect the delinquent personal property taxes on a manufactured home as long as the taxpayer is making monthly payments under an escrow account or a confession of judgment. If the taxpayer fails to make the payments, the county treasurer may employ any of the other methods to collect the remaining delinquent taxes. The purpose of the current provisions is to give the county treasurer the maximum amount of flexibility possible for collecting delinquent personal property taxes, including manufactured homes. The county treasurer is free to select the most efficient method of collection for each tax situation with the legal advice of the county attorney. All of the current provisions for collecting delinquent personal property taxes, including manufactured homes, are outlined and explained in Series 7200 through Series 7900A in this Manual. 1ST REVISION: 2002