Minnesota Church Property Tax Exemptions – Use Changes.

Minnesota Church Property Tax Exemptions

Minnesota Church Property Tax Exemptions

Use Changes

Minnesota Church Property Tax – Acquisition of Tax Exempt Status

Taxable real property can acquire tax exempt status upon:

  • its acquisition by a church, and
  • its use for qualifying exempt purposes.

Applications for real property tax exempt status will generally be required in order for tax exempt status to be initially granted, and periodic renewal applications may be required in order for continuing tax exempt status to be thereafter retained.

The county property tax assessor will review a renewal application in order to determine if there has been a change in the use of the property which would result in its loss of tax exempt status.

M.S. Section 272.025 – Minnesota Church Property Tax Exemptions

(i)      Periodic Filing Requirement

M.S. Section 272.025 Subd. 3 requires a property owner claiming a property tax exemption to file an application for exemption with the County tax assessor every third year in order to keep a Minnesota Church Property Tax exemption.

However, Module #5 of the Minnesota Property Tax Administrator’s Manual identifies that the first renewal application may be due less than three years from the date of the initial application, by providing as follows:

For most exempt properties, owners or authorized representatives must reapply for exemption every three years.

No matter what year the owner or authorized entity originally filed for exemption, reapplications must be filed in 2010, 2013, 2016, etc.

Reapplication on a three-year rotating basis does not apply to the following properties:

  • churches or houses of worship
  • property used solely for education purposes by academies, colleges, universities, or seminaries of learning

Churches, houses of worship, and properties used solely for educational purposes by academies, colleges, universities, or seminaries of learning are required to file for an exemption once but only once

 (i.e. they are required to initially file a statement by February 1, but not after that approval).

 (ii)     Churches and Houses of Worship

M.S. Section 272.025, Subd 3(b) identifies that churches and houses of worship are not required to file a application for exemption after an initial application for a Minnesota Church Property Tax exemption has been filed.

Therefore, it appears that M.S. Section 272.025 does not require churches and houses of worship to file a periodic application for tax-exempt status – after the initial application for a Minnesota Church Property Tax exemption – at least with respect to their main church building(s) or houses of worship.

(iii)    Church Property

While the Minnesota Property Tax Administrator’s Manual exempts churches and houses of worship from filing renewal applications – the filing exemption does not apply to church property – which has a different legal definition than churches or houses of worship.

Loss of Tax Exempt Status – Minnesota Church Property Tax Exemptions

The Minnesota Church Property Tax exempt status of church owned real property can be lost by reason of

  • its sale to a nonexempt user, or
  • other change in the use of the property to nonexempt purposes.

The Ramsey County, Minnesota Property Tax web site identifies that there are four primary ways that a tax exempt property can lose its exempt status in any given year:

  • The property is sold to an owner who does not qualify for a property exemption
  • The property owner loses their status as a “qualifying exempt owner”
  • The property ceases to be used exclusively for exempt purposes
  • The property is leased to a non-qualifying tenant

 Change in Use – Minnesota Church Property Tax Exemptions

 (i)      Due to Sale or Other Reason

M.S. Section 272.02 Subd. 38(a) addresses the situation where there has been a change in the use of real property due to a sale or other reason, by providing in part as follows:

Any property . . .

  • exempt from taxation on January 2 of any year,
  • which due to sale or other reason loses its exemption prior to July 1 of any year,

shall be placed on the current assessment rolls for that year.

The valuation shall be determined with respect to its value on January 2 of such year.

The classification shall be based upon

  • the use to which the property was put by the purchaser, or
  • in the event the purchaser has not utilized the property by July 1, the intended use of the property, determined by the county assessor, based upon all relevant facts.

Addressing this issue, Module #5 of the Minnesota Property Tax Administrator’s Manual provides in part as follows:

Any property

  • exempt from taxation on January 2 of an assessment year,
  • which loses its exemption prior to July 1 of that year,

shall be placed on the assessment rolls for that year.

The valuation shall be determined with respect to the January 2 assessment of that year.

The classification shall be based upon the use to which the property is put by the purchaser.

In the event that the purchaser has not used the property by July 1,

  • the intended use of the property,
  • determined by the county assessor based on all relevant facts,

will be used.

(ii)     Minnesota Church Property Tax exemptions – Retroactive Loss of Tax Exempt Status

Please note that if the tax exemption is lost prior to July 1 of any year, the tax assessor will retroactively make the property taxable as of January 2 of that same year.

However, since a real property valuation or determination of taxable status made as of January 2 of year 1 will relate to real property taxes payable in the following year, there will not be an immediate change in the taxes payable in year 1 by reason of a change in taxable status of a property as of January 2 of year 1.

The Ramsey County, Minnesota Property Tax web site identifies the situation where there has been a change use or ownership of a tax exempt property during a given year, in the following manner:

If the exemption is removed prior to July 1st of the current year,

  • the taxable class will begin for the current year
  • for taxes payable the following year;

 If the exemption is removed after June 30th of the current year,

  • the taxable class begins the following assessed year
  • for taxes payable the year after.

(iii)    Minnesota Church Property Tax Exemptions – Acquisition of Property

The retroactivity of a determination of tax exempt status will apply in favor of a church if a church acquires qualifying property prior to July 1 of any year.

M.S. Section 272.02 Subd 38(b) addresses the issue of a change in the usage of real property by reason of an acquisition of the property by the church, by providing in part as follows:

Property, . . . that is subject to tax on January 2 that is acquired before July 1 of the year is exempt for that assessment year if the property is to be used for an exempt purpose under subdivisions 2 to 8.

Addressing this subject, Minnesota Property Tax Administrator’s Manual – Module #5 – Exempt Property, provides in part as follows:

Minnesota Statutes, section 272.02, subdivision 38, specifically clause (b) provides that

“property subject to tax on January 2 that is acquired before July 1 of the year is exempt for that assessment year if the property is to be used for an exempt purpose under subdivisions 2 to 8 [emphasis added].”

The Ramsey County, Minnesota Property Tax web site identifies the situation where there has been a change in ownership of a property during a given year in the following manner:

If the property is purchased after June 30th of the current year, the exempt class does not become effective until the following assessed year.

For example, a property acquired after June 30th, 2014 then becomes exempt for the 2015 assessment for taxes payable in 2016.

(iv)    Minnesota Church Property Tax Exemptions – Change to a Tax Exempt Use

Addressing a change in the use of property owned by a church from a non-qualifying use to a qualifying use, Minnesota Property Tax Administrator’s Manual – Module #5 – Exempt Property, provides in part as follows:

If an exempt institution did not “acquire” the property after the assessment date; rather, they

  • owned the property for several years and 
  • it was put to a taxable use,
  • the acquisition qualifier is moot and 
  • the property should remain taxable for that assessment year.

The exemption may be granted for the following assessment year if all other requirements are met.

For example, a private college has owned a parcel of property for many years that

  • was improved with a single family residence, and
  • was rented to others.

The property was taxable and was classified as residential nonhomestead.

On January 2, the property was occupied by the tenants.

Sometime after the assessment date,

  • the tenants moved out,
  • the college demolished the home, and 
  • applied for exemption.

Since the property was not newly acquired by the college, the property must remain taxable for the current assessment year since it was used for taxable purposes on January 2.

 Conclusion – Minnesota Church Property Tax Exemptions

The tax exempt status of church owned real property can be lost by reason of:

  • its sale to a nonexempt user, or
  • other change in the use of the real property to nonexempt purposes.

Taxable real property can acquire tax exempt status upon:

  • its acquisition by a church, and
  • its use for qualifying exempt purposes.

Initial applications for real property tax exempt status, and periodic applications for tax exempt status, may be required in order to initially be granted, and thereafter retain, real property tax exempt status.

For additional information on Minnesota Chapter 315 churches, see also Dahlelaw.com, or also https://dahlelawchurches.com/minnesota-chapter-315-churches/

For additional information on Minnesota Chapter 317A churches, see also Dahlelaw.com, or also https://dahlelawchurches.com/minnesota-chapter-317a-corporations/

Minnesota Church Attorney

Since 1992, Attorney Gary C. Dahle has represented a variety of Minnesota churches – Baptist, Evangelical, Lutheran, Pentecostal, Presbyterian, and independent churches, with respect to:

Attorney Gary C. Dahle has represented churches located in the Minnesota cities of Arden Hills, Blaine, Bloomington, Brooklyn Park, Burnsville, Chaska, Corcoran, Coon Rapids, Eden Prairie, Fridley, Glencoe, Minneapolis, Mounds View, Roseville, St. Louis Park, St. Paul and Wyoming.

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Copyright 2018

Gary C. Dahle – Attorney at Law

2704 Mounds View Blvd., Mounds View, MN 55112

Phone:  763-780-8390    Fax: 763-780-1735

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Information provided herein is only for general informational and educational purposes. The laws relating to Minnesota churches and non-profit corporations involve many complex legal issues. If you have a specific legal problem about which you are seeking advice, consult with legal counsel. Gary C. Dahle, Attorney at Law, is licensed to practice law only in the State of Minnesota, and in the State of North Dakota, in the United States of America. Therefore, only those persons interested in matters governed by the laws of the State of Minnesota or the State of North Dakota should consult with, or provide information to, Gary C. Dahle, Attorney at Law, or take note of information provided herein.

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For a discussion of Minnesota probate law, see https://dahlelawprobate.com/ and also http://www.dahlelawminnesota.com/ and also https://dahlelaw.com/minnesota-probate/

For information on North Dakota Probate law, see http://www.dahlelawnorthdakota.com/

For information on Minnesota Cemetery Law, see http//:www.dahlelawcemeteries.com

For information on North Dakota Transfer on Death Deeds, see also http://northdakotatransferondeathdeeds.com/