Purpose

Explain and expand how certain Minnesota properties can qualify for special agricultural homestead tax treatment (class 2a). The bill broadens who can actively farm the land, adds ways to include nearby or noncontiguous land, updates the types of entities that can qualify (like family farm corporations and LLCs), and sets renewal requirements for eligibility. It also adds grandfathering provisions related to past floods and tornado events to keep eligible properties classified as agricultural homesteads.

Key Provisions and What They Do

• Expanded eligibility for class 2a (special agricultural homestead)

  • Real estate under 10 acres that is the owner’s homestead can qualify as class 2a if:
  • The house is on land that is contiguous on at least two sides to agricultural land, land owned by the U.S. Fish and Wildlife Service, or land managed by the Department of Natural Resources with in-lieu taxes paid.
  • The owner also owns a noncontiguous agricultural land parcel of at least 20 acres, located within four townships or cities (or a combination) from the homestead, and the agricultural use value of that noncontiguous land and farm buildings is at least 50% of the market value of the house, garage, and one acre of land.
  • If these conditions are met, the homestead may remain class 2a even if adjoining land changes use, so long as ownership and the 20+ acre noncontiguous parcel with sufficient agricultural use value remain.

• Regular agricultural property can qualify as the owner’s homestead (2a) if specific criteria are met

  • The property consists of at least 40 acres (including government lots and similar land).
  • A person actively farming the land is a close relative of the owner (including spouse, grandparent, grandchild, child, stepchild, sibling, aunt/uncle, niece/nephew, or parent/stepparent) and is Minnesota resident.
  • Neither the owner nor the owner’s spouse claims another agricultural homestead in Minnesota.
  • The owner and the person farming the land live within four townships/cities from the farmland (with a relaxation if living in employer-provided housing).
  • The farming relationship can be by blood or marriage.
  • Land used for noncommercial crop storage or drying on land that is part of the agricultural property can also be included in the homestead.

• Definition and inclusion of “agricultural property”

  • The term “agricultural property” includes class 2a property and any class 2b property that is adjacent to and under the same ownership.

• Noncontiguous land can be included if within reach

  • Noncontiguous land can be part of the homestead if it’s in the same township (or within four townships or cities) from the homestead.
  • Taxpayers must notify the county assessor (and, if applicable, the assessor in another county) when including noncontiguous land.

• Agricultural land with a vested remainder

  • Agricultural land used for purposes of a homestead and actively farmed by a person holding a vested remainder can qualify, and other dwellings on the land used by those with the vested remainder may also be class 2a.

• Special treatment for family farm entities

  • Family farm corporations, joint family farm ventures, family farm LLCs, or partnerships operating a family farm can qualify as agricultural homestead to the same extent as other agricultural property if:
  • The property is at least 40 acres.
  • A shareholder, member, or partner actively farms the land.
  • That person and their spouse are Minnesota residents.
  • Neither that person nor their spouse claims another agricultural homestead.
  • That person does not live farther than four townships/cities from the land.
  • If the land is leased to such an entity and legal title is in the name of an individual who is a member/shareholder/partner, homestead treatment can still apply under this provision.
  • More than half of the entity’s shareholders/members/partners must be people (or spouses of people) who are qualifying relatives under the bill.

• Application and renewal requirements

  • An initial full application must be filed with the county assessor.
  • For subsequent years, owners and active farmers can use a one-page abbreviated renewal form if nothing has changed since the initial filing (items such as operation, residency within the four-township limit, the same operator listed with Farm Service Agency, tax forms, acreage, and farm programs have not changed).
  • If any of the listed items have changed, a new full application must be filed.
  • The assessor needs Social Security numbers or ITINs, signatures, and dates on the forms.
  • The state revenue department will prepare a standard reapplication form for assessors to use.

• Disaster-related grandfathering/retention of classification

  • The bill includes specific grandfathering provisions, allowing certain properties affected by historic floods or tornadoes (e.g., 1997, 1998, 2007, 2009 events) to continue qualifying as agricultural homesteads under pre-existing conditions if certain criteria are met (ownership remains, distance limits, relocation reasons, and timely notifications).

Notable Changes to Existing Law

• Broadens who can actively farm and be a qualifying relative (beyond the owner’s spouse to include other relatives by blood or marriage).
• Allows inclusion of noncontiguous agricultural land tied to the homestead within a defined geographic distance.
• Extends eligibility to family farm entities (corporations, LLCs, partnerships, ventures) so long as majority ownership and active farming meet criteria and key residency/distance requirements are satisfied.
• Introduces an annual renewal process with an abbreviated form when uninterrupted since initial filing, plus a requirement to notify changes and reinstate full applications if needed.
• Adds disaster-specific grandfathering provisions to preserve eligibility for properties affected by past floods and tornadoes.

Administrative and Practical Notes

• The commissioner of revenue will prepare a standard reapplication form for assessors to use.
• Taxpayers must notify assessors when including noncontiguous land and when eligibility changes occur.
• The changes emphasize active farming by qualifying relatives and clear residency/distance rules to determine eligibility.

Relevant Terms - agricultural homestead - class 2a - Minnesota Statutes 273.124 subdivision 14 - real estate under 10 acres - contiguous land - noncontiguous land - active farming - qualifying relative - four townships or four cities (distance rule) - Minnesota residents - government lots - correctional 40s - undivided government lots - class 2b property - Farm Service Agency (FSA) - Schedule F - initial full application - abbreviated renewal application - family farm corporation - joint family farm venture - limited liability company (LLC) - partnership - vested remainder - in-lieu taxes (sections 477A.11–477A.14 or 477A.17) - U.S. Fish and Wildlife Service (USFWS) - Department of Natural Resources (DNR) - disaster-related provisions (floods and tornadoes from 1997, 1998, 2007, 2009) - notification to assessors - four townships or cities threshold