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UNDERSTANDING YOUR ASSESSMENT
School Building Bond Agricultural Credit (November 2017)
In some school districts, the tax base can be heavily dependent on agricultural land. In recent years, school districts with a large share of farm land have had less success passing capital referenda than those with less farm land. The new School Building Bond Agricultural Credit also known as the School Bond Credit provides tax relief for owners of farm land in districts with existing bonded debt levies. It is a state legislative effort to balance the needs for student learning with an equitable tax on farm land and help school districts have more success in passing capital referenda to fund new schools or school renovations.
Minn. Stat. § 273.1387 was enacted to provide for a property tax credit on all agricultural land and buildings equal to 40% of the tax on the property attributable to school district bonded debt levies. This credit will be shown on the Proposed Property Tax Notice as a separate line and will be aggregated with the existing Agricultural Homestead Credit on the Tax Statement beginning with taxes payable in 2018.
What property classification qualifies?
The School Bond Credit applies to all property classified as 2a (agricultural land), 2b (rural vacant land), and 2c (managed forest land), excluding the house, garage, and surrounding 1 acre of land of an agricultural homestead. In other words, it is based on values within a classification, and not on homesteads or linked ownership scenarios. Each county calculates this credit specifically on the acres in the county.
How is this credit calculated?
The County Auditor-Treasurer calculates a school debt tax rate for each school district. The school debt tax rate is the school debt service levy divided by the total Net Tax Capacity of all taxable property in the school district. The credit equals 40% of the qualifying property’s Net Tax Capacity (excluding HGA) multiplied by the school debt tax rate. This credit applies to all school debt levies, whether or not they are voter-approved.
The School Bond Credit is subtracted from the gross taxes on a property to determine the net property taxes. It comes before the Agricultural Homestead Market Value Credit but after several other applicable credits (i.e. disaster credits, power line credit, metropolitan agricultural preserves credit, enterprise zone credit, disparity reduction credit, and the county conservation credit) are applied.
Example:
ISD-123 Somewhere, MN
School Debt Total Net Tax Capacity School Debt Service Levy of All Taxable Property Tax Rate $2,333,823 $9,891,464 23.59%
$2,333,823/$9,891,464 = 0.2359 or say, 23.59%
Parcel #1
$400,000 Taxable Market Value (Ag/Rural Vacant Land Homestead Parcel with/without Outbuildings).
$400,000 x 0.005 Ag/Rural Vacant Land Homestead Classification Rate = $2,000 (Net Tax Capacity).
$2,000 x 0.40 = $800 School Building Bond Ag Credit Net Tax Capacity
$800 x 0.2359 = $188.72 School Bond Credit
Parcel #2
$580,000 Taxable Market Value (Ag/Rural Vacant Land Non-Homestead Parcel with/without Outbuildings).
$580,000 x 0.100 Ag/Rural Vacant Land Non-Homestead Classification Rate = $5,800 (Net Tax Capacity).
$5,800 x 0.40 = $2,320 School Building Bond Ag Credit Net Tax Capacity
$2,320 x 0.2359 = $547.28 School Bond Credit
The amount of the School Bond Credit will vary among properties according to the debt service levy of a school district, the total net tax capacity value of all taxable property within that district, and the valuation and classification of each parcel of 2a, 2b, and 2c property excluding the house, garage, and surrounding 1 acre of an agricultural homestead. Thus, the school debt tax rate for each school district will be different and the amount received for each qualifying parcel will also differ based on its taxable market value and classification.
Do schools get reimbursed for the tax dollars reduced by this credit?
Yes, there is an open and standing appropriation from the state general fund to pay for this credit. The Commissioner of Revenue reviews the credit calculated by the County Auditor-Treasurer for accuracy each year and then certifies the amount to the Commissioner of Revenue who allocates the reimbursement of tax dollars to each school district.
If you have any questions regarding this information or topic suggestions for a future column, please contact us.
Stearns County Assessor's Office
Administration Center, Room 37
705 Courthouse Square
St. Cloud MN 56303
320.656.3680
or e-mail the Assessor: jeff.johnson@co.stearns.mn.us |
