ST PAUL, Minn. — Some Minnesota cabin and vacation property owners will receive letters this month posing questions that could carry substantial tax ramifications, and could bump their land into a pricier commercial classification.
Assessors in Cook County along the Lake Superior shore and Otter Tail County in northwestern Minnesota are among those that recently mailed out notices, Minnesota Public Radio News reported.
Under penalty of law for making erroneous statements, property owners are asked to list the number of days they personally stay at a property and the number of nights other people rent it for brief getaways.
“That’s where you have an inequity,” said Cook County Assesor Robert Thompson, “when a hotel is paying a commercial tax and a vacation rental is not paying a commercial tax but they’re operating in the same fashion and renting short-term.”
Thompson said the county has roughly 600 seasonal recreational properties at issue — a combination of cabins and individually owned resort units. Thompson set a mid-January deadline. If a form isn’t returned, he said the county would turn to information from vendors that track rental data to make a decision.
“If it’s rented more than it’s used personally, it’s going to be classified commercial,” Thompson said. “That is following the Department of Revenue’s guidance.”
Revenue Commissioner Cynthia Bauerly said the memo was not an order, but was intended to provide stability across the state. Bauerly noted local assessors classify individual parcels for property tax purposes.
However, other counties took it as a Revenue Department order. Otter Tail County’s letter to property owners said the state agency “recently directed all county assessors to review the property tax classifications of properties offered for short-term vacation rentals.”
Otter Tail officials cautioned that failure to respond by year's end would result in a commercial classification.
Statewide, there are about 111,000 parcels valued at $10,000 or more that are classified as seasonal recreational. Bauerly believes a small fraction face classification changes, but notes it is too soon to conclude.
In May, Minnesota's tax agency advised assessors on methods to classify properties considered short-term rentals — those that are rented for less than 30 straight days. The guidance was a response to queries the department has received amid the boom of lodging services such as VRBO, Airbnb and others.
Daryl Moeller, president of the Minnesota Association of Assessing Officers, said via email that the association expects state legislators to take up the issue in 2020.
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