A Property Tax Relief Program for Qualifying Homeowners
This information brief describes “targeting,” a property tax refund program that targets property tax relief to homeowners who have large property tax increases in one year. It also includes historical information on refund data and program details.
Targeting provides a state refund for homeowners with large property tax increases
Targeting offsets some of the increase in a homeowner’s property taxes if the taxes increase by more than 12 percent. It is closely related to another property tax relief program called the homestead credit refund,1 except that the homestead credit refund is linked to the homeowner’s income while targeting is not. Targeting is sometimes referred to as the “special” homeowner’s property tax refund. To qualify for a refund, a homeowner’s property tax must increase over his or her last year’s tax by more than both 12 percent and $100. The refund equals 60 percent2 of the tax increase over the greater of these minimums. The maximum refund is $1,000. The estimated cost of the targeting program for taxes payable in 2017 (fiscal year 2018) is $6.77 million. The following example shows how the refund is calculated.
|Payable 2016 property tax
Payable 2017 property tax
|2017 tax increase (over 2016)
Taxpayer pays first 12% of increase compared to last year’s tax, which must be at least $100 (12% x $1,600)
|Remaining increase eligible for refund ($400 – $192 = $208)||$ 208|
|State pays 60% of the excess over 12%, up to $1,000 (60% x $208 = $125)||$125|
|Amount of 2017 increase paid by taxpayer ($400 – $125)||$ 275|
With the targeting refund, the taxpayer’s $400 tax increase is reduced to an “out-of-pocket” property tax increase of $275. Put another way, a 25 percent increase from the previous year is reduced to 17.2 percent.
The taxpayer pays the full $2,000 amount of the 2017 property tax to the county. The first half is due in May and the second half in October. The taxpayer may apply to the state for a targeting refund any time after receiving his or her property tax statement. Refunds are paid in September 2017, at the same time the homestead credit refund is paid (provided the taxpayer has applied for the refunds by August 15, 2017). Refund applications received after August 15 will be paid within 60 days of filing. Since both the targeting and the homestead credit refunds are paid to the taxpayer before the October tax payment is due, they can be used to defray some of the current year’s tax.
The refund is based upon the net tax increase from the current year over the year immediately preceding it. The tax is before deduction of the homestead credit refund. The tax on any improvements made to the property (such as adding a new garage or new room) is excluded in determining the net property tax increase. The effect of the targeting program is cumulative. That is, the net tax after the targeting refund in one year becomes the basis for calculating the targeting refund in the next year. As a result, a taxpayer could receive targeting relief for several years on the basis of a single year’s large tax increase; targeting, in effect, phases in the large increase over several years.
In the case of farm homesteads, the refund applies to taxes on the house, garage, and one acre of land, which is the same portion of the tax that qualifies for the homestead credit refund.
Targeting is administered with the homestead credit refund program
To simplify administration for both taxpayers and the Department of Revenue (DOR), the targeting refund is administered with the homestead credit refund. All of the definitions, filing procedures, penalties, etc., that apply to the homestead credit refund apply to the targeting refund.
Refund claims are filed using the Minnesota Department of Revenue Form M1PR, the homestead credit refund and renter property tax refund form. There is a separate schedule on the back of the M1PR (Schedule 1 – Special Refund) for the targeting program. The taxpayer may file for this refund after receiving his or her property tax statement. Claims filed before August 15, 2017, will be paid beginning in late September 2017. Homeowners who file electronically and meet all other requirements may receive refund payments up to 30 days earlier. Refund applications received after August 15 will be paid within 60 days of filing. The deadline for filing claims based on taxes payable in 2017 is August 15, 2018; taxpayers filing claims after that date will not receive a refund. (Forms are available online at DOR’s website, under “Property Tax Refund” (www.taxes.state.mn.us). The DOR’s telephone number to request forms is 651-296-4444.)
Targeting has no income restrictions
Unlike the homestead credit refund, the targeting refund is not tied to the taxpayer’s household income. In the homestead credit refund, the taxpayer’s household income may not exceed a specified maximum and the amount of household income affects the amount of the refund. Generally, the lower the income, the higher the refund, given the same qualifying property tax. (See the House Research publication, Homestead Credit Refund Program, November 2016).
The targeting refund, on the other hand, does not use income as a factor, nor is there any limitation on the taxpayer’s household income.3 Therefore, taxpayers who do not qualify for the homestead credit refund due to income restrictions are eligible for the targeting refund, if they have sufficiently large increases in tax from one year to the next. The targeting refund is designed to partially protect all homeowners, regardless of income, from a large property tax increase in one year.
The targeting program has been in existence for over 35 years
The 1980 Legislature initially enacted the “targeting refund” as a one-year program for taxes payable in 1981. It was reenacted intermittently and viewed as a temporary program during the next several years. Then in the 1989 special session, the legislature made the program permanent, and it has remained operative ever since. Tables 1 and 2 on the following pages present historical data for the targeting refund program.
TABLE 2 MISSING
For more information about property taxes, visit the property tax area of our website, www.house.mn/hrd/.
This article was copied from a government document.
1 Prior to 2014, the homestead credit refund was known as the homeowner’s property tax refund.
2 Laws 2012, chapter 294, article 1, section 6, increased the refund percentage from 60 percent to 90 percent
for returns based on taxes payable in 2012 only
3 See Table 2; there was an exception to this in 1983 (payable 1984).
4 Includes both targeting programs. See Table 2 for a description of the two programs.
5 A total of 49,275 returns was filed in 1989. These two total to more than 49,275 because some taxpayers
qualified for both targeting refunds; both refunds were filed on the same return.
6 Department of Revenue estimate from the November 2016 forecast is for $7.01 million for 2015 returns and
$6.77 million for 2016 returns. However, the statutory appropriation is unlimited.
7 For years in which a specific appropriation amount is listed, if estimated total refund claims exceeded the amount appropriated, the Commissioner of Revenue was required
to adjust the qualifying amount of tax increase or the percentage factor so that the total refund claims did not exceed the appropriation
8 The original appropriation from the 1989 law was $7 million. Appropriation was increased to $13 million by Laws 1990, chapter 604, article 5, section 4.
9 Appropriation was unlimited by Laws 1991, chapter 291, article 1, section 34. (The original appropriation from the 1989 law was $6.5 million.)
10 Original appropriation from Laws 1991, chapter 291, article 1, section 34, was $5.5 million. Appropriation was unlimited by Laws 1992, chapter 511, article 2, section 30.
11 Laws 1994, chapter 383, restores the $100 minimum qualifying increase and removed the appropriation cap. The Commissioner of Revenue had increased the minimum
qualifying increase to $300 because the original appropriation of $5.5 million from the 1992 law was insufficient to pay the expected refunds.
12 Laws 2001, first special session, chapter 5, article 4, section 1, provides that beginning with returns based on taxes payable in 2002, the portion of an agricultural homestead’s tax qualifying for targeting would be limited to the tax on the house, garage, and surrounding one acre of land. Laws 2001, first special session, chapter 5, article 4, section 2, provided that beginning with refunds based on taxes payable in 2002, the targeting refund is calculated before the regular refund. Before this change, the regular property tax refund was calculated first.