Bills Would Increase State-Paid Property Tax Credits

March 21, 2022

Rising home values and ensuing property tax shifts have legislators looking at solutions.

House and Senate committees considered bills last week to increase the state-paid property tax relief for homeowners under two existing state programs: the homestead credit refund program and the “targeting” program.

Changes to homestead credit refund program

At a hearing on March 16, the Senate Property Tax Subcommittee considered SF 3185, a bill authored by Sen. Matt Klein (DFL-West St. Paul) that would modify the homestead credit refund program to increase the tax relief provided to homeowners with high tax burdens relative to household income.

Under the homeowner property tax refund program, a homeowner whose property tax burden exceeds certain income thresholds would be eligible for a state-paid refund to offset the property tax burden. The refund maximum is phased down for homeowners with higher incomes and requires a higher “co-pay” for claimants with higher incomes.

SF 3185 would enhance the tax relief provided to eligible homeowners by reducing the co-pay percentage and increasing the maximum refund at all eligible household income levels (up to $126,290). It would also reduce the eligible household income threshold for household incomes between $21,200 and $32,800.

The House Property Tax Division considered the companion bill, HF 3518 (Rep. Cheryl Youakim, DFL-Hopkins), as well as HF 3866 (Rep. Kristin Bahner, DFL-Maple Grove), which would expand the maximum household income eligibility for the homestead credit refund to $155,000. Under current law, the household income maximum is $126,290.

Changes to “targeting” program

Also at that hearing, the committee considered HF 3725 (Rep. John Huot, DFL-Rosemount), which would increase the refund paid to homeowners under the state’s “targeting” program.

Under current law, a homeowner who experiences an increase in property taxes of more than 12%, and the increase is also more than $100, the homeowner is eligible to receive a refund equal to 60% of the increase. The refund is currently capped at $1,000. Under HF 3725, the qualifying tax increase threshold would be reduced to 10%, and the maximum refund would be increased to $2,000.

League supports these changes

The League has a legislative policy that specifically supports programs providing direct state-paid relief to property owners based on their property tax burden relative to their ability to pay. League policy also supports programs that offset the property tax increase for homeowners with relatively large annual tax increases.

These bills will be especially helpful for many homeowners across the state who, over the past several years, have experienced higher property taxes due to home valuation increases relative to household income or large annual increases in their taxes. These bills would assist qualifying homeowners through a state-paid refund and would not shift homeowner taxes to other types of property.

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