A recent challenge to state-assessed pipeline property could have a huge impact on cities and other local units of government.
(Published Apr 17, 2017)
The Senate Taxes Committee has scheduled an informational hearing for April 20 that will focus on state assessment practices related to pipeline property. The hearing is, in part, related to a recent challenge by Enbridge Energy Partners to the valuation of a pipeline that runs across 13 northern Minnesota counties and through at least 15 cities, including Bemidji, Wilton, Bena, Cass Lake, Leonard, Deer River, Cohasset, Grand Rapids, Warba, Zemple, LaPrairie, Coleraine, Trail, Oklee, and Plummer.
The Enbridge challenge covers five years of property taxes—2012 through 2016. If the challenge is successful, local units of government hosting pipeline property owned by Enbridge Energy Partners would be required to refund overpaid property taxes, which in some cases could be significant relative to impacted city budgets. The state also levies a property tax on pipeline property, and the outcome of the case could also impact the state budget.
While the Minnesota Department of Revenue determines the taxable valuation of pipelines and other property, such as railroad property and utility property, that valuation is subsequently included in the property tax base of local units of government and thus the pipeline owner pays local property taxes.
Earlier this session, bills were introduced to make the state responsible for the repayment of overpaid local property taxes related to state-assessed property. The bills, HF 1628 (Rep. Debra Kiel, R-Crookston) and SF 1630 (Sen. Paul Utke, R-Park Rapids), were heard in the House and Senate Taxes committees, but were not included in either the House or the Senate versions of the omnibus tax bill. However, the hearing is an indication that the issue is still under consideration this legislative session.
Although the Enbridge Energy Partners valuation challenge has been one of the most publicized recent challenges, Minnesota hosts several other pipelines that are also assessed by the state, and future valuation challenges of other systems are always a possibility.
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