Minnesota

Property Classification:

There are five classes of property in Minnesota containing various subclasses. The property within each subclass is assessed at specified percentages of market value, termed "class rates."

Class 1: Residential

Class 2: Agricultural

Class 3: Commercial and industrial

Class 4: Miscellaneous Real Estate

Class 5: Miscellaneous

Forest land generally falls into one of the following categories:

Class 2b property - Rural Vacant Land (Minn. Stat. § 273.13)

Class 2b rural vacant land consists of parcels of property that are real estate, rural in character and not used for agricultural purposes, including land used for growing trees for timber, lumber, and wood and wood products, that is not improved with a structure.

All Class 2b property has a net class rate of 1.0 percent of market value.

Class 2c property - Managed forest land (Minn. Stat. § 273.13)

Class 2c property is managed forest land that would otherwise likely be classified as class 2b, but its use is restricted under a forest management plan. The property must be:

• no less than 20 acres and no more than 1,920 acres statewide per taxpayer

• under a forest management plan (less than 10 years old) that meets the management plan requirements of Chapter 290C and is registered with the MN DNR

• not enrolled in the Sustainable Forest Incentive Act (SFIA) program.

All Class 2c property has a class rate of 0.65 percent of market value.

Sustainable Forest Incentive Act (SFIA): (Minn. Stat. § 290C.01)

The SFIA program provides annual payments to landowners enrolled in the program. Property is eligible for enrollment in the SFIA program if:

(1) the property consists of at least 20 contiguous acres and at least 50% of the land is forest land during the time that the land is enrolled in the program;

(2) a forest management plan for the property has been prepared by an approved plan writer and is implemented during the period in which the land is enrolled;

(3) timber harvesting and forest management guidelines are used in conjunction with any timber harvesting or forest management activities conducted on the land during the period in which the land is enrolled;

(4) the property will be enrolled for a period of at least eight years;

(5) there are no delinquent property taxes on the property;

(6) claimants enrolling more than 1,920 contiguous acres must allow year-round, non-motorized access to fish and wildlife resources on enrolled land, except within one-fourth mile of a permanent dwelling or during periods of high fire hazard (however, such claimants do not extent any assurance that the land is safe for any purpose, confer upon the person the legal status of an invitee or licensee to whom a duty of care is owed, or assume responsibility for or incur liability for any injury to the person or property.

(7) the landowner has registered the forest management plan with the MN DNR; and

(8) no portion of the tax parcel containing the enrolled land is classified as class 2c.

Forest land - "Forest land" means land containing a minimum of 20 contiguous acres for which the owner has implemented a forest management plan that was prepared or updated within the past ten years by an approved plan writer. For purposes of this subdivision, acres are considered to be contiguous even if they are separated by a road, waterway, railroad track, or other similar intervening property. At least 50 percent of the contiguous acreage must meet the definition of forest land in section 88.01, subdivision 7. For the purposes of sections 290C.01 to 209C.13, forest land does not include (i) land used for residential or agricultural purposes, (ii) land enrolled in the reinvest in Minnesota program, a state or federal conservation reserve or easement reserve program under sections 103F.501 to 103F.531, the Minnesota agricultural property tax law under section 273.111, or land subject to agricultural land preservation controls or restrictions as defined in section 40A.02 or under the Metropolitan Agricultural Preserves Act under chapter 473H, (iii) any land that becomes subject to a conservation easement funded under section 97A.056 or a comparable permanent easement conveyed to a governmental or nonprofit entity after May 30, 2013; or (iv) land improved with a structure, pavement, other than a paved trail under easement, lease, or terminable license to the state of Minnesota or a political subdivision; sewer, campsite, or any road, other than a township road, used for purposes not prescribed in the forest management plan.

Forest management plan - "Forest management plan" means a written document providing a framework for site-specific healthy, productive, and sustainable forest resources. A forest management plan must include at least the following: (i) owner-specific forest management goals for the property; (ii) a reliable field inventory of the individual forest cover types, their age, and density; (iii) a description of the soil type and quality; (iv) an aerial photo and/or map of the vegetation and other natural features of the property clearly indicating the boundaries of the property and of the forest land; (v) the proposed future conditions of the property; (vi) prescriptions to meet proposed future conditions of the property; (vii) a recommended timetable for implementing the prescribed activities; and (viii) a legal description of the parcels encompassing the parcels included in the plan. All management activities prescribed in a plan must be in accordance with the recommended timber harvesting and forest management guidelines. The commissioner of natural resources shall provide a framework for plan content and updating and revising plans.

Application - Applicants must submit an application to the commissioner of the Department of Revenue by October 31 in order for the land to be eligible for enrollment beginning in the next year. Before the application, applicants must record a covenant on the property with the County Recorder’s office. A DNR-registered forest management plan is required. The DOR shall provide data to the DNR to determine whether the land qualifies for enrollment. The DNR must notifies the DOR whether the land qualifies within 30 days of the data being available. The Commissioner of Natural Resources will notify the applicant within 90 days after receipt of a completed application whether the land has been approved for enrollment.

Incentive Payment - An approved claimant under the sustainable forest incentive program is eligible to receive an annual payment.

The annual payment for each acre of land enrolled in the program is determined by estimating a percentage of property tax that would have been paid per acre by using the previous year’s statewide average total tax for all taxes levied within townships or unorganized territories, the estimated market value per acre for class 2c managed forest lands, and a class rate of 1%.

The payment rate that a land owner will receive depends on the covenant length selected as follows:

• Enrolled land that is subject to a conservation easement conveyed to a governmental or nonprofit entity before May 31, 2013, must have an 8-year covenant and receives 25% of the calculated amount.

• Enrolled land that is not subject to a conservation easement and under an 8-year covenant receives 65% of the calculated amount.

• Enrolled land that is not subject to a conservation easement and under a 20-year covenant receives 90% of the calculated amount.

• Enrolled land that is not subject to a conservation easement and under a 50-year covenant receives 115% of the calculated amount.

The payment rate cannot increase or decrease by more than 10% from the previous year. The payment rate also cannot be less than the rate received by landowners in 2017 ($7 per acre). These payment restrictions do not apply if an eligible claimant chooses to change the length of the covenant by May 15, 2019 (in that case, the new payment amount would apply).

The 2020 payment rates are:

Covenant Length	Payment Rate (per acre)
8 years	Less than 1,920 acres enrolled: $9.40 1,920 or more acres enrolled: $13.01
20 years	Less than 1,920 acres enrolled: $13.01 1,920 or more acres enrolled: $16.63
50 years	Less than 1,920 acres enrolled: $16.63 1,920 or more acres enrolled: $20.24

Source: MN DOR, 2020.

An additional payment is provided for claimants enrolling more than 1,920 acres where public access is allowed. The additional payment rate is equal to 25% of the calculated payment. Lands over 1,920 acres that are subject to a conservation easement funded under section 97A.056 or permanent easement conveyed to a governmental or nonprofit entity are excluded from receiving this additional payment.

Annual Certification. The commissioner of natural resources to certify the lands eligible to receive SFIA payments to the commissioner of revenue by September 15 of each year.

Withdrawal Procedures

Landowners that want to withdraw must follow these procedures:

• If the landowner requests to be removed from the program, they must wait to request removal until one-half of the number of years of the covenant has been met (four years, 10 years, or 25 years).

• If a government entity or nonprofit acquires a permanent conservation easement on the enrolled property and the easement is at least as restrictive as the current covenant, the commissioner of natural resources must notify the commissioner of revenue that the lands acquired are eligible for early withdrawal from the program without penalty.

• Upon request of the claimant, land that is subject to fee or easement acquisition or leased to the state of Minnesota or a political subdivision of the state for the public purpose of a paved trail can be withdrawn early from the program without penalty.

The land is removed from the program at the beginning of the year following the receipt of the termination notice. Once withdrawn, the land is no longer eligible for SFIA incentive payments, and the landowner must wait three years before applying to re-enroll any of the properties removed.

Penalty for removal - If the DOR determines that forest land violates the conditions of enrollment, it can remove the forest land from the SFIA program. Reasons for removing land from SFIA status include not having or following the forest management plan, not using timber harvesting/forest management guidelines when conducting land management activities, having delinquent property taxes on any lands enrolled, not allowing non-motorized public access if required to do so, allowing land uses inconsistent with the act, and not completing and returning the annual certification form attesting to the DOR that the requirements and conditions for enrollment are being met.

Penalty equals to: (1) 30% of the estimated market value as property reclassified due to the change in use, as determined by the assessor; and (2) the lesser of payments received over half the duration of the covenant, or payments received over the total years enrolled, plus interest.

Landowners do have the right to appeal to the tax court the DOR's decision to remove the property from SFIA status.

Auxiliary Forest:

No new contracts have been accepted under the Auxiliary Forest Tax since June 30, 1974.

Tree growth tax:

Effective January 2002, all forest land enrolled in the Tree Growth Tax Law was converted to taxation under the state's normal (ad valorem) property tax system. This means that 2002 will be the last year landowners will pay property taxes based on Tree Growth tax rates.

There is no yield tax or severance tax in Minnesota.

The Minnesota Department of Natural Resources. Sustainable Forest Incentive Act (SFIA). https://www.dnr.state.mn.us/foreststewardship/sfia/index.html

Kilgore, M.A. 2002. Minnesota's Sustainable Forest Incentive Act: A landowner's guide. Department of Forest Resources, College of Food, Agricultural and Natural Resource Sciences, University of Minnesota, St. Paul, MN.

Minnesota Department of Revenue. Property tax administrator’s manual. https://www.revenue.state.mn.us/property-tax-administrators-manual

Minnesota Department of Revenue. 2018. Class 2c Managed Forest Land. Property Tax Fact Sheet 12. St. Paul, MN.

Minnesota Department of Revenue. 2017. The Sustainable Forest Incentive Act. Property Tax Fact Sheet 9a. St. Paul, MN.

Minnesota Department of Revenue. 2017. The Sustainable Forest Incentive Act FAQs. Property Tax Fact Sheet 9b. St. Paul, MN.

Baughman, M., and M. Reichenbach. 2010. Property tax relief for forest landowners.