Minnesota Legislature passes omnibus spending bill impacting affordable housing

By Donna Stevermer, CPA

On July 1^st, 2021, the Minnesota Legislature, during a special session, passed an omnibus tax bill (HF9) that included several important changes impacting affordable housing in the state.  While much of the multi-faceted tax bill is designed to help the State achieve conformity with recent Federal Covid-19 related assistance programs, there are several actions that impact the real estate marketplace, and in particular affordable housing.  The following Here are a few highlights of the bill that relate to real estate:

• • An extension of the sunset date of for the Minnesota Historic Structure Rehabilitation Credit by one year to fiscal year 2022.  Allocation certificates that were issued before fiscal year 2023 remain effective through 2025.

• • A change in the calculation of real estate taxes for Class 4d property.  Class 4d property is qualifying low-income rental housing certified to the assessor by Minnesota Housing Finance Agency.   The first tier of market value of class 4d has a classification rate of .75%.  The remaining value of class 4d property has a classification rate of .25%.  For the purposes of this paragraph, the “first tier of market value of class 4d property” means the market value of each housing unit up to the first tier limit of $100,000 for assessment years 2022 and 2023. Effective date begins with assessment year 2022.​

• • The creation of a Minnesota Housing Tax Credit.  A taxpayer is allowed a credit against the tax imposed​ under this chapter or the premiums tax under chapter 297I for contributions of no less than​ $1,000 and no more than $2,000,000 to the Minnesota housing tax credit contribution​ account. The credit equals 85 percent of the amount the taxpayer contributed to the account​ during the taxable year. If the amount of the credit under this section exceeds the taxpayer’s liability for tax​ under this chapter, the excess is a credit carryover to each of the ten succeeding taxable​ years. The entire amount of the excess unused credit for the taxable year must be carried​ first to the earliest of the taxable years to which the credit may be carried and then to each​ successive year to which the credit may be carried. The amount of the unused credit that​ may be added under this paragraph may not exceed the taxpayer’s liability for tax, less any​ credit for the current taxable year. This section is effective for taxable years beginning after December 31, 2022.

This is just a small portion of bill that was passed. Click here for a copy of the complete bill.  

For additional considerations, please reach out to Donna Stevermer, CPA, Partner, or contact our Real Estate Solutions Team at Mahoney to be of help to you in any way.