Minnesota county’s cabin rentals face tax debate
MINNEAPOLIS (AP) — The rental market for vacation cabins in northern Minnesota is so popular that one county may change how such dwellings are classified to ensure the tax burden is fairly distributed.
Minnesota properties fall into one of dozens of classifications for tax purposes, but some assessors said there’s no clear category for rented-out vacation homes. Cook County Assessor Todd Smith is seeking guidance from state officials as his colleagues in other counties watch, the Star Tribune reported .
″(Cook County is) leading the pack because they are affected the most,” said Gregg Swartwoudt, assessor for Lake County. “We’re all waiting to see what happens.”
Officials in the Cook County seat of Grand Marais recently found that 10 percent of the county’s taxable parcels were listed on vacation rental websites. The cabins sold for high prices, and state law requires assessors to use those sale prices to determine taxable value on nearby comparable properties, Smith said.
The sales were “driving the market, so values were going up,” he said.
Smith said his office began to reconsider whether it was fair to assign the “noncommercial season residential recreational” classification to both those owning properties used solely as family cabins and those that seemed designed to always be rented out. He had considered designating popular rentals as commercial, a decision that could have raised some property taxes by up to 300 percent.
The proposal sparked panic among some longtime residents who have recently invested into building properties to rent out. Some argued most short-term rentals aren’t profitable enough for a commercial classification.
“My income is based on 150 nights a year,” said Tim Thone, who has offered a house he built as a vacation rental for decades. “You really can’t just paint it with a brush as if somebody’s there every day.”
Smith said he hopes the state Revenue Department can provide advice, but he hasn’t received a clear answer.
“Changes in property use over time, including increase of vacation rentals by owner properties, create new circumstances,” a department email to the newspaper said. “Our objective is to assist counties to apply the statute in a way that classifies property based on primary use.”
Information from: Star Tribune, http://www.startribune.com