Monday, April 4, 2016
An interesting hearing was held last week in the Property Tax Division of the Tax Committee dealing with a long-standing exemption that affects many towns and cities throughout Minnesota. It has to do with fertilizer and chemical containment facilities built at local co-ops and other farm supply businesses. Because of concerns about spills into the environment, the EPA along with the Minnesota Dept. of Agriculture, has long required that concrete berms and other related facilities be constructed so any potential spills could be contained. The Legislature, in the middle 1990’s, passed legislation that such additions to fertilizer and chemical storage facilities should be exempted from property tax.
Fast forward to today, and a couple of problems have arisen with the exemption. First, it hasn’t been granted uniformly across the state. Some county assessors have been allowing the exemption, while others have not. And secondly, and this is where the situation gets complicated, today everything involved with agriculture has gotten bigger and more expensive. Buildings constructed in recent years containing fertilizer and other farm-related chemicals are huge compared to those built 20 or 30 years ago. And, in an effort to have this exemption carried out uniformly, the Dept. of Revenue recently issued guidance spelling out what exactly was included. They ruled that the roof should be included, along with the walls of a building that held fertilizer or chemicals. So, instead of a tax exemption for a cement floor and berms around liquid chemical tanks, for example, this ruling said that basically the entire structure was part of the containment system.
The bill heard in committee, HF2936, would repeal that long-standing exemption, and it certainly caught the attention of many. We heard from several towns where such ag facilities are located and where the exemption was not being granted. They testified that if the Dept. of Revenue clarification was allowed to stand, they would lose thousands of dollars in property tax revenue. I also was in communication with officials from the city of Brooten before and after the hearing, and heard how this would affect their city. A chemical company has both fertilizer and chemical storage facilities in their industrial park, and losing that property tax revenue would be a big loss.
We also heard testimony from those representing the interests of ag supply folks. They discussed how and why the exemption on containment facilities was granted in the first place, and that we should proceed cautiously before lifting it. We were told this is one of 90 such exemptions currently in place in our tax code.
We need to reach a compromise here. When the original exemption was granted some 20 years ago, facilities were much smaller. I don’t think that exempting today’s entire multi-million dollar structures was envisioned back then. But, on the other hand, with today’s facilities containing tanks with capacities of thousands of gallons and also holding fertilizer measured in thousands of tons, these containment structures are more important than ever. The actual containment structures should remain tax-exempt, while the buildings themselves could be taxable.
The house last week passed legislation that’s the first step in making our state compliant with federal Real ID laws. We have time to finish this work as the Dept. of Homeland Security recently announced they would not begin enforcement for passengers boarding airplanes until at least the year 2018 and probably not before 2020.