By Chad & Sara Huebener
Our Minnesota Association of REALTORS just compiled a booklet of the recent tax bills that moved through the Minnesota legislature as it pertains to housing. The legislature's goal this year was to balance the budget and create jobs to stabilize the economy. Here is a partial summary of what passed, and what did not. I will expand on this list in future blog posts in the interest of time. (For those who are simply curious, every one of the representatives proposing these bills was of the DFL party.)
1. The mortgage interest deduction and property tax deductions, both of which are considered tax expenditures for the State, were on the chopping block this legislative season. Anyone who owns a home knows these are among the top benefits of homeownership, and eliminating these deductions to homeowners would further cripple our housing market. This bill did NOT pass.
2. As part of th Omnibus Tax Bill (a collection of numerous tax provisions rolled into one bill), it was proposed that the relative homestead classification be prohibited on new properties seeking such qualification after December 16, 2010. The relative homestead provision allows residential real estate occupied by and used for a homestead by the owner's relative (defined as a parent, stepparent, child, stephchild, grandparent, grandchild, brother, sister, uncle, aunt, nepher or niece) to receive an additional tax credit that non-homesteaded properties do not have. The prohibition on new relative homesteads did NOT pass.
3. As part of the Omnibus Tax Bill, the Department of Revenue is to report to the legislature by February 15, 2011, suggestions for a process of periodic review and/or sunset or extention of tax expenditures (such as the mortgage interest and property tax deductions MID & PTD, respectively). This DID pass. The Minnesota Association of REALTORS is working to help preserve MID and PTD.
4. Each year a proposal comes forward seeking to increase the mortgage registry tax and deed tax rate, with the additional revenues being dedicated to three housing programs advocated by affordable housing groups.
This year the proposal was to capture the growth in the mortgage registry tax and deed tax revenues from a base year and direct those dollars to the Minnesota Housing Finance Agency (MHFA) - currently all these revenues go into the general fund for the State. The base line for growth would start in 2011 and end in 2021. In the bill, MHFA would need to annually report their progress in creating 1000 affordable housing units, to be available to households with incomes at or below 115% of state or median income as determined by HUD (up to $91,885 in the metro area). The Minnesota Association of REALTORS believes that increasing the mortgage registry and deed taxes deprives homeowners of their equity and increases the costs to sell a home, thereby REDUCING housing affordability. This bill did NOT pass.
5. A ban on Private Transfer Fees (PTF) passed. Private Transfer Fees are obligations a third party attaches to real property by adding a covenant to the deed. It requires future buyers pay a percentage of the selling price to the designated third party every time the property transfers hands. There is no cap the failure to pay can result in the third party having a claim to the property. A new comprehensive ban on PTF's PASSED.
6. A bill was proposed to modify the seller disclosure requirements, such that a seller would need to provide a written disclosure before signing any purchase agreements, whether the property was a nuisance property during the seller's ownership. A nuisance is usually tied to a homeowner's behavior and is loose and subjective, and the rules would require, as an example, that someone having a bonfire past the allowed time and who had thus received a notice for such an issue, would have to disclose their property as a nuisance property. This bill did NOT pass. 
7. A bill declaring an econonmic state of emergency in Minnesota attempted to provide for a two-year stay on foreclosures. The bill would have provided protections for tenants in rental properties going through foreclosure, and would have stayed a foreclosure for two years if a homeowner wanted to reside there, so long as they could continue to make their payments at the rate they paid when the stay began, or at 41% of their income, whichever is less. (Currently a Minnesota homeowner can reside in their property up to 6-12 months from the time they stop paying their mortgage.) This bill did NOT pass.
8. A Foreclosure Procurement bill just PASSED, which modifies and increases the number of notices a lender must send to a mortgagor going through foreclosure. Namely, the Foreclosure Advice Notice must be provided every 60 days telling the homeowner how to obtain help through the process of foreclosure. The Redemption Rights Notice must explain that the mortgagor can sell the property, detail how to find out the winning bid/sale price, and how to obtain further help. The Notice of Results of Sale has to be provided outlining the date and amount of Sheriff's sale, identify the purchaser, and more. This bill PASSED and went into effect August 1, 2010.
9. It was proposed that before transferring any type of property, a wetland disclosure bill would require sellers to disclose the existence and location of all wetlands on the property as certified by the county. To receive certification, a full wetland delineation was required in order to determine if a wetland exists, and if so, where it is. This would also apply to, for example, someone on the 23rd floor of a condo building. This bill would increase the cost to sell any type of real estate and the wetland delineations could not be done in winter, and would therefore delay the sale for months. This bill did NOT pass.
