Special Agricultural Homestead
September 2004
The homestead classification has undergone several revisions during the past decade. These changes are attributable to new laws and policy updates that were adopted in an attempt to recognize diverse lifestyles and special circumstances. One particular homestead provision that was implemented a few years ago addresses specific situations regarding the ownership, occupancy, and use of agricultural property. It is known as the "Special Agricultural Homestead", and it extends homestead treatment to a property owner who does not live on the farm but actively farms the land or who has a spouse, a son, or a daughter that actively farms the land.
What criteria must be met for a farm to qualify for the Special Agricultural Homestead?
The agricultural property must be at least 40 acres in size. The owner of the farm must: (1) be a Minnesota resident; (2) not claim, nor can the owner's spouse claim, another agricultural homestead in the State; and (3) live no farther than four townships and cities from the property. Furthermore, the owner must either actively farm the land or the person who actively farms the land must: (1) be a Minnesota resident; (2) live within four townships and cities of the property; and (3) be the owner's spouse or the son or daughter of the owner or owner's spouse.
What is meant by the term, "actively farms" the land?
Through property tax policy, assessors have been informed that this term implies, "participation in the day-to-day decision making, labor, and the administration and management of the farm as well as the assumption of all or a portion of the financial risks including the distribution of any profit or losses". In other words, actively farming does not consist of: (1) simply keeping the records for the farm; (2) just occasionally operating a truck or a piece of farm equipment; (3) renting out the farm; or (4) allowing somebody other than the qualified person to farm the land.
Can a property enrolled in:
Conservation Reserve Program (CRP),
Conservation Reserve Enhancement Program (CREP), or
Reinvest in Minnesota (RIM)
satisfy the actively farming requirement to qualify for the Special Agricultural Homestead?
If an agricultural property is entirely enrolled in a conservation land program, then it is not eligible for an actively farming homestead. Land enrolled in CRP/CREP/RIM by definition is not farmable. The rule is that at least 51% of the farmable land must be actively farmed in order for the property to qualify. Farmable land is defined as the land that can be farmed (i.e. tillable ground plus pasture). Wetlands, waste, and woodland are not farmable.
How does a person apply for the Special Agricultural Homestead?
The Special Agricultural Homestead application must be filed on or before December 15th in the assessment year that proceeds the next payable tax year. It may be requested by writing, e-mailing, calling, or visiting the county assessor's office. The person actively farming the property must fill out and sign one part of the application, and the owner must offer information and put a signature on the other two parts of it. If the property owner is also the person actively farming it, then the owner must complete all three sections of the form. In addition to furnishing the requested data, the Farm Service Agency (FSA) number, Form 156 EZ, and IRS Schedule F or an affidavit from a tax preparer acknowledging that it has been filed must be submitted along with the application by the person actively farming the land. Does a Special Agricultural Homestead application have to be filed each year? What is the deadline for filing this application?
The Special Agricultural Homestead re-application form must be filed each year by December 15th. It is available from the county assessor's office. This document may only be completed for property that received a Special Agricultural Homestead and had not changed from the previous year. The person actively farming the property must fill out and sign the operator's part and the owner must complete owner's section of the form. If the person who is actively farming the property is also the property owner, then both parts of the application must be completed. The person actively farming the land must also submit the FSA number and Form 156 EZ with the application. IRS Schedule F is required if the county assessor requests it.
Does a property owner qualifying for the Special Agricultural Homestead need to notify the county assessor if there are any changes in ownership, occupancy, or use of the farm?
If the farm is sold, if the owner or owner's spouse has a change in primary residence, if there is a change in marital status, or if there is a change in the use or person actively farming the land, the homestead law requires the owner to inform the county assessor within thirty days. The failure to provide this notification can result in the property being assessed the tax that is due based upon its correct property classification plus a penalty equal to the same amount of tax.