The Agricultural Homestead Exemption - Minnesota

August 11, 2011 | Erin C. Herbold-Swalwell


In Minnesota, agricultural homestead property is taxed at a lower rate than agricultural non-homestead property. In 2008, the defendant changed the property tax classification of farmland owned by a family farm corporation from agricultural-homestead to agricultural non-homestead property.  Here, the farm corporation owned three parcels of land totaling 300 acres. The sole shareholder of the corporation farmed the land and personally owned 80 acres adjacent to the corporation’s farmland where he lived. When the county reclassified the corporate-owned farmland, the corporation through its sole-shareholder filed a petition with the tax court to change the classification back to ag-homestead property. 

The Minnesota Tax Court denied the farmer’s petition and the farmer appealed to the Minnesota Supreme Court. The state’s highest court agreed that the corporation was ineligible for the ag-homestead classification because the sole shareholder already claimed ag-homestead classification on the 80 acres he owned personally. According to the court, granting ag-homestead status to the corporate and personal land would violate Minn. Stat. §273.124(14)(g). Under that provision, ag property owned by a family farm corporation may qualify for ag homestead classification if a shareholder of the corporation who is “actively farming” the property doesn’t claim another ag-homestead in Minnesota. 

It was undisputed that the corporation’s sole shareholder claimed ag-homestead classification on the 80 acres where he resided. The farmer argued that, because he was the sole shareholder of the corporation, the corporation and the personal holdings constituted a “joint family farm venture.” The farmer was essentially arguing that the ag-homestead classification should apply to the entire 380 acres. The appellate court did not agree that the 380 acres, though contiguous, constituted a single farm in this case. 

According to Min. Stat. §273.124(8)(a), a “joint family farm venture” is a “cooperative agreement among two or more farm enterprises authorized to operate a family farm.” Under Minnesota law, a joint family farm venture must own or lease the land in question for the land to qualify as an ag-homestead. Here, the 300 acres was owned by the family farm corporation. The farmer owned the 80 acres personally. The legal title to the acres in question was not in the name of a joint family farm venture. Thus, Minnesota offers an exception to the general requirement that, to claim an ag-homestead, the land must be “occupied and used as a homestead by its owner.” In this case, the land could only have qualified for ag-homestead classification if the land was in the name of the joint family venture. The only part of the farm that qualified was the 80 acres that the farmer owned and occupied.

According to the court, the statute was clear and the Minnesota State Legislature would have amended the statute if they wanted a different result. In any event, the farmer could have gotten around this problem if the joint family farm venture leased the property. Frederick Farms, Inc. v. Olmsted County, No. A10-1089 (Minn. Sup. Ct. Aug. 10, 2011)