SAINT PAUL, Minn. – Today, the House Taxes Committee held a remote hearing on legislation authored by Rep. Rob Ecklund (DFL – International Falls) to increase Payments in Lieu of Taxes (PILT) for natural resources land administered by counties and the Minnesota Department of Natural Resources (DNR). The bill also creates additional PILT payment amounts for counties with high proportions of PILT eligible lands to help improve equity within the program itself.
“PILT was created specifically to ensure fairness for counties when they have significant amounts of state land and therefore a lower tax base. However, there are vast disparities within the current PILT formula, which run directly contrary to the program’s intent in the first place,” Rep. Ecklund said. “This bill will go a long way toward addressing these significant inequities within PILT, and will ultimately reduce property taxes for folks in northern Minnesota.”
The legislature created PILT in 1979 to compensate counties for the loss of tax base from state ownership of land, including state parks, state forests, scenic and natural areas, and wildlife management areas. In 2021, the Department of Revenue distributed $36.3 million in PILT payments to counties, and some of those payments are further shared with townships and local school districts.
Despite 95% of PILT land being in northern Minnesota – including over half of all land in Koochiching, Lake of the Woods, and Aitkin counties eligible for PILT – the bulk of PILT increases over the past four decades have gone to southern Minnesota counties. The inequity is a result of higher valuations given to Acquired Natural Resources Land, which includes DNR-administered land acquired by purchase, condemnation, or gift. In 2021, payments for these lands topped $5 per acre, or 0.75% of appraised value, as opposed to just $2 per acre for other natural resources land administered by counties or the DNR. The current formula also ignores counties’ obligations to manage lands, including tax-forfeited plots.
On top of increasing PILT payments from $2 to $3 per acre, Rep. Ecklund’s bill creates two additional PILT payment amounts for counties with a high proportion of PILT-qualifying land. For counties where PILT eligible acreage is at least 25% of the county’s total acreage, payments are increased by $0.18 per acre of PILT eligible land. For counties where PILT eligible acreage is between ten and 25% of the county’s total acreage, payments are increased by $0.08 per acre of PILT eligible land. Additionally, the bill will hold counties harmless by preventing the appraised value of Acquired Natural Resources Land from decreasing from one appraisal to the next, and indexes payment amounts for all natural resources lands to inflation.
The Association of Minnesota Counties and the Minnesota Inter-County Association both strongly support the bill. The legislation would become effective starting with payments made in 2023.
The committee laid the bill over for future consideration in a larger package of tax legislation. Documents and other information from the hearing are available on the committee webpage. Video of the hearing will be available on House Public Information Services’ YouTube channel.