Over the past four years Alliance has provided updates related to our effort to maintain property tax exemption status after being denied exemption by Hennepin County in 2020. After several years of advocacy, Alliance prevailed and the Minnesota Supreme Court affirmed our exemption status according to state law. This was a win not only for Alliance, but for nonprofit-owned affordable housing across the state.
Alliance successfully brought an action in the Minnesota Tax Court to retain these exemptions. Hennepin County then appealed to the Minnesota Supreme Court, which affirmed the tax court’s decision. The Court held that the properties in question should be tax-exempt since they are owned by a 501(c)(3) nonprofit organization and rented to fulfill its charitable purpose of providing affordable housing. Hennepin County is now advocating for legislation in the Minnesota Legislature that would deny tax exemption unless “a portion of the property is permanently used by the charitable organization to provide services to the intended beneficiaries of the organization’s work.
Hennepin County is seeking legislation as part of the omnibus tax bill (SF 5234/HF 5247) that would effectively eliminate tax exemption for some nonprofit-owned affordable housing rented to low-income and formerly homeless Minnesotans.
The change proposed by Hennepin County would effectively eliminate the property tax-exempt status for nonprofit housing providers across Minnesota, many of whom serve Minnesotans facing the greatest risk of homelessness. Organizations like Alliance operate at a loss and must seek charitable donations to help pay the cost of operating these properties, as rental revenues fall well short of operating expenses.
Eliminating tax exemption for these properties would require Alliance to either seek significant additional donations or subsidies, or to raise the rents charged to tenants who are already struggling to afford housing. This would have a $100,000 annual impact on Alliance alone.
Alliance and its peers hope to work with Hennepin County to meet their shared goals of preventing homelessness and ensuring a range of housing options. Alliance supports a change to Minn. Stat. § 273.19 to clarify that individuals residing in nonprofit-owned affordable housing should not be subject to tax as a result of the property’s tax-exempt status, as they are its intended beneficiaries.
Learn more about Alliance’s position on the new legislation.
