State creates $109 million fund for tax-forfeited lands settlements

In response to a U.S. Supreme Court ruling, the state has created a $109 million fund to be paid out to counties that need to settle litigation on how they have treated tax-forfeited lands.

In Tyler v. Hennepin County, the court determined that a provision in Minnesota law was unconstitutional because it allowed counties to seize property whose owners had been delinquent in property tax payments, sell the property and keep the surplus proceeds of the sale. The Supreme Court determined that, in such cases, the net total after collecting the delinquent taxes should be returned to the property’s original owner.

Under a new law that took effect May 19, 2024, $109 million is appropriated in fiscal year 2024 to Minnesota Management and Budget for payments to counties for settling such litigation, which can also include mineral rights in those lands. The one-time appropriation is available until June 30, 2026, after which the claims administrator must return any unspent funds.

To be eligible, counties must elect to participate in the settlement, agree to provide the commissioner with necessary property tax data and make a good faith effort to sell any remaining properties that forfeited prior to 2024, and remit to the state a portion of the proceeds from those sales. A county that does not notify the claims administrator in writing by Aug. 1, 2024, that it is not a participating county will be deemed to have elected to become a participating county.

For sales made before June 30, 2027, a participating county must remit to the state 75% of the proceeds. For sales made between July 1, 2027, and June 30, 2029, a participating county must remit to the state 85% of the proceeds. Any property tax forfeited prior to 2024 that remains unsold after June 30, 2029, may continue to be managed as allowed by law.

The law also requires the commissioner to deposit into the General Fund any remitted proceeds from the sale of properties that forfeited prior to 2024. And it states that nonparticipating counties retain all risk and liability for claims related to properties forfeited prior to 2024.

Participating counties are also required to submit annual reports to Minnesota Management and Budget with details on properties forfeited prior to 2024. The commissioner must compile this information and issue a report to the Legislature.

Rep. Dave Lislegard (DFL-Aurora) and Sen. Grant Hauschild (DFL-Hermantown) sponsor the law.

HF5246*/SF4936/CH113

HF5246* / SF4936 / CH113