Tax panel approves changes in tax-forfeited property proceeds

The U.S. Supreme Court case was called Tyler v. Hennepin County, but its repercussions resonate far outside the metropolitan area county.

In fact, the largest item in the supplemental budget target agreement reached between Gov. Tim Walz and legislative leaders in March is $109 million for the “Tyler Settlement.” It amounts to about 23% of the state’s $477.5 million proposed supplemental budget for the next fiscal year.

HF4822 is designed to make sure the state doesn’t have to pay such a settlement in the future.

Sponsored by Rep. Sandra Feist (DFL-New Brighton), the bill would change the state’s tax forfeiture statutes to make them constitutional in light of the Supreme Court decision.

On Tuesday, the House Taxes Committee approved the bill, as amended, and referred it to the House Ways and Means Committee after adding another amendment providing a $3.8 million annual appropriation to the Department of Natural Resources beginning in fiscal year 2026.

Rep. Sandra Feist

“The DNR will have additional duties under the new structure,” Feist said.

The bill had previously been approved by the House Judiciary Finance and Civil Law Committee, as well as the House Environment and Natural Resources Finance and Policy Committee.

“If we are not able to reform our laws, we are perpetuating a broken system for property owners, and adding fiscal liability to the state,” Feist said. “This problem will only get more expensive as time passes.”

In May 2023, the Supreme Court determined that Hennepin County did not have the right to seize Geraldine Tyler’s unoccupied Minneapolis condo because of $15,000 in delinquent property taxes, sell it for $40,000 and keep the excess proceeds after her tax bill was settled.

There were two subsequent class action lawsuits from Minnesota residents who had similar experiences, losing their properties to tax forfeiture and having their counties keep the surpluses. Since those counties were acting in accordance with Minnesota statute, the state has agreed to pay $109 million to settle the cases.

The bill would create a process for individuals to file a claim for monetary compensation of excess proceeds from the sale of their property after the property forfeits and is sold for nonpayment of property taxes.

All tax-forfeited property would be offered for sale at a public auction. If the sale results in proceeds in excess of the delinquent taxes and associated costs, penalties and interest, any interested party may file a claim for that surplus amount. The bill would also create a process for claims to excess proceeds when mineral interests are forfeited to the state for nonpayment of property taxes.

And as for that $109 million in the supplemental budget target?

The committee passed a bill that would appropriate $109 million in fiscal year 2024 to provide payments for settling litigation related to the retention of tax-forfeited lands, surplus proceeds from the sale of tax-forfeited lands, and mineral rights in those lands.

HF5246, sponsored by Rep. Dave Lislegard (DFL-Aurora) and replaced by a delete-all amendment, would require participating counties to provide Minnesota Management and Budget with necessary property tax data, agree to make a good faith effort to sell any remaining properties forfeited prior to 2024, and remit to the state 75% of the proceeds from those sales.

The bill was approved by the committee and referred to the House Ways and Means Committee.

“We have to pay what we owe,” Lislegard said. “Minnesota must respond by creating the framework to settle damages to individuals impacted by the prior unconstitutional law that we had.”