Property Tax Appeals: “August 1 Rule” Traps for the Unwary
If you just filed a property tax appeal for the January 2, 2020 (Pay 2021) tax year, you may have obligations to comply with what is commonly referred to as the “August 1 Rule.” Because failure to comply with the August 1 Rule results in dismissal of your case, understanding the rule’s nuances is critically important to maintaining a property tax appeal.
The “August 1 Rule” is a Minnesota law that requires petitioners contesting the valuation of income-producing property to provide the following information to the county assessor by August 1 of the year the taxes are payable:
- a year-end financial statement for the year prior to the assessment date;
- a year-end financial statement for the year of the assessment date;
- a rent roll on or near the assessment date listing the tenant name, lease start and end dates, base rent, square footage leased and vacant space;
- identification of all lease agreements not disclosed on a rent roll in the response to clause (3), listing the tenant name, lease start and end dates, base rent, and square footage leased;
- net rentable square footage of the building or buildings; and
- anticipated income and expenses in the form of a proposed budget for the year subsequent to the year of the assessment date.
Minn. Stat. § 278.05, subd. 6(a).
Failure to provide all the required information results in the dismissal of the property tax petition, unless (1) the failure to provide it was due to the unavailability of the information at the time that the information was due, or (2) the petitioner was not aware of or informed of the requirement to provide the information.
Sounds simple enough, right? But the August 1 Rule can quickly become complicated. The Minnesota Supreme Court and the Minnesota Tax Court recently issued decisions in a number of cases in which the courts found that petitioners failed to meet their August 1 Rule burdens:
- August 1 Rule information must be provided by the petitioner—not a third party. Avis Budget Car Rental LLC v. Cty. of Hennepin, 937 NW2d 446 (Minn. 2020)
- Vestibule occupants and income must be disclosed on the rent rolls, financial statements, and budget. Wal-Mart Real Estate Business Trust v. Cty. of Anoka, 931 NW2d 382 (Minn. 2019)
- Contingent rent should be included on financial statements and budgets. Wal-Mart Real Estate Business Trust (Woodbury #2643) v. Cty. of Washington, No. 82-CV-17-1777 (Minn. T.C. Feb. 21, 2019).
- Rental income from a billboard on the corner of a property renders the entire property income producing for purposes of the August 1 Rule. Mostafa Sadat v. Cty. of Scott, No. 70-CV-12-8404 (Minn. T.C. Apr. 24, 2015)
The biggest takeaway is that failure to fully comply with each element of the August 1 Rule will result in dismissal of your case (even in circumstances where the income that was not disclosed does not impact the value of the subject property).
So, if you are unsure whether you need to disclose information, we recommend that you err on the side of caution and disclose it to avoid having your case dismissed.