04.06 CLASSIFICATION OF PROPERTY

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1 04.06 CLASSIFICATION OF PROPERTY Overview Although the classification of property for purposes of taxation can be thought of as a broad concept where any feature that differentiates properties in any way is a form of classification, this section addresses the more specific and overt application of different rates of taxation on different defined types of property. Many states draw a distinction between market values and assessed values which reflect the application of different assessment ratios for a limited set of different property types (such as commercial/industrial, residential, agricultural, etc.). Minnesota, which has a uniformity clause in its constitution that allows for different classes of property to be taxed at different rates, has perhaps the most detailed classification system for a wide range of defined classes of property. The class rates, as opposed to assessment ratios, are applied to taxable market values to yield a measure called net tax capacity, which is the basis for most taxes. The net tax capacity is a computed, conceptual basis for taxation, as opposed to the resultant assessed values used in most states. (The focus of this section is on the classifications of property; see Section for further discussion of net tax capacity.) The assessor, in the process of determining values, also is responsible for determining the classification (or use) of property. Property is classified according to its use on the assessment date (January 2 nd ) of each year. If the property is not currently being used, it is classified according to its most probable, highest and best use. Property owners do not get to choose or request what they want their property to be classified; it is the assessor s job to make this determination. The classification system starts with the definition of classes and their class rates. Comprehensive information on property tax classifications can be found in the Property Tax Administrator s Manual. Classifications and Class Rates While the determination of class rates is perhaps the most important function served by the definition of classes, many other features of the system may relate to only certain classifications, so the determinations do have significance beyond the class rate that is applied to yield net tax capacities. The table, for example, identifies which classes are subject to the state general levy tax base (as will be discussed in later sections) and notes the alternative class rates used for the state property tax. Generally speaking, there are currently five categories of classes, each of which has numerous specific sub-classifications: Class 1 = Variations of Residential Homesteads Class 2 = Agricultural Homesteads, Agricultural Lands, and Rural Vacant Lands, Managed Forest Land, Private Airport, and Land with a Commercial Aggregate Deposit Class 3 = Commercial, Industrial, and Public Utility Property CLASSIFICATION OF PROPERTY

2 Class 4 = Rental Housing, Non-Homestead Residential, Agricultural Dwellings, Manufactured Home Parks, and Seasonal properties Class 5 = Minerals and Other Miscellaneous Property The classifications and class rates are continually being adjusted and redefined by the legislature. A class rate table can be found in Module 3 of the Property Tax Administrator s Manual. CLASSIFICATION OF PROPERTY

3 Homestead Status One of the most important distinctions in the various definitions of classes is the distinction of homesteads from non-homesteads or other sorts of property. Homestead status is a fundamental concept that has been closely guarded by the legislature. Even though current class rates have largely eliminated the difference between homesteads and non-homesteads (which once had much different class rates), homestead status is important for many features of the tax system because it determines eligibility for programs such as property tax refunds, senior deferrals, and the homestead exclusion. Homestead Determination Homestead determination is a complex topic when all of the exceptions are considered. Agricultural homesteads have some special provisions. This manual does not cover all of the exceptions, rules, and details pertaining to homesteads. The Assessor s Property Tax Administrator s Manual located on the Department of Revenue s website provides greater detail on homestead determination. Some general rules, definitions, and topics for homestead determination follow. Residential real estate that is occupied and used for the purposes of a homestead by its owner is a residential homestead. The owner must be a Minnesota resident. Agricultural land that is occupied and used as a homestead by its owner is an agricultural homestead. The owner must be a Minnesota resident. Full-Year Homestead The property is occupied by its owner on January 2nd of the assessment year. Mid-Year Homestead The property must be owned and occupied by its owner on December 1st of the assessment year and application must be made by December 15th to qualify for a mid-year homestead. Mid-year homesteads result in the same tax as a full-year homestead. An owner may not have the benefits of the homestead classification in more than one place. A person may have only one homestead and that must be their place of abode on January 2nd. (Exceptions to this rule may include a second mid-year homestead in the year of a sale or in cases of divorce.) Homestead requirements are prescribed by the state. No county or other jurisdiction has the authority to impose additional requirements. Manufactured Homes In the case of manufactured homes assessed as personal property, the homestead must be established and application made by May 29 of the assessment year. Manufactured Homes Park Cooperatives If a manufactured home park is owned by a legally organized corporation or association and each shareholder/member in the corporation or association is entitled to occupy a lot within the park, then the park may claim homestead treatment. Each lot must be designated by legal description or number, and each lot is limited to not more than one-half acre of land. The homestead rate received depends on the number of occupying shareholders within the park; if over 50% of the park is owned by occupying shareholders then class rate is 0.75%, otherwise the class rate is set at 1.00%. 1 1 Minn. Stat , subd. 3a CLASSIFICATION OF PROPERTY

4 Homestead Application and Discontinuation A person who meets the requirements for the homestead classification must file a homestead application with the county assessor to initially obtain the homestead classification. The Commissioner of Revenue prescribes the format and content of the application. After the initial application, owners are not required to file a new application every year. However, the assessor may, at any time, require a new application to verify the homestead status. By law, owners are required to inform the assessor s office within 30 days that they have vacated the property. The assessor should reclassify the property as non-homestead as of the next assessment date. If a homesteaded property sells, the new owners technically have until December 15 of the following year to file for homestead under their name. Social Security Numbers Every property owner applying for homestead classification must furnish to the county assessor the social security number of each occupant who is listed as an owner of the property on the deed of record, the name and address of each owner that does not occupy the property, and the name and social security number of each owner s spouse. Each owner and their spouse who occupies the property must sign the application. In the case of a relative homestead, the owner and the qualifying relative must both sign the application. (Individual Taxpayer Identification Numbers, or ITINs, may substitute for social security numbers.) Social security numbers and affidavits of the property owners are considered to be private data on individuals. However, this private data may be disclosed to the Commissioner of Revenue. Fraudulent Homesteads/Social Security Match Counties must submit a homestead file to the Commissioner of Revenue on an annual basis. This file includes the name and social security number of each property owner, their spouse, or the qualifying relative, that occupies the property. From this list, the Commissioner generates a duplicate homestead file identifying social security numbers that have been used to homestead more than one property. Counties are required to investigate these situations to determine if the homestead classifications were property claimed. If a homestead has been improperly claimed, the owner must reimburse the county for the difference in tax between homestead and non-homestead and pay a penalty equal to 100% of the homestead benefits. It should be noted that the information provided in the duplicate homestead file mentioned above is also included in the Property Tax Refund file. Relative Homesteads Residential real estate that is occupied and used for the purposes of a homestead by a qualifying relative of the owner may be given a relative homestead. A qualifying relative for residential property is the following: a parent, stepparent, child, stepchild, grandparent, grandchild, brother, sister, uncle, aunt, nephew or niece. This relationship may be by blood or by marriage. In the case of residential relative homesteads, the owner of the property does not have to be a Minnesota resident. The occupying relative has to be a Minnesota resident. 2 2 Minn. Stat , subd. 1, para. (c) CLASSIFICATION OF PROPERTY

5 Agricultural homesteads have additional limitations and a different list of a qualifying relative. A qualifying relative for agricultural property is the following: a son, daughter, brother, sister, grandson, granddaughter, father, or mother of the owner of the agricultural property or a son, daughter, brother, sister, grandson, or granddaughter of the spouse of the owner of the agricultural property. In the case of agricultural homesteads, both the owner and the qualifying relative must be Minnesota residents. The owner of the agricultural property must not receive the homestead treatment on any other agricultural property in Minnesota and is limited to only one agricultural homestead per family. 3 Neither the related occupant nor the owner of the property may claim a property tax refund for a homestead occupied by a relative unless the property is owned jointly and one of the joint owners occupies the property as their permanent primary residence. In the case of a residential relative homestead located on agricultural land, only the house, garage, and 1 st acre of land shall be classified as a relative homestead, but an agricultural relative homestead includes the house garage, other farm buildings and structures, and agricultural land. Annual Registration for Certain Relative Homesteads If a property is classified as relative homestead, and the owner of the property or the owner s relative who occupies the property receives compensation for rental of any part of the property for a period that exceeds 31 consecutive days, the recipient of the compensation must register the property with the city in which the property is located no longer than 60 days after the initial rental period began. Each city is then required to maintain a file for these registrations, retain the registrations for one year after the date of filing, and allow the file to be open to the public. This requirement only applies to property located in a city with population over 25, Special Agricultural Homesteads ( Actively Farming ) The Special Agricultural Homestead provisions extend homestead status to property owners who do not live on their farm but actively farm their land or who have a spouse, child, or grandchild who actively farms the land. More details on these homesteads can also be found in the Assessor s Property Tax Administrator s Manual or in fact sheets on the Department of Revenue website. Prohibition on Seasonal Residential Recreational Property that has been classified as seasonal residential recreational property at any time during which the current owner or the spouse of the current owner has owned it cannot be reclassified as a relative homestead. It also cannot be classified as 4bb (non-homestead). Townhouses and Condominiums Upon qualification, a total townhouse, condo, or cooperative unit, including its interest in any common areas shall be awarded the homestead classification. The value of the unit s interest in the common area should be included in the total value of the unit. The common areas should not be valued or taxed separately. 3 Minn. Stat , subd. 1, para. (d) 4 Minn. Stat , subd. 22 CLASSIFICATION OF PROPERTY

6 Other Topics There are many other special cases of homestead determination that are not explained here. Consult the Assessor s Property Tax Administrator s Manual for details on these topics: Doubtful Cases as Homesteads Spousal Homesteads Social Security Numbers for Aliens Nursing Home or Boarding Care Residents Property Subject to Jurisdiction of Probate Court Homesteads where a Relative is Required for Financing Trust Property as a Homestead See Fact Sheet 6 Homesteads Owned by or Leased to a Family Farm Corporation Manufactured Home Park Cooperative Motels Owned by Corporations or Partnerships Leased Buildings or Land Homestead of a Member of the Armed Forces, Peace Corps, or VISTA Church or Non-Profit Corporation Owned Renovated Houses Certification of 1b Property and Blind Homesteads One unique subset of homestead property is the Class 1b designation for homesteads of qualifying blind or disabled persons. This class, which receives a reduced class rate on its first $50,000 of market value, applies to: (1) any blind person who is blind as defined in Minnesota Statute 256D.35, or the blind person and the blind person s spouse (2) any person who is permanently and totally disabled. Property is classified and assessed under clause (2) only if the government agency or income-providing source certifies that the homestead occupant satisfies the disability requirements of this paragraph. Property is classified and assessed pursuant to clause (1) only if the county assessor certifies that the homestead occupant satisfies the requirements of this paragraph. Historically, the Minnesota Department of Revenue awarded and maintained the blind and disabled classifications. Counties are now responsible for awarding and maintaining this classification. The necessary forms need only be filed once in order to qualify for the classification. They must be filed with the county on or before October 1 to be effective for property taxes payable during the next calendar year. However, this application must contain the information necessary to verify that the property owner or the owner s spouse satisfied the requirements on or before June 30 of the filing year. Agricultural Property and the House, Garage, and One Acre (HGA) HGA refers to the house, garage, and immediately surrounding one acre of land on agricultural properties. The HGA carries class rates equivalent to residential property whether homestead or non-homestead, while the remainder of a farm receives reduced class rates relative to the HGA. County computer systems CLASSIFICATION OF PROPERTY

7 create separate records for the HGA to apply appropriate class rates and any other applicable property tax features that are unique to HGA. Agricultural Homesteads First Tier Valuation Limit Beginning with the 2006 assessment year, the amount in which the first tier of value is eligible to receive the first tier homestead class rate of 0.50 (previously the first $600,000) is annually adjusted upon the ratio of the previous assessment year s statewide average taxable market value of agricultural property per acre of deeded farm land to the same measure for assessment year The limit is to be rounded to the nearest $10,000, and is certified annually by the Department of Revenue. Chart : Ag Homestead Certified First Tier Valuation Limit Amounts Assessment Year Valuation Limit 2006 $690, $790, $890, $1,010, $1,140,000* 2011 $1,210, $1,290, $1,500, $1,900, $2,140, $2,050, $1,940,000 *reset by Legislature due to 2008 classification changes Farming Entity Non-Homesteads Unused First Tier Homestead If a farming entity (such as a family farm corporation, joint farm venture, limited liability company, or partnership) has any stockholders/members who own an agricultural homestead no further than four cities or townships away from the entity s non-homestead property, then the farming entity can receive a first tier homestead class rate of 0.50% up to the first tier maximum market value on any remaining market value not received on the shareholder/member s agricultural homestead, if any. The owner must apply annually to the county assessor to receive the reduced class rate. For more details please refer to Minnesota Statutes , Subd. 8, Paragraph (d). Agricultural Land Agricultural vs. Rural Vacant Land Class 2a is agricultural land, while class 2b is rural vacant land. CLASSIFICATION OF PROPERTY

8 Both class 2a and 2b can be homestead or non-homestead if the 2b is part of the farm. Class 2a property must contain property that would otherwise be classified as 2b, including but not limited to sloughs, wooded wind shelters, acreage abutting ditches, and other similar land impractical for the assessor to value separately from the rest of the property. Managed Forest Lands Certain real estate that normally would be classified as class 2b rural vacant land may be eligible to be classified as class 2c, managed forest land. Such unplatted property must be: (1) rural in character and used exclusively for growing trees for timber, lumber, and wood and wood products; or (2) NOT improved with a structure (a minor ancillary nonresidential structure does not disqualify the property) and is used exclusively for growing trees for timber, lumber, and wood and wood products, if the owner has participated or is participating in a cost-sharing program for afforestation, reforestation, or timber stand improvement on that particular property, administered or coordinated by the commissioner or natural resources. Such property must be no less than 10 and no more than 1,920 acres and must be managed under a forest management plan that meets the requirements of the SFIA program, while not being enrolled in that program. Property classified as 2c is subject to a class rate of 0.65%. The owner must apply annually to the county assessor to receive the reduced class rate. Non-Homestead and Multi-Unit Residential Property With the designation of homestead status for some residential property, comes the counter group of properties that are non-homestead. The classification system has attempted in different ways to distinguish between single non-homestead dwellings, duplexes, triplexes, apartments, and other types of housing or non-commercial property. Single unit dwellings that are neither homesteads nor cabins are typically 4bb(1), or 4bb(2) if agricultural, and have class rates the same as for homesteads. A single unit could instead be class 4b(1), if the property has previously been classed as seasonal recreational residential by the current owner but is no longer used seasonally. Class 4b(1) and most other class 4 property carries the class rate for the second tier of homestead property on its entire value (1.25%). Only student housing carries a lower class rate (1.00%), while non-profit community service organization property and certain non-commercial aircraft hangars carry a higher class rate (1.50%). If any unit of a duplex or triplex is homestead, the whole duplex or triplex is treated as homestead. Duplexes and triplexes that are not homesteads are class 4b(1) non-homesteads, or 4b(3) if agricultural. Apartments are generally defined as buildings of four or more units (class 4a). If the owner resides in a unit of an apartment building, that unit may be homestead. Certain low-income rental property (LIRC) is classified as class 4d and benefits from a lower class rate of 0.75% on the first tier of its property. CLASSIFICATION OF PROPERTY

9 Manufactured Home Park land 4c(5) can receive a lower homestead rate of.75% if it is owned by a qualified cooperative with more than 50% shareholder occupancy; however, if the shareholder occupancy is less than 50% or is not owned by a qualified cooperative then the rates would be 1.00% and 1.25% respectively. The only other multi-unit classification is for bed and breakfasts (class 4c(9)), which receive the residential non-homestead standard rate of 1.25% for the first 5 units, with additional units generally being classes as commercial. Seasonal Recreational Property There are three types of seasonal recreational property (SRR), all of which must be devoted to temporary and seasonal use for not more than 250 days in the year preceding the assessment: cabins, resorts, and ma & pa resorts. Noncommercial SRR (Class 4c12) Noncommercial SRR, or cabins, have the same class rates as for non-homestead 4bb(1) property, which in turn is the same as for homesteads. However, cabins and other non-commercial seasonal property (class 4c(12)) are subject to the state tax and, of those classes which are subject to the state tax, only cabins have a different class rate for the state tax in that the first $76,000 of value has a class rate of 0.40%. Commercial SRR (Class 4c1) Resorts are commercial seasonal residential recreational, other than any property or portion of property that is class 1c Ma & Pa Resort. This class 4c(1) property has the same class rates as cabins but does not receive the discounted class rate for the state tax. Class 4c property must contain three or more rental units. A rental unit is defined as a cabin, condominium, townhouse, sleeping room, or individual camping site equipped with water and electrical hookups for recreational vehicles. In most cases, class 4c property must provide recreational activities such as rental of ice fishing houses, boats and motors, snowmobiles, downhill or cross-country ski equipment; provide marina services, launch services, or guide services; or sell bait and fishing tackle. Any unit in which the right to use the property is transferred to an individual or entity by deeded interest, or the sale of shares or stock, no longer qualifies for class 4c even though it may remain available for rent. A camping pad offered for rent by a property that otherwise qualifies for class 1c is also class 4c, regardless of the term of the rental agreement, as long as the use of the camping pad does not exceed 250 days. The portion of a property that is operated as a (1) restaurant, (2) bar, (3) gift shop, (4) conference enter or meeting room, and (5) other nonresidential facility operated on a commercial basis not directly related to temporary and seasonal residential occupancy for recreation purposes does not qualify for class 4c. CLASSIFICATION OF PROPERTY

10 Ma & Pa Resorts (Class 1c) Ma & pa resorts are those resorts that abut lakeshore or a state trail and include a portion used as a homestead by the owner. Class 1c property must contain three or more rental units. A rental unit is defined as a cabin, condominium, townhouse, sleeping room, or individual camping site equipped with water and electrical hookups for recreational vehicles. Class 1c property must provide recreational activities such as rental of ice fishing houses, boats and motors, snowmobiles, downhill or cross-country ski equipment; provide marina services, launch services, or guide services; or sell bait and fishing tackle. Any unit in which the right to use the property is transferred to an individual or entity by deeded interest, or the sale of shares or stock, no longer qualifies for class 1c even though it may remain available for rent. A camping pad offered for rent by a property that otherwise qualifies for class 1c is also class 1c, regardless of the term of the rental agreement, as long as the use of the camping pad does not exceed 250 days. Class 1c is divided into three tiers; up to $600,000 at 0.50%; $600,000 to $2,300,000 at 1.00%; and over $2,300,000 at 1.25%. Any value in tier three is also subject to the state general property tax. Non-Profit Community Service Oriented Organizations Class 4c(3)i (Non-Revenue) Class 4c(3)i is real property up to a maximum of three acres of land owned by a nonprofit community service oriented organization; provided that the property is not used for a revenue producing activity for more than six days in the calendar year preceding the year of assessment and the property is not used for residential purposes on either a temporary or permanent basis. Class 4c(3)i has a class rate of 1.50% and is not subject to the state general tax. Class 4c(3)ii (Donations) Class 4c(3)ii is property that is not used for residential purposes on either a temporary or permanent basis. The organization is required to make annual charitable contributions and donations (as defined in Minn. Stat , subd. 25, excluding those purposes relating to the payment of taxes, assessments, fees, auditing costs and utility payments) at least equal to the property s previous year s property taxes (excluding the state general tax) an the property is allowed to be used for public and community meetings or events for no charge as appropriate to the size of the facility. An organization meeting these requirements must file an application by May 1 with the assessor for eligibility for the current year s assessment. Class 4c(3)ii has a class rate of 1.50% and is also subject to the state general tax at the SRR rate. Class 4c(3) Veterans Organizations Ccongressionally chartered veterans service organizations that qualify as class 4c(3) non-profit community service-oriented organizations have a class rate of 1.00%. The Department of Veterans Affairs is required to provide a list of congressionally chartered veterans service organizations to the Department of Revenue each year. This list is available on the Department of Veterans Affairs website. CLASSIFICATION OF PROPERTY

11 To qualify for the reduced class rate, assessors must verify the organization is on the Department of Veterans Affairs list and meets requirements for class 4c(3)(i) or 4c(3)(ii) Non-Profit Community Service Organizations. Seasonal Restaurant on a Lake Class 4c(10), seasonal restaurant on a lake, was enacted effective for the assessment year The property owner must submit a declaration annually to the assessor by February 1 to be eligible for the same assessment year. To qualify for 4c(10) classification, a property must have the following characteristics: the restaurant and up to 3 acres of property must be located on a lake; it must not be devoted to commercial purposes for more than 250 days or at least 60 percent of its gross annual receipts (including alcohol sales but excluding gift shop sales) must be from business conducted during four consecutive months; and the declaration information must be based on sales from the previous year (in other words, declarations received by February 1, 2009 will contain sales information from the 2008 calendar year). Seasonal restaurants on a lake that qualify for the 4c(10) classification will not be subject to the state general tax. The class rate is 1.25 percent. Marinas Class 4c(11), marinas, was enacted effective for the assessment year To be eligible to receive the classification: the marina must provide access to the public; the qualifying land cannot exceed six acres; and the qualifying land is limited to 800 feet of shoreline. Commercial buildings on the premises, such as buildings used to provide food and beverage services, fuel, boat repairs, or the sale of bait or fishing tackle, shall continue to be classified as class 3a commercial. Marinas that qualify for the 4c(11) classification are subject to a tax rate of 1.00 percent for the first $500,000 of market value and 1.25% of the value in excess of $500,000. Other Classification Descriptions and Provisions For greater detail on all classes of property, see the statutory definitions in M.S , or the Assessor s Property Tax Administrator s Manual found on the Department of Revenue s website. Split Class Properties Properties that have more than one use are split class properties. An example would be a hardware store with four apartments on the second floor. The hardware store would be classed commercial, and the second floor would be classed apartment or residential, depending upon if the owner or a relative of the CLASSIFICATION OF PROPERTY

12 owner lived in them or if they were rented out to others. The classification of the property is split between the two uses. The assessor must determine a value for each of the classifications. Multiple Owners (Fractional Homestead) When multiple owners create partial homestead and partial non-homestead classification for a property, the homestead share is often referred to as a fractional homestead. For example, if two brothers and one unrelated person own a house, each having a one-third interest, and one of the two brothers lives in the house and claims it as his homestead, the property is one-third homestead, one-third relative homestead, and one-third non-homestead. Chaining or Linking of Parcels All parcels with property class rates based on value tiers, including but not limited to agricultural parcels, residential homestead, commercial/industrial, and commercial seasonal residential recreational, are subject to provisions that require them to be chained, or linked, together for computation of net tax capacity. The general rule is that only contiguous homesteads and businesses 5 that have the same property owner should be linked for net tax capacity calculation if the property class rates are based on value tiers. Contiguous homestead parcels must be linked to take advantage of residential market value exclusions and agricultural homestead market value credits, but also to make certain that fractional homesteads are valued correctly. Following these guidelines, the following property classifications would not be part of a parcel chain for net tax capacity calculation: 2a: Agricultural Non-Homestead 2b: Rural Vacant Land Non-Homestead 2c: Managed Forest Land 2e: Unmined Commercial Aggregate Deposit 4bb: Non-Homestead Residence (single unit) 4b: Residential Non-Homestead 4c(12): Non-Commercial Seasonal Residential Recreational 5: Mineral and All Other Class 5 Property The above only refers to linkages for net tax capacity calculation. Linking for other reasons (like a class 2a farming entity and a class 2a agricultural non-homestead parcel chain to account for future underutilized homestead value) is acceptable, but the parcels would not be linked to calculate the net tax capacity. Some chaining examples are provided on the next page. 5 The term business does not refer just to class 3a commercial/industrial property but also properties such as commercial seasonal residential recreational (resorts) and apartments. The exception to this is if there is more than one business on contiguous parcels that have the same owner, the parcels containing each business do not have to be linked to each other and are treated as separate. CLASSIFICATION OF PROPERTY

13 Example 1: The definition of class 3 requires that in the case of contiguous parcels of property owned by the same person or entity, the preferred commercial benefit (i.e. the lower class rate) for the first tier of value can only be applied once for the group of parcels as a whole. (The exception to this is that each separate business may receive the first-tier reduced class rate if the contiguous property owned by the same person or entity contains separate businesses in separate structures.) In order to limit a group of commercial parcels to the $150,000 first tier limit, they must be chained in the calculation. For example, the first parcel may be valued at $120,000 and a second parcel may have a value of $70,000. Without chaining, the restriction would not be able to be enforced and both parcels would all be at the first-tier rate. By chaining these parcels, only the first $30,000 of the second parcel would receive the first tier class rate. Example 2: Agricultural land, as defined in M.S , includes contiguous acreage of ten acres or more and may be on multiple adjacent parcels under the same ownership. Since the remainder of a farm beyond the HGA has a first tier break (at $1,940,000 for Assessment Year 2017), chaining is also needed to apply this to the farm as a whole. Example 3: Special ag homesteads (aka actively farming homesteads) contain a provision that the owners must live within four townships or cities from the agricultural property that is being farmed. These records must recognize this link. Economic Development Zones Values of property that qualify for benefits in certain economic development zones need to be identified separately from the non-qualifying values. Although they do not have different class rates, the land and building on the same parcel may be subject to different tax rates. Border City Development Zones These zones can exist in only five cities Moorhead, Breckenridge, Ortonville, Dilworth, and East Grand Forks. Certain qualifying properties are exempt from all tax rates except debt rates, special assessments, and non-equalized school levies. CLASSIFICATION OF PROPERTY