Part I: NAIOP says Minnesota is an “egregious outlier” on commercial property taxes

by | Apr 28, 2021 | Commercial Property Tax Appeals

There are only four states using statewide property taxes to fund their state general fund appropriations – Minnesota is one of them. There’s only one state that taxes commercial and industrial properties exclusively to support the fund – that one state is, of course, Minnesota.

According to a recent report by the Commercial Real Estate Development Association of Minnesota (aka NAIOP), Minnesota’s taxation of commercial and industrial properties is an “egregious outlier” that limits our state’s business growth and our opportunities for business relocations.

Five times and more

NAIOP says Minnesota’s “effective tax rate on commercial property is more than double the next highest tax. It is five or more times higher than most states that also impose a general levy or tax on real property.”

This year, commercial and industrial property owners will together contribute more than $737 million to the state’s general levy.

A comparison

The NAIOP compares that to the revenue generated in 2018 in the other three states imposing statewide property taxes for their general funds:

  • Kentucky: $294 million
  • Alaska: $125 million
  • West Virginia: $7 million

Bottom-line effect

Phil Cattanach, president of NAIOP and vice president and general manager of the Opus Group, says the commercial and industrial property tax “manifests itself in, just, the cost of doing business in the state of Minnesota — (it) becomes more prohibitive when you have these types of taxes.”

Cattanach said the tax has multiple effects on a business: It shrinks the bottom line, which limits its ability to reinvest in expansion, hiring, training and more.

We will have more on the NAIOP report in an upcoming blog post. Please check back.