County assessor sets 'primary use' threshold for short-term rentals

A memo from the Minnesota Department of Revenue dated May 21 that was sent to every county assessor in the state says any property where the ‘primary use’ of the home is a short-term rental should be classified as a 3a commercial property.

The question remained, at least in Cook County, what defines primary use?

According to Cook County Assessor Bob Thompson, that determination will now fall primarily on the number of days a short-term rental is occupied by guests on an annual basis. If the property is rented 183 days or more, it will be considered a commercial property in Cook County. If it was rented less than that, it will not, though there are some exceptions to that rule. One exception, for example, could be if the property was purchased specifically for short-term rental purposes and is not used as a family cabin or other non-revenue generating purposes.   

Currently, at least in Cook County, short-term rentals are classified as residential non-homestead and pay a significantly lower property tax than they would pay if taxed at the commercial rate. “Short-term rentals” include family cabins in the woods that are rented by the night, homes and other units in Grand Marais that sit in the allowed-use zone and condominiums in developments like Bluefin Bay, Lutsen Resort and Caribou Highlands.

A questionnaire was sent in early December to anyone the county thinks is operating a short-term rental at their property. The purpose of this questionnaire is to determine the primary use of the property.

Leading up to the likely tax classification change for at least some short-term rentals in Minnesota starting in 2020, a meeting took place Nov. 25 that included State Sen. Tom Bakk, Gov. Tim Walz and Department of Revenue Commissioner Cynthia Bauerly. This meeting, along with numerous media reports from across the state in recent weeks covering this story, and local pushback from business owners and community leaders, led to the establishment of the 183-day threshold being set, according to Thompson.

WTIP’s Joe Friedrichs spoke with Thompson Dec. 13 about the primary-use determination and an overall update on this story.