Short-term rentals discussed during final county board meeting of 2019

Taxing short-term rentals in Cook County as commercial properties ‘violates the principle of tax fairness,’ according to certain business leaders in the community.

This sentiment was shared by Cook County/Grand Marais Chamber of Commerce Director Jim Boyd during a meeting of the Cook County Board of Commissioners Tuesday, Dec. 17. The meeting opened with a lengthy public comment period. Four people, including Boyd, spoke about the proposed changes regarding short-term rental tax classification in 2020.

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.

Dennis Rysdahl is the owner of Bluefin Bay in Tofte. He shared his concerns about the impacts of a commercial classification for townhomes and condominiums in Cook County. These concerns focused on property owners intentionally renting only during the peak tourist seasons and therefore decreasing economic activity during the shoulder seasons like early winter and spring. In summary, this move is not a good fit for the business community in Cook County, Rysdahl says.

Bryce Campbell is the owner of Lutsen Resort. He too expressed concern about the commercial tax classification for short-term rentals. Campbell says such a change could impact development plans being considered at Lutsen Resort.  

Boyd also spoke against the reclassification of short-term rentals as commercial properties. This topic has been discussed at length by the chamber board and concerned business owners, Boyd says.

Mary Somnis from the local Economic Development Authority also addressed the topic during Tuesday’s public comment period. She says the issue should be determined at the state level, not just by the Cook County assessor.

Following the public comment period, Cook County Assessor Bob Thompson shared an update with the county board. Thompson says the ‘primary-use’ 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.

Thompson says the state assumes assessors will follow recommendations at the county level. A breach of this trust could be problematic for all parties concerned, including Thompson himself, he believes.

Moving forward, Thompson says short-term rentals will fall under what the county considers the appropriate tax classification starting Jan. 2, 2020. Meanwhile, should there be a legislative or other change in guidance from the Department of Revenue, the assessor could change the tax classification for short-term rentals any time before June 18. In addition, Thompson encouraged the board or others at the county level to draft a bill that could be presented to the Minnesota Legislature regarding tax classifications for short-term rentals.

The Minnesota Legislature will reconvene its regular session on Feb. 11, 2020.

The sound file below contains audio from Tuesday's county board meeting.