Of all the regressive taxes (those falling on people with the least ability to pay) rental property taxes are the most regressive category of property tax, according to the 2011 Minnesota Tax Incidence Study (MTIS). While renters do not pay property taxes directly, the cost of property taxes are passed on to them in the form of higher rents. To reduce the regressivity of rental property taxes, Minnesota has instituted the Renters’ Property Tax Refund (or Renters’ PTR), which directs property tax relief to low income renters. Dollar for dollar, no program in the state does more to reduce tax regressivity than the Renters’ PTR.
However, there are barriers that prevent qualifying low income renters from receiving the tax relief that they are due. To remedy this situation, Home Line, a non-profit Minnesota tenant advocacy organization that advised over 11,000 renters in 2012, has proposed a series of reforms.
By law, landlords are required to provide a “certificate of rent paid” (or CRP) to tenants, which tenants then use to apply for their refund. However, some landlords fail to provide a CRP or do not provide it on a timely basis. According to Eric Hauge of Home Line, “A landlord who does not provide a CRP inhibits the ability of low income renters to receive significant tax relief; in addition, failure to provide a CRP should be a red flag to tax enforcement officials that landlords are not declaring the rent as income.”
In order to address this problem, Home Line recommends consistently enforcing the penalty for failure to provide tenants with a timely CRP and to increase that penalty above the current $100.
For renters who cannot get a CRP from their landlord, the alternative is to obtain a “rent paid affidavit” (RPA) from the Department of Revenue (DOR), which can be a time consuming process for renters, requiring them to submit comprehensive proof of rent payments. Allowing renters to apply for an RPA on-line would streamline the process for both the renter and DOR. In addition, renters could be allowed to file for a refund electronically using the RPA; currently, renters can only file electronically if they have a CRP from their landlord.
Not all reforms require big new plans and large appropriation increases. The modest reforms suggested by Home Line to the Renters’ PTR will make it easier for low-income renters to access the relief they are entitled to under the law.