Property Taxes

  1. Why are Minnesota Utilities the #1 Property Tax Payer in the State?

1. Why are Minnesota Utilities the #1 Property Tax Payer in the State?

Minnesota’s investor-owned utilities are the number one property tax payer in the state, providing over $260 million to Minnesota cities, counties and school districts in 2015.

Why are they the number one source of property tax revenue?   Utilities have a statutory obligation to serve every customer in their assigned service areas, and they invest billions to build and maintain the necessary infrastructure to serve Minnesota.  They have large scale nuclear, coal and gas plants, utility scale solar and wind facilities, electric and transmission and distribution lines, extensive natural gas delivery systems, offices and service centers across the state.

However, utilities also hold this distinction because they’re subject to an additional property tax under state law.   Most property owners, both residential and commercial, pay taxes only on their real property – their land and buildings;  they don’t pay taxes on their personal property – the contents of their buildings, such as appliances, fixtures, pipes, and machinery.

But utilities pay both real and personal property taxes, and their personal property is capital intensive and extremely valuable.   Personal property includes the nuclear reactors, generators, turbines, compressors, machinery, transformers, distribution systems and pipelines, and it accounts for about 80% of utility tax revenues.  Ultimately of course, the taxes are built into utility customers’ rates but, unlike some unregulated providers, the utilities’ tax revenues do stay in the state and local communities.

Like all businesses, utilities also collect the sales tax on behalf of state and local governments, and pay state and federal income and payroll taxes.