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Last Updated: 1/23/2017

Ad Valorem Tax on Taconite Railroads

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Minnesota Statutes 270.80 to 270.88.

 

Beginning with the Jan. 2, 1989 assessment, taconite railroads have been included in the definitions of  common carrier railroads and were assessed and taxed on an ad valorem basis according to Minnesota law.  LTV and Northshore were the only railroads classified as taconite railroads. Since the 2003 assessment, Northshore Mining is the only operating railroad.

The Minnesota Department of Revenue developed rules governing the valuation of railroad operating property.  The rules have been in effect since 1979 when common carrier railroads went off the gross earnings tax.  Each railroad is required to file an annual report containing the necessary information.

The valuation process utilizes the unit value concept of appraisal.  For taconite railroads, this involves calculating a weighted cost indicator of value allowing for depreciation and obsolescence.  Personal property is then deducted from the net cost indicator to yield a Minnesota taxable value.

This value is then apportioned to the various taxing districts where the taconite railroad owns property. The amount of value each taxing district receives is based on an apportionment formula involving three factors: land, miles of track, and the cost of buildings over $10,000.

After the market value is apportioned to each taxing district, the value is equalized with the other commercial and industrial property on a county-wide basis using an estimated median commercial and industrial sales ratio. A commercial and industrial ratio is developed for each county and applied to that county’s taconite railroad market values.