Deed Tax Eminent Domain through Negotiation
Eminent domain is generally defined as the power to take private property for a public purpose.
Deed Tax is due on the execution of a deed conveying legal ownership of real property sold in lieu of condemnation by eminent domain. This power is granted by Minnesota law to state and local governments, to railroads, and to public service corporations, such as electric utility companies. (Minnesota Statutes, Chapter 117.)
When court action is initiated to acquire property
Eminent domain involves a court action initiated by a public or private authority to acquire either legal ownership or easement rights to real property. If the court action is completed and judgment is awarded to the condemning authority, a court decree will order either the transfer of legal ownership or the granting of the easement. No Deed Tax is due on the decree.
When the owner decides to sell
If a property owner decides to sell his or her real property to the condemning authority before court action is completed, the court case would be canceled. In this case, the transaction would not technically involve the power of eminent domain. The transaction would not be the result of a court decree. It would involve the negotiated execution of a deed between a grantor and grantee in lieu of condemnation through eminent domain. In short, it would be a sale and not a judgment.
When the negotiated transaction in lieu of condemnation conveys legal ownership of real property, the executed deed is subject to Deed Tax. When the negotiated transaction in lieu of condemnation grants easement rights, the document is exempt from tax because documents that create, modify or terminate an easement are exempt. (M.S. 287.22 (13)).