Property Tax Refund Not Exemptible

Posted by NCBRC - January 25, 2017

A state property tax refund intended to “provide property tax relief to certain persons who own or rent their homesteads,” is not “government assistance based on need,” for purposes of Minnesota exemptions. Hanson v. Seaver (In re Hanson), No. 16-6023 (B.A.P. 8th Cir. Jan. 6, 2017).

Upon objection by the chapter 7 trustee, the Bankruptcy Court found debtor, Sheri Lynn Hanson, was not entitled to the public assistance exemption based on her refund under the Minnesota Property Tax Refund Act.

On appeal, Ms. Hanson argued that In re Hardy, 787 F.3d 1189 (8th Cir. 2015), which reversed the BAP to hold that the Missouri child tax credit refund was exemptible public assistance, abrogated Manty v. Johnson (In re Johnson), 509 B.R. 213 (B.A.P. 8th Cir. 2014), in which the BAP held that the Property Tax Refund Act was not exemptible as public assistance. The BAP rejected this argument, finding that the Eighth Circuit decision in Hardy was based on its disagreement with the BAP as to whether the child tax credit refund fit the definition of government assistance based on need. Relying on the history of amendments to the statute which were geared toward increasing benefits to poorer taxpayers, the circuit court found that the child tax credit refund fit the definition of public assistance.

Turning to the legislative history of the property tax refund statute, the court found amendments to that Act showed that the legislature had “rais[ed] the maximum eligible household income and lower[ed] the threshold income percentage for higher income individuals.” Taking into consideration the property tax relief statute as a whole, the court noted that other sections were not tied to income. Contrary to Ms. Hanson’s assertion, the court saw “no basis in the legislative history for a finding that the Act was intended to benefit low-income homeowners.” Based on this analysis, the court found that it was bound by the holding in Johnson and affirmed the bankruptcy court decision.

Hanson 8th BAP opinion Jan 2017


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