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8th Circuit Rules Minnesota Property tax refunds are not exempt under state law

| Sep 11, 2018 | Bankruptcy, Firm News

The 8th Circuit Court of Appeals just released it opinion in Seaver v. Hanson, determining that state property tax refunds are not government assistance based on need.

The prior caselaw on the subject at the BAP level, Manty v. Johnson, had relied on the Hardy case out of Missouri, which was later reversed by the 8th Circuit. But Manty v. Johnson was never appealed, leaving it up to someone to take this issue up the ladder for final clarification.

Property taxes in Minnesota are paid to the County, and distributed to a variety of local governmental entities. Homeowners who make less than $105,000 per year can get a portion of their property taxes doled back to them, which comes out of the State of Minnesota general treasury funds. The amount that they can get phases out from $2,500 down to $500, the closer their income gets to the $105,000. The real issue was whether that high of a threshold, renders this sort of refund “based on need.” In so holding, the 8th Circuit determined, in their considered opinion, that the small class of people whose income approach $105,000 are not needy, and since this statutory scheme may benefit some people who are not needy, it is therefore not based on need. Never mind that the median income for a household of four in Minnesota is $105,000. Or that as people approach the threshold, the amount of their refund is negligible and not administering in bankruptcy, such that trustees only go after the refunds of poorer homeowners who get the larger refunds.

When I lose a case, I take consolation in knowing that the judges fully considered my arguments, and in this case I can say that. But I think they improperly substituted their judgment for that of the legislature, since the legislature draws the lines, and courts should follow those lines unless they are absurd. I put $15,000 of my own time and money into this case, arguing over $1,500, and I know there are a lot of other people who were waiting for this decision, so the total amount in controversy exceeds what I have into it. Unfortunately I didn’t get the desired result, and the next step is to take this to the legislature to clarify that this is within the list of government assistance based on need.

Click here to download the full decision