Hennepin County extending hours to prepay taxes because of federal law change

In county tax offices Wednesday across Minnesota, long lines snaked from counters and urgent phone calls poured in from that rarest of all creatures: Property owners who wanted to pay their taxes early.

"It's a last shot at the deduction," said Mark Chapin, director of Hennepin County's Resident and Real Estate Services. "The demand to prepay is something we've never seen before and don't expect to happen again."

The rush was prompted by the newly enacted federal tax law that, after Jan. 1, will cap the annual state and local tax deduction at $10,000.

That's a change that could cost some taxpayers thousands of dollars. And it's the reason why Hennepin County officials decided to extend the hours they will accept prepayments on 2018 property taxes and set up the county's website to take payments online.

As of Friday morning, Hennepin County had received $122.2 million in prepaid property taxes — $89.9 million of that through online payments, and $32.3 million in payments made in person or through the mail. In comparison, the county received about $6 million in prepayments in all of 2016.

In all, more than 16,000 Hennepin County taxpayers had prepaid their taxes. Nearly 500 people have been coming in person each day, said Derrick Hodge, the county's resident services administrative manager in the Property Tax Division.

"It's the most excited I've seen people come in and pay taxes," he said. One example was taxpayer David Anderson, who had a fairly hefty check in hand on the advice of his accountant — and said he was happy to turn it over.

The race to prepay is trending across the nation. While the federal tax law specifically prohibited prepayment of income taxes to avoid the new limits, it didn't include any language on early payment of property taxes. That means that property taxes paid before Tuesday — New Year's Day — can be deducted on 2017 returns, up to the amount stated on the truth-in-taxation notices sent out in November.

Things were 'blowing up'

Because Hennepin County is home to 420,000 taxable property parcels and more than 20 percent of the state's population, Chapin wasn't surprised that it would see the most significant number of people wanting to prepay their bills.

To accommodate demand, the county has temporarily moved its tax payment services from the sixth floor of the Government Center in downtown Minneapolis to the skyway level, so people won't have to go through weapons screening.

Beyond Hennepin, each of the metro area's six other core counties also were experiencing an uptick in tax payments this week. Ramsey County had handled 893 prepayments since Tuesday, compared to 418 in 2016. Anoka and Dakota counties, which combined had collected nearly $8 million in property taxes, shifted staffers to handle the increased workload.

None of the metro counties beyond Hennepin extended the hours they will accept prepayments. But business was booming nevertheless.

"My phone is blowing up," said Pam LeBlanc, Anoka County's director of property records and taxation. "We are seeing double the amount of people who want to make early payments."

Outstate, Wabasha County, on the Mississippi River southeast of the metro area, had taken in $100,000 in prepaid taxes by 2 p.m. Tuesday; it collected $139,000 in prepaid taxes in all of 2016. Olmsted County, also dealing with a steady stream of eager taxpayers, took in $600,000.

Dozens have called or e-mailed the St. Louis County Auditor's Office this week wanting to pay their taxes early. Others have mailed in checks for the amount listed on their property tax statements, even though that amount is just an estimate based on the preliminary budgets of the various taxing jurisdictions; the actual amount due won't be known until taxes are calculated and established in late February 2018.

"Our current cashiering and property tax software doesn't allow us to provide a receipt showing that property taxes are prepaid," said St. Louis County Auditor Don Dicklich. "And it's not possible for us to make that sort of procedural or software change in the final two weeks of the year. We can provide a receipt showing that we received a payment on a specific date, but not that the payment is for 2018 taxes."

Other questions may arise, such as whether prepaying taxes might subject a taxpayer to the federal Alternative Minimum Tax. Chapin stressed that the county's top priority is to make the taxpaying experience go as smoothly as possible rather than address specific tax concerns. Dicklich said that officials can't give legal advice on whether early payment will help a person's tax situation, or offer early refunds if it doesn't benefit the county.

"I would recommend a person consult a professional tax accountant for that advice," Dicklich said.

As Hennepin officials developed a plan to handle the rush of taxpayers, Chapin said he ran things by several commissioners. Getting enough staffers together during the holidays wasn't easy, he said.

There will be some overtime costs to cover staffers who are working extended hours, but Chapin said he expected that expense to be covered by the folks who park Saturday in the typically closed ramp.

The significant amount of prepayment money actually can create a potential investment income benefit, said County Administrator David Hough. County funds are managed and invested in a diversified investment portfolio, he said.

Hennepin County staffers starting to get more calls about prepaying property taxes about 10 days ago. By a week ago Wednesday, Hodge said, "Everything just blew up."

"Since then, we've had nonstop lines out the door every day," he said.

david.chanen@startribune.com 612-673-4465