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In re Hanson

United States Court of Appeals, Eighth Circuit

September 11, 2018

In re: Sheri Lynn Hanson, formerly known as Sheri Lynn Alger Debtor
v.
Randall L. Seaver Trustee - Appellee Sheri Lynn Hanson Appellant

          Submitted: February 13, 2018

          Appeal from the United States Bankruptcy Appellate Panel for the Eighth Circuit

          BEFORE SMITH, CHIEF JUDGE, MURPHY AND COLLOTON, CIRCUIT JUDGES. [*]

          SMITH, CHIEF JUDGE.

         Sheri Hanson filed for bankruptcy in 2015. She later sought to exempt a property tax refund of $1, 500, asserting that she could exempt the refund as government assistance based on need under Minnesota law.[1] The trustee objected to Hanson's amended exemption, and the bankruptcy court sustained the objection. The Bankruptcy Appellate Panel (BAP) affirmed. Hanson appeals, and we affirm.

         I. Background

         Minnesota law provides a list of types of property that a bankruptcy debtor may claim as exempt. See Minn. Stat. § 550.37. Subdivision 14 of Minnesota Statute § 550.37 exempts "[a]ll government assistance based on need" and provides, in relevant part:

All government assistance based on need, and the earnings or salary of a person who is a recipient of government assistance based on need, shall be exempt from all claims of creditors including any contractual setoff or security interest asserted by a financial institution. For the purposes of this chapter, government assistance based on need includes but is not limited to Minnesota family investment program, Supplemental Security Income, medical assistance, MinnesotaCare, payment of Medicare part B premiums or receipt of part D extra help, MFIP diversionary work program, work participation cash benefit, Minnesota supplemental assistance, emergency Minnesota supplemental assistance, general assistance, emergency general assistance, emergency assistance or county crisis funds, energy or fuel assistance, and food support. The salary or earnings of any debtor who is or has been an eligible recipient of government assistance based on need . . . shall, upon the debtor's return to private employment or farming after having been an eligible recipient of government assistance based on need . . . be exempt from attachment, garnishment, or levy of execution for a period of six months after the debtor's return to employment or farming and after all public assistance for which eligibility existed has been terminated. . . . The burden of establishing that funds are exempt rests upon the debtor.

         Hanson argues that her property tax refund falls within the definition of "government assistance based on need." Id.

         The State of Minnesota Property Tax Refund Act provides three types of refunds: (1) a refund for homeowners whose property taxes are above a certain percentage of their household income, Minn. Stat. § 290A.04, subd. 2; (2) a refund for renters whose rent constituting property taxes exceeds a certain percentage of their household income, id., subd. 2a; and (3) a refund for homeowners whose property taxes increased substantially, id., subd. 2h. Hanson's refund falls in the first category.

         Under subdivision 2 of the Act, a homeowner whose property taxes are above a certain percentage of their household income is eligible for a refund. See also id., subd. 2b ("The commissioner may reconstruct the tables in subdivision 2 for homeowners to reflect the elimination of the homestead credit beginning for claims based on taxes payable in 1990."). The maximum refund a household can collect is currently $2, 710. See Minnesota Department of Revenue, Homeowner Schedule for 2017 (Filing in 2018/Fiscal Year 2 019), http://www.revenue.state.mn.us/Forms_and_Instructions/ho_schedule_17.pdf. This amount decreases as household income increases, but a household with an income of up to $40, 939 is eligible for the full $2, 710. See id. Homeowners with household incomes of $110, 650 and up are not eligible for the refund. Id. Although the payment is termed a "refund" under state law, it is actually a payment from the general treasury rather than a return of funds paid by the taxpayer.

         Subdivision 2a sets up a similar type of scheme for renters whose rent constituting property taxes exceeds a certain percentage of household income. Renters with household incomes of $59, 960 and up are not eligible for the refund. See Minnesota Department of Revenue, Renter Schedule for 2017 (Filing in 2018/Fiscal Year 2019), http://www.revenue.state.mn.us/Forms_and_Instructions/renter_schedule_17.pdf. Subdivision 2h provides an additional refund for homeowners whose gross property taxes payable have increased substantially over the past year. A homeowner whose gross property taxes payable on a homestead increased more than 12 percent on the same property is eligible for an additional refund, provided the increase is more than $100 and is not due to improvements made to the property. The refund is "60 percent of the amount of the increase over the greater of 12 percent of the prior year's property taxes payable or $100" and is available regardless of the homeowner's income. Minn. Stat. § 290A.04, subd. 2h.

         II. Discussion

         This case requires us to determine whether a Minnesota property tax refund is exempt from the bankruptcy estate as "government assistance ...


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