3rd Engrossment - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to financing and operation of state and local 1.3 government; making policy, technical, administrative, 1.4 enforcement, collection, refund, and other changes to 1.5 income, franchise, property, sales and use, estate, 1.6 vehicle registration, health care provider, cigarette 1.7 and tobacco products, insurance premiums, aggregate 1.8 removal, petroleum, gambling, mortgage registry, 1.9 occupation, net proceeds, and production taxes, and 1.10 other taxes and tax-related provisions; changing 1.11 provisions relating to fiscal disparities, 1.12 tax-forfeited lands, state debt collection procedures, 1.13 sustainable forest incentives programs, and tax data 1.14 provisions; conforming provisions to certain changes 1.15 in federal law; changing powers and duties of certain 1.16 local governments and state departments or agencies; 1.17 changing tax increment financing provisions; 1.18 authorizing establishment of an International Economic 1.19 Development Zone and providing for tax incentives; 1.20 imposing a franchise fee for operation of card clubs; 1.21 regulating tax preparers; imposing requirement on 1.22 vendors that contract with state to collect sales 1.23 taxes; changing provisions relating to certificates of 1.24 title of vehicles held by motor vehicle dealers; 1.25 changing or providing for studies and reports; 1.26 providing for task force on electronic filing and 1.27 recording of real estate documents; changing and 1.28 providing penalties; providing for allocation and 1.29 transfers of funds; clarifying appropriations; 1.30 appropriating money; amending Minnesota Statutes 2002, 1.31 sections 16C.03, by adding a subdivision; 16D.10; 1.32 97A.061, subdivision 1; 144F.01, subdivision 10; 1.33 168A.02, subdivision 2; 168A.11, subdivisions 1, 2, by 1.34 adding a subdivision; 240.30, by adding a subdivision; 1.35 270.02, subdivision 3; 270.65; 270.69, subdivision 4; 1.36 270B.01, subdivision 8; 270B.12, subdivision 9; 1.37 272.01, subdivision 2; 272.02, subdivisions 1a, 7, 22, 1.38 by adding subdivisions; 272.0212, subdivisions 1, 2; 1.39 272.029, subdivisions 4, 6; 273.11, by adding a 1.40 subdivision; 273.111, subdivision 6; 273.124, 1.41 subdivision 8, by adding a subdivision; 273.1384, 1.42 subdivision 1; 273.19, subdivision 1a; 274.14; 1.43 275.065, subdivision 1a; 275.07, subdivisions 1, 4; 1.44 276.04, subdivision 2; 282.016; 282.21; 282.224; 1.45 282.301; 287.04; 289A.08, subdivision 1; 289A.12, 1.46 subdivision 3; 289A.31, subdivision 2; 289A.37, 2.1 subdivision 5; 289A.38, subdivision 6; 289A.56, by 2.2 adding a subdivision; 289A.60, subdivision 6; 290.06, 2.3 subdivision 22, by adding a subdivision; 290.0674, 2.4 subdivision 2; 290.091, subdivision 3; 290.17, by 2.5 adding a subdivision; 290.191, subdivisions 2, 3, 5, 2.6 6, 10, 11, by adding a subdivision; 290.92, 2.7 subdivisions 1, 4b; 290.9705, subdivision 1; 290A.03, 2.8 subdivision 13; 290A.07, by adding a subdivision; 2.9 290C.05; 295.50, subdivision 4; 295.582; 296A.22, by 2.10 adding a subdivision; 297A.61, subdivision 4, by 2.11 adding subdivisions; 297A.62, by adding a subdivision; 2.12 297A.67, by adding a subdivision; 297A.68, by adding 2.13 subdivisions; 297A.70, by adding a subdivision; 2.14 297A.71, by adding a subdivision; 297A.87, 2.15 subdivisions 2, 3; 297A.995, subdivision 6; 297E.01, 2.16 subdivisions 5, 7, by adding subdivisions; 297E.07; 2.17 297F.01, by adding a subdivision; 297F.09, by adding a 2.18 subdivision; 297I.01, by adding subdivisions; 297I.05, 2.19 subdivisions 4, 5, by adding a subdivision; 298.01, 2.20 subdivisions 3, 4; 298.24, subdivision 1; 325D.33, 2.21 subdivision 6; 365.43, subdivision 1; 365.431; 2.22 469.1734, subdivision 6; 469.174, subdivision 11; 2.23 469.175, subdivision 4a; 469.176, subdivision 4d; 2.24 469.1761, subdivisions 1, 3; 469.1771, subdivision 5; 2.25 469.178, subdivision 1; 469.1831, subdivision 6; 2.26 473.843, subdivision 5; 473F.02, subdivisions 2, 7; 2.27 477A.11, subdivision 4, by adding a subdivision; 2.28 477A.12, subdivisions 1, 2; 477A.14, subdivision 1; 2.29 Minnesota Statutes 2003 Supplement, sections 4A.02; 2.30 16A.152, subdivision 2; 116J.556; 168A.05, subdivision 2.31 1a; 270.06; 270.30, subdivisions 1, 5, 8; 270B.12, 2.32 subdivision 13; 272.02, subdivisions 47, 56, 65; 2.33 273.11, subdivision 1a; 273.13, subdivisions 22, 23; 2.34 274.014, subdivision 3; 275.065, subdivision 3; 2.35 276.112; 289A.02, subdivision 7; 289A.08, subdivision 2.36 16; 289A.19, subdivision 4; 289A.40, subdivision 2; 2.37 290.01, subdivisions 7, 19, 19a, 19b, 19c, 19d, 31; 2.38 290.06, subdivision 2c; 290.0674, subdivision 1; 2.39 290.091, subdivision 2; 290.0921, subdivision 3; 2.40 290A.03, subdivision 15; 290C.10; 291.005, subdivision 2.41 1; 291.03, subdivision 1; 297A.668, subdivisions 1, 3, 2.42 5; 297A.669, subdivision 16; 297A.68, subdivisions 2, 2.43 5, 39; 297A.70, subdivision 8; 297F.08, subdivision 2.44 12; 297F.09, subdivisions 1, 2; 298.75, subdivision 1; 2.45 469.174, subdivision 25; 469.177, subdivision 1; 2.46 469.310, subdivision 11; 469.330, subdivision 11; 2.47 469.335; 469.337; 477A.011, subdivision 36; 477A.03, 2.48 subdivision 2b; Laws 1990, chapter 604, article 7, 2.49 section 29, subdivision 1, as amended; Laws 1998, 2.50 chapter 389, article 3, section 41; Laws 1998, chapter 2.51 389, article 3, section 42, subdivision 2, as amended; 2.52 Laws 1998, chapter 389, article 8, section 43, 2.53 subdivision 3; Laws 1998, chapter 389, article 11, 2.54 section 24, subdivisions 1, 2; Laws 2000, chapter 391, 2.55 section 1, subdivisions 1, 2, as amended; Laws 2001, 2.56 First Special Session chapter 10, article 2, section 2.57 77, as amended; Laws 2002, chapter 365, section 9; 2.58 Laws 2002, chapter 377, article 3, section 4; Laws 2.59 2003, First Special Session chapter 1, article 2, 2.60 section 123; Laws 2003, First Special Session chapter 2.61 21, article 5, section 13; Laws 2003, First Special 2.62 Session chapter 21, article 6, section 9; proposing 2.63 coding for new law in Minnesota Statutes, chapters 2.64 270; 272; 273; 290; 290C; 297F; 325F; 469; 473; 2.65 repealing Minnesota Statutes 2002, sections 273.19, 2.66 subdivision 5; 274.05; 275.15; 283.07; 297E.12, 2.67 subdivision 10; 469.176, subdivision 1a; 469.1766; 2.68 Laws 1975, chapter 287, section 5; Laws 2003, chapter 2.69 127, article 9, section 9, subdivision 4; Minnesota 2.70 Rules, parts 8093.2000; 8093.3000; 8130.0110, subpart 2.71 4; 8130.0200, subparts 5, 6; 8130.0400, subpart 9; 3.1 8130.1200, subparts 5, 6; 8130.2900; 8130.3100, 3.2 subpart 1; 8130.4000, subparts 1, 2; 8130.4200, 3.3 subpart 1; 8130.4400, subpart 3; 8130.5200; 8130.5600, 3.4 subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 5; 3.5 8130.8800, subpart 4. 3.6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 3.7 ARTICLE 1 3.8 INCOME, FRANCHISE, AND OCCUPATION TAXES 3.9 Section 1. Minnesota Statutes 2002, section 289A.08, 3.10 subdivision 1, is amended to read: 3.11 Subdivision 1. [GENERALLY; INDIVIDUALS.] (a) A taxpayer 3.12 must file a return for each taxable year the taxpayer is 3.13 required to file a return under section 6012 of the Internal 3.14 Revenue Code, except that: 3.15 (1) an individual who is not a Minnesota resident for any 3.16 part of the year is not required to file a Minnesota income tax 3.17 return if the individual's gross income derived from Minnesota 3.18 sources as determined under sections 290.081, paragraph (a), and 3.19 290.17, is less than the filing requirements for a single 3.20 individual who is a full year resident of Minnesota; and 3.21 (2) an individual who is a Minnesota resident is not 3.22 required to file a Minnesota income tax return if the 3.23 individual's gross income derived from Minnesota sources as 3.24 determined under section 290.17, less the amount of the 3.25 individual's gross income that consists of compensation paid to 3.26 members of the armed forces of the United States or United 3.27 Nations for active duty performed outside Minnesota, is less 3.28 than the filing requirements for a single individual who is a 3.29 full-year resident of Minnesota. 3.30 (b) The decedent's final income tax return, and other 3.31 income tax returns for prior years where the decedent had gross 3.32 income in excess of the minimum amount at which an individual is 3.33 required to file and did not file, must be filed by the 3.34 decedent's personal representative, if any. If there is no 3.35 personal representative, the return or returns must be filed by 3.36 the transferees, as defined in section 289A.38, subdivision 13, 3.37 who receive property of the decedent. 3.38 (c) The term "gross income," as it is used in this section, 4.1 has the same meaning given it in section 290.01, subdivision 20. 4.2 [EFFECTIVE DATE.] This section is effective for taxable 4.3 years beginning after December 31,2003. 4.4 Sec. 2. Minnesota Statutes 2003 Supplement, section 4.5 289A.08, subdivision 16, is amended to read: 4.6 Subd. 16. [TAX REFUND OR RETURN PREPARERS; ELECTRONIC 4.7 FILING; PAPER FILING FEE IMPOSED.] (a) A "tax refund or return 4.8 preparer," as defined in section 289A.60, subdivision 13, 4.9 paragraph (g), who prepared more than500100 Minnesota 4.10 individual income tax returns for the prior calendar year must 4.11 file all Minnesota individual income tax returns prepared for 4.12 the current calendar year by electronic means. "Tax refund or 4.13 return preparer" does not include (i) an organization that meets 4.14 the requirements of section 501(c)(3) of the Internal Revenue 4.15 Code or (ii) an individual hired by such an organization for the 4.16 purpose of preparing tax returns. 4.17 (b)For tax returns prepared for the tax year beginning in4.182001, the "500" in paragraph (a) is reduced to 250.4.19(c) For tax returns prepared for tax years beginning after4.20December 31, 2001, the "500" in paragraph (a) is reduced to 100.4.21(d)Paragraph (a) does not apply to a return if the 4.22 taxpayer has indicated on the return that the taxpayer did not 4.23 want the return filed by electronic means. 4.24(e)(c) For each return that is not filed electronically by 4.25 a tax refund or return preparer under this subdivision, 4.26 including returns filed under paragraph(d)(b), a paper filing 4.27 fee of $5 is imposed upon the preparer. The fee is collected 4.28 from the preparer in the same manner as income tax. The fee 4.29 does not apply to returns that the commissioner requires to be 4.30 filed in paper form. 4.31 [EFFECTIVE DATE.] This section is effective for returns 4.32 filed for tax years beginning after December 31, 2003. 4.33 Sec. 3. Minnesota Statutes 2003 Supplement, section 4.34 290.01, subdivision 7, is amended to read: 4.35 Subd. 7. [RESIDENT.] (a) The term "resident" means any 4.36 individual domiciled in Minnesota, except that an individual is 5.1 not a "resident" for the period of time that the individual is 5.2either:5.3(1) on active duty stationed outside of Minnesota while in5.4the armed forces of the United States or the United Nations; or5.5(2)a "qualified individual" as defined in section 5.6 911(d)(1) of the Internal Revenue Code, if the qualified 5.7 individual notifies the county within three months of moving out 5.8 of the country that homestead status be revoked for the 5.9 Minnesota residence of the qualified individual, and the 5.10 property is not classified as a homestead while the individual 5.11 remains a qualified individual. 5.12 (b) "Resident" also means any individual domiciled outside 5.13 the state who maintains a place of abode in the state and spends 5.14 in the aggregate more than one-half of the tax year in 5.15 Minnesota, unless: 5.16 (1) the individual or the spouse of the individual is in 5.17 the armed forces of the United States; or 5.18 (2) the individual is covered under the reciprocity 5.19 provisions in section 290.081. 5.20 For purposes of this subdivision, presence within the state 5.21 for any part of a calendar day constitutes a day spent in the 5.22 state. Individuals shall keep adequate records to substantiate 5.23 the days spent outside the state. 5.24 The term "abode" means a dwelling maintained by an 5.25 individual, whether or not owned by the individual and whether 5.26 or not occupied by the individual, and includes a dwelling place 5.27 owned or leased by the individual's spouse. 5.28 (c) Neither the commissioner nor any court shall consider 5.29 charitable contributions made by an individual within or without 5.30 the state in determining if the individual is domiciled in 5.31 Minnesota. 5.32 [EFFECTIVE DATE.] This section is effective for taxable 5.33 years beginning after December 31, 2003. 5.34 Sec. 4. Minnesota Statutes 2003 Supplement, section 5.35 290.01, subdivision 19b, is amended to read: 5.36 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 6.1 individuals, estates, and trusts, there shall be subtracted from 6.2 federal taxable income: 6.3 (1) interest income on obligations of any authority, 6.4 commission, or instrumentality of the United States to the 6.5 extent includable in taxable income for federal income tax 6.6 purposes but exempt from state income tax under the laws of the 6.7 United States; 6.8 (2) if included in federal taxable income, the amount of 6.9 any overpayment of income tax to Minnesota or to any other 6.10 state, for any previous taxable year, whether the amount is 6.11 received as a refund or as a credit to another taxable year's 6.12 income tax liability; 6.13 (3) the amount paid to others, less the amount used to 6.14 claim the credit allowed under section 290.0674, not to exceed 6.15 $1,625 for each qualifying child in grades kindergarten to 6 and 6.16 $2,500 for each qualifying child in grades 7 to 12, for tuition, 6.17 textbooks, and transportation of each qualifying child in 6.18 attending an elementary or secondary school situated in 6.19 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 6.20 wherein a resident of this state may legally fulfill the state's 6.21 compulsory attendance laws, which is not operated for profit, 6.22 and which adheres to the provisions of the Civil Rights Act of 6.23 1964 and chapter 363A. For the purposes of this clause, 6.24 "tuition" includes fees or tuition as defined in section 6.25 290.0674, subdivision 1, clause (1). As used in this clause, 6.26 "textbooks" includes books and other instructional materials and 6.27 equipment purchased or leased for use in elementary and 6.28 secondary schools in teaching only those subjects legally and 6.29 commonly taught in public elementary and secondary schools in 6.30 this state. Equipment expenses qualifying for deduction 6.31 includes expenses as defined and limited in section 290.0674, 6.32 subdivision 1, clause (3). "Textbooks" does not include 6.33 instructional books and materials used in the teaching of 6.34 religious tenets, doctrines, or worship, the purpose of which is 6.35 to instill such tenets, doctrines, or worship, nor does it 6.36 include books or materials for, or transportation to, 7.1 extracurricular activities including sporting events, musical or 7.2 dramatic events, speech activities, driver's education, or 7.3 similar programs. For purposes of the subtraction provided by 7.4 this clause, "qualifying child" has the meaning given in section 7.5 32(c)(3) of the Internal Revenue Code; 7.6 (4) income as provided under section 290.0802; 7.7 (5) to the extent included in federal adjusted gross 7.8 income, income realized on disposition of property exempt from 7.9 tax under section 290.491; 7.10 (6) to the extent included in federal taxable income, 7.11 postservice benefits for youth community service under section 7.12 124D.42 for volunteer service under United States Code, title 7.13 42, sections 12601 to 12604; 7.14 (7) to the extent not deducted in determining federal 7.15 taxable income by an individual who does not itemize deductions 7.16 for federal income tax purposes for the taxable year, an amount 7.17 equal to 50 percent of the excess of charitable contributions 7.18 allowable as a deduction for the taxable year under section 7.19 170(a) of the Internal Revenue Code over $500; 7.20 (8) for taxable years beginning before January 1, 2008, the 7.21 amount of the federal small ethanol producer credit allowed 7.22 under section 40(a)(3) of the Internal Revenue Code which is 7.23 included in gross income under section 87 of the Internal 7.24 Revenue Code; 7.25 (9) for individuals who are allowed a federal foreign tax 7.26 credit for taxes that do not qualify for a credit under section 7.27 290.06, subdivision 22, an amount equal to the carryover of 7.28 subnational foreign taxes for the taxable year, but not to 7.29 exceed the total subnational foreign taxes reported in claiming 7.30 the foreign tax credit. For purposes of this clause, "federal 7.31 foreign tax credit" means the credit allowed under section 27 of 7.32 the Internal Revenue Code, and "carryover of subnational foreign 7.33 taxes" equals the carryover allowed under section 904(c) of the 7.34 Internal Revenue Code minus national level foreign taxes to the 7.35 extent they exceed the federal foreign tax credit; 7.36 (10) in each of the five tax years immediately following 8.1 the tax year in which an addition is required under subdivision 8.2 19a, clause (7), or subdivision 19c, clause (16), an amount 8.3 equal to one-fifth of the delayed depreciation. For purposes of 8.4 this clause, "delayed depreciation" means the amount of the 8.5 addition made by the taxpayer under subdivision 19a, clause (7), 8.6 or, in the case of a corporation that converts to an "S" 8.7 corporation, the addition made under subdivision 19c, clause 8.8 (16), minus the positive value of any net operating loss under 8.9 section 172 of the Internal Revenue Code generated for the tax 8.10 year of the addition. The resulting delayed depreciation cannot 8.11 be less than zero;and8.12 (11) job opportunity building zone income as provided under 8.13 section 469.316.; 8.14 (12) the amount of compensation paid to members of the 8.15 Minnesota National Guard or other reserve components of the 8.16 United States military for active service performed in 8.17 Minnesota, excluding compensation for services performed under 8.18 the Active Guard Reserve (AGR) program. For purposes of this 8.19 clause, "active service" means (i) state active service as 8.20 defined in section 190.05, subdivision 5a, clause (1); (ii) 8.21 federally funded state active service as defined in section 8.22 190.05, subdivision 5b; or (iii) federal active service as 8.23 defined in section 190.05, subdivision 5c, but "active service" 8.24 excludes services performed exclusively for purposes of basic 8.25 combat training, advanced individual training, annual training, 8.26 and periodic inactive duty training; special training 8.27 periodically made available to reserve members; and service 8.28 performed in accordance with section 190.08, subdivision 3; 8.29 (13) the amount of compensation paid to members of the 8.30 armed forces of the United States or United Nations for active 8.31 duty performed outside Minnesota; and 8.32 (14) to the extent not deducted in computing federal 8.33 taxable income, an amount, not to exceed $10,000, equal to 8.34 qualified expenses related to a qualified donor's donation, 8.35 while living, of one or more of the qualified donor's organs to 8.36 another person for human organ transplantation. For purposes of 9.1 determining the extent to which expenses are deducted in 9.2 computing federal taxable income, travel and lodging expenses 9.3 related to an organ donation are considered deducted by an 9.4 individual in determining federal taxable income to the extent 9.5 they exceed 7.5 percent of federal adjusted gross income as 9.6 defined in section 62 of the Internal Revenue Code. For 9.7 purposes of this clause, "organ" means all or part of an 9.8 individual's liver, pancreas, kidney, intestine, lung, or bone 9.9 marrow; "human organ transplantation" means the medical 9.10 procedure by which transfer of a human organ is made from the 9.11 body of one person to the body of another person; "qualified 9.12 expenses" means unreimbursed expenses for both the individual 9.13 and the qualified donor for (i) travel, (ii) lodging, and (iii) 9.14 lost wages net of sick pay, except that such expenses may be 9.15 subtracted under this clause only once; and "qualified donor" 9.16 means the individual or the individual's dependent, as defined 9.17 in section 152 of the Internal Revenue Code. An individual may 9.18 claim the subtraction in this clause only once for each instance 9.19 of organ donation for transplantation during the taxable year in 9.20 which the human organ donation and transplantation occurs. 9.21 [EFFECTIVE DATE.] The changes to clause (10) of this 9.22 section are effective for taxable years beginning after December 9.23 31, 2002. The rest of this section is effective for taxable 9.24 years beginning after December 31, 2003. 9.25 Sec. 5. Minnesota Statutes 2003 Supplement, section 9.26 290.01, subdivision 19c, is amended to read: 9.27 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 9.28 INCOME.] For corporations, there shall be added to federal 9.29 taxable income: 9.30 (1) the amount of any deduction taken for federal income 9.31 tax purposes for income, excise, or franchise taxes based on net 9.32 income or related minimum taxes, including but not limited to 9.33 the tax imposed under section 290.0922, paid by the corporation 9.34 to Minnesota, another state, a political subdivision of another 9.35 state, the District of Columbia, or any foreign country or 9.36 possession of the United States; 10.1 (2) interest not subject to federal tax upon obligations 10.2 of: the United States, its possessions, its agencies, or its 10.3 instrumentalities; the state of Minnesota or any other state, 10.4 any of its political or governmental subdivisions, any of its 10.5 municipalities, or any of its governmental agencies or 10.6 instrumentalities; the District of Columbia; or Indian tribal 10.7 governments; 10.8 (3) exempt-interest dividends received as defined in 10.9 section 852(b)(5) of the Internal Revenue Code; 10.10 (4) the amount of any net operating loss deduction taken 10.11 for federal income tax purposes under section 172 or 832(c)(10) 10.12 of the Internal Revenue Code or operations loss deduction under 10.13 section 810 of the Internal Revenue Code; 10.14 (5) the amount of any special deductions taken for federal 10.15 income tax purposes under sections 241 to 247 of the Internal 10.16 Revenue Code; 10.17 (6) losses from the business of mining, as defined in 10.18 section 290.05, subdivision 1, clause (a), that are not subject 10.19 to Minnesota income tax; 10.20 (7) the amount of any capital losses deducted for federal 10.21 income tax purposes under sections 1211 and 1212 of the Internal 10.22 Revenue Code; 10.23 (8) the exempt foreign trade income of a foreign sales 10.24 corporation under sections 921(a) and 291 of the Internal 10.25 Revenue Code; 10.26 (9) the amount of percentage depletion deducted under 10.27 sections 611 through 614 and 291 of the Internal Revenue Code; 10.28 (10) for certified pollution control facilities placed in 10.29 service in a taxable year beginning before December 31, 1986, 10.30 and for which amortization deductions were elected under section 10.31 169 of the Internal Revenue Code of 1954, as amended through 10.32 December 31, 1985, the amount of the amortization deduction 10.33 allowed in computing federal taxable income for those 10.34 facilities; 10.35 (11) the amount of any deemed dividend from a foreign 10.36 operating corporation determined pursuant to section 290.17, 11.1 subdivision 4, paragraph (g); 11.2 (12) the amount of any environmental tax paid under section 11.3 59(a) of the Internal Revenue Code; 11.4 (13) the amount of a partner's pro rata share of net income 11.5 which does not flow through to the partner because the 11.6 partnership elected to pay the tax on the income under section 11.7 6242(a)(2) of the Internal Revenue Code; 11.8 (14) the amount of net income excluded under section 114 of 11.9 the Internal Revenue Code; 11.10 (15) any increase in subpart F income, as defined in 11.11 section 952(a) of the Internal Revenue Code, for the taxable 11.12 year when subpart F income is calculated without regard to the 11.13 provisions of section 614 of Public Law 107-147;and11.14 (16) 80 percent of the depreciation deduction allowed under 11.15 section 168(k) of the Internal Revenue Code. For purposes of 11.16 this clause, if the taxpayer has an activity that in the taxable 11.17 year generates a deduction for depreciation under section 168(k) 11.18 and the activity generates a loss for the taxable year that the 11.19 taxpayer is not allowed to claim for the taxable year, "the 11.20 depreciation allowed under section 168(k)" for the taxable year 11.21 is limited to excess of the depreciation claimed by the activity 11.22 under section 168(k) over the amount of the loss from the 11.23 activity that is not allowed in the taxable year. In succeeding 11.24 taxable years when the losses not allowed in the taxable year 11.25 are allowed, the depreciation under section 168(k) is allowed; 11.26 and 11.27 (17) the excess of deductions over income attributable to 11.28 tax-exempt property, as provided under section 290.0711. 11.29 [EFFECTIVE DATE.] This section is effective for leases and 11.30 service contracts or similar arrangements entered into after 11.31 February 5, 2004, and for taxable years beginning after December 11.32 31, 2003. 11.33 Sec. 6. Minnesota Statutes 2003 Supplement, section 11.34 290.01, subdivision 19d, is amended to read: 11.35 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 11.36 TAXABLE INCOME.] For corporations, there shall be subtracted 12.1 from federal taxable income after the increases provided in 12.2 subdivision 19c: 12.3 (1) the amount of foreign dividend gross-up added to gross 12.4 income for federal income tax purposes under section 78 of the 12.5 Internal Revenue Code; 12.6 (2) the amount of salary expense not allowed for federal 12.7 income tax purposes due to claiming the federal jobs credit 12.8 under section 51 of the Internal Revenue Code; 12.9 (3) any dividend (not including any distribution in 12.10 liquidation) paid within the taxable year by a national or state 12.11 bank to the United States, or to any instrumentality of the 12.12 United States exempt from federal income taxes, on the preferred 12.13 stock of the bank owned by the United States or the 12.14 instrumentality; 12.15 (4) amounts disallowed for intangible drilling costs due to 12.16 differences between this chapter and the Internal Revenue Code 12.17 in taxable years beginning before January 1, 1987, as follows: 12.18 (i) to the extent the disallowed costs are represented by 12.19 physical property, an amount equal to the allowance for 12.20 depreciation under Minnesota Statutes 1986, section 290.09, 12.21 subdivision 7, subject to the modifications contained in 12.22 subdivision 19e; and 12.23 (ii) to the extent the disallowed costs are not represented 12.24 by physical property, an amount equal to the allowance for cost 12.25 depletion under Minnesota Statutes 1986, section 290.09, 12.26 subdivision 8; 12.27 (5) the deduction for capital losses pursuant to sections 12.28 1211 and 1212 of the Internal Revenue Code, except that: 12.29 (i) for capital losses incurred in taxable years beginning 12.30 after December 31, 1986, capital loss carrybacks shall not be 12.31 allowed; 12.32 (ii) for capital losses incurred in taxable years beginning 12.33 after December 31, 1986, a capital loss carryover to each of the 12.34 15 taxable years succeeding the loss year shall be allowed; 12.35 (iii) for capital losses incurred in taxable years 12.36 beginning before January 1, 1987, a capital loss carryback to 13.1 each of the three taxable years preceding the loss year, subject 13.2 to the provisions of Minnesota Statutes 1986, section 290.16, 13.3 shall be allowed; and 13.4 (iv) for capital losses incurred in taxable years beginning 13.5 before January 1, 1987, a capital loss carryover to each of the 13.6 five taxable years succeeding the loss year to the extent such 13.7 loss was not used in a prior taxable year and subject to the 13.8 provisions of Minnesota Statutes 1986, section 290.16, shall be 13.9 allowed; 13.10 (6) an amount for interest and expenses relating to income 13.11 not taxable for federal income tax purposes, if (i) the income 13.12 is taxable under this chapter and (ii) the interest and expenses 13.13 were disallowed as deductions under the provisions of section 13.14 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 13.15 federal taxable income; 13.16 (7) in the case of mines, oil and gas wells, other natural 13.17 deposits, and timber for which percentage depletion was 13.18 disallowed pursuant to subdivision 19c, clause (11), a 13.19 reasonable allowance for depletion based on actual cost. In the 13.20 case of leases the deduction must be apportioned between the 13.21 lessor and lessee in accordance with rules prescribed by the 13.22 commissioner. In the case of property held in trust, the 13.23 allowable deduction must be apportioned between the income 13.24 beneficiaries and the trustee in accordance with the pertinent 13.25 provisions of the trust, or if there is no provision in the 13.26 instrument, on the basis of the trust's income allocable to 13.27 each; 13.28 (8) for certified pollution control facilities placed in 13.29 service in a taxable year beginning before December 31, 1986, 13.30 and for which amortization deductions were elected under section 13.31 169 of the Internal Revenue Code of 1954, as amended through 13.32 December 31, 1985, an amount equal to the allowance for 13.33 depreciation under Minnesota Statutes 1986, section 290.09, 13.34 subdivision 7; 13.35 (9) amounts included in federal taxable income that are due 13.36 to refunds of income, excise, or franchise taxes based on net 14.1 income or related minimum taxes paid by the corporation to 14.2 Minnesota, another state, a political subdivision of another 14.3 state, the District of Columbia, or a foreign country or 14.4 possession of the United States to the extent that the taxes 14.5 were added to federal taxable income under section 290.01, 14.6 subdivision 19c, clause (1), in a prior taxable year; 14.7 (10) 80 percent of royalties, fees, or other like income 14.8 accrued or received from a foreign operating corporation or a 14.9 foreign corporation which is part of the same unitary business 14.10 as the receiving corporation; 14.11 (11) income or gains from the business of mining as defined 14.12 in section 290.05, subdivision 1, clause (a), that are not 14.13 subject to Minnesota franchise tax; 14.14 (12) the amount of handicap access expenditures in the 14.15 taxable year which are not allowed to be deducted or capitalized 14.16 under section 44(d)(7) of the Internal Revenue Code; 14.17 (13) the amount of qualified research expenses not allowed 14.18 for federal income tax purposes under section 280C(c) of the 14.19 Internal Revenue Code, but only to the extent that the amount 14.20 exceeds the amount of the credit allowed under section 290.068; 14.21 (14) the amount of salary expenses not allowed for federal 14.22 income tax purposes due to claiming the Indian employment credit 14.23 under section 45A(a) of the Internal Revenue Code; 14.24 (15) the amount of any refund of environmental taxes paid 14.25 under section 59A of the Internal Revenue Code; 14.26 (16) for taxable years beginning before January 1, 2008, 14.27 the amount of the federal small ethanol producer credit allowed 14.28 under section 40(a)(3) of the Internal Revenue Code which is 14.29 included in gross income under section 87 of the Internal 14.30 Revenue Code; 14.31 (17) for a corporation whose foreign sales corporation, as 14.32 defined in section 922 of the Internal Revenue Code, constituted 14.33 a foreign operating corporation during any taxable year ending 14.34 before January 1, 1995, and a return was filed by August 15, 14.35 1996, claiming the deduction under section 290.21, subdivision 14.36 4, for income received from the foreign operating corporation, 15.1 an amount equal to 1.23 multiplied by the amount of income 15.2 excluded under section 114 of the Internal Revenue Code, 15.3 provided the income is not income of a foreign operating 15.4 company; 15.5 (18) any decrease in subpart F income, as defined in 15.6 section 952(a) of the Internal Revenue Code, for the taxable 15.7 year when subpart F income is calculated without regard to the 15.8 provisions of section 614 of Public Law 107-147;and15.9 (19) in each of the five tax years immediately following 15.10 the tax year in which an addition is required under subdivision 15.11 19c, clause (16), an amount equal to one-fifth of the delayed 15.12 depreciation. For purposes of this clause, "delayed 15.13 depreciation" means the amount of the addition made by the 15.14 taxpayer under subdivision 19c, clause (16). The resulting 15.15 delayed depreciation cannot be less than zero; and 15.16 (20) amounts allowed as carryover subtractions attributable 15.17 to tax-exempt property, as provided under section 290.0711. 15.18 [EFFECTIVE DATE.] This section is effective for leases and 15.19 service contracts or similar arrangements entered into after 15.20 February 5, 2004, and for taxable years beginning after December 15.21 31, 2003. 15.22 Sec. 7. Minnesota Statutes 2002, section 290.0674, 15.23 subdivision 2, is amended to read: 15.24 Subd. 2. [LIMITATIONS.] (a) For claimants with income not 15.25 greater than $33,500, the maximum credit allowed is $1,000per15.26qualifying child and $2,000 per familyfor a family with one 15.27 qualifying child and $2,000 for a family with two or more 15.28 qualifying children. No credit is allowed for education-related 15.29 expenses for claimants with income greater than $37,500. The 15.30 maximum creditperfor a family with one qualifying child is 15.31 reduced by $1 for each $4 of household income over $33,500, and 15.32 the maximum creditperfor a family with more than one 15.33 qualifying child is reduced by $2 for each $4 of household 15.34 income over $33,500, but in no case is the credit less than zero. 15.35 For purposes of this section "income" has the meaning given 15.36 in section 290.067, subdivision 2a. In the case of a married 16.1 claimant, a credit is not allowed unless a joint income tax 16.2 return is filed. 16.3 (b) For a nonresident or part-year resident, the credit 16.4 determined under subdivision 1 and the maximum credit amount in 16.5 paragraph (a) must be allocated using the percentage calculated 16.6 in section 290.06, subdivision 2c, paragraph (e). 16.7 [EFFECTIVE DATE.] This section is effective for taxable 16.8 years beginning after December 31, 2003. 16.9 Sec. 8. [290.0711] [TAX-EXEMPT PROPERTY; LIMITS ON TAX 16.10 BENEFITS.] 16.11 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 16.12 section, the following terms have the meanings given. 16.13 (b) "Tax-exempt use property" has the meaning given in 16.14 section 168(h) of the Internal Revenue Code, except the 16.15 provisions of clause (2)(C)(ii) and paragraph (3) do not apply. 16.16 If tangible property is subject to a service contract or other 16.17 similar arrangement between a taxpayer or any related person and 16.18 any tax-exempt entity, the contract or arrangement must be 16.19 treated in the same manner as if it is tax-exempt property under 16.20 this subdivision. 16.21 (c) "Taxpayer" means a corporation, subject to the 16.22 corporate franchise tax under this chapter, that is claiming the 16.23 deduction on the federal return and any member of its unitary 16.24 group. 16.25 Subd. 2. [ADDITION OF EXCESS DEDUCTIONS.] In computing 16.26 Minnesota taxable income, the taxpayer must add to federal 16.27 taxable income the excess of: 16.28 (1) the aggregate amount of deductions claimed in computing 16.29 federal taxable income with respect to tax-exempt use property; 16.30 over 16.31 (2) the aggregate amount of income includable in federal 16.32 gross income of the taxpayer for the taxable year with respect 16.33 to tax-exempt use property. 16.34 Subd. 3. [CARRYOVER SUBTRACTION.] Unless otherwise 16.35 provided in this section, any addition under subdivision 2 may 16.36 be carried to a later taxable year and claimed as a subtraction 17.1 reducing the federal taxable income of the taxpayer to the 17.2 extent that income with respect to tax-exempt use property 17.3 exceeds the amount of deductions claimed with respect to 17.4 tax-exempt properties in computing federal taxable income for 17.5 that taxable year. 17.6 Subd. 4. [SPECIAL RULES.] (a) The following rules apply to 17.7 the computation of the addition under subdivision 2. 17.8 (b) Subdivision 2 applies to deductions directly allocable 17.9 to any tax-exempt use property and to a proper share of other 17.10 deductions that are not directly allocable to tax exempt. 17.11 (c) If property of a taxpayer ceases to be tax-exempt use 17.12 property in the hands of the taxpayer, any unused carryover 17.13 under subdivision 3 with respect to the property is only 17.14 allowable as a subtraction for any taxable year to the extent of 17.15 any net income of the taxpayer that is allocable to the property 17.16 that ceased to be tax-exempt property. 17.17 (d) If during the taxable year, a taxpayer disposes of the 17.18 taxpayer's entire interest in tax-exempt use property, the 17.19 taxpayer may claim a subtraction for the lesser of: 17.20 (1) the amount of gain realized on the disposition and 17.21 includable in federal taxable income; or 17.22 (2) the amount of additions under subdivision 2 17.23 attributable to the property and not claimed in a later year 17.24 under subdivision 3. 17.25 [EFFECTIVE DATE.] This section is effective for leases and 17.26 service contracts or similar arrangements entered into after 17.27 February 5, 2004, and for taxable years beginning after December 17.28 31, 2003. 17.29 Sec. 9. Minnesota Statutes 2003 Supplement, section 17.30 290.091, subdivision 2, is amended to read: 17.31 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 17.32 this section, the following terms have the meanings given: 17.33 (a) "Alternative minimum taxable income" means the sum of 17.34 the following for the taxable year: 17.35 (1) the taxpayer's federal alternative minimum taxable 17.36 income as defined in section 55(b)(2) of the Internal Revenue 18.1 Code; 18.2 (2) the taxpayer's itemized deductions allowed in computing 18.3 federal alternative minimum taxable income, but excluding: 18.4 (i) the charitable contribution deduction under section 170 18.5 of the Internal Revenue Code; 18.6 (A) for taxable years beginning before January 1, 2004, to 18.7 the extent that the deduction exceeds 1.0 percent of adjusted 18.8 gross income, as defined; 18.9 (B) for taxable years beginning after December 31, 2003, 18.10 and before January 1, 2005, to the extent the deduction exceeds 18.11 0.25 percent of adjusted gross income; 18.12 (C) for taxable years beginning after December 31, 2004, 18.13 and before January 1, 2006, to the extent the deduction exceeds 18.14 0.1 percent of adjusted gross income; 18.15 (D) for taxable years beginning after December 31, 2005, to 18.16 the full extent of the deduction. 18.17 For purposes of this clause, "adjusted gross income" has 18.18 the meaning given in section 62 of the Internal Revenue Code; 18.19 (ii) the medical expense deduction; 18.20 (iii) the casualty, theft, and disaster loss deduction; and 18.21 (iv) the impairment-related work expenses of a disabled 18.22 person; 18.23 (3) for depletion allowances computed under section 613A(c) 18.24 of the Internal Revenue Code, with respect to each property (as 18.25 defined in section 614 of the Internal Revenue Code), to the 18.26 extent not included in federal alternative minimum taxable 18.27 income, the excess of the deduction for depletion allowable 18.28 under section 611 of the Internal Revenue Code for the taxable 18.29 year over the adjusted basis of the property at the end of the 18.30 taxable year (determined without regard to the depletion 18.31 deduction for the taxable year); 18.32 (4) to the extent not included in federal alternative 18.33 minimum taxable income, the amount of the tax preference for 18.34 intangible drilling cost under section 57(a)(2) of the Internal 18.35 Revenue Code determined without regard to subparagraph (E); 18.36 (5) to the extent not included in federal alternative 19.1 minimum taxable income, the amount of interest income as 19.2 provided by section 290.01, subdivision 19a, clause (1); and 19.3 (6) the amount of addition required by section 290.01, 19.4 subdivision 19a, clause (7); 19.5 less the sum of the amounts determined under the following: 19.6 (1) interest income as defined in section 290.01, 19.7 subdivision 19b, clause (1); 19.8 (2) an overpayment of state income tax as provided by 19.9 section 290.01, subdivision 19b, clause (2), to the extent 19.10 included in federal alternative minimum taxable income; 19.11 (3) the amount of investment interest paid or accrued 19.12 within the taxable year on indebtedness to the extent that the 19.13 amount does not exceed net investment income, as defined in 19.14 section 163(d)(4) of the Internal Revenue Code. Interest does 19.15 not include amounts deducted in computing federal adjusted gross 19.16 income; and 19.17 (4) amounts subtracted from federal taxable income as 19.18 provided by section 290.01, subdivision 19b, clauses (10)and19.19(11)to (14). 19.20 In the case of an estate or trust, alternative minimum 19.21 taxable income must be computed as provided in section 59(c) of 19.22 the Internal Revenue Code. 19.23 (b) "Investment interest" means investment interest as 19.24 defined in section 163(d)(3) of the Internal Revenue Code. 19.25 (c) "Tentative minimum tax" equals 6.4 percent of 19.26 alternative minimum taxable income after subtracting the 19.27 exemption amount determined under subdivision 3. 19.28 (d) "Regular tax" means the tax that would be imposed under 19.29 this chapter (without regard to this section and section 19.30 290.032), reduced by the sum of the nonrefundable credits 19.31 allowed under this chapter. 19.32 (e) "Net minimum tax" means the minimum tax imposed by this 19.33 section. 19.34 [EFFECTIVE DATE.] This section is effective for taxable 19.35 years beginning after December 31, 2003. 19.36 Sec. 10. Minnesota Statutes 2002, section 290.091, 20.1 subdivision 3, is amended to read: 20.2 Subd. 3. [EXEMPTION AMOUNT.] (a) For purposes of computing 20.3 the alternative minimum tax, the exemption amount is: 20.4 (1) for taxable years beginning before January 1, 2004, the 20.5 exemption determined under section 55(d) of the Internal Revenue 20.6 Code, as amended through December 31, 1992; 20.7 (2) for taxable years beginning after December 31, 2003, 20.8 and before January 1, 2005, $41,000 for married couples filing 20.9 joint returns; $20,500 for married individuals filing separate 20.10 returns, estates, and trusts; and $30,750 for unmarried 20.11 individuals; 20.12 (3) for taxable years beginning after December 31, 2004, 20.13 and before January 1, 2006, $42,000 for married couples filing 20.14 joint returns; $21,000 for married individuals filing separate 20.15 returns, estates, and trusts; and $31,500 for unmarried 20.16 individuals; 20.17 (4) for taxable years beginning after December 31, 2005, 20.18 $44,000 for married couples filing joint returns; $22,000 for 20.19 married individuals filing separate returns, estates, and 20.20 trusts; and $33,000 for unmarried individuals. 20.21 (b) The exemption amount determined under this subdivision 20.22 is subject to the phase out under section 55(d)(3) of the 20.23 Internal Revenue Code, except that alternative minimum taxable 20.24 income as determined under this section must be substituted in 20.25 the computation of the phase outunder section 55(d)(3). 20.26 (c) For taxable years beginning after December 31, 2006, 20.27 the exemption amount under paragraph (a), clause (4), must be 20.28 adjusted for inflation. The commissioner shall make the 20.29 inflation adjustments in accordance with section 1(f) of the 20.30 Internal Revenue Code except that for the purposes of this 20.31 subdivision the percentage increase must be determined from the 20.32 year starting September 1, 2005, and ending August 31, 2006, as 20.33 the base year for adjusting for inflation for the tax year 20.34 beginning after December 31, 2006. The determination of the 20.35 commissioner under this subdivision is not a rule under the 20.36 Administrative Procedure Act. 21.1 [EFFECTIVE DATE.] This section is effective for taxable 21.2 years beginning after December 31, 2003. 21.3 Sec. 11. Minnesota Statutes 2002, section 290.17, is 21.4 amended by adding a subdivision to read: 21.5 Subd. 8. [FOREIGN OPERATING CORPORATIONS; COMMISSIONER'S 21.6 AUTHORITY.] (a) This subdivision applies to a unitary business 21.7 that includes a foreign operating corporation. 21.8 (b) The commissioner may disqualify a corporation as a 21.9 foreign operating corporation, if the commissioner finds that: 21.10 (1) there was no substantial independent business purpose, 21.11 other than the reduction of tax, for establishment of the 21.12 foreign operating corporation; 21.13 (2) the income of the foreign operating corporation, on a 21.14 multiyear basis, is primarily derived from or fairly 21.15 attributable to domestic operations or sources of the unitary 21.16 business; or 21.17 (3) a significant amount of inter-company transactions 21.18 involving the foreign operating corporation lack economic 21.19 substance or do not reflect market prices. 21.20 Disqualification of a foreign operating corporation under 21.21 this paragraph applies for the taxable year and two subsequent 21.22 taxable years. 21.23 (c) The commissioner may disallow all or part of the 21.24 subtraction for royalties, fees, and like income under section 21.25 290.01, subdivision 19d, clause (10), or all or part of the 21.26 deduction for deemed dividends of the foreign operating 21.27 corporation under section 290.21, if the commissioner finds that 21.28 the income or transactions on which the deductions are based: 21.29 (1) lack economic substance or fail to reflect market 21.30 prices; or 21.31 (2) have no substantial independent business purpose other 21.32 than the reduction of tax. 21.33 (d) The amount of any tax imposed as a result of a 21.34 commissioner finding under this subdivision is increased by a 21.35 surtax of 15 percent. 21.36 [EFFECTIVE DATE.] This section is effective January 1, 22.1 2005, for taxable years beginning after December 31, 2003. 22.2 Sec. 12. Minnesota Statutes 2002, section 290.191, 22.3 subdivision 2, is amended to read: 22.4 Subd. 2. [APPORTIONMENT FORMULA OF GENERAL APPLICATION.] 22.5 Except for those trades or businesses required to use a 22.6 different formula under subdivision 3 or section 290.36, and for 22.7 those trades or businesses that receive permission to use some 22.8 other method under section 290.20 or under subdivision 4, a 22.9 trade or business required to apportion its net income must 22.10 apportion its income to this state on the basis of the 22.11 percentage obtained by taking the sum of: 22.12 (1) 75 percent of the percentage which the sales made 22.13 within this state in connection with the trade or business 22.14 during the tax period are of the total sales wherever made in 22.15 connection with the trade or business during the tax period; 22.16 (2) 12.5 percent of the percentage which the total tangible 22.17 property used by the taxpayer in this state in connection with 22.18 the trade or business during the tax period is of the total 22.19 tangible property, wherever located, used by the taxpayer in 22.20 connection with the trade or business during the tax period; and 22.21 (3) 12.5 percent of the percentage which the taxpayer's 22.22 total payrolls paid or incurred in this state or paid in respect 22.23 to labor performed in this state in connection with the trade or 22.24 business during the tax period are of the taxpayer's total 22.25 payrolls paid or incurred in connection with the trade or 22.26 business during the tax period. 22.27 For tax years beginning after December 31, 2004, but before 22.28 January 1, 2006, the apportionment percentage in clause (1) 22.29 shall be 78 percent and the apportionment percentages in clauses 22.30 (2) and (3) shall be 11 percent. 22.31 For tax years beginning after December 31, 2005, but before 22.32 January 1, 2007, the apportionment percentage in clause (1) 22.33 shall be 81 percent and the apportionment percentages in clauses 22.34 (2) and (3) shall be 9.5 percent. 22.35 For tax years beginning after December 31, 2006, but before 22.36 January 1, 2008, the apportionment percentage in clause (1) 23.1 shall be 84 percent and the apportionment percentages in clauses 23.2 (2) and (3) shall be 8 percent. 23.3 For tax years beginning after December 31, 2007, but before 23.4 January 1, 2009, the apportionment percentage in clause (1) 23.5 shall be 87 percent and the apportionment percentages in clauses 23.6 (2) and (3) shall be 6.5 percent. 23.7 For tax years beginning after December 31, 2008, but before 23.8 January 1, 2010, the apportionment percentage in clause (1) 23.9 shall be 90 percent and the apportionment percentages in clauses 23.10 (2) and (3) shall be 5 percent. 23.11 For tax years beginning after December 31, 2009, but before 23.12 January 1, 2011, the apportionment percentage in clause (1) 23.13 shall be 93 percent and the apportionment percentages in clauses 23.14 (2) and (3) shall be 3.5 percent. 23.15 For tax years beginning after December 31, 2010, but before 23.16 January 1, 2012, the apportionment percentage in clause (1) 23.17 shall be 96 percent and the apportionment percentages in clauses 23.18 (2) and (3) shall be 2 percent. 23.19 For tax years beginning after December 31, 2011, the 23.20 apportionment percentage in clause (1) shall be 100 percent and 23.21 the apportionment percentages in clauses (2) and (3) shall be 23.22 zero percent. 23.23 [EFFECTIVE DATE.] This section is effective the day 23.24 following final enactment. 23.25 Sec. 13. Minnesota Statutes 2002, section 290.191, 23.26 subdivision 3, is amended to read: 23.27 Subd. 3. [APPORTIONMENT FORMULA FOR FINANCIAL 23.28 INSTITUTIONS.] Except for an investment company required to 23.29 apportion its income under section 290.36, a financial 23.30 institution that is required to apportion its net income must 23.31 apportion its net income to this state on the basis of the 23.32 percentage obtained by taking the sum of: 23.33 (1) 75 percent of the percentage which the receipts from 23.34 within this state in connection with the trade or business 23.35 during the tax period are of the total receipts in connection 23.36 with the trade or business during the tax period, from wherever 24.1 derived; 24.2 (2) 12.5 percent of the percentage which the sum of the 24.3 total tangible property used by the taxpayer in this state and 24.4 the intangible property owned by the taxpayer and attributed to 24.5 this state in connection with the trade or business during the 24.6 tax period is of the sum of the total tangible property, 24.7 wherever located, used by the taxpayer and the intangible 24.8 property owned by the taxpayer and attributed to all states in 24.9 connection with the trade or business during the tax period; and 24.10 (3) 12.5 percent of the percentage which the taxpayer's 24.11 total payrolls paid or incurred in this state or paid in respect 24.12 to labor performed in this state in connection with the trade or 24.13 business during the tax period are of the taxpayer's total 24.14 payrolls paid or incurred in connection with the trade or 24.15 business during the tax period. 24.16 For tax years beginning after December 31, 2004, but before 24.17 January 1, 2006, the apportionment percentage in clause (1) 24.18 shall be 78 percent and the apportionment percentages in clauses 24.19 (2) and (3) shall be 11 percent. 24.20 For tax years beginning after December 31, 2005, but before 24.21 January 1, 2007, the apportionment percentage in clause (1) 24.22 shall be 81 percent and the apportionment percentages in clauses 24.23 (2) and (3) shall be 9.5 percent. 24.24 For tax years beginning after December 31, 2006, but before 24.25 January 1, 2008, the apportionment percentage in clause (1) 24.26 shall be 84 percent and the apportionment percentages in clauses 24.27 (2) and (3) shall be 8 percent. 24.28 For tax years beginning after December 31, 2007, but before 24.29 January 1, 2009, the apportionment percentage in clause (1) 24.30 shall be 87 percent and the apportionment percentages in clauses 24.31 (2) and (3) shall be 6.5 percent. 24.32 For tax years beginning after December 31, 2008, but before 24.33 January 1, 2010, the apportionment percentage in clause (1) 24.34 shall be 90 percent and the apportionment percentages in clauses 24.35 (2) and (3) shall be 5 percent. 24.36 For tax years beginning after December 31, 2009, but before 25.1 January 1, 2011, the apportionment percentage in clause (1) 25.2 shall be 93 percent and the apportionment percentages in clauses 25.3 (2) and (3) shall be 3.5 percent. 25.4 For tax years beginning after December 31, 2010, but before 25.5 January 1, 2012, the apportionment percentage in clause (1) 25.6 shall be 96 percent and the apportionment percentages in clauses 25.7 (2) and (3) shall be 2 percent. 25.8 For tax years beginning after December 31, 2011, the 25.9 apportionment percentage in clause (1) shall be 100 percent and 25.10 the apportionment percentages in clauses (2) and (3) shall be 25.11 zero percent. 25.12 [EFFECTIVE DATE.] This section is effective the day 25.13 following final enactment. 25.14 Sec. 14. Minnesota Statutes 2002, section 290.191, 25.15 subdivision 5, is amended to read: 25.16 Subd. 5. [DETERMINATION OF SALES FACTOR.] For purposes of 25.17 this section, the following rules apply in determining the sales 25.18 factor. 25.19 (a) The sales factor includes all sales, gross earnings, or 25.20 receipts received in the ordinary course of the business, except 25.21 that the following types of income are not included in the sales 25.22 factor: 25.23 (1) interest; 25.24 (2) dividends; 25.25 (3) sales of capital assets as defined in section 1221 of 25.26 the Internal Revenue Code; 25.27 (4) sales of property used in the trade or business, except 25.28 sales of leased property of a type which is regularly sold as 25.29 well as leased; 25.30 (5) sales of debt instruments as defined in section 25.31 1275(a)(1) of the Internal Revenue Code or sales of stock;and25.32 (6) royalties, fees, or other like income of a type which 25.33 qualify for a subtraction from federal taxable income under 25.34 section 290.01, subdivision 19(d)(11); and 25.35 (7) lease or other payments received for tax-exempt 25.36 property, as defined in and subject to section 290.0711. 26.1 (b) Sales of tangible personal property are made within 26.2 this state if the property is received by a purchaser at a point 26.3 within this state, and the taxpayer is taxable in this state, 26.4 regardless of the f.o.b. point, other conditions of the sale, or 26.5 the ultimate destination of the property. 26.6 (c) Tangible personal property delivered to a common or 26.7 contract carrier or foreign vessel for delivery to a purchaser 26.8 in another state or nation is a sale in that state or nation, 26.9 regardless of f.o.b. point or other conditions of the sale. 26.10 (d) Notwithstanding paragraphs (b) and (c), when 26.11 intoxicating liquor, wine, fermented malt beverages, cigarettes, 26.12 or tobacco products are sold to a purchaser who is licensed by a 26.13 state or political subdivision to resell this property only 26.14 within the state of ultimate destination, the sale is made in 26.15 that state. 26.16 (e) Sales made by or through a corporation that is 26.17 qualified as a domestic international sales corporation under 26.18 section 992 of the Internal Revenue Code are not considered to 26.19 have been made within this state. 26.20 (f) Sales, rents, royalties, and other income in connection 26.21 with real property is attributed to the state in which the 26.22 property is located. 26.23 (g) Receipts from the lease or rental of tangible personal 26.24 property, including finance leases and true leases, must be 26.25 attributed to this state if the property is located in this 26.26 state and to other states if the property is not located in this 26.27 state. Receipts from the lease or rental of moving property 26.28 including, but not limited to, motor vehicles, rolling stock, 26.29 aircraft, vessels, or mobile equipment are included in the 26.30 numerator of the receipts factor to the extent that the property 26.31 is used in this state. The extent of the use of moving property 26.32 is determined as follows: 26.33 (1) A motor vehicle is used wholly in the state in which it 26.34 is registered. 26.35 (2) The extent that rolling stock is used in this state is 26.36 determined by multiplying the receipts from the lease or rental 27.1 of the rolling stock by a fraction, the numerator of which is 27.2 the miles traveled within this state by the leased or rented 27.3 rolling stock and the denominator of which is the total miles 27.4 traveled by the leased or rented rolling stock. 27.5 (3) The extent that an aircraft is used in this state is 27.6 determined by multiplying the receipts from the lease or rental 27.7 of the aircraft by a fraction, the numerator of which is the 27.8 number of landings of the aircraft in this state and the 27.9 denominator of which is the total number of landings of the 27.10 aircraft. 27.11 (4) The extent that a vessel, mobile equipment, or other 27.12 mobile property is used in the state is determined by 27.13 multiplying the receipts from the lease or rental of the 27.14 property by a fraction, the numerator of which is the number of 27.15 days during the taxable year the property was in this state and 27.16 the denominator of which is the total days in the taxable year. 27.17 (h) Royalties and other income not described in paragraph 27.18 (a), clause (6), received for the use of or for the privilege of 27.19 using intangible property, including patents, know-how, 27.20 formulas, designs, processes, patterns, copyrights, trade names, 27.21 service names, franchises, licenses, contracts, customer lists, 27.22 or similar items, must be attributed to the state in which the 27.23 property is used by the purchaser. If the property is used in 27.24 more than one state, the royalties or other income must be 27.25 apportioned to this state pro rata according to the portion of 27.26 use in this state. If the portion of use in this state cannot 27.27 be determined, the royalties or other income must be excluded 27.28 from both the numerator and the denominator. Intangible 27.29 property is used in this state if the purchaser uses the 27.30 intangible property or the rights therein in the regular course 27.31 of its business operations in this state, regardless of the 27.32 location of the purchaser's customers. 27.33 (i) Sales of intangible property are made within the state 27.34 in which the property is used by the purchaser. If the property 27.35 is used in more than one state, the sales must be apportioned to 27.36 this state pro rata according to the portion of use in this 28.1 state. If the portion of use in this state cannot be 28.2 determined, the sale must be excluded from both the numerator 28.3 and the denominator of the sales factor. Intangible property is 28.4 used in this state if the purchaser used the intangible property 28.5 in the regular course of its business operations in this state. 28.6 (j) Receipts from the performance of services must be 28.7 attributed to the state where the services are received. For 28.8 the purposes of this section, receipts from the performance of 28.9 services provided to a corporation, partnership, or trust may 28.10 only be attributed to a state where it has a fixed place of 28.11 doing business. If the state where the services are received is 28.12 not readily determinable or is a state where the corporation, 28.13 partnership, or trust receiving the service does not have a 28.14 fixed place of doing business, the services shall be deemed to 28.15 be received at the location of the office of the customer from 28.16 which the services were ordered in the regular course of the 28.17 customer's trade or business. If the ordering office cannot be 28.18 determined, the services shall be deemed to be received at the 28.19 office of the customer to which the services are billed. 28.20 [EFFECTIVE DATE.] This section is effective for leases and 28.21 service contracts or similar arrangements entered into after 28.22 February 5, 2004, and for taxable years beginning after December 28.23 31, 2003. 28.24 Sec. 15. Minnesota Statutes 2002, section 290.191, 28.25 subdivision 6, is amended to read: 28.26 Subd. 6. [DETERMINATION OF RECEIPTS FACTOR FOR FINANCIAL 28.27 INSTITUTIONS.] (a) For purposes of this section, the rules in 28.28 this subdivision and subdivision 8 apply in determining the 28.29 receipts factor for financial institutions. 28.30 (b) "Receipts" for this purpose means gross income, 28.31 including net taxable gain on disposition of assets, including 28.32 securities and money market instruments, when derived from 28.33 transactions and activities in the regular course of the 28.34 taxpayer's trade or business. 28.35 (c) "Money market instruments" means federal funds sold and 28.36 securities purchased under agreements to resell, commercial 29.1 paper, banker's acceptances, and purchased certificates of 29.2 deposit and similar instruments to the extent that the 29.3 instruments are reflected as assets under generally accepted 29.4 accounting principles. 29.5 (d) "Securities" means United States Treasury securities, 29.6 obligations of United States government agencies and 29.7 corporations, obligations of state and political subdivisions, 29.8 corporate stock, bonds, and other securities, participations in 29.9 securities backed by mortgages held by United States or state 29.10 government agencies, loan-backed securities and similar 29.11 investments to the extent the investments are reflected as 29.12 assets under generally accepted accounting principles. 29.13 (e) Receipts from the lease or rental of real or tangible 29.14 personal property, including both finance leases and true 29.15 leases, must be attributed to this state if the property is 29.16 located in this state. Receipts from the lease or rental of 29.17 tangible personal property that is characteristically moving 29.18 property, including, but not limited to, motor vehicles, rolling 29.19 stock, aircraft, vessels, or mobile equipment are included in 29.20 the numerator of the receipts factor to the extent that the 29.21 property is used in this state. The extent of the use of moving 29.22 property is determined as follows: 29.23 (1) A motor vehicle is used wholly in the state in which it 29.24 is registered. 29.25 (2) The extent that rolling stock is used in this state is 29.26 determined by multiplying the receipts from the lease or rental 29.27 of the rolling stock by a fraction, the numerator of which is 29.28 the miles traveled within this state by the leased or rented 29.29 rolling stock and the denominator of which is the total miles 29.30 traveled by the leased or rented rolling stock. 29.31 (3) The extent that an aircraft is used in this state is 29.32 determined by multiplying the receipts from the lease or rental 29.33 of the aircraft by a fraction, the numerator of which is the 29.34 number of landings of the aircraft in this state and the 29.35 denominator of which is the total number of landings of the 29.36 aircraft. 30.1 (4) The extent that a vessel, mobile equipment, or other 30.2 mobile property is used in the state is determined by 30.3 multiplying the receipts from the lease or rental of property by 30.4 a fraction, the numerator of which is the number of days during 30.5 the taxable year the property was in this state and the 30.6 denominator of which is the total days in the taxable year. 30.7 (f) Interest income and other receipts from assets in the 30.8 nature of loans that are secured primarily by real estate or 30.9 tangible personal property must be attributed to this state if 30.10 the security property is located in this state under the 30.11 principles stated in paragraph (e). 30.12 (g) Interest income and other receipts from consumer loans 30.13 not secured by real or tangible personal property that are made 30.14 to residents of this state, whether at a place of business, by 30.15 traveling loan officer, by mail, by telephone or other 30.16 electronic means, must be attributed to this state. 30.17 (h) Interest income and other receipts from commercial 30.18 loans and installment obligations that are unsecured by real or 30.19 tangible personal property or secured by intangible property 30.20 must be attributed to this state if the proceeds of the loan are 30.21 to be applied in this state. If it cannot be determined where 30.22 the funds are to be applied, the income and receipts are 30.23 attributed to the state in which the office of the borrower from 30.24 which the application would be made in the regular course of 30.25 business is located. If this cannot be determined, the 30.26 transaction is disregarded in the apportionment formula. 30.27 (i) Interest income and other receipts from a participating 30.28 financial institution's portion of participation and syndication 30.29 loans must be attributed under paragraphs (e) to (h). A 30.30 participation loan is an arrangement in which a lender makes a 30.31 loan to a borrower and then sells, assigns, or otherwise 30.32 transfers all or a part of the loan to a purchasing financial 30.33 institution. A syndication loan is a loan transaction involving 30.34 multiple financial institutions in which all the lenders are 30.35 named as parties to the loan documentation, are known to the 30.36 borrower, and have privity of contract with the borrower. 31.1 (j) Interest income and other receipts including service 31.2 charges from financial institution credit card and travel and 31.3 entertainment credit card receivables and credit card holders' 31.4 fees must be attributed to the state to which the card charges 31.5 and fees are regularly billed. 31.6 (k) Merchant discount income derived from financial 31.7 institution credit card holder transactions with a merchant must 31.8 be attributed to the state in which the merchant is located. In 31.9 the case of merchants located within and outside the state, only 31.10 receipts from merchant discounts attributable to sales made from 31.11 locations within the state are attributed to this state. It is 31.12 presumed, subject to rebuttal, that the location of a merchant 31.13 is the address shown on the invoice submitted by the merchant to 31.14 the taxpayer. 31.15 (l) Receipts from the performance of fiduciary and other 31.16 services must be attributed to the state in which the services 31.17 are received. For the purposes of this section, services 31.18 provided to a corporation, partnership, or trust must be 31.19 attributed to a state where it has a fixed place of doing 31.20 business. If the state where the services are received is not 31.21 readily determinable or is a state where the corporation, 31.22 partnership, or trust does not have a fixed place of doing 31.23 business, the services shall be deemed to be received at the 31.24 location of the office of the customer from which the services 31.25 were ordered in the regular course of the customer's trade or 31.26 business. If the ordering office cannot be determined, the 31.27 services shall be deemed to be received at the office of the 31.28 customer to which the services are billed. 31.29 (m) Receipts from the issuance of travelers checks and 31.30 money orders must be attributed to the state in which the checks 31.31 and money orders are purchased. 31.32 (n) Receipts from investments of a financial institution in 31.33 securities and from money market instruments must be apportioned 31.34 to this state based on the ratio that total deposits from this 31.35 state, its residents, including any business with an office or 31.36 other place of business in this state, its political 32.1 subdivisions, agencies, and instrumentalities bear to the total 32.2 deposits from all states, their residents, their political 32.3 subdivisions, agencies, and instrumentalities. In the case of 32.4 an unregulated financial institution subject to this section, 32.5 these receipts are apportioned to this state based on the ratio 32.6 that its gross business income, excluding such receipts, earned 32.7 from sources within this state bears to gross business income, 32.8 excluding such receipts, earned from sources within all states. 32.9 For purposes of this subdivision, deposits made by this state, 32.10 its residents, its political subdivisions, agencies, and 32.11 instrumentalities must be attributed to this state, whether or 32.12 not the deposits are accepted or maintained by the taxpayer at 32.13 locations within this state. 32.14 (o) A financial institution's interest in property 32.15 described in section 290.015, subdivision 3, paragraph (b), is 32.16 included in the receipts factor in the same manner as assets in 32.17 the nature of securities or money market instruments are 32.18 included in paragraph (n). 32.19 (p) Receipts from leases, service contracts, or other 32.20 arrangements for tax-exempt property, as defined in and subject 32.21 to section 290.0711, are excluded from the receipts factor. 32.22 [EFFECTIVE DATE.] This section is effective for leases and 32.23 service contracts or similar arrangements entered into after 32.24 February 5, 2004, and for taxable years beginning after December 32.25 31, 2003. 32.26 Sec. 16. Minnesota Statutes 2002, section 290.191, 32.27 subdivision 10, is amended to read: 32.28 Subd. 10. [PROPERTY FACTOR; TANGIBLE PROPERTY.] (a) 32.29 Tangible property includes land, buildings, machinery and 32.30 equipment, inventories, and other tangible personal property 32.31 actually used by the taxpayer during the taxable year in 32.32 carrying on the business activities of the taxpayer. Tangible 32.33 property which is separately allocated under section 290.17 is 32.34 not includable in the property factor. 32.35 (b) Cash on hand or in banks, shares of stock, notes, 32.36 bonds, accounts receivable, or other evidences of indebtedness, 33.1 special privileges, franchises, and goodwill, are specifically 33.2 excluded from the property factor, except as otherwise provided 33.3 for financial institutions in subdivision 11. 33.4 (c) The value of tangible property that is owned by the 33.5 taxpayer and that is to be used in the apportionment fraction is 33.6 the original cost adjusted for any later capital additions or 33.7 improvements and partial disposition by reason of sale, 33.8 exchange, or abandonment. 33.9 (d) For purposes of computing the property factor, United 33.10 States government property that is used by the taxpayer must be 33.11 considered owned by the taxpayer. 33.12 (e) Property that is rented by the taxpayer is valued at 33.13 eight times the net annual rental. Net annual rental is the 33.14 annual rental paid by the taxpayer less any annual rental 33.15 received by the taxpayer from subrentals. If the subrents taken 33.16 into account in determining the net annual rental produce a 33.17 negative or clearly inaccurate value for any item of property, 33.18 another method that will properly reflect the value of rented 33.19 property may be required by the commissioner or requested by the 33.20 taxpayer. In no case, however, shall the value be less than an 33.21 amount which bears the same ratio to the annual rental paid by 33.22 the taxpayer for such property as the fair market value of that 33.23 portion of the property used by the taxpayer bears to the total 33.24 fair market value of the rented property. Rents paid during the 33.25 year cannot be averaged. 33.26 (f) A person filing a combined report shall use this method 33.27 of calculating the property factor for all members of the group. 33.28 (g) Tax-exempt property, as defined in and subject to 33.29 section 290.0711, is excluded from the property factor. 33.30 [EFFECTIVE DATE.] This section is effective for leases and 33.31 service contracts or similar arrangements entered into after 33.32 February 5, 2004, and for taxable years beginning after December 33.33 31, 2003. 33.34 Sec. 17. Minnesota Statutes 2002, section 290.191, 33.35 subdivision 11, is amended to read: 33.36 Subd. 11. [FINANCIAL INSTITUTIONS; PROPERTY FACTOR.] (a) 34.1 For financial institutions, the property factor includes, as 34.2 well as tangible property, intangible property as set forth in 34.3 this subdivision. 34.4 (b) Intangible personal property must be included at its 34.5 tax basis for federal income tax purposes. 34.6 (c) Goodwill must not be included in the property factor. 34.7 (d) Coin and currency located in this state must be 34.8 attributed to this state. 34.9 (e) Lease financing receivables must be attributed to this 34.10 state if and to the extent that the property is located within 34.11 this state. 34.12 (f) Assets in the nature of loans that are secured by real 34.13 or tangible personal property must be attributed to this state 34.14 if and to the extent that the security property is located 34.15 within this state. 34.16 (g) Assets in the nature of consumer loans and installment 34.17 obligations that are unsecured or secured by intangible property 34.18 must be attributed to this state if the loan was made to a 34.19 resident of this state. 34.20 (h) Assets in the nature of commercial loan and installment 34.21 obligations that are unsecured by real or tangible personal 34.22 property or secured by intangible property must be attributed to 34.23 this state if the proceeds of the loan are to be applied in this 34.24 state. If it cannot be determined where the funds are to be 34.25 applied, the assets must be attributed to the state in which 34.26 there is located the office of the borrower from which the 34.27 application would be made in the regular course of business. If 34.28 this cannot be determined, the transaction is disregarded in the 34.29 apportionment formula. 34.30 (i) A participating financial institution's portion of 34.31 participation and syndication loans must be attributed under 34.32 paragraphs (e) to (h). 34.33 (j) Financial institution credit card and travel and 34.34 entertainment credit card receivables must be attributed to the 34.35 state to which the credit card charges and fees are regularly 34.36 billed. 35.1 (k) Receivables arising from merchant discount income 35.2 derived from financial institution credit card holder 35.3 transactions with a merchant are attributed to the state in 35.4 which the merchant is located. In the case of merchants located 35.5 within and without the state, only receivables from merchant 35.6 discounts attributable to sales made from locations within the 35.7 state are attributed to this state. It is presumed, subject to 35.8 rebuttal, that the location of a merchant is the address shown 35.9 on the invoice submitted by the merchant to the taxpayer. 35.10 (l) Assets in the nature of securities and money market 35.11 instruments are apportioned to this state based upon the ratio 35.12 that total deposits from this state, its residents, its 35.13 political subdivisions, agencies and instrumentalities bear to 35.14 the total deposits from all states, their residents, their 35.15 political subdivisions, agencies and instrumentalities. In the 35.16 case of an unregulated financial institution, the assets are 35.17 apportioned to this state based upon the ratio that its gross 35.18 business income earned from sources within this state bears to 35.19 gross business income earned from sources within all states. 35.20 For purposes of this paragraph, deposits made by this state, its 35.21 residents, its political subdivisions, agencies, and 35.22 instrumentalities are attributed to this state, whether or not 35.23 the deposits are accepted or maintained by the taxpayer at 35.24 locations within this state. 35.25 (m) A financial institution's interest in any property 35.26 described in section 290.015, subdivision 3, paragraph (b), is 35.27 included in the property factor in the same manner as assets in 35.28 the nature of securities or money market instruments are 35.29 included under paragraph (1). 35.30 (n) Tax-exempt property, as defined in and subject to 35.31 section 290.0711, is excluded from the property factor. 35.32 [EFFECTIVE DATE.] This section is effective for leases and 35.33 service contracts or similar arrangements entered into after 35.34 February 5, 2004, and for taxable years beginning after December 35.35 31, 2003. 35.36 Sec. 18. Minnesota Statutes 2002, section 290.92, 36.1 subdivision 4b, is amended to read: 36.2 Subd. 4b. [WITHHOLDING BY PARTNERSHIPS.] (a) A partnership 36.3 shall deduct and withhold a tax as provided in paragraph (b) for 36.4 nonresident individual partners based on their distributive 36.5 shares of partnership income for a taxable year of the 36.6 partnership. 36.7 (b) The amount of tax withheld is determined by multiplying 36.8 the partner's distributive share allocable to Minnesota under 36.9 section 290.17, paid or credited during the taxable year by the 36.10 highest rate used to determine the income tax liability for an 36.11 individual under section 290.06, subdivision 2c, except that the 36.12 amount of tax withheld may be determined by the commissioner if 36.13 the partner submits a withholding exemption certificate under 36.14 subdivision 5. 36.15 (c) The commissioner may reduce or abate the tax withheld 36.16 under this subdivision if the partnership had reasonable cause 36.17 to believe that no tax was due under this section. 36.18 (d) Notwithstanding paragraph (a), a partnership is not 36.19 required to deduct and withhold tax for a nonresident partner if: 36.20 (1) the partner elects to have the tax due paid as part of 36.21 the partnership's composite return under section 289A.08, 36.22 subdivision 7; 36.23 (2) the partner has Minnesota assignable federal adjusted 36.24 gross income from the partnership of less than $1,000; or 36.25 (3) the partnership is liquidated or terminated, the income 36.26 was generated by a transaction related to the termination or 36.27 liquidation, and no cash or other property was distributed in 36.28 the current or prior taxable year;or36.29 (4) the distributive shares of partnership income are 36.30 attributable to: 36.31 (i) income required to be recognized because of discharge 36.32 of indebtedness; 36.33 (ii) income recognized because of a sale, exchange, or 36.34 other disposition of real estate, depreciable property, or 36.35 property described in section 179 of the Internal Revenue Code; 36.36 or 37.1 (iii) income recognized on the sale, exchange, or other 37.2 disposition of any property that has been the subject of a basis 37.3 reduction pursuant to section 108, 734, 743, 754, or 1017 of the 37.4 Internal Revenue Code 37.5 to the extent that the income does not include cash received or 37.6 receivable or, if there is cash received or receivable, to the 37.7 extent that the cash is required to be used to pay indebtedness 37.8 by the partnership or a secured debt on partnership property; or 37.9 (5) the partnership is a publicly traded partnership, as 37.10 defined in section 7704(b) of the Internal Revenue Code. 37.11 (e) For purposes of subdivision 6a, and sections 289A.09, 37.12 subdivision 2, 289A.20, subdivision 2, paragraph (c), 289A.50, 37.13 289A.56, 289A.60, and 289A.63, a partnership is considered an 37.14 employer. 37.15 (f) To the extent that income is exempt from withholding 37.16 under paragraph (d), clause (4), the commissioner has a lien in 37.17 an amount up to the amount that would be required to be withheld 37.18 with respect to the income of the partner attributable to the 37.19 partnership interest, but for the application of paragraph (d), 37.20 clause (4). The lien arises under section 270.69 from the date 37.21 of assessment of the tax against the partner, and attaches to 37.22 that partner's share of the profits and any other money due or 37.23 to become due to that partner in respect of the partnership. 37.24 Notice of the lien may be sent by mail to the partnership, 37.25 without the necessity for recording the lien. The notice has 37.26 the force and effect of a levy under section 270.70, and is 37.27 enforceable against the partnership in the manner provided by 37.28 that section. Upon payment in full of the liability subsequent 37.29 to the notice of lien, the partnership must be notified that the 37.30 lien has been satisfied. 37.31 [EFFECTIVE DATE.] This section is effective for taxable 37.32 years beginning after December 31, 2003. 37.33 Sec. 19. Minnesota Statutes 2002, section 298.01, 37.34 subdivision 3, is amended to read: 37.35 Subd. 3. [OCCUPATION TAX; OTHER ORES.] Every person 37.36 engaged in the business of mining or producing ores in this 38.1 state, except iron ore or taconite concentrates, shall pay an 38.2 occupation tax to the state of Minnesota as provided in this 38.3 subdivision. The tax is determined in the same manner as the 38.4 tax imposed by section 290.02, except that sections 290.05, 38.5 subdivision 1, clause (a),and290.17, subdivision 4, and 38.6 290.191, subdivision 2, do not apply. A person subject to 38.7 occupation tax under this section shall apportion its net income 38.8 on the basis of the percentage obtained by taking the sum of: 38.9 (1) 75 percent of the percentage which the sales made 38.10 within this state in connection with the trade or business 38.11 during the tax period are of the total sales wherever made in 38.12 connection with the trade or business during the tax period; 38.13 (2) 12.5 percent of the percentage which the total tangible 38.14 property used by the taxpayer in this state in connection with 38.15 the trade or business during the tax period is of the total 38.16 tangible property, wherever located, used by the taxpayer in 38.17 connection with the trade or business during the tax period; and 38.18 (3) 12.5 percent of the percentage which the taxpayer's 38.19 total payrolls paid or incurred in this state or paid in respect 38.20 to labor performed in this state in connection with the trade or 38.21 business during the tax period are of the taxpayer's total 38.22 payrolls paid or incurred in connection with the trade or 38.23 business during the tax period. 38.24 The tax is in addition to all other taxes. 38.25 [EFFECTIVE DATE.] This section is effective for tax years 38.26 beginning after December 31, 2004. 38.27 Sec. 20. Minnesota Statutes 2002, section 298.01, 38.28 subdivision 4, is amended to read: 38.29 Subd. 4. [OCCUPATION TAX; IRON ORE; TACONITE 38.30 CONCENTRATES.] A person engaged in the business of mining or 38.31 producing of iron ore, taconite concentrates or direct reduced 38.32 ore in this state shall pay an occupation tax to the state of 38.33 Minnesota. The tax is determined in the same manner as the tax 38.34 imposed by section 290.02, except that sections 290.05, 38.35 subdivision 1, clause (a),and290.17, subdivision 4, and 38.36 290.191, subdivision 2, do not apply. A person subject to 39.1 occupation tax under this section shall apportion its net income 39.2 on the basis of the percentage obtained by taking the sum of: 39.3 (1) 75 percent of the percentage which the sales made 39.4 within this state in connection with the trade or business 39.5 during the tax period are of the total sales wherever made in 39.6 connection with the trade or business during the tax period; 39.7 (2) 12.5 percent of the percentage which the total tangible 39.8 property used by the taxpayer in this state in connection with 39.9 the trade or business during the tax period is of the total 39.10 tangible property, wherever located, used by the taxpayer in 39.11 connection with the trade or business during the tax period; and 39.12 (3) 12.5 percent of the percentage which the taxpayer's 39.13 total payrolls paid or incurred in this state or paid in respect 39.14 to labor performed in this state in connection with the trade or 39.15 business during the tax period are of the taxpayer's total 39.16 payrolls paid or incurred in connection with the trade or 39.17 business during the tax period. 39.18 The tax is in addition to all other taxes. 39.19 [EFFECTIVE DATE.] This section is effective for tax years 39.20 beginning after December 31, 2004. 39.21 Sec. 21. [REFUND PAYMENTS AUTHORIZED.] 39.22 The commissioner of revenue may allow a taxpayer to claim a 39.23 refund of Minnesota individual income tax paid on a distribution 39.24 from a qualified governmental pension plan, an individual 39.25 retirement account, a simplified employee pension, or a 39.26 qualified plan covering a self-employed person in a taxable year 39.27 beginning after December 31, 2001, and before January 1, 2004, 39.28 if the individual was unable to claim the subtraction under 39.29 Minnesota Statutes 1999 Supplement, section 290.01, subdivision 39.30 19b, clause (4), for taxable year 2000 or 2001 because the 39.31 individual was not a resident and had no Minnesota taxable 39.32 income. The amount of the refund equals the lesser of (1) the 39.33 tax on the distribution or (2) the marginal tax rate for the 39.34 taxpayer's tax year in which the distribution was received 39.35 multiplied by the subtraction under clause (4) that would have 39.36 been allowed if the taxpayer were a resident in tax year 2001. 40.1 The commissioner may process refunds under this section 40.2 separately from administration of the individual income tax in 40.3 the most efficient and lowest cost manner. 40.4 [EFFECTIVE DATE.] This section is effective the day 40.5 following final enactment. 40.6 ARTICLE 2 40.7 FEDERAL UPDATE 40.8 Section 1. Minnesota Statutes 2003 Supplement, section 40.9 289A.02, subdivision 7, is amended to read: 40.10 Subd. 7. [INTERNAL REVENUE CODE.] Unless specifically 40.11 defined otherwise, "Internal Revenue Code" means the Internal 40.12 Revenue Code of 1986, as amended throughJune 15, 2003April 10, 40.13 2004. 40.14 [EFFECTIVE DATE.] This section is effective for actions 40.15 required on or after November 11, 2003. 40.16 Sec. 2. Minnesota Statutes 2003 Supplement, section 40.17 290.01, subdivision 19, is amended to read: 40.18 Subd. 19. [NET INCOME.] The term "net income" means the 40.19 federal taxable income, as defined in section 63 of the Internal 40.20 Revenue Code of 1986, as amended through the date named in this 40.21 subdivision, incorporating any elections made by the taxpayer in 40.22 accordance with the Internal Revenue Code in determining federal 40.23 taxable income for federal income tax purposes, and with the 40.24 modifications provided in subdivisions 19a to 19f. 40.25 In the case of a regulated investment company or a fund 40.26 thereof, as defined in section 851(a) or 851(g) of the Internal 40.27 Revenue Code, federal taxable income means investment company 40.28 taxable income as defined in section 852(b)(2) of the Internal 40.29 Revenue Code, except that: 40.30 (1) the exclusion of net capital gain provided in section 40.31 852(b)(2)(A) of the Internal Revenue Code does not apply; 40.32 (2) the deduction for dividends paid under section 40.33 852(b)(2)(D) of the Internal Revenue Code must be applied by 40.34 allowing a deduction for capital gain dividends and 40.35 exempt-interest dividends as defined in sections 852(b)(3)(C) 40.36 and 852(b)(5) of the Internal Revenue Code; and 41.1 (3) the deduction for dividends paid must also be applied 41.2 in the amount of any undistributed capital gains which the 41.3 regulated investment company elects to have treated as provided 41.4 in section 852(b)(3)(D) of the Internal Revenue Code. 41.5 The net income of a real estate investment trust as defined 41.6 and limited by section 856(a), (b), and (c) of the Internal 41.7 Revenue Code means the real estate investment trust taxable 41.8 income as defined in section 857(b)(2) of the Internal Revenue 41.9 Code. 41.10 The net income of a designated settlement fund as defined 41.11 in section 468B(d) of the Internal Revenue Code means the gross 41.12 income as defined in section 468B(b) of the Internal Revenue 41.13 Code. 41.14 The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 41.15 1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 41.16 1616, 1617, 1704(l), and 1704(m) of the Small Business Job 41.17 Protection Act, Public Law 104-188, the provisions of Public Law 41.18 104-117, the provisions of sections 313(a) and (b)(1), 602(a), 41.19 913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013, 41.20 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b) 41.21 and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and 41.22 1604(d)(1) of the Taxpayer Relief Act of 1997, Public Law 41.23 105-34, the provisions of section 6010 of the Internal Revenue 41.24 Service Restructuring and Reform Act of 1998, Public Law 41.25 105-206, the provisions of section 4003 of the Omnibus 41.26 Consolidated and Emergency Supplemental Appropriations Act, 41.27 1999, Public Law 105-277, and the provisions of section 318 of 41.28 the Consolidated Appropriation Act of 2001, Public Law 106-554, 41.29 shall become effective at the time they become effective for 41.30 federal purposes. 41.31 The Internal Revenue Code of 1986, as amended through 41.32 December 31, 1996, shall be in effect for taxable years 41.33 beginning after December 31, 1996. 41.34 The provisions of sections 202(a) and (b), 221(a), 225, 41.35 312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 41.36 (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 42.1 1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 42.2 1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 42.3 of the Taxpayer Relief Act of 1997, Public Law 105-34, the 42.4 provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002, 42.5 and 7003 of the Internal Revenue Service Restructuring and 42.6 Reform Act of 1998, Public Law 105-206, the provisions of 42.7 section 3001 of the Omnibus Consolidated and Emergency 42.8 Supplemental Appropriations Act, 1999, Public Law 105-277, the 42.9 provisions of section 3001 of the Miscellaneous Trade and 42.10 Technical Corrections Act of 1999, Public Law 106-36,andthe 42.11 provisions of section 316 of the Consolidated Appropriation Act 42.12 of 2001, Public Law 106-554, and the provision of section 101 of 42.13 the Military Family Tax Relief Act of 2003, Public Law 108-121, 42.14 shall become effective at the time they become effective for 42.15 federal purposes. 42.16 The Internal Revenue Code of 1986, as amended through 42.17 December 31, 1997, shall be in effect for taxable years 42.18 beginning after December 31, 1997. 42.19 The provisions of sections 5002, 6009, 6011, and 7001 of 42.20 the Internal Revenue Service Restructuring and Reform Act of 42.21 1998, Public Law 105-206, the provisions of section 9010 of the 42.22 Transportation Equity Act for the 21st Century, Public Law 42.23 105-178, the provisions of sections 1004, 4002, and 5301 of the 42.24 Omnibus Consolidation and Emergency Supplemental Appropriations 42.25 Act, 1999, Public Law 105-277, the provision of section 303 of 42.26 the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law 42.27 105-369, the provisions of sections 532, 534, 536, 537, and 538 42.28 of the Ticket to Work and Work Incentives Improvement Act of 42.29 1999, Public Law 106-170, the provisions of the Installment Tax 42.30 Correction Act of 2000, Public Law 106-573, and the provisions 42.31 of section 309 of the Consolidated Appropriation Act of 2001, 42.32 Public Law 106-554, shall become effective at the time they 42.33 become effective for federal purposes. 42.34 The Internal Revenue Code of 1986, as amended through 42.35 December 31, 1998, shall be in effect for taxable years 42.36 beginning after December 31, 1998. 43.1 The provisions of the FSC Repeal and Extraterritorial 43.2 Income Exclusion Act of 2000, Public Law 106-519, and the 43.3 provision of section 412 of the Job Creation and Worker 43.4 Assistance Act of 2002, Public Law 107-147, shall become 43.5 effective at the time it became effective for federal purposes. 43.6 The Internal Revenue Code of 1986, as amended through 43.7 December 31, 1999, shall be in effect for taxable years 43.8 beginning after December 31, 1999. The provisions of sections 43.9 306 and 401 of the Consolidated Appropriation Act of 2001, 43.10 Public Law 106-554, and the provision of section 632(b)(2)(A) of 43.11 the Economic Growth and Tax Relief Reconciliation Act of 2001, 43.12 Public Law 107-16, and provisions of sections 101 and 402 of the 43.13 Job Creation and Worker Assistance Act of 2002, Public Law 43.14 107-147, shall become effective at the same time it became 43.15 effective for federal purposes. 43.16 The Internal Revenue Code of 1986, as amended through 43.17 December 31, 2000, shall be in effect for taxable years 43.18 beginning after December 31, 2000. The provisions of sections 43.19 659a and 671 of the Economic Growth and Tax Relief 43.20 Reconciliation Act of 2001, Public Law 107-16, the provisions of 43.21 sections 104, 105, and 111 of the Victims of Terrorism Tax 43.22 Relief Act of 2001, Public Law 107-134,andthe provisions of 43.23 sections 201, 403, 413, and 606 of the Job Creation and Worker 43.24 Assistance Act of 2002, Public Law 107-147, and the provision of 43.25 section 102 of the Military Family Tax Relief Act of 2003, 43.26 Public Law 108-121, shall become effective at the same time it 43.27 became effective for federal purposes. 43.28 The Internal Revenue Code of 1986, as amended through March 43.29 15, 2002, shall be in effect for taxable years beginning after 43.30 December 31, 2001. 43.31 The provisions of sections 101 and 102 of the Victims of 43.32 Terrorism Tax Relief Act of 2001, Public Law 107-134, shall 43.33 become effective at the same time it becomes effective for 43.34 federal purposes. 43.35 The Internal Revenue Code of 1986, as amended through June 43.36 15, 2003, shall be in effect for taxable years beginning after 44.1 December 31, 2002. The provisions of section 201 of the Jobs 44.2 and Growth Tax Relief and Reconciliation Act of 2003,H.R. 2, if44.3it is enacted into lawPublic Law 108-27, and the provisions of 44.4 sections 103, 106, 108, 109, and 110 of the Military Family Tax 44.5 Relief Act of 2003, Public Law 108-121, are effective at the 44.6 same time it became effective for federal purposes. 44.7 The Internal Revenue Code of 1986, as amended through April 44.8 10, 2004, shall be in effect for taxable years beginning after 44.9 December 31, 2003. 44.10 Except as otherwise provided, references to the Internal 44.11 Revenue Code in subdivisions 19a to 19g mean the code in effect 44.12 for purposes of determining net income for the applicable year. 44.13 [EFFECTIVE DATE.] This section is effective the day 44.14 following final enactment. 44.15 Sec. 3. Minnesota Statutes 2003 Supplement, section 44.16 290.01, subdivision 19a, is amended to read: 44.17 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 44.18 individuals, estates, and trusts, there shall be added to 44.19 federal taxable income: 44.20 (1)(i) interest income on obligations of any state other 44.21 than Minnesota or a political or governmental subdivision, 44.22 municipality, or governmental agency or instrumentality of any 44.23 state other than Minnesota exempt from federal income taxes 44.24 under the Internal Revenue Code or any other federal statute; 44.25 and 44.26 (ii) exempt-interest dividends as defined in section 44.27 852(b)(5) of the Internal Revenue Code, except the portion of 44.28 the exempt-interest dividends derived from interest income on 44.29 obligations of the state of Minnesota or its political or 44.30 governmental subdivisions, municipalities, governmental agencies 44.31 or instrumentalities, but only if the portion of the 44.32 exempt-interest dividends from such Minnesota sources paid to 44.33 all shareholders represents 95 percent or more of the 44.34 exempt-interest dividends that are paid by the regulated 44.35 investment company as defined in section 851(a) of the Internal 44.36 Revenue Code, or the fund of the regulated investment company as 45.1 defined in section 851(g) of the Internal Revenue Code, making 45.2 the payment; and 45.3 (iii) for the purposes of items (i) and (ii), interest on 45.4 obligations of an Indian tribal government described in section 45.5 7871(c) of the Internal Revenue Code shall be treated as 45.6 interest income on obligations of the state in which the tribe 45.7 is located; 45.8 (2) the amount of income taxes paid or accrued within the 45.9 taxable year under this chapter and income taxes paid to any 45.10 other state or to any province or territory of Canada, to the 45.11 extent allowed as a deduction under section 63(d) of the 45.12 Internal Revenue Code, but the addition may not be more than the 45.13 amount by which the itemized deductions as allowed under section 45.14 63(d) of the Internal Revenue Code exceeds the amount of the 45.15 standard deduction as defined in section 63(c) of the Internal 45.16 Revenue Code. For the purpose of this paragraph, the 45.17 disallowance of itemized deductions under section 68 of the 45.18 Internal Revenue Code of 1986, income tax is the last itemized 45.19 deduction disallowed; 45.20 (3) the capital gain amount of a lump sum distribution to 45.21 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 45.22 Reform Act of 1986, Public Law 99-514, applies; 45.23 (4) the amount of income taxes paid or accrued within the 45.24 taxable year under this chapter and income taxes paid to any 45.25 other state or any province or territory of Canada, to the 45.26 extent allowed as a deduction in determining federal adjusted 45.27 gross income. For the purpose of this paragraph, income taxes 45.28 do not include the taxes imposed by sections 290.0922, 45.29 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 45.30 (5) the amount of expense, interest, or taxes disallowed 45.31 pursuant to section 290.10; 45.32 (6) the amount of a partner's pro rata share of net income 45.33 which does not flow through to the partner because the 45.34 partnership elected to pay the tax on the income under section 45.35 6242(a)(2) of the Internal Revenue Code;and45.36 (7) 80 percent of the depreciation deduction allowed under 46.1 section 168(k) of the Internal Revenue Code. For purposes of 46.2 this clause, if the taxpayer has an activity that in the taxable 46.3 year generates a deduction for depreciation under section 168(k) 46.4 and the activity generates a loss for the taxable year that the 46.5 taxpayer is not allowed to claim for the taxable year, "the 46.6 depreciation allowed under section 168(k)" for the taxable year 46.7 is limited to excess of the depreciation claimed by the activity 46.8 under section 168(k) over the amount of the loss from the 46.9 activity that is not allowed in the taxable year. In succeeding 46.10 taxable years when the losses not allowed in the taxable year 46.11 are allowed, the depreciation under section 168(k) is allowed; 46.12 and 46.13 (8) the exclusion allowed under section 139A of the 46.14 Internal Revenue Code for federal subsidies for prescription 46.15 drug plans. 46.16 [EFFECTIVE DATE.] This section is effective for taxable 46.17 years beginning after December 31, 2003. 46.18 Sec. 4. Minnesota Statutes 2003 Supplement, section 46.19 290.01, subdivision 19b, is amended to read: 46.20 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 46.21 individuals, estates, and trusts, there shall be subtracted from 46.22 federal taxable income: 46.23 (1) interest income on obligations of any authority, 46.24 commission, or instrumentality of the United States to the 46.25 extent includable in taxable income for federal income tax 46.26 purposes but exempt from state income tax under the laws of the 46.27 United States; 46.28 (2) if included in federal taxable income, the amount of 46.29 any overpayment of income tax to Minnesota or to any other 46.30 state, for any previous taxable year, whether the amount is 46.31 received as a refund or as a credit to another taxable year's 46.32 income tax liability; 46.33 (3) the amount paid to others, less the amount used to 46.34 claim the credit allowed under section 290.0674, not to exceed 46.35 $1,625 for each qualifying child in grades kindergarten to 6 and 46.36 $2,500 for each qualifying child in grades 7 to 12, for tuition, 47.1 textbooks, and transportation of each qualifying child in 47.2 attending an elementary or secondary school situated in 47.3 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 47.4 wherein a resident of this state may legally fulfill the state's 47.5 compulsory attendance laws, which is not operated for profit, 47.6 and which adheres to the provisions of the Civil Rights Act of 47.7 1964 and chapter 363A. For the purposes of this clause, 47.8 "tuition" includes fees or tuition as defined in section 47.9 290.0674, subdivision 1, clause (1). As used in this clause, 47.10 "textbooks" includes books and other instructional materials and 47.11 equipment purchased or leased for use in elementary and 47.12 secondary schools in teaching only those subjects legally and 47.13 commonly taught in public elementary and secondary schools in 47.14 this state. Equipment expenses qualifying for deduction 47.15 includes expenses as defined and limited in section 290.0674, 47.16 subdivision 1, clause (3). "Textbooks" does not include 47.17 instructional books and materials used in the teaching of 47.18 religious tenets, doctrines, or worship, the purpose of which is 47.19 to instill such tenets, doctrines, or worship, nor does it 47.20 include books or materials for, or transportation to, 47.21 extracurricular activities including sporting events, musical or 47.22 dramatic events, speech activities, driver's education, or 47.23 similar programs. For purposes of the subtraction provided by 47.24 this clause, "qualifying child" has the meaning given in section 47.25 32(c)(3) of the Internal Revenue Code; 47.26 (4) income as provided under section 290.0802; 47.27 (5) to the extent included in federal adjusted gross 47.28 income, income realized on disposition of property exempt from 47.29 tax under section 290.491; 47.30 (6) to the extent included in federal taxable income, 47.31 postservice benefits for youth community service under section 47.32 124D.42 for volunteer service under United States Code, title 47.33 42, sections 12601 to 12604; 47.34 (7) to the extent not deducted in determining federal 47.35 taxable income by an individual who does not itemize deductions 47.36 for federal income tax purposes for the taxable year, an amount 48.1 equal to 50 percent of the excess of charitable contributions 48.2 allowable as a deduction for the taxable year under section 48.3 170(a) of the Internal Revenue Code over $500; 48.4 (8) for taxable years beginning before January 1, 2008, the 48.5 amount of the federal small ethanol producer credit allowed 48.6 under section 40(a)(3) of the Internal Revenue Code which is 48.7 included in gross income under section 87 of the Internal 48.8 Revenue Code; 48.9 (9) for individuals who are allowed a federal foreign tax 48.10 credit for taxes that do not qualify for a credit under section 48.11 290.06, subdivision 22, an amount equal to the carryover of 48.12 subnational foreign taxes for the taxable year, but not to 48.13 exceed the total subnational foreign taxes reported in claiming 48.14 the foreign tax credit. For purposes of this clause, "federal 48.15 foreign tax credit" means the credit allowed under section 27 of 48.16 the Internal Revenue Code, and "carryover of subnational foreign 48.17 taxes" equals the carryover allowed under section 904(c) of the 48.18 Internal Revenue Code minus national level foreign taxes to the 48.19 extent they exceed the federal foreign tax credit; 48.20 (10) in each of the five tax years immediately following 48.21 the tax year in which an addition is required under subdivision 48.22 19a, clause (7), an amount equal to one-fifth of the delayed 48.23 depreciation. For purposes of this clause, "delayed 48.24 depreciation" means the amount of the addition made by the 48.25 taxpayer under subdivision 19a, clause (7), minus the positive 48.26 value of any net operating loss under section 172 of the 48.27 Internal Revenue Code generated for the tax year of the 48.28 addition. The resulting delayed depreciation cannot be less 48.29 than zero;and48.30 (11) job opportunity building zone income as provided under 48.31 section 469.316; and 48.32 (12) to the extent included in federal taxable income, 48.33 compensation paid to a service member as defined in United 48.34 States Code, title 10, section 101(a)(5), for military service 48.35 as defined in the Service Members Civil Relief Act, Public Law 48.36 108-189, section 101(2), performed by a nonresident. This 49.1 subtraction does not apply to "retirement income" as defined in 49.2 section 290.17, subdivision 2, paragraph (a), clause (3). 49.3 [EFFECTIVE DATE.] This section is effective for tax years 49.4 beginning after December 31, 2002. 49.5 Sec. 5. Minnesota Statutes 2003 Supplement, section 49.6 290.01, subdivision 19c, is amended to read: 49.7 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 49.8 INCOME.] For corporations, there shall be added to federal 49.9 taxable income: 49.10 (1) the amount of any deduction taken for federal income 49.11 tax purposes for income, excise, or franchise taxes based on net 49.12 income or related minimum taxes, including but not limited to 49.13 the tax imposed under section 290.0922, paid by the corporation 49.14 to Minnesota, another state, a political subdivision of another 49.15 state, the District of Columbia, or any foreign country or 49.16 possession of the United States; 49.17 (2) interest not subject to federal tax upon obligations 49.18 of: the United States, its possessions, its agencies, or its 49.19 instrumentalities; the state of Minnesota or any other state, 49.20 any of its political or governmental subdivisions, any of its 49.21 municipalities, or any of its governmental agencies or 49.22 instrumentalities; the District of Columbia; or Indian tribal 49.23 governments; 49.24 (3) exempt-interest dividends received as defined in 49.25 section 852(b)(5) of the Internal Revenue Code; 49.26 (4) the amount of any net operating loss deduction taken 49.27 for federal income tax purposes under section 172 or 832(c)(10) 49.28 of the Internal Revenue Code or operations loss deduction under 49.29 section 810 of the Internal Revenue Code; 49.30 (5) the amount of any special deductions taken for federal 49.31 income tax purposes under sections 241 to 247 of the Internal 49.32 Revenue Code; 49.33 (6) losses from the business of mining, as defined in 49.34 section 290.05, subdivision 1, clause (a), that are not subject 49.35 to Minnesota income tax; 49.36 (7) the amount of any capital losses deducted for federal 50.1 income tax purposes under sections 1211 and 1212 of the Internal 50.2 Revenue Code; 50.3 (8) the exempt foreign trade income of a foreign sales 50.4 corporation under sections 921(a) and 291 of the Internal 50.5 Revenue Code; 50.6 (9) the amount of percentage depletion deducted under 50.7 sections 611 through 614 and 291 of the Internal Revenue Code; 50.8 (10) for certified pollution control facilities placed in 50.9 service in a taxable year beginning before December 31, 1986, 50.10 and for which amortization deductions were elected under section 50.11 169 of the Internal Revenue Code of 1954, as amended through 50.12 December 31, 1985, the amount of the amortization deduction 50.13 allowed in computing federal taxable income for those 50.14 facilities; 50.15 (11) the amount of any deemed dividend from a foreign 50.16 operating corporation determined pursuant to section 290.17, 50.17 subdivision 4, paragraph (g); 50.18 (12) the amount of any environmental tax paid under section 50.19 59(a) of the Internal Revenue Code; 50.20 (13) the amount of a partner's pro rata share of net income 50.21 which does not flow through to the partner because the 50.22 partnership elected to pay the tax on the income under section 50.23 6242(a)(2) of the Internal Revenue Code; 50.24 (14) the amount of net income excluded under section 114 of 50.25 the Internal Revenue Code; 50.26 (15) any increase in subpart F income, as defined in 50.27 section 952(a) of the Internal Revenue Code, for the taxable 50.28 year when subpart F income is calculated without regard to the 50.29 provisions of section 614 of Public Law 107-147;and50.30 (16) 80 percent of the depreciation deduction allowed under 50.31 section 168(k) of the Internal Revenue Code. For purposes of 50.32 this clause, if the taxpayer has an activity that in the taxable 50.33 year generates a deduction for depreciation under section 168(k) 50.34 and the activity generates a loss for the taxable year that the 50.35 taxpayer is not allowed to claim for the taxable year, "the 50.36 depreciation allowed under section 168(k)" for the taxable year 51.1 is limited to excess of the depreciation claimed by the activity 51.2 under section 168(k) over the amount of the loss from the 51.3 activity that is not allowed in the taxable year. In succeeding 51.4 taxable years when the losses not allowed in the taxable year 51.5 are allowed, the depreciation under section 168(k) is allowed; 51.6 and 51.7 (17) the exclusion allowed under section 139A of the 51.8 Internal Revenue Code for federal subsidies for prescription 51.9 drug plans. 51.10 [EFFECTIVE DATE.] This section is effective for taxable 51.11 years beginning after December 31, 2003. 51.12 Sec. 6. Minnesota Statutes 2003 Supplement, section 51.13 290.01, subdivision 31, is amended to read: 51.14 Subd. 31. [INTERNAL REVENUE CODE.] Unless specifically 51.15 defined otherwise, "Internal Revenue Code" means the Internal 51.16 Revenue Code of 1986, as amended throughJune 15, 2003April 10, 51.17 2004. 51.18 [EFFECTIVE DATE.] This section is effective the day 51.19 following final enactment except the changes incorporated by 51.20 federal changes are effective at the same times as the changes 51.21 were effective for federal purposes. 51.22 Sec. 7. Minnesota Statutes 2003 Supplement, section 51.23 290.06, subdivision 2c, is amended to read: 51.24 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 51.25 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 51.26 married individuals filing joint returns and surviving spouses 51.27 as defined in section 2(a) of the Internal Revenue Code must be 51.28 computed by applying to their taxable net income the following 51.29 schedule of rates: 51.30 (1) On the first $25,680, 5.35 percent; 51.31 (2) On all over $25,680, but not over $102,030, 7.05 51.32 percent; 51.33 (3) On all over $102,030, 7.85 percent. 51.34 Married individuals filing separate returns, estates, and 51.35 trusts must compute their income tax by applying the above rates 51.36 to their taxable income, except that the income brackets will be 52.1 one-half of the above amounts. 52.2 (b) The income taxes imposed by this chapter upon unmarried 52.3 individuals must be computed by applying to taxable net income 52.4 the following schedule of rates: 52.5 (1) On the first $17,570, 5.35 percent; 52.6 (2) On all over $17,570, but not over $57,710, 7.05 52.7 percent; 52.8 (3) On all over $57,710, 7.85 percent. 52.9 (c) The income taxes imposed by this chapter upon unmarried 52.10 individuals qualifying as a head of household as defined in 52.11 section 2(b) of the Internal Revenue Code must be computed by 52.12 applying to taxable net income the following schedule of rates: 52.13 (1) On the first $21,630, 5.35 percent; 52.14 (2) On all over $21,630, but not over $86,910, 7.05 52.15 percent; 52.16 (3) On all over $86,910, 7.85 percent. 52.17 (d) In lieu of a tax computed according to the rates set 52.18 forth in this subdivision, the tax of any individual taxpayer 52.19 whose taxable net income for the taxable year is less than an 52.20 amount determined by the commissioner must be computed in 52.21 accordance with tables prepared and issued by the commissioner 52.22 of revenue based on income brackets of not more than $100. The 52.23 amount of tax for each bracket shall be computed at the rates 52.24 set forth in this subdivision, provided that the commissioner 52.25 may disregard a fractional part of a dollar unless it amounts to 52.26 50 cents or more, in which case it may be increased to $1. 52.27 (e) An individual who is not a Minnesota resident for the 52.28 entire year must compute the individual's Minnesota income tax 52.29 as provided in this subdivision. After the application of the 52.30 nonrefundable credits provided in this chapter, the tax 52.31 liability must then be multiplied by a fraction in which: 52.32 (1) the numerator is the individual's Minnesota source 52.33 federal adjusted gross income as defined in section 62 of the 52.34 Internal Revenue Code and increased by the additions required 52.35 under section 290.01, subdivision 19a, clauses (1), (5), and 52.36 (6), and reduced by thesubtractionsubtractions under section 53.1 290.01, subdivision 19b,clauseclauses (11) and (12), and the 53.2 Minnesota assignable portion of the subtraction for United 53.3 States government interest under section 290.01, subdivision 53.4 19b, clause (1), after applying the allocation and assignability 53.5 provisions of section 290.081, clause (a), or 290.17; and 53.6 (2) the denominator is the individual's federal adjusted 53.7 gross income as defined in section 62 of the Internal Revenue 53.8 Code of 1986, increased by the amounts specified in section 53.9 290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 53.10 by the amounts specified in section 290.01, subdivision 19b, 53.11 clauses (1)and, (11), and (12). 53.12 [EFFECTIVE DATE.] This section is effective for taxable 53.13 years beginning after December 31, 2002. 53.14 Sec. 8. Minnesota Statutes 2003 Supplement, section 53.15 290.091, subdivision 2, is amended to read: 53.16 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 53.17 this section, the following terms have the meanings given: 53.18 (a) "Alternative minimum taxable income" means the sum of 53.19 the following for the taxable year: 53.20 (1) the taxpayer's federal alternative minimum taxable 53.21 income as defined in section 55(b)(2) of the Internal Revenue 53.22 Code; 53.23 (2) the taxpayer's itemized deductions allowed in computing 53.24 federal alternative minimum taxable income, but excluding: 53.25 (i) the charitable contribution deduction under section 170 53.26 of the Internal Revenue Code to the extent that the deduction 53.27 exceeds 1.0 percent of adjusted gross income, as defined in 53.28 section 62 of the Internal Revenue Code; 53.29 (ii) the medical expense deduction; 53.30 (iii) the casualty, theft, and disaster loss deduction; and 53.31 (iv) the impairment-related work expenses of a disabled 53.32 person; 53.33 (3) for depletion allowances computed under section 613A(c) 53.34 of the Internal Revenue Code, with respect to each property (as 53.35 defined in section 614 of the Internal Revenue Code), to the 53.36 extent not included in federal alternative minimum taxable 54.1 income, the excess of the deduction for depletion allowable 54.2 under section 611 of the Internal Revenue Code for the taxable 54.3 year over the adjusted basis of the property at the end of the 54.4 taxable year (determined without regard to the depletion 54.5 deduction for the taxable year); 54.6 (4) to the extent not included in federal alternative 54.7 minimum taxable income, the amount of the tax preference for 54.8 intangible drilling cost under section 57(a)(2) of the Internal 54.9 Revenue Code determined without regard to subparagraph (E); 54.10 (5) to the extent not included in federal alternative 54.11 minimum taxable income, the amount of interest income as 54.12 provided by section 290.01, subdivision 19a, clause (1);and54.13 (6) the amount of addition required by section 290.01, 54.14 subdivision 19a, clause (7); and 54.15 (7) the amount of addition required by section 290.01, 54.16 subdivision 19a, clause (8); 54.17 less the sum of the amounts determined under the following: 54.18 (1) interest income as defined in section 290.01, 54.19 subdivision 19b, clause (1); 54.20 (2) an overpayment of state income tax as provided by 54.21 section 290.01, subdivision 19b, clause (2), to the extent 54.22 included in federal alternative minimum taxable income; 54.23 (3) the amount of investment interest paid or accrued 54.24 within the taxable year on indebtedness to the extent that the 54.25 amount does not exceed net investment income, as defined in 54.26 section 163(d)(4) of the Internal Revenue Code. Interest does 54.27 not include amounts deducted in computing federal adjusted gross 54.28 income; and 54.29 (4) amounts subtracted from federal taxable income as 54.30 provided by section 290.01, subdivision 19b, clauses (10)and54.31(11)to (12). 54.32 In the case of an estate or trust, alternative minimum 54.33 taxable income must be computed as provided in section 59(c) of 54.34 the Internal Revenue Code. 54.35 (b) "Investment interest" means investment interest as 54.36 defined in section 163(d)(3) of the Internal Revenue Code. 55.1 (c) "Tentative minimum tax" equals 6.4 percent of 55.2 alternative minimum taxable income after subtracting the 55.3 exemption amount determined under subdivision 3. 55.4 (d) "Regular tax" means the tax that would be imposed under 55.5 this chapter (without regard to this section and section 55.6 290.032), reduced by the sum of the nonrefundable credits 55.7 allowed under this chapter. 55.8 (e) "Net minimum tax" means the minimum tax imposed by this 55.9 section. 55.10 [EFFECTIVE DATE.] This section is effective for taxable 55.11 years beginning after December 31, 2003. 55.12 Sec. 9. Minnesota Statutes 2003 Supplement, section 55.13 290.0921, subdivision 3, is amended to read: 55.14 Subd. 3. [ALTERNATIVE MINIMUM TAXABLE INCOME.] 55.15 "Alternative minimum taxable income" is Minnesota net income as 55.16 defined in section 290.01, subdivision 19, and includes the 55.17 adjustments and tax preference items in sections 56, 57, 58, and 55.18 59(d), (e), (f), and (h) of the Internal Revenue Code. If a 55.19 corporation files a separate company Minnesota tax return, the 55.20 minimum tax must be computed on a separate company basis. If a 55.21 corporation is part of a tax group filing a unitary return, the 55.22 minimum tax must be computed on a unitary basis. The following 55.23 adjustments must be made. 55.24 (1) For purposes of the depreciation adjustments under 55.25 section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 55.26 the basis for depreciable property placed in service in a 55.27 taxable year beginning before January 1, 1990, is the adjusted 55.28 basis for federal income tax purposes, including any 55.29 modification made in a taxable year under section 290.01, 55.30 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 55.31 subdivision 7, paragraph (c). 55.32 For taxable years beginning after December 31, 2000, the 55.33 amount of any remaining modification made under section 290.01, 55.34 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 55.35 subdivision 7, paragraph (c), not previously deducted is a 55.36 depreciation allowance in the first taxable year after December 56.1 31, 2000. 56.2 (2) The portion of the depreciation deduction allowed for 56.3 federal income tax purposes under section 168(k) of the Internal 56.4 Revenue Code that is required as an addition under section 56.5 290.01, subdivision 19c, clause (16), is disallowed in 56.6 determining alternative minimum taxable income. 56.7 (3) The subtraction for depreciation allowed under section 56.8 290.01, subdivision 19d, clause (19), is allowed as a 56.9 depreciation deduction in determining alternative minimum 56.10 taxable income. 56.11 (4) The alternative tax net operating loss deduction under 56.12 sections 56(a)(4) and 56(d) of the Internal Revenue Code does 56.13 not apply. 56.14 (5) The special rule for certain dividends under section 56.15 56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 56.16 (6) The special rule for dividends from section 936 56.17 companies under section 56(g)(4)(C)(iii) does not apply. 56.18 (7) The tax preference for depletion under section 57(a)(1) 56.19 of the Internal Revenue Code does not apply. 56.20 (8) The tax preference for intangible drilling costs under 56.21 section 57(a)(2) of the Internal Revenue Code must be calculated 56.22 without regard to subparagraph (E) and the subtraction under 56.23 section 290.01, subdivision 19d, clause (4). 56.24 (9) The tax preference for tax exempt interest under 56.25 section 57(a)(5) of the Internal Revenue Code does not apply. 56.26 (10) The tax preference for charitable contributions of 56.27 appreciated property under section 57(a)(6) of the Internal 56.28 Revenue Code does not apply. 56.29 (11) For purposes of calculating the tax preference for 56.30 accelerated depreciation or amortization on certain property 56.31 placed in service before January 1, 1987, under section 57(a)(7) 56.32 of the Internal Revenue Code, the deduction allowable for the 56.33 taxable year is the deduction allowed under section 290.01, 56.34 subdivision 19e. 56.35 For taxable years beginning after December 31, 2000, the 56.36 amount of any remaining modification made under section 290.01, 57.1 subdivision 19e, not previously deducted is a depreciation or 57.2 amortization allowance in the first taxable year after December 57.3 31, 2004. 57.4 (12) For purposes of calculating the adjustment for 57.5 adjusted current earnings in section 56(g) of the Internal 57.6 Revenue Code, the term "alternative minimum taxable income" as 57.7 it is used in section 56(g) of the Internal Revenue Code, means 57.8 alternative minimum taxable income as defined in this 57.9 subdivision, determined without regard to the adjustment for 57.10 adjusted current earnings in section 56(g) of the Internal 57.11 Revenue Code. 57.12 (13) For purposes of determining the amount of adjusted 57.13 current earnings under section 56(g)(3) of the Internal Revenue 57.14 Code, no adjustment shall be made under section 56(g)(4) of the 57.15 Internal Revenue Code with respect to (i) the amount of foreign 57.16 dividend gross-up subtracted as provided in section 290.01, 57.17 subdivision 19d, clause (1), (ii) the amount of refunds of 57.18 income, excise, or franchise taxes subtracted as provided in 57.19 section 290.01, subdivision 19d, clause (10), or (iii) the 57.20 amount of royalties, fees or other like income subtracted as 57.21 provided in section 290.01, subdivision 19d, clause (11). 57.22 (14) Alternative minimum taxable income excludes the income 57.23 from operating in a job opportunity building zone as provided 57.24 under section 469.317. 57.25 (15) Alternative minimum taxable income excludes the income 57.26 from operating in a biotechnology and health sciences industry 57.27 zone as provided under section 469.337. 57.28 (16) The addition required under section 290.01, 57.29 subdivision 19c, clause (17), is included in determining 57.30 alternative minimum taxable income. 57.31 Items of tax preference must not be reduced below zero as a 57.32 result of the modifications in this subdivision. 57.33 [EFFECTIVE DATE.] This section is effective for taxable 57.34 years beginning after December 31, 2003. 57.35 Sec. 10. Minnesota Statutes 2003 Supplement, section 57.36 290A.03, subdivision 15, is amended to read: 58.1 Subd. 15. [INTERNAL REVENUE CODE.] "Internal Revenue Code" 58.2 means the Internal Revenue Code of 1986, as amended throughJune58.315, 2003April 10, 2004. 58.4 [EFFECTIVE DATE.] This section is effective the day 58.5 following final enactment except the changes to household income 58.6 generated by federal changes to federal adjusted gross income 58.7 are effective at the same time federal changes are effective. 58.8 Sec. 11. Minnesota Statutes 2003 Supplement, section 58.9 291.005, subdivision 1, is amended to read: 58.10 Subdivision 1. Unless the context otherwise clearly 58.11 requires, the following terms used in this chapter shall have 58.12 the following meanings: 58.13 (1) "Federal gross estate" means the gross estate of a 58.14 decedent as valued and otherwise determined for federal estate 58.15 tax purposes by federal taxing authorities pursuant to the 58.16 provisions of the Internal Revenue Code. 58.17 (2) "Minnesota gross estate" means the federal gross estate 58.18 of a decedent after (a) excluding therefrom any property 58.19 included therein which has its situs outside Minnesota, and (b) 58.20 including therein any property omitted from the federal gross 58.21 estate which is includable therein, has its situs in Minnesota, 58.22 and was not disclosed to federal taxing authorities. 58.23 (3) "Personal representative" means the executor, 58.24 administrator or other person appointed by the court to 58.25 administer and dispose of the property of the decedent. If 58.26 there is no executor, administrator or other person appointed, 58.27 qualified, and acting within this state, then any person in 58.28 actual or constructive possession of any property having a situs 58.29 in this state which is included in the federal gross estate of 58.30 the decedent shall be deemed to be a personal representative to 58.31 the extent of the property and the Minnesota estate tax due with 58.32 respect to the property. 58.33 (4) "Resident decedent" means an individual whose domicile 58.34 at the time of death was in Minnesota. 58.35 (5) "Nonresident decedent" means an individual whose 58.36 domicile at the time of death was not in Minnesota. 59.1 (6) "Situs of property" means, with respect to real 59.2 property, the state or country in which it is located; with 59.3 respect to tangible personal property, the state or country in 59.4 which it was normally kept or located at the time of the 59.5 decedent's death; and with respect to intangible personal 59.6 property, the state or country in which the decedent was 59.7 domiciled at death. 59.8 (7) "Commissioner" means the commissioner of revenue or any 59.9 person to whom the commissioner has delegated functions under 59.10 this chapter. 59.11 (8) "Internal Revenue Code" means the United States 59.12 Internal Revenue Code of 1986, as amended through December 31, 59.1320022003. 59.14 [EFFECTIVE DATE.] This section is effective for estates of 59.15 decedents dying after January 31, 2003. 59.16 ARTICLE 3 59.17 PROPERTY TAXES 59.18 Section 1. Minnesota Statutes 2002, section 97A.061, 59.19 subdivision 1, is amended to read: 59.20 Subdivision 1. [APPLICABILITY; AMOUNT.] (a) The 59.21 commissioner shall annually make a payment to each county having 59.22 public hunting areas and game refuges. Money to make the 59.23 payments is annually appropriated for that purpose from the 59.24 general fund. Except as provided in paragraph (b), this section 59.25 does not apply to state trust fund land and other state land not 59.26 purchased for game refuge or public hunting purposes. Except as 59.27 provided in paragraph (b), the payment shall be the greatest of: 59.28 (1) 35 percent of the gross receipts from all special use 59.29 permits and leases of land acquired for public hunting and game 59.30 refuges; 59.31 (2) 50 cents per acre on land purchased actually used for 59.32 public hunting or game refuges; or 59.33 (3) three-fourths of one percent of the appraised value of 59.34 purchased land actually used for public hunting and game refuges. 59.35 (b) The payment shall be 50 percent of the dollar amount 59.36 adjusted for inflation as determined under section 477A.12, 60.1 subdivision 1, paragraph (a), clause (1), multiplied by the 60.2 number of acres of land in the county that are owned by another 60.3 state agency for military purposes and designated as a game 60.4 refuge under section 97A.085. 60.5 (c) The payment must be reduced by the amount paid under 60.6 subdivision 3 for croplands managed for wild geese. 60.7(c)(d) The appraised value is the purchase price for five 60.8 years after acquisition. The appraised value shall be 60.9 determined by the county assessor every five years after 60.10 acquisition. 60.11 [EFFECTIVE DATE.] This section is effective for aids paid 60.12 in calendar year 2005 and thereafter. 60.13 Sec. 2. Minnesota Statutes 2002, section 144F.01, 60.14 subdivision 10, is amended to read: 60.15 Subd. 10. [REPORTS.] On or before March 15,20052006, and 60.16 March 15,20072008, the special taxing district shall submit a 60.17 levy and expenditure report to the commissioner of revenue and 60.18 to the chairs of the house and senate committees with 60.19 jurisdiction over taxes. Each report must include the amount of 60.20 the district's levies for taxes payable for each of the two 60.21 previous years and its actual expenditures of those revenues. 60.22 Expenditures must be reported by general service category, as 60.23 listed in subdivision 5, and include a separate category for 60.24 administrative expenses. 60.25 [EFFECTIVE DATE.] This section is effective the day 60.26 following final enactment. 60.27 Sec. 3. Minnesota Statutes 2002, section 272.02, 60.28 subdivision 22, is amended to read: 60.29 Subd. 22. [WIND ENERGY CONVERSION SYSTEMS.] All real and 60.30 personal property of a wind energy conversion system as defined 60.31 in section 272.029, subdivision 2, is exempt from property tax 60.32 except that the land on which the property is located remains 60.33 taxable. The value of the land on which the wind energy 60.34 conversion system is located shall not be increased or 60.35 decreased, but shall be valued in the same manner as similar 60.36 land that has not been improved with a wind energy conversion 61.1 system. The land shall be classified based on the most probable 61.2 use of the property if it were not improved with a wind energy 61.3 conversion system. 61.4 [EFFECTIVE DATE.] This section is effective for assessment 61.5 year 2004 and thereafter, for taxes payable in 2005 and 61.6 thereafter. 61.7 Sec. 4. Minnesota Statutes 2003 Supplement, section 61.8 272.02, subdivision 47, is amended to read: 61.9 Subd. 47. [POULTRY LITTER BIOMASS GENERATION FACILITY; 61.10 PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 61.11 attached machinery and other personal property which is part of 61.12 an electrical generating facility that meets the requirements of 61.13 this subdivision is exempt. At the time of construction, the 61.14 facility must: 61.15 (1) be designed to utilize poultry litter as a primary fuel 61.16 source; and 61.17 (2) be constructed for the purpose of generating power at 61.18 the facility that will be sold pursuant to a contract approved 61.19 by the Public Utilities Commission in accordance with the 61.20 biomass mandate imposed under section 216B.2424. 61.21 Construction of the facility must be commenced after 61.22 January 1, 2003, and before December 31,20032004. Property 61.23 eligible for this exemption does not include electric 61.24 transmission lines and interconnections or gas pipelines and 61.25 interconnections appurtenant to the property or the facility. 61.26 [EFFECTIVE DATE.] This section is effective for assessment 61.27 year 2004, taxes payable in 2005, and thereafter. 61.28 Sec. 5. Minnesota Statutes 2003 Supplement, section 61.29 272.02, subdivision 56, is amended to read: 61.30 Subd. 56. [ELECTRIC GENERATION FACILITY; PERSONAL 61.31 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 61.32 attached machinery and other personal property which is part of 61.33 a combined-cycle combustion-turbine electric generation facility 61.34 that exceeds550300 megawatts of installed capacity and that 61.35 meets the requirements of this subdivision is exempt. At the 61.36 time of construction, the facility must: 62.1 (1) be designed to utilize natural gas as a primary fuel; 62.2 (2) not be owned by a public utility as defined in section 62.3 216B.02, subdivision 4; 62.4 (3) be located within five miles of an existing natural gas 62.5 pipeline and within four miles of an existing electrical 62.6 transmission substation; 62.7 (4) be located outside the metropolitan area as defined 62.8 under section 473.121, subdivision 2; and 62.9 (5) be designed to provide energy and ancillary services 62.10 and have received a certificate of need under section 216B.243. 62.11 (b) Construction of the facility must be commenced after 62.12 January 1, 2004, and before January 1, 2007, except that 62.13 property eligible for this exemption includes any expansion of 62.14 the facility that also meets the requirements of paragraph (a), 62.15 clauses (1) to (5), without regard to the date that construction 62.16 of the expansion commences. Property eligible for this 62.17 exemption does not include electric transmission lines and 62.18 interconnections or gas pipelines and interconnections 62.19 appurtenant to the property or the facility. 62.20 [EFFECTIVE DATE.] This section is effective for assessment 62.21 year 2005, taxes payable in 2006, and thereafter. 62.22 Sec. 6. Minnesota Statutes 2002, section 272.02, is 62.23 amended by adding a subdivision to read: 62.24 Subd. 68. [ELECTRIC GENERATION FACILITY; PERSONAL 62.25 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 62.26 machinery and other personal property which is part of a 62.27 simple-cycle, combustion-turbine electric generation facility 62.28 that exceeds 300 megawatts of installed capacity and that meets 62.29 the requirements of this subdivision is exempt. At the time of 62.30 the construction, the facility must: 62.31 (1) be designed to utilize natural gas as a primary fuel; 62.32 (2) be owned by a public utility as defined in section 62.33 216B.02, subdivision 4, and be located at or interconnected with 62.34 an existing generating plant of the utility; 62.35 (3) be designed to provide peaking, emergency backup, or 62.36 contingency services; 63.1 (4) satisfy a resource need identified in an approved 63.2 integrated resource plan filed under section 216B.2422; and 63.3 (5) have received, by resolution, the approval from the 63.4 governing body of the county and the city for the exemption of 63.5 personal property under this subdivision. 63.6 Construction of the facility must be commenced after 63.7 January 1, 2004, and before January 1, 2006. Property eligible 63.8 for this exemption does not include electric transmission lines 63.9 and interconnections or gas pipelines and interconnections 63.10 appurtenant to the property or the facility. 63.11 [EFFECTIVE DATE.] This section is effective for assessment 63.12 year 2005, taxes payable in 2006, and thereafter. 63.13 Sec. 7. Minnesota Statutes 2002, section 272.02, is 63.14 amended by adding a subdivision to read: 63.15 Subd. 69. [ELECTRIC GENERATION FACILITY; PERSONAL 63.16 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 63.17 attached machinery and other personal property which is part of 63.18 a simple-cycle combustion-turbine electric generation facility 63.19 that exceeds 290 megawatts of installed capacity and that meets 63.20 the requirements of this subdivision is exempt. At the time of 63.21 construction, the facility must: 63.22 (1) be designed to utilize natural gas as a primary fuel; 63.23 (2) not be owned by a public utility as defined in section 63.24 216B.02, subdivision 4; 63.25 (3) be located within five miles of an existing natural gas 63.26 pipeline and within five miles of an existing electrical 63.27 transmission substation; 63.28 (4) be located outside the metropolitan area as defined 63.29 under section 473.121, subdivision 2; 63.30 (5) be designed to provide peaking capacity energy and 63.31 ancillary services and have satisfied all of the requirements 63.32 under section 216B.243; and 63.33 (6) have received, by resolution, the approval from the 63.34 governing body of the county, city, and school district in which 63.35 the proposed facility is to be located for the exemption of 63.36 personal property under this subdivision. 64.1 (b) Construction of the facility must be commenced after 64.2 January 1, 2005, and before January 1, 2009. Property eligible 64.3 for this exemption does not include electric transmission lines 64.4 and interconnections or gas pipelines and interconnections 64.5 appurtenant to the property or the facility. 64.6 [EFFECTIVE DATE.] This section is effective for assessment 64.7 year 2006, taxes payable in 2007, and thereafter. 64.8 Sec. 8. Minnesota Statutes 2002, section 272.02, is 64.9 amended by adding a subdivision to read: 64.10 Subd. 70. [ELECTRIC GENERATION FACILITY PERSONAL 64.11 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), and 64.12 section 453.54, subdivision 20, attached machinery and other 64.13 personal property which is part of an electric generation 64.14 facility that exceeds 150 megawatts of installed capacity and 64.15 meets the requirements of this subdivision is exempt. At the 64.16 time of construction, the facility must: 64.17 (1) be designed to utilize natural gas as a primary fuel; 64.18 (2) be owned and operated by a municipal power agency as 64.19 defined in section 453.52, subdivision 8; 64.20 (3) have received the certificate of need under section 64.21 216B.243; 64.22 (4) be located outside the metropolitan area as defined 64.23 under section 473.121, subdivision 2; and 64.24 (5) be designed to be a combined-cycle facility, although 64.25 initially the facility will be operated as a simple-cycle 64.26 combustion turbine. 64.27 (b) To qualify under this subdivision, an agreement must be 64.28 negotiated between the municipal power agency and the host city, 64.29 for a payment in lieu of property taxes to the host city. 64.30 (c) Construction of the facility must be commenced after 64.31 January 1, 2004, and before January 1, 2006. Property eligible 64.32 for this exemption does not include electric transmission lines 64.33 and interconnections or gas pipelines and interconnections 64.34 appurtenant to the property or the facility. 64.35 [EFFECTIVE DATE.] This section is effective for assessment 64.36 year 2005, taxes payable in 2006, and thereafter. 65.1 Sec. 9. Minnesota Statutes 2002, section 272.02, is 65.2 amended by adding a subdivision to read: 65.3 Subd. 71. [BIOMASS ELECTRIC GENERATION FACILITY; PERSONAL 65.4 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 65.5 attached machinery and other personal property which is a part 65.6 of an electric generation facility generating up to 30 megawatts 65.7 of installed capacity and that meets the requirements of this 65.8 subdivision is exempt. At the time of construction, the 65.9 facility must: 65.10 (1) be designed to utilize a minimum 90 percent waste 65.11 biomass as a fuel; 65.12 (2) not be owned by a public utility as defined in section 65.13 216B.02, subdivision 4; 65.14 (3) be located within a city of the first class and have 65.15 its primary location at a former garbage transfer station; and 65.16 (4) be designed to have capability to provide baseload 65.17 energy and district heating. 65.18 (b) Construction of the facility must be commenced after 65.19 January 1, 2004, and before January 1, 2008. Property eligible 65.20 for this exemption does not include electric transmission lines 65.21 and interconnections or gas pipelines and interconnections 65.22 appurtenant to the property or the facility. 65.23 [EFFECTIVE DATE.] This section is effective for assessment 65.24 year 2005, taxes payable in 2006, and thereafter. 65.25 Sec. 10. Minnesota Statutes 2002, section 272.02, is 65.26 amended by adding a subdivision to read: 65.27 Subd. 72. [ELECTRIC GENERATION FACILITY; PERSONAL 65.28 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 65.29 attached machinery and other personal property that is part of 65.30 either a simple-cycle, combustion-turbine electric generation 65.31 facility that equals or exceeds 150 megawatts of installed 65.32 capacity, or a combined-cycle, combustion-turbine electric 65.33 generation facility that equals or exceeds 225 megawatts of 65.34 installed capacity, and that in either case meets the 65.35 requirements of this subdivision, is exempt. At the time of 65.36 construction, the facility must: 66.1 (1) be designed to utilize natural gas as a primary fuel; 66.2 (2) not be owned by a public utility as defined in section 66.3 216B.02, subdivision 4; 66.4 (3) be located in a metropolitan county defined in section 66.5 473.121, subdivision 4, that has a population greater than 66.6 190,000 and less than 225,000 in the most recent federal 66.7 decennial census, within one mile of an existing natural gas 66.8 pipeline, and within one mile of an existing electrical 66.9 transmission substation; and 66.10 (4) be designed to provide energy and ancillary services 66.11 and have received a certificate of need under section 216B.243. 66.12 (b) Construction of the facility must be commenced after 66.13 January 1, 2005, and before January 1, 2008. Property eligible 66.14 for this exemption does not include electric transmission lines 66.15 and interconnections or gas pipelines and interconnections 66.16 appurtenant to the property or the facility. 66.17 [EFFECTIVE DATE.] This section is effective for assessment 66.18 year 2005, taxes payable in 2006, and thereafter. 66.19 Sec. 11. Minnesota Statutes 2002, section 272.02, is 66.20 amended by adding a subdivision to read: 66.21 Subd. 73. [HOMESTEAD OF DISABLED VETERAN OR SURVIVING 66.22 SPOUSE.] (a) Property otherwise qualifying for homestead 66.23 classification under section 273.13 is exempt from taxation if 66.24 it serves as the homestead of a military veteran, as defined in 66.25 section 197.447, who has a total and permanent service-connected 66.26 disability. To qualify for exemption under this subdivision, 66.27 the veteran must have been honorably discharged from the United 66.28 States armed forces, as indicated by United States Government 66.29 Form DD214 or other official military discharge papers, and must 66.30 be certified by the United States Veterans Administration as 66.31 having a total (100 percent) and permanent service-connected 66.32 disability. 66.33 (b) If a disabled veteran qualifying for exemption under 66.34 paragraph (a) predeceases the veteran's spouse, and if upon the 66.35 death of the veteran the spouse holds the legal or beneficial 66.36 title to the homestead and permanently resides there, the 67.1 exemption from taxation shall carry over to the benefit of the 67.2 veteran's spouse until such time as the spouse remarries or 67.3 sells or otherwise disposes of the property. 67.4 (c) In the case of an agricultural homestead, only the 67.5 portion of the property consisting of the house and garage and 67.6 immediately surrounding one acre of land qualifies for exemption 67.7 under this subdivision. 67.8 (d) A property owner attempting to first qualify for 67.9 exemption under this section must apply to the assessor by July 67.10 1 of the assessment year, except that for assessment year 2004 67.11 application may be made until October 1, 2004. The application 67.12 must be accompanied by supporting documentation as required by 67.13 the assessor. Once a property has been accepted for exemption 67.14 under this section, the property continues to qualify until 67.15 there is a change in ownership of the property. 67.16 [EFFECTIVE DATE.] This section is effective for assessment 67.17 year 2004 and thereafter, for taxes payable in 2005 and 67.18 thereafter. 67.19 Sec. 12. Minnesota Statutes 2002, section 272.0212, 67.20 subdivision 1, is amended to read: 67.21 Subdivision 1. [EXEMPTION.] All qualified property in a 67.22 zone is exempt to the extent and for a period up to the duration 67.23 provided by the zone designation and under sections 469.1731 to 67.24 469.1735. 67.25 [EFFECTIVE DATE.] This section is effective for development 67.26 agreements approved after the day following final enactment and 67.27 beginning for property taxes payable in 2005. 67.28 Sec. 13. Minnesota Statutes 2002, section 272.0212, 67.29 subdivision 2, is amended to read: 67.30 Subd. 2. [LIMITS ON EXEMPTION.] (a) Property in a zone is 67.31 not exempt under this section from the following: 67.32 (1) special assessments; 67.33 (2) ad valorem property taxes specifically levied for the 67.34 payment of principal and interest on debt obligations; and 67.35 (3) all taxes levied by a school district, except equalized 67.36 school levies as defined in section 273.1398, subdivision 1, 68.1 paragraph (e). 68.2 (b) The city may limit the property tax exemption to a 68.3 shorter period than the duration of the zone or to a percentage 68.4 of the property taxes payable or both. 68.5 [EFFECTIVE DATE.] This section is effective for development 68.6 agreements approved after the day following final enactment and 68.7 beginning for property taxes payable in 2005. 68.8 Sec. 14. [272.0275] [PERSONAL PROPERTY USED TO GENERATE 68.9 ELECTRICITY; EXEMPTION.] 68.10 Subdivision 1. [NEW PLANT CONSTRUCTION AFTER JANUARY 1, 68.11 2004.] For a new generating plant built and placed in service 68.12 after January 1, 2004, its personal property used to generate 68.13 electric power is exempt from property taxation, including under 68.14 section 453.54, subdivision 20, if an exemption of generation 68.15 personal property form, with an attached siting agreement, is 68.16 filed with the Department of Revenue. The form must be signed 68.17 by the utility, and the county and city or town where the 68.18 facility is proposed to be located. 68.19 Subd. 2. [EXISTING PLANT; INCREASE IN NAMEPLATE CAPACITY.] 68.20 For a plant existing or under construction on the day of final 68.21 enactment of this act, a partial exemption applies if the 68.22 nameplate capacity of the plant is increased from that existing 68.23 on the day of final enactment of this act, and if an exemption 68.24 of generation personal property form, with an attached siting 68.25 agreement is filed with the Department of Revenue. The form 68.26 must be signed by the utility, and the county and city or town 68.27 where the facility expansion is located. This partial exemption 68.28 must be computed by taking the increase in megawatts over the 68.29 total megawatt nameplate capacity after construction is 68.30 complete, multiplied by the market value of all taxable tools, 68.31 implements, and machinery of the generating plant as determined 68.32 by the commissioner of revenue. The resulting exemption is 68.33 effective beginning in the next assessment year. 68.34 Subd. 3. [IN-LIEU PAYMENT; LIMITATION.] If an in-lieu 68.35 payment or service fee is negotiated between a facility exempted 68.36 under this section and the county, city, or town where the 69.1 facility is located, the payment or fee in any year may not 69.2 exceed the property tax revenue that the jurisdiction would 69.3 receive from the facility if it were not exempt. 69.4 Subd. 4. [DEFINITION; APPLICABILITY.] For purposes of this 69.5 section, "personal property" means tools, implements, and 69.6 machinery of the generating plant. The exemption under this 69.7 section does not apply to transformers, transmission lines, 69.8 distribution lines, or any other tools, implements, and 69.9 machinery that are part of an electric substation, wherever 69.10 located. 69.11 [EFFECTIVE DATE.] This section is effective the day 69.12 following final enactment. 69.13 Sec. 15. Minnesota Statutes 2002, section 272.029, 69.14 subdivision 4, is amended to read: 69.15 Subd. 4. [REPORTS.] (a) An owner of a wind energy 69.16 conversion system subject to tax under subdivision 3 shall file 69.17 a report with the commissioner of revenue annually on or before 69.18March 1February 1 detailing the amount of electricity in 69.19 kilowatt-hours that was produced by the wind energy conversion 69.20 system for the previous calendar year. The commissioner shall 69.21 prescribe the form of the report. The report must contain the 69.22 information required by the commissioner to determine the tax 69.23 due to each county under this section for the current year. If 69.24 an owner of a wind energy conversion system subject to taxation 69.25 under this section fails to file the report by the due date, the 69.26 commissioner of revenue shall determine the tax based upon the 69.27 nameplate capacity of the system multiplied by a capacity factor 69.28 of 40 percent. 69.29 (b) On or beforeMarch 31February 28, the commissioner of 69.30 revenue shall notify the owner of the wind energy conversion 69.31 systems of the tax due to each county for the current year and 69.32 shall certify to the county auditor of each county in which the 69.33 systems are located the tax due from each owner for the current 69.34 year. 69.35 [EFFECTIVE DATE.] This section is effective for taxes 69.36 payable in 2005 and thereafter. 70.1 Sec. 16. Minnesota Statutes 2002, section 272.029, 70.2 subdivision 6, is amended to read: 70.3 Subd. 6. [DISTRIBUTION OF REVENUES.] Revenues from the 70.4 taxes imposed under subdivision 5 must be part of the settlement 70.5 between the county treasurer and the county auditor under 70.6 section 276.09. The revenue must be distributed by the county 70.7 auditor or the county treasurer to all local taxing 70.8 jurisdictions in which the wind energy conversion system is 70.9 located, in the same proportion that each of the taxing 70.10 jurisdiction'scurrentprevious year's net tax capacity based 70.11 tax rate is to thecurrentprevious year's total local net tax 70.12 capacity based rate. 70.13 [EFFECTIVE DATE.] This section is effective for taxes 70.14 payable in 2004 and thereafter. 70.15 Sec. 17. Minnesota Statutes 2003 Supplement, section 70.16 273.11, subdivision 1a, is amended to read: 70.17 Subd. 1a. [LIMITED MARKET VALUE.] In the case of all 70.18 property classified as agricultural homestead or nonhomestead, 70.19 residential homestead or nonhomestead, timber,ornoncommercial 70.20 seasonal residential recreational, or class 1c resort property, 70.21 the assessor shall compare the value with the taxable portion of 70.22 the value determined in the preceding assessment, except that 70.23 for class 1c resort property for assessment year 2004, the 70.24 assessor shall determine the limited market value as provided in 70.25 subdivision 1b. 70.26 For assessment year 2002, the amount of the increase shall 70.27 not exceed the greater of (1) ten percent of the value in the 70.28 preceding assessment, or (2) 15 percent of the difference 70.29 between the current assessment and the preceding assessment. 70.30 For assessment year 2003, the amount of the increase shall 70.31 not exceed the greater of (1) 12 percent of the value in the 70.32 preceding assessment, or (2) 20 percent of the difference 70.33 between the current assessment and the preceding assessment. 70.34 For assessment year 2004, the amount of the increase shall 70.35 not exceed the greater of (1) 15 percent of the value in the 70.36 preceding assessment, or (2) 25 percent of the difference 71.1 between the current assessment and the preceding assessment. 71.2 For assessment year 2005, the amount of the increase shall 71.3 not exceed the greater of (1) 15 percent of the value in the 71.4 preceding assessment, or (2) 33 percent of the difference 71.5 between the current assessment and the preceding assessment. 71.6 For assessment year 2006, the amount of the increase shall 71.7 not exceed the greater of (1) 15 percent of the value in the 71.8 preceding assessment, or (2) 50 percent of the difference 71.9 between the current assessment and the preceding assessment. 71.10 This limitation shall not apply to increases in value due 71.11 to improvements. For purposes of this subdivision, the term 71.12 "assessment" means the value prior to any exclusion under 71.13 subdivision 16. 71.14 The provisions of this subdivision shall be in effect 71.15 through assessment year 2006 as provided in this subdivision. 71.16 For purposes of this subdivision and subdivision 1b, "class 71.17 1c resort property" includes the portion of the property 71.18 classified class 1a or 1b homestead, the portion of the property 71.19 classified 1c, plus any remaining portion of the resort that is 71.20 classified 4c under section 273.13, subdivision 25, paragraph 71.21 (d), clause (1). 71.22 For purposes of the assessment/sales ratio study conducted 71.23 under section 127A.48, and the computation of state aids paid 71.24 under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 71.25 477A, market values and net tax capacities determined under this 71.26 subdivision and subdivision 16, shall be used. 71.27 [EFFECTIVE DATE.] This section is effective for assessment 71.28 year 2004 through 2006, for taxes payable in 2005 through 2007. 71.29 Sec. 18. Minnesota Statutes 2002, section 273.11, is 71.30 amended by adding a subdivision to read: 71.31 Subd. 1b. [CLASS 1C RESORTS; 2004 ASSESSMENT ONLY.] For 71.32 assessment year 2004, the valuation increase on class 1c resort 71.33 property shall not exceed the greater of (1) 15 percent of the 71.34 value of its 2002 assessment, or (2) 25 percent of the 71.35 difference in value between its 2004 assessment and its 2002 71.36 assessment. The valuation increase on class 1c resort property 72.1 for the 2005 and 2006 assessment years shall be determined based 72.2 upon the schedule contained in subdivision 1a. 72.3 [EFFECTIVE DATE.] This section is effective the day 72.4 following final enactment. 72.5 Sec. 19. Minnesota Statutes 2002, section 273.111, 72.6 subdivision 6, is amended to read: 72.7 Subd. 6. [AGRICULTURAL USE.] Real property qualifying 72.8 under subdivision 3 shall be considered to be in agricultural 72.9 use provided that annually: 72.10 (1) at least 33-1/3 percent of the total family income of 72.11 the owner is derived therefrom, or the total production income 72.12 including rental from the property is$300$500 plus$10$50 per 72.13 tillable acre; and 72.14 (2) it is devoted to the production for sale of 72.15 agricultural products as defined in section 273.13, subdivision 72.16 23, paragraph (e). 72.17 Slough, wasteland, and woodland contiguous to or surrounded 72.18 by land that is entitled to valuation and tax deferment under 72.19 this section is considered to be in agricultural use if under 72.20 the same ownership and management. 72.21 [EFFECTIVE DATE.] This section is effective for assessment 72.22 year 2005, taxes payable in 2006, and thereafter. 72.23 Sec. 20. Minnesota Statutes 2002, section 273.124, is 72.24 amended by adding a subdivision to read: 72.25 Subd. 22. [RESIDENTIAL PROPERTY ALSO USED TO PROVIDE DAY 72.26 CARE.] Residential and agricultural property that is also used 72.27 to provide day care must be classified without regard to its use 72.28 in providing the day care, provided that the operator of the day 72.29 care service is occupying the property as the operator's 72.30 permanent residence. For purposes of this subdivision, "day 72.31 care" means family day care or adult family day care licensed 72.32 under section 245A.03, or provided without license under section 72.33 245A.03, subdivision 2, paragraph (a), clause (2). 72.34 [EFFECTIVE DATE.] This section is effective for assessment 72.35 year 2004 and thereafter, for taxes payable in 2005 and 72.36 thereafter. 73.1 Sec. 21. Minnesota Statutes 2003 Supplement, section 73.2 273.13, subdivision 22, is amended to read: 73.3 Subd. 22. [CLASS 1.] (a) Except as provided in subdivision 73.4 23 and in paragraphs (b) and (c), real estate which is 73.5 residential and used for homestead purposes is class 1a. In the 73.6 case of a duplex or triplex in which one of the units is used 73.7 for homestead purposes, the entire property is deemed to be used 73.8 for homestead purposes. The market value of class 1a property 73.9 must be determined based upon the value of the house, garage, 73.10 and land. 73.11 The first $500,000 of market value of class 1a property has 73.12 a net class rate of one percent of its market value; and the 73.13 market value of class 1a property that exceeds $500,000 has a 73.14 class rate of 1.25 percent of its market value. 73.15 (b) Class 1b property includes homestead real estate or 73.16 homestead manufactured homes used for the purposes of a 73.17 homestead by 73.18 (1) any person who is blind as defined in section 256D.35, 73.19 or the blind person and the blind person's spouse; or 73.20 (2)any person, hereinafter referred to as "veteran," who:73.21(i) served in the active military or naval service of the73.22United States; and73.23(ii) is entitled to compensation under the laws and73.24regulations of the United States for permanent and total73.25service-connected disability due to the loss, or loss of use, by73.26reason of amputation, ankylosis, progressive muscular73.27dystrophies, or paralysis, of both lower extremities, such as to73.28preclude motion without the aid of braces, crutches, canes, or a73.29wheelchair; and73.30(iii) has acquired a special housing unit with special73.31fixtures or movable facilities made necessary by the nature of73.32the veteran's disability, or the surviving spouse of the73.33deceased veteran for as long as the surviving spouse retains the73.34special housing unit as a homestead; or73.35(3)any person who is permanently and totally disabled. 73.36 Property is classified and assessed under clause(3)(2) 74.1 only if the government agency or income-providing source 74.2 certifies, upon the request of the homestead occupant, that the 74.3 homestead occupant satisfies the disability requirements of this 74.4 paragraph. 74.5 Property is classified and assessed pursuant to clause (1) 74.6 only if the commissioner of revenue certifies to the assessor 74.7 that the homestead occupant satisfies the requirements of this 74.8 paragraph. 74.9 Permanently and totally disabled for the purpose of this 74.10 subdivision means a condition which is permanent in nature and 74.11 totally incapacitates the person from working at an occupation 74.12 which brings the person an income. The first $32,000 market 74.13 value of class 1b property has a net class rate of .45 percent 74.14 of its market value. The remaining market value of class 1b 74.15 property has a class rate using the rates for class 1a or class 74.16 2a property, whichever is appropriate, of similar market value. 74.17 (c) Class 1c property is commercial use real property that 74.18 abuts a lakeshore line and is devoted to temporary and seasonal 74.19 residential occupancy for recreational purposes but not devoted 74.20 to commercial purposes for more than 250 days in the year 74.21 preceding the year of assessment, and that includes a portion 74.22 used as a homestead by the owner, which includes a dwelling 74.23 occupied as a homestead by a shareholder of a corporation that 74.24 owns the resort, a partner in a partnership that owns the 74.25 resort, or a member of a limited liability company that owns the 74.26 resort even if the title to the homestead is held by the 74.27 corporation, partnership, or limited liability company. For 74.28 purposes of this clause, property is devoted to a commercial 74.29 purpose on a specific day if any portion of the property, 74.30 excluding the portion used exclusively as a homestead, is used 74.31 for residential occupancy and a fee is charged for residential 74.32 occupancy. The first $500,000 of market value of class 1c 74.33 property has a class rate of one percent, and the remaining 74.34 market value of class 1c property has a class rate of one 74.35 percent, with the following limitation: the area of the 74.36 property must not exceed 100 feet of lakeshore footage for each 75.1 cabin or campsite located on the property up to a total of 800 75.2 feet and 500 feet in depth, measured away from the lakeshore. 75.3 If any portion of the class 1c resort property is classified as 75.4 class 4c under subdivision 25, the entire property must meet the 75.5 requirements of subdivision 25, paragraph (d), clause (1), to 75.6 qualify for class 1c treatment under this paragraph. 75.7 (d) Class 1d property includes structures that meet all of 75.8 the following criteria: 75.9 (1) the structure is located on property that is classified 75.10 as agricultural property under section 273.13, subdivision 23; 75.11 (2) the structure is occupied exclusively by seasonal farm 75.12 workers during the time when they work on that farm, and the 75.13 occupants are not charged rent for the privilege of occupying 75.14 the property, provided that use of the structure for storage of 75.15 farm equipment and produce does not disqualify the property from 75.16 classification under this paragraph; 75.17 (3) the structure meets all applicable health and safety 75.18 requirements for the appropriate season; and 75.19 (4) the structure is not salable as residential property 75.20 because it does not comply with local ordinances relating to 75.21 location in relation to streets or roads. 75.22 The market value of class 1d property has the same class 75.23 rates as class 1a property under paragraph (a). 75.24 [EFFECTIVE DATE.] This section is effective for assessment 75.25 year 2004 and thereafter, for taxes payable in 2005 and 75.26 thereafter. 75.27 Sec. 22. [273.1321] [VACANT COMMERCIAL INDUSTRIAL 75.28 PROPERTIES.] 75.29 Subdivision 1. [AUTHORITY.] A city may establish, by 75.30 ordinance, a program to encourage redevelopment, provide for 75.31 better utilization of commercial industrial property, and 75.32 eliminate blighting influences by revoking the eligibility of 75.33 individual commercial industrial properties to receive the 75.34 credit authorized under section 273.1398, subdivision 4. The 75.35 program may revoke eligibility only if the property has been 75.36 vacant, as defined in subdivision 3, clauses (1) to (3), for 76.1 three or more consecutive years prior to the current assessment 76.2 year, or under subdivision 3, clause (4), for five or more 76.3 consecutive years prior to the current assessment year. 76.4 Subd. 2. [MINIMUM REQUIREMENTS.] The program must provide: 76.5 (1) standards for determining whether a property is vacant; 76.6 (2) written assessment notice by the city or county to the 76.7 property owner informing the owner that the property's 76.8 eligibility will be revoked; 76.9 (3) opportunity for the property owner to appeal the 76.10 revocation at the board of equalization; 76.11 (4) timely notice to the county assessor of the property's 76.12 eligibility revocation, if the city has a city assessor and the 76.13 city assessor has revoked the property's eligibility; and 76.14 (5) any other provisions the city determines are necessary 76.15 or appropriate to the operation of the program to achieve its 76.16 purposes. 76.17 Subd. 3. [DEFINITION OF VACANT.] A program established 76.18 under this section may provide that a property is vacant if the 76.19 property is: 76.20 (1) condemned, dangerous, or having multiple building code 76.21 violations; 76.22 (2) condemned and illegally occupied; 76.23 (3) either occupied or unoccupied, during which time the 76.24 enforcement officer for the municipality has issued multiple 76.25 orders to correct nuisance conditions; or 76.26 (4) unoccupied and not utilized for a commercial or 76.27 industrial purpose. 76.28 Subd. 4. [NOTICE TO PROPERTY OWNER.] The municipality 76.29 shall give notice to the property owner requiring that any 76.30 conditions in subdivision 3, clauses (1) to (3) be remedied, and 76.31 that the property be occupied and used for a commercial or 76.32 industrial purpose for at least 180 days during the next 76.33 12-month period, or else the property may cease to be eligible 76.34 for the credit under section 273.1398, subdivision 4. 76.35 [EFFECTIVE DATE.] This section is effective for taxes 76.36 payable in 2006 and thereafter. 77.1 Sec. 23. Minnesota Statutes 2002, section 273.1384, 77.2 subdivision 1, is amended to read: 77.3 Subdivision 1. [RESIDENTIAL HOMESTEAD MARKET VALUE 77.4 CREDIT.] Each county auditor shall determine a homestead credit 77.5 for each class 1a, 1b, 1c, and 2a homestead property within the 77.6 county equal to 0.4 percent of the market value of the 77.7 property. The amount of homestead credit for a homestead may 77.8 not exceed $304 and is reduced by .09 percent of the market 77.9 value in excess of $76,000. In the case of an agricultural or 77.10 resort homestead, only the market value of the house, garage, 77.11 and immediately surrounding one acre of land is eligible in 77.12 determining the property's homestead credit. In the case of a 77.13 propertywhichthat is classified asparta partial homestead 77.14and part nonhomestead, the credit shall apply only to the77.15homestead portion of the property.because the property is not 77.16 occupied by all owners or both spouses, the credit is determined 77.17 based on the homestead portion only, except that the credit must 77.18 not exceed the credit that would be calculated if the entire 77.19 residential portion of the property was classified as homestead. 77.20 [EFFECTIVE DATE.] This section is effective for taxes 77.21 payable in 2005 and thereafter. 77.22 Sec. 24. Minnesota Statutes 2003 Supplement, section 77.23 274.014, subdivision 3, is amended to read: 77.24 Subd. 3. [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] (a) 77.25 Any city or town thatdoes notconducts local boards of appeal 77.26 and equalization meetings must provide proof to the county 77.27 assessor by December 1,20062005, and each year thereafter, 77.28 that it is in compliance with the requirements of subdivision 2,77.29and that it had. Beginning in 2006, this notice must also 77.30 verify that there was a quorum of voting members at each meeting 77.31 of the board of appeal and equalization in thepriorcurrent 77.32 year,. A city or town that does not comply with these 77.33 requirements is deemed to have transferred its board of appeal 77.34 and equalization powers to the countyunder section 274.01,77.35subdivision 3, forbeginning with the following year's 77.36 assessment and continuing unless the powers are reinstated under 78.1 paragraph (c). 78.2 (b) The county shall notify the taxpayers when the board of 78.3 appeal and equalization for a city or town has been transferred 78.4 to the county under this subdivision and, prior to the meeting 78.5 time of the county board of equalization, the county shall make 78.6 available to those taxpayers a procedure for a review of the 78.7 assessments, including, but not limited to, open book meetings. 78.8 This alternate review process shall take place in April and May. 78.9 (c) A local board whose powers are transferred to the 78.10 county under this subdivision may be reinstated by resolution of 78.11 the governing body of the city or town and upon proof of 78.12 compliance with the requirements of subdivision 2. The 78.13 resolution and proofs must be provided to the county assessor by 78.14 December 1 in order to be effective for the following year's 78.15 assessment. 78.16 Sec. 25. Minnesota Statutes 2003 Supplement, section 78.17 275.065, subdivision 3, is amended to read: 78.18 Subd. 3. [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 78.19 county auditor shall prepare and the county treasurer shall 78.20 deliver after November 10 and on or before November 24 each 78.21 year, by first class mail to each taxpayer at the address listed 78.22 on the county's current year's assessment roll, a notice of 78.23 proposed property taxes. 78.24 (b) The commissioner of revenue shall prescribe the form of 78.25 the notice. 78.26 (c) The notice must inform taxpayers that it contains the 78.27 amount of property taxes each taxing authority proposes to 78.28 collect for taxes payable the following year. In the case of a 78.29 town, or in the case of the state general tax, the final tax 78.30 amount will be its proposed tax. In the case of taxing 78.31 authorities required to hold a public meeting under subdivision 78.32 6, the notice must clearly state that each taxing authority, 78.33 including regional library districts established under section 78.34 134.201, and including the metropolitan taxing districts as 78.35 defined in paragraph (i), but excluding all other special taxing 78.36 districts and towns, will hold a public meeting to receive 79.1 public testimony on the proposed budget and proposed or final 79.2 property tax levy, or, in case of a school district, on the 79.3 current budget and proposed property tax levy. It must clearly 79.4 state the time and place of each taxing authority's meeting, a 79.5 telephone number for the taxing authority that taxpayers may 79.6 call if they have questions related to the notice, and an 79.7 address where comments will be received by mail. 79.8 (d) The notice must state for each parcel: 79.9 (1) the market value of the property as determined under 79.10 section 273.11, and used for computing property taxes payable in 79.11 the following year and for taxes payable in the current year as 79.12 each appears in the records of the county assessor on November 1 79.13 of the current year; and, in the case of residential property, 79.14 whether the property is classified as homestead or 79.15 nonhomestead. The notice must clearly inform taxpayers of the 79.16 years to which the market values apply and that the values are 79.17 final values; 79.18 (2) the items listed below, shown separately by county, 79.19 city or town, and state general tax, net of the residential and 79.20 agricultural homestead credit under section 273.1384, voter 79.21 approved school levy, other local school levy, and the sum of 79.22 the special taxing districts, and as a total of all taxing 79.23 authorities: 79.24 (i) the actual tax for taxes payable in the current year; 79.25 and 79.26 (ii) the proposed tax amount. 79.27 If the county levy under clause (2) includes an amount for 79.28 a lake improvement district as defined under sections 103B.501 79.29 to 103B.581, the amount attributable for that purpose must be 79.30 separately stated from the remaining county levy amount. 79.31 In the case of a town or the state general tax, the final 79.32 tax shall also be its proposed tax unless the town changes its 79.33 levy at a special town meeting under section 365.52. If a 79.34 school district has certified under section 126C.17, subdivision 79.35 9, that a referendum will be held in the school district at the 79.36 November general election, the county auditor must note next to 80.1 the school district's proposed amount that a referendum is 80.2 pending and that, if approved by the voters, the tax amount may 80.3 be higher than shown on the notice. In the case of the city of 80.4 Minneapolis, the levy for the Minneapolis Library Board and the 80.5 levy for Minneapolis Park and Recreation shall be listed 80.6 separately from the remaining amount of the city's levy. In the 80.7 case of the city of St. Paul, the levy for the St. Paul Library 80.8 Agency must be listed separately from the remaining amount of 80.9 the city's levy. In the case of Ramsey County, any amount 80.10 levied under section 134.07 may be listed separately from the 80.11 remaining amount of the county's levy. In the case of a parcel 80.12 where tax increment or the fiscal disparities areawide tax under 80.13 chapter 276A or 473F applies, the proposed tax levy on the 80.14 captured value or the proposed tax levy on the tax capacity 80.15 subject to the areawide tax must each be stated separately and 80.16 not included in the sum of the special taxing districts; and 80.17 (3) the increase or decrease between the total taxes 80.18 payable in the current year and the total proposed taxes, 80.19 expressed as a percentage. 80.20 For purposes of this section, the amount of the tax on 80.21 homesteads qualifying under the senior citizens' property tax 80.22 deferral program under chapter 290B is the total amount of 80.23 property tax before subtraction of the deferred property tax 80.24 amount. 80.25 (e) The notice must clearly state that the proposed or 80.26 final taxes do not include the following: 80.27 (1) special assessments; 80.28 (2) levies approved by the voters after the date the 80.29 proposed taxes are certified, including bond referenda and 80.30 school district levy referenda; 80.31 (3) a levy limit increase approved by the voters by the 80.32 first Tuesday after the first Monday in November of the levy 80.33 year as provided under section 275.73; 80.34 (4) amounts necessary to pay cleanup or other costs due to 80.35 a natural disaster occurring after the date the proposed taxes 80.36 are certified; 81.1 (5) amounts necessary to pay tort judgments against the 81.2 taxing authority that become final after the date the proposed 81.3 taxes are certified; and 81.4 (6) the contamination tax imposed on properties which 81.5 received market value reductions for contamination. 81.6 (f) Except as provided in subdivision 7, failure of the 81.7 county auditor to prepare or the county treasurer to deliver the 81.8 notice as required in this section does not invalidate the 81.9 proposed or final tax levy or the taxes payable pursuant to the 81.10 tax levy. 81.11 (g) If the notice the taxpayer receives under this section 81.12 lists the property as nonhomestead, and satisfactory 81.13 documentation is provided to the county assessor by the 81.14 applicable deadline, and the property qualifies for the 81.15 homestead classification in that assessment year, the assessor 81.16 shall reclassify the property to homestead for taxes payable in 81.17 the following year. 81.18 (h) In the case of class 4 residential property used as a 81.19 residence for lease or rental periods of 30 days or more, the 81.20 taxpayer must either: 81.21 (1) mail or deliver a copy of the notice of proposed 81.22 property taxes to each tenant, renter, or lessee; or 81.23 (2) post a copy of the notice in a conspicuous place on the 81.24 premises of the property. 81.25 The notice must be mailed or posted by the taxpayer by 81.26 November 27 or within three days of receipt of the notice, 81.27 whichever is later. A taxpayer may notify the county treasurer 81.28 of the address of the taxpayer, agent, caretaker, or manager of 81.29 the premises to which the notice must be mailed in order to 81.30 fulfill the requirements of this paragraph. 81.31 (i) For purposes of this subdivision, subdivisions 5a and 81.32 6, "metropolitan special taxing districts" means the following 81.33 taxing districts in the seven-county metropolitan area that levy 81.34 a property tax for any of the specified purposes listed below: 81.35 (1) Metropolitan Council under section 473.132, 473.167, 81.36 473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 82.1 (2) Metropolitan Airports Commission under section 473.667, 82.2 473.671, or 473.672; and 82.3 (3) Metropolitan Mosquito Control Commission under section 82.4 473.711. 82.5 For purposes of this section, any levies made by the 82.6 regional rail authorities in the county of Anoka, Carver, 82.7 Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 82.8 398A shall be included with the appropriate county's levy and 82.9 shall be discussed at that county's public hearing. 82.10 [EFFECTIVE DATE.] This section is effective for notices for 82.11 property taxes levied in 2004, payable in 2005, and thereafter. 82.12 Sec. 26. Minnesota Statutes 2002, section 276.04, 82.13 subdivision 2, is amended to read: 82.14 Subd. 2. [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 82.15 shall provide for the printing of the tax statements. The 82.16 commissioner of revenue shall prescribe the form of the property 82.17 tax statement and its contents. The statement must contain a 82.18 tabulated statement of the dollar amount due to each taxing 82.19 authority and the amount of the state tax from the parcel of 82.20 real property for which a particular tax statement is prepared. 82.21 The dollar amounts attributable to the county, the state tax, 82.22 the voter approved school tax, the other local school tax, the 82.23 township or municipality, and the total of the metropolitan 82.24 special taxing districts as defined in section 275.065, 82.25 subdivision 3, paragraph (i), must be separately stated. The 82.26 amounts due all other special taxing districts, if any, may be 82.27 aggregated. If the county levy under this paragraph includes an 82.28 amount for a lake improvement district as defined under sections 82.29 103B.501 to 103B.581, the amount attributable for that purpose 82.30 must be separately stated from the remaining county levy 82.31 amount. In the case of Ramsey County, if the county levy under 82.32 this paragraph includes an amount for public library service 82.33 under section 134.07, the amount attributable for that purpose 82.34 may be separately stated from the remaining county levy amount. 82.35 The amount of the tax on homesteads qualifying under the senior 82.36 citizens' property tax deferral program under chapter 290B is 83.1 the total amount of property tax before subtraction of the 83.2 deferred property tax amount. The amount of the tax on 83.3 contamination value imposed under sections 270.91 to 270.98, if 83.4 any, must also be separately stated. The dollar amounts, 83.5 including the dollar amount of any special assessments, may be 83.6 rounded to the nearest even whole dollar. For purposes of this 83.7 section whole odd-numbered dollars may be adjusted to the next 83.8 higher even-numbered dollar. The amount of market value 83.9 excluded under section 273.11, subdivision 16, if any, must also 83.10 be listed on the tax statement. 83.11 (b) The property tax statements for manufactured homes and 83.12 sectional structures taxed as personal property shall contain 83.13 the same information that is required on the tax statements for 83.14 real property. 83.15 (c) Real and personal property tax statements must contain 83.16 the following information in the order given in this paragraph. 83.17 The information must contain the current year tax information in 83.18 the right column with the corresponding information for the 83.19 previous year in a column on the left: 83.20 (1) the property's estimated market value under section 83.21 273.11, subdivision 1; 83.22 (2) the property's taxable market value after reductions 83.23 under section 273.11, subdivisions 1a and 16; 83.24 (3) the property's gross tax, calculated by adding the 83.25 property's total property tax to the sum of the aids enumerated 83.26 in clause (4); 83.27 (4) a total of the following aids: 83.28 (i) education aids payable under chapters 122A, 123A, 123B, 83.29 124D, 125A, 126C, and 127A; 83.30 (ii) local government aids for cities, towns, and counties 83.31 under chapter 477A; 83.32 (iii) disparity reduction aid under section 273.1398; and 83.33 (iv) homestead and agricultural credit aid under section 83.34 273.1398; 83.35 (5) for homestead residential and agricultural properties, 83.36 the credits under section 273.1384; 84.1 (6) any credits received under sections 273.119; 273.123; 84.2 273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 84.3 473H.10, except that the amount of credit received under section 84.4 273.135 must be separately stated and identified as "taconite 84.5 tax relief"; and 84.6 (7) the net tax payable in the manner required in paragraph 84.7 (a). 84.8 (d) If the county uses envelopes for mailing property tax 84.9 statements and if the county agrees, a taxing district may 84.10 include a notice with the property tax statement notifying 84.11 taxpayers when the taxing district will begin its budget 84.12 deliberations for the current year, and encouraging taxpayers to 84.13 attend the hearings. If the county allows notices to be 84.14 included in the envelope containing the property tax statement, 84.15 and if more than one taxing district relative to a given 84.16 property decides to include a notice with the tax statement, the 84.17 county treasurer or auditor must coordinate the process and may 84.18 combine the information on a single announcement. 84.19 The commissioner of revenue shall certify to the county 84.20 auditor the actual or estimated aids enumerated in clause (4) 84.21 that local governments will receive in the following year. The 84.22 commissioner must certify this amount by January 1 of each year. 84.23 [EFFECTIVE DATE.] This section is effective for property 84.24 tax statements for taxes payable in 2005 and thereafter. 84.25 Sec. 27. Minnesota Statutes 2002, section 290A.03, 84.26 subdivision 13, is amended to read: 84.27 Subd. 13. [PROPERTY TAXES PAYABLE.] (a) "Initial property 84.28 taxes payable" means (i) the property taxexclusive ofpayable 84.29 on a claimant's homestead plus (ii) any fees or charges for 84.30 police or fire services included in the total amount on the 84.31 property tax statement, excluding charges related to capital 84.32 expenditures and nuisance charges under section 429.101. 84.33 (b) "Property taxes payable" means initial property taxes 84.34 payable minus 84.35 (i) special assessments, other than fees or charges for 84.36 police or fire services that are included in paragraph (a)(ii); 85.1 (ii) penalties, and; 85.2 (iii) interestpayable on a claimant's homestead after; 85.3 (iv) deductions made under sections 273.135, 273.1384, 85.4 273.1391, 273.42, subdivision 2, and any other state paid 85.5 property tax credits in any calendar year,; andafter85.6 (v) any refund claimed and allowable under section 290A.04, 85.7 subdivision 2h, that is first payable in the year that the 85.8 property tax is payable. 85.9 (c) In the case of a claimant who makes ground lease 85.10 payments, "property taxes payable" includes the amount of the 85.11 payments directly attributable to the property taxes assessed 85.12 against the parcel on which the house is located. No 85.13 apportionment or reduction of the "property taxes payable" shall 85.14 be required for the use of a portion of the claimant's homestead 85.15 for a business purpose if the claimant does not deduct any 85.16 business depreciation expenses for the use of a portion of the 85.17 homestead in the determination of federal adjusted gross 85.18 income. For homesteads which are manufactured homes as defined 85.19 in section 273.125, subdivision 8, and for homesteads which are 85.20 park trailers taxed as manufactured homes under section 168.012, 85.21 subdivision 9, "property taxes payable" shall also include 19 85.22 percent of the gross rent paid in the preceding year for the 85.23 site on which the homestead is located. When a homestead is 85.24 owned by two or more persons as joint tenants or tenants in 85.25 common, such tenants shall determine between them which tenant 85.26 may claim the property taxes payable on the homestead. If they 85.27 are unable to agree, the matter shall be referred to the 85.28 commissioner of revenue whose decision shall be final. Property 85.29 taxes are considered payable in the year prescribed by law for 85.30 payment of the taxes. 85.31 (d) In the case of a claim relating to "property taxes 85.32 payable," the claimant must have owned and occupied the 85.33 homestead on January 2 of the year in which the tax is payable 85.34 and (i) the property must have been classified as homestead 85.35 property pursuant to section 273.124, on or before December 15 85.36 of the assessment year to which the "property taxes payable" 86.1 relate; or (ii) the claimant must provide documentation from the 86.2 local assessor that application for homestead classification has 86.3 been made on or before December 15 of the year in which the 86.4 "property taxes payable" were payable and that the assessor has 86.5 approved the application. 86.6 [EFFECTIVE DATE.] This section is effective for refunds 86.7 based on property taxes payable in 2005 and following years. 86.8 Sec. 28. Minnesota Statutes 2002, section 290A.07, is 86.9 amended by adding a subdivision to read: 86.10 Subd. 5. [EARLY PAYMENT; E-FILE CLAIMS.] The commissioner 86.11 may pay a claim up to 30 days earlier than the first permitted 86.12 date under subdivision 2a or 3 if the claim was submitted by 86.13 electronic means. 86.14 [EFFECTIVE DATE.] This section is effective the day 86.15 following final enactment. 86.16 Sec. 29. Minnesota Statutes 2002, section 365.43, 86.17 subdivision 1, is amended to read: 86.18 Subdivision 1. [LEVIED AMOUNT IS SPENDING LIMITTOTAL 86.19 REVENUE DEFINED.] A town must notcontract debts orspend more 86.20 money in a year thanthe taxes levied for the yearits total 86.21 revenue without a favorable vote of a majority of the town's 86.22 electors. In this section, "total revenue" means property taxes 86.23 payable in that year as well as amounts received from all other 86.24 sources and amounts carried forward from the last year. 86.25 Sec. 30. Minnesota Statutes 2002, section 365.431, is 86.26 amended to read: 86.27 365.431 [AMOUNT VOTED AT MEETING IS TAX LIMIT.] 86.28 Except as otherwise authorized by law, the tax for town 86.29 purposes must not be more than the amount voted to be raised at 86.30 the annual town meeting. 86.31 Sec. 31. Minnesota Statutes 2002, section 477A.11, 86.32 subdivision 4, is amended to read: 86.33 Subd. 4. [OTHER NATURAL RESOURCES LAND.] "Other natural 86.34 resources land" means:86.35(1)any other land presently owned in fee title by the 86.36 state and administered by the commissioner, or any tax-forfeited 87.1 land, other than platted lots within a city or those lands 87.2 described under subdivision 3, clause (2), which is owned by the 87.3 state and administered by the commissioner or by the county in 87.4 which it is located; and87.5(2) land leased by the state from the United States of87.6America through the United States Secretary of Agriculture87.7pursuant to Title III of the Bankhead Jones Farm Tenant Act,87.8which land is commonly referred to as land utilization project87.9land that is administered by the commissioner. 87.10 [EFFECTIVE DATE.] This section is effective for aids paid 87.11 in calendar year 2005 and thereafter. 87.12 Sec. 32. Minnesota Statutes 2002, section 477A.11, is 87.13 amended by adding a subdivision to read: 87.14 Subd. 5. [LAND UTILIZATION PROJECT LAND.] "Land 87.15 utilization project land" means land that is leased by the state 87.16 from the United States through the United States Secretary of 87.17 Agriculture according to Title III of the Bankhead Jones Farm 87.18 Tenant Act and that is administered by the commissioner. 87.19 [EFFECTIVE DATE.] This section is effective for aids paid 87.20 in calendar year 2005 and thereafter. 87.21 Sec. 33. Minnesota Statutes 2002, section 477A.12, 87.22 subdivision 1, is amended to read: 87.23 Subdivision 1. [TYPES OF LAND; PAYMENTS.] (a) As an offset 87.24 for expenses incurred by counties and towns in support of 87.25 natural resources lands, the following amounts are annually 87.26 appropriated to the commissioner of natural resources from the 87.27 general fund for transfer to the commissioner of revenue. The 87.28 commissioner of revenue shall pay the transferred funds to 87.29 counties as required by sections 477A.11 to 477A.145. The 87.30 amounts are: 87.31 (1) for acquired natural resources land, $3, as adjusted 87.32 for inflation under section 477A.145, multiplied by the total 87.33 number of acres of acquired natural resources land or, at the 87.34 county's option three-fourths of one percent of the appraised 87.35 value of all acquired natural resources land in the county, 87.36 whichever is greater; 88.1 (2) 75 cents, as adjusted for inflation under section 88.2 477A.145, multiplied by the number of acres of 88.3 county-administered other natural resources land; and 88.4 (3) 75 cents, as adjusted for inflation under section 88.5 477A.145, multiplied by the total number of acres of land 88.6 utilization project land; 88.7(3)(4) 37.5 cents, as adjusted for inflation under section 88.8 477A.145, multiplied by the number of acres of 88.9 commissioner-administered other natural resources land located 88.10 in each county as of July 1 of each year prior to the payment 88.11 year. 88.12 (b) The amount determined under paragraph (a), clause (1), 88.13 is payable for land that is acquired from a private owner and 88.14 owned by the Department of Transportation for the purpose of 88.15 replacing wetland losses caused by transportation projects, but 88.16 only if the county contains more than 500 acres of such land at 88.17 the time the certification is made under subdivision 2. 88.18 [EFFECTIVE DATE.] This section is effective for aids paid 88.19 in calendar year 2005 and thereafter. 88.20 Sec. 34. Minnesota Statutes 2002, section 477A.12, 88.21 subdivision 2, is amended to read: 88.22 Subd. 2. [PROCEDURE.] Lands for which payments in lieu are 88.23 made pursuant to section 97A.061, subdivision 3, and Laws 1973, 88.24 chapter 567, shall not be eligible for payments under this 88.25 section. Each county auditor shall certify to the Department of 88.26 Natural Resources during July of each year prior to the payment 88.27 year the number of acres of county-administered other natural 88.28 resources land within the county. The Department of Natural 88.29 resources may, in addition to the certification of acreage, 88.30 require descriptive lists of land so certified. The 88.31 commissioner of natural resources shall determine and certify to 88.32 the commissioner of revenue by March 1 of the payment year: 88.33 (1) the number of acres and most recent appraised value of 88.34 acquired natural resources land within each county; 88.35 (2) the number of acres of commissioner-administered 88.36 natural resources land within each county;and89.1 (3) the number of acres of county-administered other 89.2 natural resources land within each county, based on the reports 89.3 filed by each county auditor with the commissioner of natural 89.4 resources; and 89.5 (4) the number of acres of land utilization project land 89.6 within each county. 89.7 The commissioner of transportation shall determine and 89.8 certify to the commissioner of revenue by March 1 of the payment 89.9 year the number of acres of land and the appraised value of the 89.10 land described in subdivision 1, paragraph (b), but only if it 89.11 exceeds 500 acres. 89.12 The commissioner of revenue shall determine the 89.13 distributions provided for in this section using the number of 89.14 acres and appraised values certified by the commissioner of 89.15 natural resources and the commissioner of transportation by 89.16 March 1 of the payment year. 89.17 [EFFECTIVE DATE.] This section is effective for aids paid 89.18 in calendar year 2005 and thereafter. 89.19 Sec. 35. Minnesota Statutes 2002, section 477A.14, 89.20 subdivision 1, is amended to read: 89.21 Subdivision 1. [GENERAL DISTRIBUTION.] Except as provided 89.22 in subdivision 2 or in section 97A.061, subdivision 5, 40 89.23 percent of the total payment to the county shall be deposited in 89.24 the county general revenue fund to be used to provide property 89.25 tax levy reduction. The remainder shall be distributed by the 89.26 county in the following priority: 89.27 (a) 37.5 cents, as adjusted for inflation under section 89.28 477A.145, for each acre of county-administered other natural 89.29 resources land shall be deposited in a resource development fund 89.30 to be created within the county treasury for use in resource 89.31 development, forest management, game and fish habitat 89.32 improvement, and recreational development and maintenance of 89.33 county-administered other natural resources land. Any county 89.34 receiving less than $5,000 annually for the resource development 89.35 fund may elect to deposit that amount in the county general 89.36 revenue fund; 90.1 (b) From the funds remaining, within 30 days of receipt of 90.2 the payment to the county, the county treasurer shall pay each 90.3 organized township 30 cents, as adjusted for inflation under 90.4 section 477A.145, for each acre of acquired natural resources 90.5 land and each acre of land described in section 477A.12, 90.6 subdivision 1, paragraph (b), and 7.5 cents, as adjusted for 90.7 inflation under section 477A.145, for each acre of other natural 90.8 resources land and each acre of land utilization project land 90.9 located within its boundaries. Payments for natural resources 90.10 lands not located in an organized township shall be deposited in 90.11 the county general revenue fund. Payments to counties and 90.12 townships pursuant to this paragraph shall be used to provide 90.13 property tax levy reduction, except that of the payments for 90.14 natural resources lands not located in an organized township, 90.15 the county may allocate the amount determined to be necessary 90.16 for maintenance of roads in unorganized townships. Provided 90.17 that, if the total payment to the county pursuant to section 90.18 477A.12 is not sufficient to fully fund the distribution 90.19 provided for in this clause, the amount available shall be 90.20 distributed to each township and the county general revenue fund 90.21 on a pro rata basis; and 90.22 (c) Any remaining funds shall be deposited in the county 90.23 general revenue fund. Provided that, if the distribution to the 90.24 county general revenue fund exceeds $35,000, the excess shall be 90.25 used to provide property tax levy reduction. 90.26 [EFFECTIVE DATE.] This section is effective for aids paid 90.27 in calendar year 2005 and thereafter. 90.28 Sec. 36. Laws 1998, chapter 389, article 3, section 41, is 90.29 amended to read: 90.30 Sec. 41. [SPECIAL ASSESSMENT DEFERRAL AUTHORIZED.] 90.31 Notwithstanding Minnesota Statutes, chapter 429, a city may 90.32 defer the payment of any special assessment levied against a 90.33 property qualifying under section 38 as determined by the city. 90.34 Any special assessment, the payment of which has been deferred 90.35 by the city, must be paid in full or a payment agreement may be 90.36 approved by the city if the ownership of property is transferred 91.1 to anyone or any entity. Payment or a payment agreement must be 91.2 made within 60 days of the transfer of ownership. 91.3 [EFFECTIVE DATE.] This section is effective the day 91.4 following final enactment. 91.5 Sec. 37. Laws 1998, chapter 389, article 3, section 42, 91.6 subdivision 2, as amended by Laws 2002, chapter 377, article 4, 91.7 section 24, is amended to read: 91.8 Subd. 2. [RECAPTURE.] (a) Property or any portion thereof 91.9 qualifying under section 38 is subject to additional taxes if: 91.10 (1) ownership of the property is transferred to anyone 91.11 other than the spouse or child of the current owner; 91.12 (2) the current owner or the spouse or child of the current 91.13 owner has not conveyed or entered into a contract before July 1, 91.14 2007, to convey for ownership or public easement rights, (i) a 91.15 portion of the property toaone or more nonprofitfoundation91.16 foundations orcorporation operatingcorporations; and (ii) a 91.17 portion of the property to one or more local governments; and 91.18 those entities shall separately or jointly operate the property 91.19 as an art park providing the services included in section 38, 91.20 clauses (2) to (5), and may also use some of the property for 91.21 other public purposes as determined by the local governments; or 91.22 (3) the nonprofit foundation or corporation to which a 91.23 portion of the property was transferred ceases to provide the 91.24 services included in section 38, clauses (2) to (5), earlier 91.25 than ten years following the effective date of theconveyance91.26 conveyances or of the execution of thecontractcontracts to 91.27 convey. 91.28 (b) The additional taxes are imposed at the earlier of (1) 91.29 the year following transfer of ownership to anyone other than 91.30 the spouse or child of the current owner or a nonprofit 91.31 foundation or corporation or local government operating the 91.32 property as an art park and used for other public purposes, or 91.33 (2) for taxes payable in 2008, or (3) in the event the nonprofit 91.34 foundation or corporation to which a portion of the property was 91.35 conveyed ceases to provide the required services within ten 91.36 years after the conveyance, for taxes payable in the year 92.1 following the year when it ceased to do so. 92.2 The county board, with the approval of the city council, 92.3 shall determine the amount of the additional taxes due on the 92.4 portion of property which is no longer utilized as an art park; 92.5 provided, however, that the additional taxesare equal tomust 92.6 not be greater than the difference between the taxes determined 92.7 on that portion of the property utilized as an art park under 92.8 sections 39 and 40 and the amount determined under subdivision 1 92.9 for all years that the property qualified under section 38.The92.10additional taxes must be extended against the property on the92.11tax list for the current year; provided, however, thatNo 92.12 interest or penalties may be levied on the additionaltaxes if92.13timely paidamount provided that it is paid within 30 days of 92.14 the county's notice. 92.15 [EFFECTIVE DATE.] This section is effective the day 92.16 following final enactment. 92.17 Sec. 38. [TOWNSHIP LEVY ADJUSTMENT FOR WIND ENERGY 92.18 PRODUCTION TAX; PAYABLE 2004 ONLY.] 92.19 Notwithstanding the deadlines in Minnesota Statutes, 92.20 section 275.07, towns located in Lincoln or Pipestone County are 92.21 authorized to adjust their payable 2004 levy for all or a 92.22 portion of their estimated wind energy production tax amounts 92.23 for 2004, as computed by the commissioner of revenue from 92.24 reports filed under Minnesota Statutes, section 272.029, 92.25 subdivision 4. The Lincoln and Pipestone county auditors may 92.26 adjust the payable 2004 levy certifications under Minnesota 92.27 Statutes, section 275.07, subdivision 1, based upon the towns 92.28 that have recertified their levies under this section by March 92.29 15, 2004. 92.30 [EFFECTIVE DATE.] This section is effective for taxes 92.31 levied in 2003, payable in 2004 only. 92.32 Sec. 39. [SAUK RIVER WATERSHED DISTRICT.] 92.33 Notwithstanding Minnesota Statutes, section 103D.905, 92.34 subdivision 3, the Sauk River Watershed District may annually 92.35 levy an additional amount up to $100,000 for its general fund. 92.36 [EFFECTIVE DATE.] This section is effective, without local 93.1 approval, beginning with the taxes levied in 2004, payable in 93.2 2005. 93.3 Sec. 40. [PRINSBURG; SPECIAL LEVY AUTHORITY.] 93.4 Subdivision 1. [BOARD APPROVAL.] Notwithstanding any law 93.5 to the contrary, the board of Common School District No. 815, 93.6 Prinsburg, may continue to operate as a common school district 93.7 provided that: 93.8 (1) the district adopts an annual resolution by May 1 of 93.9 each year declaring that it will be operating for the following 93.10 school year; 93.11 (2) for fiscal years 2006 and later, the district's 93.12 proposed budget for the following year shows that the district 93.13 will not return to statutory operating debt under Minnesota 93.14 Statutes, section 123B.81; and 93.15 (3) the district has passed a referendum under subdivision 93.16 4 authorizing levy authority for the coming school year. 93.17 Subd. 2. [DETERMINATION OF OUTSTANDING OBLIGATIONS.] Prior 93.18 to exercising the authority to levy under this section, the 93.19 boards of Common School District No. 815 and Independent School 93.20 District No. 2180, MACCRAY, must mutually agree to the amount of 93.21 the outstanding tuition owed by the Prinsburg School District to 93.22 the MACCRAY School District. If the districts cannot agree to 93.23 the amount of the tuition owed, the districts may submit all 93.24 relevant information to the commissioner of education who shall 93.25 determine the amount of the obligation owed to the MACCRAY 93.26 School District. 93.27 Subd. 3. [STATUTORY OPERATING DEBT.] For taxes payable in 93.28 2005, 2006, and 2007, Common School District No. 815, Prinsburg, 93.29 may levy the amount necessary to eliminate a deficit in the net 93.30 unappropriated balance in the operating funds of the district, 93.31 determined as of June 30, 2004, and certified and adjusted by 93.32 the commissioner. This levy may also include the amount 93.33 necessary to eliminate the estimated deficit for fiscal year 93.34 2005. 93.35 Subd. 4. [ANNUAL LEVY AUTHORITY.] (a) Common School 93.36 District No. 815, Prinsburg, may levy the amount necessary to 94.1 eliminate any projected deficit in the district's operating 94.2 budget for the preceding school year, excluding the amounts 94.3 raised by this subdivision, if the district's voters approve a 94.4 referendum according to the provisions of this subdivision. 94.5 (b) The referendum shall be called by the school board. 94.6 The ballot must state that the annual levy will be the estimated 94.7 amount necessary to eliminate the previous year's estimated 94.8 operating deficit. The ballot must designate the specific 94.9 number of years, not to exceed five, for which the referendum 94.10 authorization applies. The ballot shall state substantially the 94.11 following: 94.12 "Shall the increase in the levy proposed by the Board of 94.13 Prinsburg, Common School District No. 815, be approved?" 94.14 If approved, the amount necessary to eliminate the previous 94.15 year's estimated operating deficit may be authorized for 94.16 certification for the number of years approved. 94.17 (c) The board must follow the notice provisions of 94.18 Minnesota Statutes, section 126C.17. 94.19 (d) This levy is not subject to the property tax 94.20 recognition shift under Minnesota Statutes, sections 123B.75, 94.21 subdivision 5, and 127A.441. 94.22 Subd. 5. [FISCAL YEAR 2005 ONLY.] Notwithstanding the 94.23 provisions of this section, for fiscal year 2005 only, Common 94.24 School District No. 815, Prinsburg, may continue to operate as a 94.25 common school district upon approval of a referendum under 94.26 subdivision 4. 94.27 [EFFECTIVE DATE.] This section is effective the day 94.28 following final enactment. 94.29 Sec. 41. [STUDY OF PROPERTY TAX AS A PERCENTAGE OF RENT.] 94.30 (a) The commissioner of revenue shall study the percentage 94.31 of rent that constitutes property tax used to calculate refunds 94.32 under Minnesota Statutes, chapter 290A, and provide a written 94.33 report and recommendations to the legislature, in compliance 94.34 with Minnesota Statutes, sections 3.195 and 3.197, by February 94.35 1, 2005. In preparing the study, the commissioner must conduct 94.36 a survey of rent paid and property taxes payable on samples of 95.1 rental properties in (i) the metropolitan area as defined in 95.2 Minnesota Statutes, section 473.121, subdivision 2, (ii) each 95.3 remaining county that is included in a metropolitan statistical 95.4 area as defined by the U.S. Census Bureau, and (iii) the 95.5 remaining Minnesota counties. The survey must include rental 95.6 properties classified under Minnesota Statutes, section 273.13, 95.7 subdivisions 22 and 25, paragraphs (a) and (c), and rental 95.8 property that is exempt from taxation. 95.9 (b) The study must report on: 95.10 (1) the percentage of rent constituting property tax for 95.11 the different types of property and different geographic regions 95.12 surveyed; and 95.13 (2) if rent paid in each geographic region surveyed differs 95.14 significantly between rental units subject to different 95.15 classifications and units in buildings exempt from taxation. 95.16 (c) The study must make recommendations on: 95.17 (1) if the percentage of rent constituting property taxes 95.18 specified in Minnesota Statutes, section 290A.03, subdivisions 95.19 11 and 13, should be changed to more accurately reflect the 95.20 actual percentage of rent constituting property taxes throughout 95.21 Minnesota; 95.22 (2) if the percentage of rent constituting property taxes 95.23 used to calculate refunds under Minnesota Statutes, chapter 95.24 290A, should be set at one uniform percentage for the entire 95.25 state or should vary by geographic region and type of rental 95.26 property, including an analysis of the advantages and 95.27 disadvantages of using a uniform rate or varying the rate by 95.28 region and type of property; 95.29 (3) if the percentage of rent constituting property tax 95.30 should be replaced by reporting of actual property taxes on 95.31 rental units; 95.32 (4) a method by which the commissioner could regularly 95.33 recommend to the legislature adjustments to the percentage of 95.34 rent constituting property taxes; and 95.35 (5) proposed statutory language authorizing the 95.36 commissioner to adjust the percentage based on ongoing survey 96.1 research. 96.2 ARTICLE 4 96.3 SALES AND USE AND LODGING TAXES 96.4 Section 1. Minnesota Statutes 2002, section 16C.03, is 96.5 amended by adding a subdivision to read: 96.6 Subd. 18. [CONTRACTS WITH FOREIGN VENDORS.] (a) The 96.7 commissioner and other agencies to which this section applies 96.8 and the legislative branch of government shall not contract for 96.9 goods or services from a vendor or an affiliate of the vendor 96.10 which has not registered to collect the sales and use tax 96.11 imposed under chapter 297A on its sales in Minnesota or to a 96.12 destination in Minnesota. A vendor that sells tangible personal 96.13 property or provides services subject to tax under chapter 297A 96.14 to an agency or the legislature, and each affiliate of that 96.15 vendor, is regarded as a "retailer maintaining a place of 96.16 business in this state" and is required to collect the Minnesota 96.17 sales or use tax under chapter 297A. This subdivision does not 96.18 apply to state colleges and universities, the courts, and any 96.19 agency in the judicial branch of government. For purposes of 96.20 this subdivision, the term "affiliate" means any person or 96.21 entity that is controlled by, or is under common control of, a 96.22 vendor through stock ownership or other affiliation. 96.23 (b) Beginning on or after January 1, 2005, each vendor or 96.24 affiliate of a vendor that is offered a contract to sell goods 96.25 or services subject to tax under chapter 297A to an agency or 96.26 the legislature must submit to the agency or legislature 96.27 certification that the vendor is registered to collect Minnesota 96.28 sales or use tax and acknowledging that the contract may be 96.29 declared void if the certification is false. 96.30 (c) An agency or the legislature is exempted from the 96.31 provisions of this subdivision in the event of an emergency or 96.32 when the vendor is the sole source of such goods or services. 96.33 [EFFECTIVE DATE.] This section is effective for all 96.34 contracts entered into after December 31, 2004. 96.35 Sec. 2. Minnesota Statutes 2002, section 297A.61, 96.36 subdivision 4, is amended to read: 97.1 Subd. 4. [RETAIL SALE.] (a) A "retail sale" means any 97.2 sale, lease, or rental for any purpose other than resale, 97.3 sublease, or subrent. 97.4 (b) A sale of property used by the owner only by leasing it 97.5 to others or by holding it in an effort to lease it, and put to 97.6 no use by the owner other than resale after the lease or effort 97.7 to lease, is a sale of property for resale. 97.8 (c) A sale of master computer software that is purchased 97.9 and used to make copies for sale or lease is a sale of property 97.10 for resale. 97.11 (d) A sale of building materials, supplies, and equipment 97.12 to owners, contractors, subcontractors, or builders for the 97.13 erection of buildings or the alteration, repair, or improvement 97.14 of real property is a retail sale in whatever quantity sold, 97.15 whether the sale is for purposes of resale in the form of real 97.16 property or otherwise. 97.17 (e) A sale of carpeting, linoleum, or similar floor 97.18 covering to a person who provides for installation of the floor 97.19 covering is a retail sale and not a sale for resale since a sale 97.20 of floor covering which includes installation is a contract for 97.21 the improvement of real property. 97.22 (f) A sale of shrubbery, plants, sod, trees, and similar 97.23 items to a person who provides for installation of the items is 97.24 a retail sale and not a sale for resale since a sale of 97.25 shrubbery, plants, sod, trees, and similar items that includes 97.26 installation is a contract for the improvement of real property. 97.27 (g) A sale of tangible personal property that is awarded as 97.28 prizes is a retail sale and is not considered a sale of property 97.29 for resale. 97.30 (h) A sale of tangible personal property utilized or 97.31 employed in the furnishing or providing of services under 97.32 subdivision 3, paragraph (g), clause (1), including, but not 97.33 limited to, property given as promotional items, is a retail 97.34 sale and is not considered a sale of property for resale. 97.35 (i) A sale of tangible personal property used in conducting 97.36 lawful gambling under chapter 349 or the state lottery under 98.1 chapter 349A, including, but not limited to, property given as 98.2 promotional items, is a retail sale and is not considered a sale 98.3 of property for resale. 98.4 (j) A sale of machines, equipment, or devices that are used 98.5 to furnish, provide, or dispense goods or services, including, 98.6 but not limited to, coin-operated devices, is a retail sale and 98.7 is not considered a sale of property for resale. 98.8 (k) In the case of a lease, a retail sale occurs when (1) 98.9 an obligation to make a lease payment becomes due under the 98.10 terms of the agreement or the trade practices of the lessor or 98.11 (2) in the case of a lease of a motor vehicle, as defined in 98.12 section 297B.01, subdivision 5, but excluding vehicles with a 98.13 manufacturer's gross vehicle weight rating greater than 10,000 98.14 pounds and rentals of vehicles for not more than 28 days, at the 98.15 time the least is consummated. 98.16 (l) In the case of a conditional sales contract, a retail 98.17 sale occurs upon the transfer of title or possession of the 98.18 tangible personal property. 98.19 [EFFECTIVE DATE.] This section is effective for leases 98.20 entered into after June 30, 2004. 98.21 Sec. 3. Minnesota Statutes 2002, section 297A.61, is 98.22 amended by adding a subdivision to read: 98.23 Subd. 7a. [MOTOR VEHICLE LEASE PRICE.] In the case of a 98.24 lease of a motor vehicle as provided in subdivision 4, paragraph 98.25 (k), clause (2), the tax is imposed on the total amount to be 98.26 paid by the lessee under the lease agreement. The tax shall be 98.27 collected in full by the lessor at the time the lease is 98.28 consummated or, if the tax is included in the lease and the 98.29 lease is assigned, the tax shall be due from the original lessor 98.30 at the time the lease is assigned. The total amount to be paid 98.31 by the lessee under the lease agreement equals the agreed upon 98.32 value of the vehicle less manufacturer's rebates, the stated 98.33 residual value of the leased vehicle, and the total value 98.34 allowed for a vehicle owned by the lessee taken in trade by 98.35 lessor, plus the price of any taxable goods and services 98.36 included in the lease and the rent charge as provided by Code of 99.1 Federal Regulations, title 12, section 213.4, excluding any rent 99.2 charge related to the capitalization of the tax. 99.3 If the total amount paid by the lessee for use of the 99.4 leased vehicle includes amounts that are not calculated at the 99.5 time the lease is executed, the tax is imposed and shall be 99.6 collected by the lessor at the time such amounts are paid by the 99.7 lessee. In the case of a lease which by its terms may be 99.8 renewed, the sales tax is due and payable on the total amount to 99.9 be paid during the initial term of the lease, and then for each 99.10 subsequent renewal period on the total amount to be paid during 99.11 the renewal period. 99.12 If a lease is canceled or rescinded on or before 90 days of 99.13 its consummation or in cases where a vehicle is returned to the 99.14 manufacturer pursuant to section 325F.665, the lessor may file a 99.15 claim for a refund of the total tax paid minus the amount of tax 99.16 due for the period the vehicle is used by the lessee. 99.17 [EFFECTIVE DATE.] This section is effective for leases 99.18 entered into after June 30, 2004. 99.19 Sec. 4. Minnesota Statutes 2002, section 297A.61, is 99.20 amended by adding a subdivision to read: 99.21 Subd. 37. [PERSONAL RAPID TRANSIT SYSTEM.] "Personal rapid 99.22 transit system" means a transportation system: 99.23 (1) of small, computer-controlled vehicles, transporting 99.24 one to three passengers on elevated guideways in a 99.25 transportation network operating on demand and nonstop directly 99.26 to any stations in the network; 99.27 (2) that provides service to the public on a regular and 99.28 continuing basis; and 99.29 (3) that is operated independent of any governmental 99.30 subsidies, other than reduced borrowing or capital costs from 99.31 the issuing of state or local bonds, direct loans, loan 99.32 guarantees, or similar financial assistance provided by a 99.33 governmental entity to finance acquisition, construction, or 99.34 improvement of the system. 99.35 [EFFECTIVE DATE.] This section is effective the day 99.36 following final enactment. 100.1 Sec. 5. Minnesota Statutes 2002, section 297A.62, is 100.2 amended by adding a subdivision to read: 100.3 Subd. 4. [LEASE OF MOTOR VEHICLES.] When the lease of a 100.4 motor vehicle as defined in section 297A.61, subdivision 4, 100.5 paragraph (k), clause (2), originates in another state, the 100.6 sales tax under subdivision 1 shall be calculated by the lessor 100.7 on the total amount that is due under the lease agreement after 100.8 the vehicle is required to be registered in Minnesota. If the 100.9 total amount to be paid by the lessee under the lease agreement 100.10 has already been subjected to tax by another state, a credit for 100.11 taxes paid in the other state shall be allowed as provided in 100.12 section 297A.80. 100.13 [EFFECTIVE DATE.] This section is effective for vehicles 100.14 registering in Minnesota after June 30, 2004. 100.15 Sec. 6. Minnesota Statutes 2002, section 297A.67, is 100.16 amended by adding a subdivision to read: 100.17 Subd. 32. [CIGARETTES.] Cigarettes upon which a tax has 100.18 been imposed under section 297F.25 are exempt. 100.19 [EFFECTIVE DATE.] This section is effective for sales and 100.20 purchases made after July 31, 2004. 100.21 Sec. 7. Minnesota Statutes 2003 Supplement, section 100.22 297A.68, subdivision 2, is amended to read: 100.23 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 100.24 (a) Materials stored, used, or consumed in industrial production 100.25 of personal property intended to be sold ultimately at retail 100.26 are exempt, whether or not the item so used becomes an 100.27 ingredient or constituent part of the property produced. 100.28 Materials that qualify for this exemption include, but are not 100.29 limited to, the following: 100.30 (1) chemicals, including chemicals used for cleaning food 100.31 processing machinery and equipment; 100.32 (2) materials, including chemicals, fuels, and electricity 100.33 purchased by persons engaged in industrial production to treat 100.34 waste generated as a result of the production process; 100.35 (3) fuels, electricity, gas, and steam used or consumed in 100.36 the production process, except that electricity, gas, or steam 101.1 used for space heating, cooling, or lighting is exempt if (i) it 101.2 is in excess of the average climate control or lighting for the 101.3 production area, and (ii) it is necessary to produce that 101.4 particular product; 101.5 (4) petroleum products and lubricants; 101.6 (5) packaging materials, including returnable containers 101.7 used in packaging food and beverage products; 101.8 (6) accessory tools, equipment, and other items that are 101.9 separate detachable units with an ordinary useful life of less 101.10 than 12 months used in producing a direct effect upon the 101.11 product; and 101.12 (7) the following materials, tools, and equipment used in 101.13 metalcasting: crucibles, thermocouple protection sheaths and 101.14 tubes, stalk tubes, refractory materials, molten metal filters 101.15 and filter boxes, degassing lances, and base blocks. 101.16 (b) This exemption does not include: 101.17 (1) machinery, equipment, implements, tools, accessories, 101.18 appliances, contrivances and furniture and fixtures, except 101.19 those listed in paragraph (a), clause (6); and 101.20 (2) petroleum and special fuels used in producing or 101.21 generating power for propelling ready-mixed concrete trucks on 101.22 the public highways of this state. 101.23 (c) Industrial production includes, but is not limited to, 101.24 research, development, design or production of any tangible 101.25 personal property, manufacturing, processing (other than by 101.26 restaurants and consumers) of agricultural products (whether 101.27 vegetable or animal), commercial fishing, refining, smelting, 101.28 reducing, brewing, distilling, printing, mining, quarrying, 101.29 lumbering, generating electricity, the production of road 101.30 building materials, and the research, development, design, or 101.31 production of computer software. Industrial production does not 101.32 include painting, cleaning, repairing or similar processing of 101.33 property except as part of the original manufacturing process. 101.34 Industrial production does not include the transportation, 101.35 transmission, or distribution of petroleum, liquefied gas, 101.36 natural gas, water, or steam, in, by, or through pipes, lines, 102.1 tanks, mains, or other means of transporting those products, 102.2 except transportation, transmission, and distribution do not 102.3 include blending of petroleum or biodiesel fuel, as defined in 102.4 section 239.77. 102.5 [EFFECTIVE DATE.] This section is effective for sales and 102.6 purchases made after June 30, 2004. 102.7 Sec. 8. Minnesota Statutes 2003 Supplement, section 102.8 297A.68, subdivision 5, is amended to read: 102.9 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 102.10 exempt. The tax must be imposed and collected as if the rate 102.11 under section 297A.62, subdivision 1, applied, and then refunded 102.12 in the manner provided in section 297A.75. 102.13 "Capital equipment" means machinery and equipment purchased 102.14 or leased, and used in this state by the purchaser or lessee 102.15 primarily for manufacturing, fabricating, mining, or refining 102.16 tangible personal property to be sold ultimately at retail if 102.17 the machinery and equipment are essential to the integrated 102.18 production process of manufacturing, fabricating, mining, or 102.19 refining. Capital equipment also includes machinery and 102.20 equipment used to electronically transmit results retrieved by a 102.21 customer of an on-line computerized data retrieval system. 102.22 (b) Capital equipment includes, but is not limited to: 102.23 (1) machinery and equipment used to operate, control, or 102.24 regulate the production equipment; 102.25 (2) machinery and equipment used for research and 102.26 development, design, quality control, and testing activities; 102.27 (3) environmental control devices that are used to maintain 102.28 conditions such as temperature, humidity, light, or air pressure 102.29 when those conditions are essential to and are part of the 102.30 production process; 102.31 (4) materials and supplies used to construct and install 102.32 machinery or equipment; 102.33 (5) repair and replacement parts, including accessories, 102.34 whether purchased as spare parts, repair parts, or as upgrades 102.35 or modifications to machinery or equipment; 102.36 (6) materials used for foundations that support machinery 103.1 or equipment; 103.2 (7) materials used to construct and install special purpose 103.3 buildings used in the production process; 103.4 (8) ready-mixed concrete equipment in which the ready-mixed 103.5 concrete is mixed as part of the delivery process regardless if 103.6 mounted on a chassis and leases of ready-mixed concrete trucks; 103.7 and 103.8 (9) machinery or equipment used for research, development, 103.9 design, or production of computer software. 103.10 (c) Capital equipment does not include the following: 103.11 (1) motor vehicles taxed under chapter 297B; 103.12 (2) machinery or equipment used to receive or store raw 103.13 materials; 103.14 (3) building materials, except for materials included in 103.15 paragraph (b), clauses (6) and (7); 103.16 (4) machinery or equipment used for nonproduction purposes, 103.17 including, but not limited to, the following: plant security, 103.18 fire prevention, first aid, and hospital stations; support 103.19 operations or administration; pollution control; and plant 103.20 cleaning, disposal of scrap and waste, plant communications, 103.21 space heating, cooling, lighting, or safety; 103.22 (5) farm machinery and aquaculture production equipment as 103.23 defined by section 297A.61, subdivisions 12 and 13; 103.24 (6) machinery or equipment purchased and installed by a 103.25 contractor as part of an improvement to real property;or103.26 (7) machinery or equipment used in the transportation, 103.27 transmission, or distribution of petroleum, liquefied gas, 103.28 natural gas, water, or steam, in, by, or through pipes, lines, 103.29 tanks, mains, or other means of transporting those products. 103.30 This clause does not apply to machinery and equipment used to 103.31 blend petroleum or biodiesel fuel, as defined in section 239.77; 103.32 or 103.33 (8) any other item that is not essential to the integrated 103.34 process of manufacturing, fabricating, mining, or refining. 103.35 (d) For purposes of this subdivision: 103.36 (1) "Equipment" means independent devices or tools separate 104.1 from machinery but essential to an integrated production 104.2 process, including computers and computer software, used in 104.3 operating, controlling, or regulating machinery and equipment; 104.4 and any subunit or assembly comprising a component of any 104.5 machinery or accessory or attachment parts of machinery, such as 104.6 tools, dies, jigs, patterns, and molds. 104.7 (2) "Fabricating" means to make, build, create, produce, or 104.8 assemble components or property to work in a new or different 104.9 manner. 104.10 (3) "Integrated production process" means a process or 104.11 series of operations through which tangible personal property is 104.12 manufactured, fabricated, mined, or refined. For purposes of 104.13 this clause, (i) manufacturing begins with the removal of raw 104.14 materials from inventory and ends when the last process prior to 104.15 loading for shipment has been completed; (ii) fabricating begins 104.16 with the removal from storage or inventory of the property to be 104.17 assembled, processed, altered, or modified and ends with the 104.18 creation or production of the new or changed product; (iii) 104.19 mining begins with the removal of overburden from the site of 104.20 the ores, minerals, stone, peat deposit, or surface materials 104.21 and ends when the last process before stockpiling is completed; 104.22 and (iv) refining begins with the removal from inventory or 104.23 storage of a natural resource and ends with the conversion of 104.24 the item to its completed form. 104.25 (4) "Machinery" means mechanical, electronic, or electrical 104.26 devices, including computers and computer software, that are 104.27 purchased or constructed to be used for the activities set forth 104.28 in paragraph (a), beginning with the removal of raw materials 104.29 from inventory through completion of the product, including 104.30 packaging of the product. 104.31 (5) "Machinery and equipment used for pollution control" 104.32 means machinery and equipment used solely to eliminate, prevent, 104.33 or reduce pollution resulting from an activity described in 104.34 paragraph (a). 104.35 (6) "Manufacturing" means an operation or series of 104.36 operations where raw materials are changed in form, composition, 105.1 or condition by machinery and equipment and which results in the 105.2 production of a new article of tangible personal property. For 105.3 purposes of this subdivision, "manufacturing" includes the 105.4 generation of electricity or steam to be sold at retail. 105.5 (7) "Mining" means the extraction of minerals, ores, stone, 105.6 or peat. 105.7 (8) "On-line data retrieval system" means a system whose 105.8 cumulation of information is equally available and accessible to 105.9 all its customers. 105.10 (9) "Primarily" means machinery and equipment used 50 105.11 percent or more of the time in an activity described in 105.12 paragraph (a). 105.13 (10) "Refining" means the process of converting a natural 105.14 resource to an intermediate or finished product, including the 105.15 treatment of water to be sold at retail. 105.16 [EFFECTIVE DATE.] This section is effective for sales and 105.17 purchases made after June 30, 2004. 105.18 Sec. 9. Minnesota Statutes 2002, section 297A.68, is 105.19 amended by adding a subdivision to read: 105.20 Subd. 40. [PERSONAL RAPID TRANSIT SYSTEM.] (a) Machinery, 105.21 equipment, and supplies purchased or leased, and used by the 105.22 purchaser or lessee in this state directly in the provision of a 105.23 personal rapid transit system as defined in section 297A.61, 105.24 subdivision 37, are exempt. Machinery, equipment, and supplies 105.25 that qualify for this exemption include, but are not limited to, 105.26 the following: 105.27 (1) vehicles, guideways, and related parts used directly in 105.28 the transit system; 105.29 (2) computers and equipment used primarily for operating, 105.30 controlling, and regulating the system; 105.31 (3) machinery, equipment, furniture, and fixtures necessary 105.32 for the functioning of system stations; 105.33 (4) machinery, equipment, implements, tools, and supplies 105.34 used to maintain vehicles, guideways, and stations; and 105.35 (5) electricity and other fuels used in the provision of 105.36 the transit service, including heating, cooling, and lighting of 106.1 system stations. 106.2 (b) This exemption does not include machinery, equipment, 106.3 and supplies used for nonproduction purposes such as operations 106.4 support and administration. 106.5 (c) This subdivision expires three years after completion 106.6 of a public safety certification and training facility. 106.7 [EFFECTIVE DATE.] This section is effective for sales and 106.8 purchases made after June 30, 2004. 106.9 Sec. 10. Minnesota Statutes 2003 Supplement, section 106.10 297A.70, subdivision 8, is amended to read: 106.11 Subd. 8. [REGIONWIDE PUBLIC SAFETY RADIO COMMUNICATION 106.12 SYSTEM; PRODUCTS AND SERVICES.] Products and services including, 106.13 but not limited to, end user equipment used for construction, 106.14 ownership, operation, maintenance, and enhancement of the 106.15backbone system of theregionwide or statewide public safety 106.16 radio communication system established under sections 403.21 to 106.17 403.34, are exempt.For purposes of this subdivision, backbone106.18system is defined in section 403.21, subdivision 9.This 106.19 subdivision is effective for purchases, sales, storage, use, or 106.20 consumptionoccurring before August 1, 2005,in the counties of 106.21Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and106.22WashingtonBenton, Sherburne, Stearns, and Wright, and all 106.23 counties located in the west metro, east metro, and southeast 106.24 districts of the State Patrol. 106.25 [EFFECTIVE DATE.] This section is effective for sales made 106.26 beginning the day after final enactment. 106.27 Sec. 11. Minnesota Statutes 2002, section 297A.70, is 106.28 amended by adding a subdivision to read: 106.29 Subd. 17. [DONATED MEALS.] Meals that are normally sold at 106.30 retail in the ordinary business activities of the taxpayer are 106.31 exempt if the meals are donated to a nonprofit group as defined 106.32 in subdivision 4 for fund-raising purposes. 106.33 [EFFECTIVE DATE.] This section is effective for donations 106.34 made after June 30, 2004. 106.35 Sec. 12. Minnesota Statutes 2002, section 297A.71, is 106.36 amended by adding a subdivision to read: 107.1 Subd. 33. [PERSONAL RAPID TRANSIT SYSTEM.] Materials, 107.2 equipment, and supplies used in the construction, expansion, or 107.3 improvement of a personal rapid transit system as defined in 107.4 section 297A.61, subdivision 37. 107.5 [EFFECTIVE DATE.] This section is effective for sales and 107.6 purchases made after June 30, 2004. 107.7 Sec. 13. Minnesota Statutes 2002, section 297A.87, 107.8 subdivision 2, is amended to read: 107.9 Subd. 2. [SELLER'S PERMIT OR ALTERNATE STATEMENT.] (a) The 107.10 operator of an event under subdivision 1 shall obtain one of the 107.11 following from a person who wishes to do business as a seller at 107.12 the event: 107.13 (1) evidence that the person holds a valid seller's permit 107.14 under section 297A.84;or107.15 (2) a written statement that the person is not offering for 107.16 sale any item that is taxable under this chapter; or 107.17 (3) a written statement that this is the only selling event 107.18 that the person will be participating in for that calendar year, 107.19 that the person will be participating for three or fewer days, 107.20 and that the person will make less than $500 in total sales at 107.21 the event. The written statement shall include the person's 107.22 name, address, and telephone number. 107.23 (b) The operator shall require the evidence or statement as 107.24 a prerequisite to participating in the event as a seller. 107.25 [EFFECTIVE DATE.] This section is effective for selling 107.26 events occurring after June 15, 2004. 107.27 Sec. 14. Minnesota Statutes 2002, section 297A.87, 107.28 subdivision 3, is amended to read: 107.29 Subd. 3. [OCCASIONAL SALE PROVISIONSNOTAPPLICABLE UNDER 107.30 LIMITED CIRCUMSTANCES.] The isolated and occasional 107.31 saleprovisionsprovision under section 297A.67, subdivision 23, 107.32orapplies, provided that the seller only participates for three 107.33 or fewer days in one event per calendar year, makes $500 or less 107.34 in sales at the event, and provides the written statement 107.35 required in subdivision 2, paragraph (a), clause (3). The 107.36 isolated and occasional sales provision under section 297A.68, 108.1 subdivision 25,dodoes not apply to a seller at an event under 108.2 this section. 108.3 [EFFECTIVE DATE.] This section is effective for selling 108.4 events occurring after June 15, 2004. 108.5 Sec. 15. Laws 1998, chapter 389, article 8, section 43, 108.6 subdivision 3, is amended to read: 108.7 Subd. 3. [USE OF REVENUES.] Revenues received from the 108.8 taxes authorized by subdivisions 1 and 2 must be used by the 108.9 city to pay for the cost of collecting and administering the 108.10 taxes and to pay for the following projects: 108.11 (1) transportation infrastructure improvements including 108.12 both highway and airport improvements; 108.13 (2) improvements to the civic center complex; 108.14 (3) a municipal water, sewer, and storm sewer project 108.15 necessary to improve regional ground water quality; and 108.16 (4) construction of a regional recreation and sports center 108.17 andassociatedother higher education facilities available for 108.18 both community and student use, located at or adjacent to the108.19Rochester center. 108.20 The total amount of capital expenditures or bonds for these 108.21 projects that may be paid from the revenues raised from the 108.22 taxes authorized in this section may not exceed $71,500,000. 108.23 The total amount of capital expenditures or bonds for the 108.24 project in clause (4) that may be paid from the revenues raised 108.25 from the taxes authorized in this section may not exceed 108.26 $20,000,000. 108.27 [EFFECTIVE DATE.] This section is effective the day after 108.28 the governing body of Rochester and its chief clerical officer 108.29 timely complete their compliance with Minnesota Statutes, 108.30 section 645.021, subdivisions 2 and 3. 108.31 Sec. 16. Laws 2002, chapter 377, article 3, section 4, the 108.32 effective date, is amended to read: 108.33 [EFFECTIVE DATE.]With the exception of clause (2), item108.34(ii),This section is effective for sales and purchases made 108.35 after June 30, 2002.Clause (2), item (ii), is effective for108.36sales and purchases made after June 30, 2002, and before January109.11, 2006.109.2 [EFFECTIVE DATE.] This section is effective the day 109.3 following final enactment. 109.4 ARTICLE 5 109.5 SPECIAL TAXES 109.6 Section 1. Minnesota Statutes 2002, section 295.582, is 109.7 amended to read: 109.8 295.582 [AUTHORITY.] 109.9 (a) A hospital, surgical center, or health care provider 109.10 that is subject to a tax under section 295.52, or a pharmacy 109.11 that has paid additional expense transferred under this section 109.12 by a wholesale drug distributor, may transfer additional expense 109.13 generated by section 295.52 obligations on to all third-party 109.14 contracts for the purchase of health care services on behalf of 109.15 a patient or consumer. The additional expense transferred to 109.16 the third-party purchaser must not exceed the tax percentage 109.17 specified in section 295.52 multiplied against the gross 109.18 revenues received under the third-party contract, and the tax 109.19 percentage specified in section 295.52 multiplied against 109.20 co-payments and deductibles paid by the individual patient or 109.21 consumer. The expense must not be generated on revenues derived 109.22 from payments that are excluded from the tax under section 109.23 295.53. All third-party purchasers of health care services 109.24 including, but not limited to, third-party purchasers regulated 109.25 under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79, 109.26 or 79A, or under section 471.61 or 471.617, must pay the 109.27 transferred expense in addition to any payments due under 109.28 existing contracts with the hospital, surgical center, pharmacy, 109.29 or health care provider, to the extent allowed under federal 109.30 law. A third-party purchaser of health care services includes, 109.31 but is not limited to, a health carrier or community integrated 109.32 service network that pays for health care services on behalf of 109.33 patients or that reimburses, indemnifies, compensates, or 109.34 otherwise insures patients for health care services. A 109.35 third-party purchaser shall comply with this section regardless 109.36 of whether the third-party purchaser is a for-profit, 110.1 not-for-profit, or nonprofit entity or whether the health care 110.2 provider has chosen to itemize the tax on patient billings. A 110.3 wholesale drug distributor may transfer additional expense 110.4 generated by section 295.52 obligations to entities that 110.5 purchase from the wholesaler, and the entities must pay the 110.6 additional expense. Nothing in this section limits the ability 110.7 of a hospital, surgical center, pharmacy, wholesale drug 110.8 distributor, or health care provider to recover all or part of 110.9 the section 295.52 obligation by other methods, including 110.10 increasing fees or charges. If a provider elects to separately 110.11 itemize the tax on the patient's bill and collect the tax, a 110.12 third-party purchaser that has already incorporated the tax in 110.13 its calculation of the payment amount due to the provider may 110.14 deduct the additional itemized tax amount from the payment made 110.15 to the provider. 110.16 (b) Each third-party purchaser regulated under any chapter 110.17 cited in paragraph (a) shall include with its annual renewal for 110.18 certification of authority or licensure documentation indicating 110.19 compliance with paragraph (a). 110.20 (c) Any hospital, surgical center, or health care provider 110.21 subject to a tax under section 295.52 or a pharmacy that has 110.22 paid additional expense transferred under this section by a 110.23 wholesale drug distributor may file a complaint with the 110.24 commissioner responsible for regulating the third-party 110.25 purchaser if at any time the third-party purchaser fails to 110.26 comply with paragraph (a). 110.27 (d) If the commissioner responsible for regulating the 110.28 third-party purchaser finds at any time that the third-party 110.29 purchaser has not complied with paragraph (a), the commissioner 110.30 may take enforcement action against a third-party purchaser 110.31 which is subject to the commissioner's regulatory jurisdiction 110.32 and which does not allow a hospital, surgical center, pharmacy, 110.33 or provider to pass-through the tax. The commissioner may by 110.34 order fine or censure the third-party purchaser or revoke or 110.35 suspend the certificate of authority or license of the 110.36 third-party purchaser to do business in this state if the 111.1 commissioner finds that the third-party purchaser has not 111.2 complied with this section. The third-party purchaser may 111.3 appeal the commissioner's order through a contested case hearing 111.4 in accordance with chapter 14. 111.5 [EFFECTIVE DATE.] This section is effective January 1, 111.6 2005, and applies to actions arising from services provided on 111.7 or after that date. 111.8 Sec. 2. Minnesota Statutes 2002, section 297F.01, is 111.9 amended by adding a subdivision to read: 111.10 Subd. 10a. [OUT-OF-STATE RETAILER.] "Out-of-state retailer" 111.11 means a person engaged outside of this state in the business of 111.12 selling, or offering to sell, cigarettes or tobacco products to 111.13 consumers located in this state. 111.14 Sec. 3. [297F.031] [REGISTRATION REQUIREMENT.] 111.15 Prior to making delivery sales or shipping cigarettes or 111.16 tobacco products in connection with any sales, an out-of-state 111.17 retailer shall file with the Department of Revenue a statement 111.18 setting forth the out-of-state retailer's name and trade name, 111.19 and the address of the out-of-state retailer's principal place 111.20 of business and any other place of business. 111.21 Sec. 4. Minnesota Statutes 2002, section 297F.09, is 111.22 amended by adding a subdivision to read: 111.23 Subd. 4a. [REPORTING REQUIREMENTS.] No later than the 18th 111.24 day of each calendar month, an out-of-state retailer that has 111.25 made a delivery of cigarettes or tobacco products or shipped or 111.26 delivered cigarettes or tobacco products into the state in a 111.27 delivery sale in the previous calendar month shall file with the 111.28 Department of Revenue reports in the form and in the manner 111.29 prescribed by the commissioner of revenue that provides for each 111.30 delivery sale, the name and address of the purchaser and the 111.31 brand or brands and quantity of cigarettes or tobacco products 111.32 sold. A tobacco retailer that meets the requirements of United 111.33 States Code, title 15, section 375 et seq. satisfies the 111.34 requirements of this subdivision. 111.35 Sec. 5. [297F.25] [CIGARETTE WHOLESALE TAX.] 111.36 Subdivision 1. [IMPOSITION.] A tax is imposed on the sale 112.1 of cigarettes by a cigarette distributor to a retailer or 112.2 cigarette subjobber for resale in this state. The tax is equal 112.3 to 6.5 percent of: 112.4 (1) 112 percent of the distributor's gross invoice price, 112.5 before any discounts and including the full face value of any 112.6 cigarette stamps and the fee imposed under section 297F.24, of 112.7 the cigarettes sold to a retailer; or 112.8 (2) 112 percent of the cost of the retailer, as defined in 112.9 section 325D.32, subdivision 11, and any fees imposed under 112.10 section 297F.24 of the cigarettes sold to a cigarette subjobber. 112.11 Subd. 2. [TAX COLLECTION REQUIRED.] A cigarette 112.12 distributor must collect the tax imposed under subdivision 1 112.13 from the retailer or cigarette subjobber and the tax must be 112.14 stated and charged separately. The tax collected must be 112.15 remitted to the commissioner in the manner prescribed by 112.16 subdivision 4. 112.17 Subd. 3. [PAYMENT.] Each taxpayer must remit payments of 112.18 the taxes to the commissioner on the same dates prescribed under 112.19 section 297F.09, subdivision 1, for cigarette tax returns, 112.20 including the accelerated remittance of the June liability. 112.21 Subd. 4. [RETURN.] A taxpayer must file a return with the 112.22 commissioner on the same dates prescribed under section 297F.09, 112.23 subdivision 1, for cigarette tax returns. 112.24 Subd. 5. [FORM OF RETURN.] The return must contain the 112.25 information and be in the form prescribed by the commissioner. 112.26 Subd. 6. [TAX AS DEBT.] The tax that is required to be 112.27 collected by the distributor is a debt from the retailer or 112.28 cigarette subjobber to the distributor recoverable at law in the 112.29 same manner as other debts. 112.30 Subd. 7. [ADMINISTRATION.] The audit, assessment, 112.31 interest, appeal, refund, and collection provisions applicable 112.32 to the taxes imposed under this chapter apply to taxes imposed 112.33 under this section. 112.34 Subd. 8. [DEPOSIT OF REVENUES.] Notwithstanding the 112.35 provisions of section 297F.10, the commissioner shall deposit 112.36 all revenues, including penalties and interest, derived from the 113.1 tax imposed by this section, in the general fund. 113.2 [EFFECTIVE DATE.] This section is effective for all sales 113.3 made on or after August 1, 2004. 113.4 Sec. 6. Minnesota Statutes 2002, section 297I.01, is 113.5 amended by adding a subdivision to read: 113.6 Subd. 6a. [DIRECT BUSINESS.] (a) "Direct business" means 113.7 all insurance provided by an insurance company or its agents, 113.8 and specifically includes stop-loss insurance purchased in 113.9 connection with a self-insurance plan for employee health 113.10 benefits or for other purposes, but excludes: 113.11 (1) reinsurance; and 113.12 (2) self-insurance. 113.13 (b) For purposes of this subdivision, an insurance company 113.14 includes a nonprofit health service corporation, health 113.15 maintenance organization, and community integrated service 113.16 network. 113.17 [EFFECTIVE DATE.] This section is effective for insurance 113.18 premiums received after June 30, 2004. 113.19 Sec. 7. Minnesota Statutes 2002, section 297I.05, 113.20 subdivision 4, is amended to read: 113.21 Subd. 4. [MUTUAL PROPERTY AND CASUALTY COMPANIES WITH 113.22 TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 113.23 tax is imposed on mutual property and casualty companies that 113.24 had total assets greater than $5,000,000 at the end of the 113.25 calendar year but that had total assets less than $1,600,000,000 113.26 on December 31, 1989. The rate of tax is equal to: 113.27 (1)two percent of gross premiums less return premiums on113.28all direct business received by the insurer or agents of the113.29insurer in Minnesotathe tax under subdivision 14 for life 113.30 insurance, in cash or otherwise, during the year; and 113.31 (2) 1.26 percent of gross premiums less return premiums on 113.32 all other direct business received by the insurer or agents of 113.33 the insurer in Minnesota, in cash or otherwise, during the year. 113.34 [EFFECTIVE DATE.] This section is effective for premiums 113.35 received after June 30, 2004. 113.36 Sec. 8. Minnesota Statutes 2002, section 297I.05, is 114.1 amended by adding a subdivision to read: 114.2 Subd. 14. [LIFE INSURANCE.] A tax is imposed on life 114.3 insurance. The rate of tax equals a percentage of gross 114.4 premiums less return premiums on all direct business received by 114.5 the insurer or agents of the insurer in Minnesota for life 114.6 insurance, in cash or otherwise, during the year. For premiums 114.7 received after December 31, 2004, but before January 1, 2006, 114.8 the rate of tax is 1.9 percent. For premiums received after 114.9 December 31, 2005, but before January 1, 2007, the rate of tax 114.10 is 1.8 percent. For premiums received after December 31, 2006, 114.11 but before January 1, 2008, the rate of tax is 1.7 percent. For 114.12 premiums received after December 31, 2007, but before January 1, 114.13 2009, the rate of tax is 1.6 percent. For premiums received 114.14 after December 31, 2008, the rate of tax is 1.5 percent. 114.15 [EFFECTIVE DATE.] This section is effective for premiums 114.16 received after December 31, 2004. 114.17 Sec. 9. Minnesota Statutes 2003 Supplement, section 114.18 298.75, subdivision 1, is amended to read: 114.19 Subdivision 1. [DEFINITIONS.] Except as may otherwise be 114.20 provided, the following words, when used in this section, shall 114.21 have the meanings herein ascribed to them. 114.22 (1) "Aggregate material" shall mean nonmetallic natural 114.23 mineral aggregate including, but not limited to sand, silica 114.24 sand, gravel, crushed rock, limestone, granite, and borrow, but 114.25 only if the borrow is transported on a public road, street, or 114.26 highway. Aggregate material shall not include dimension stone 114.27 and dimension granite. Aggregate material must be measured or 114.28 weighed after it has been extracted from the pit, quarry, or 114.29 deposit. 114.30 (2) "Person" shall mean any individual, firm, partnership, 114.31 corporation, organization, trustee, association, or other entity. 114.32 (3) "Operator" shall mean any person engaged in the 114.33 business of removing aggregate material from the surface or 114.34 subsurface of the soil, for the purpose of sale, either directly 114.35 or indirectly, through the use of the aggregate material in a 114.36 marketable product or service; except that operator does not 115.1 include persons engaged in a transaction in which the aggregate 115.2 is moved within a project's construction limits, as defined in 115.3 the official project construction plan documents, to other 115.4 locations within that same project's construction limits. 115.5 (4) "Extraction site" shall mean a pit, quarry, or deposit 115.6 containing aggregate material and any contiguous property to the 115.7 pit, quarry, or deposit which is used by the operator for 115.8 stockpiling the aggregate material. 115.9 (5) "Importer" shall mean any person who buys aggregate 115.10 material produced from a county not listed in paragraph (6) or 115.11 another state and causes the aggregate material to be imported 115.12 into a county in this state which imposes a tax on aggregate 115.13 material. 115.14 (6) "County" shall mean the counties of Pope, Stearns, 115.15 Benton, Sherburne, Carver, Scott, Dakota, Le Sueur, Kittson, 115.16 Marshall, Pennington, Red Lake, Polk, Norman, Mahnomen, Clay, 115.17 Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, 115.18 Sibley, Hennepin, Washington, Chisago, and Ramsey. County also 115.19 means any other county whose board has voted after a public 115.20 hearing to impose the tax under this section and has notified 115.21 the commissioner of revenue of the imposition of the tax. 115.22 (7) "Borrow" shall mean granular borrow, consisting of 115.23 durable particles of gravel and sand, crushed quarry or mine 115.24 rock, crushed gravel or stone, or any combination thereof, the 115.25 ratio of the portion passing the (#200) sieve divided by the 115.26 portion passing the (1 inch) sieve may not exceed 20 percent by 115.27 mass. 115.28 [EFFECTIVE DATE.] This section is effective for aggregate 115.29 sold, imported, transported, or used from a stockpile after June 115.30 30, 2004. 115.31 Sec. 10. [325F.781] [REQUIREMENTS; TOBACCO PRODUCT 115.32 DELIVERY SALES.] 115.33 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 115.34 section, the following terms have the meanings given, unless the 115.35 language or context clearly provides otherwise. 115.36 (b) "Consumer" means an individual who purchases, receives, 116.1 or possesses tobacco products for personal consumption and not 116.2 for resale. 116.3 (c)(1) "Delivery sale" means: 116.4 (i) a sale of tobacco products to a consumer in this state 116.5 when: 116.6 (A) the purchaser submits the order for the sale by means 116.7 of a telephonic or other method of voice transmission, the mail 116.8 or any other delivery service, or the Internet or other on-line 116.9 service; or 116.10 (B) the tobacco products are delivered by use of the mail 116.11 or other delivery service; or 116.12 (ii) a sale of tobacco products that satisfies the criteria 116.13 in clause (1), item (i), regardless of whether the seller is 116.14 located inside or outside the state. 116.15 (2) A sale of tobacco products to an individual in this 116.16 state must be treated as a sale to a consumer, unless the 116.17 individual is licensed as a distributor or retailer of tobacco 116.18 products. 116.19 (d) "Delivery service" means a person, including the United 116.20 States Postal Service, that is engaged in the commercial 116.21 delivery of letters, packages, or other containers. 116.22 (e) "Distributor" means a person, whether located inside or 116.23 outside this state, other than a retailer, who sells or 116.24 distributes tobacco products in the state. Distributor does not 116.25 include a tobacco products manufacturer, export warehouse 116.26 proprietor, or importer with a valid permit under United States 116.27 Code, title 26, section 5712 (1997), if the person sells or 116.28 distributes tobacco products in this state only to distributors 116.29 who hold valid and current licenses under the laws of a state, 116.30 or to an export warehouse proprietor or another manufacturer. 116.31 Distributor does not include a common or contract carrier that 116.32 is transporting tobacco products under a proper bill of lading 116.33 or freight bill that states the quantity, source, and 116.34 destination of tobacco products, or a person who ships tobacco 116.35 products through this state by common or contract carrier under 116.36 a bill of lading or freight bill. 117.1 (f) "Retailer" means a person, whether located inside or 117.2 outside this state, who sells or distributes tobacco products to 117.3 a consumer in this state. 117.4 (g) "Tobacco products" means: 117.5 (1) cigarettes, as defined in section 297F.01, subdivision 117.6 3; and 117.7 (2) smokeless tobacco as defined in section 325F.76. 117.8 Subd. 2. [REQUIREMENTS FOR ACCEPTING ORDER FOR DELIVERY 117.9 SALE.] (a) This subdivision applies to acceptance of an order 117.10 for a delivery sale of tobacco products. 117.11 (b) When accepting the first order for a delivery sale from 117.12 a consumer, the tobacco retailer shall obtain the following 117.13 information from the person placing the order: 117.14 (1) a copy of a valid government-issued document that 117.15 provides the person's name, current address, photograph, and 117.16 date of birth; and 117.17 (2) an original written statement signed by the person 117.18 documenting that the person: 117.19 (i) is of legal age to purchase tobacco products in the 117.20 state; 117.21 (ii) has made a choice whether to receive mailings from a 117.22 tobacco retailer; 117.23 (iii) understands that providing false information may be a 117.24 violation of law; and 117.25 (iv) understands that it is a violation of law to purchase 117.26 tobacco products for subsequent resale or for delivery to 117.27 persons who are under the legal age to purchase tobacco products. 117.28 (c) If an order is made as a result of advertisement over 117.29 the Internet, the tobacco retailer shall request the e-mail 117.30 address of the purchaser and shall receive payment by credit 117.31 card or check prior to shipping. 117.32 (d) Prior to shipping the tobacco products, the tobacco 117.33 retailer shall verify the information provided under paragraph 117.34 (b) against a commercially available database. Any such 117.35 database or databases may also include age and identity 117.36 information from other government or validated commercial 118.1 sources, if that additional information is regularly used by 118.2 government and businesses for the purpose of identity 118.3 verification and authentication, and if the additional 118.4 information is used only to supplement and not to replace the 118.5 government-issued identification data in the age and identity 118.6 verification process. 118.7 Subd. 3. [REQUIREMENTS FOR SHIPPING A DELIVERY SALE.] (a) 118.8 This subdivision applies to a tobacco retailer shipping tobacco 118.9 products pursuant to a delivery sale. 118.10 (b) The tobacco retailer shall clearly mark the outside of 118.11 the package of tobacco products to be shipped "tobacco products - 118.12 adult signature required" and to show the name of the tobacco 118.13 retailer. 118.14 (c) The tobacco retailer shall utilize a delivery service 118.15 that imposes the following requirements: 118.16 (1) an adult must sign for the delivery; and 118.17 (2) the person signing for the delivery must show valid 118.18 government-issued identification that contains a photograph of 118.19 the person signing for the delivery and indicates that the 118.20 person signing for the delivery is of legal age to purchase 118.21 tobacco products and resides at the delivery address. 118.22 (d) The retailer must provide delivery instructions that 118.23 clearly indicate the requirements of this subdivision and must 118.24 declare that state law requires compliance with the requirements. 118.25 Subd. 4. [COMMON CARRIERS.] This section may not be 118.26 construed as imposing liability upon any common carrier, or 118.27 officers or employees of the common carrier, when acting within 118.28 the scope of business of the common carrier. 118.29 Subd. 5. [REGISTRATION REQUIREMENT.] Prior to making 118.30 delivery sales or shipping tobacco products in connection with 118.31 any sales, an out-of-state retailer must meet the requirements 118.32 of section 297F.031. 118.33 Subd. 6. [COLLECTION OF TAXES.] (a) Prior to shipping any 118.34 tobacco products to a purchaser in this state, the out-of-state 118.35 retailer shall comply with all requirements of chapter 297F and 118.36 shall ensure that all state excise taxes and fees that apply to 119.1 such tobacco products have been collected and paid to the state 119.2 and that all related state excise tax stamps or other indicators 119.3 of state excise tax payment have been properly affixed to those 119.4 tobacco products. 119.5 (b) In addition to any penalties under chapter 297F, a 119.6 distributor who fails to pay any tax due according to paragraph 119.7 (a) shall pay, in addition to any other penalty, a penalty of 50 119.8 percent of the tax due but unpaid. 119.9 Subd. 7. [APPLICATION OF STATE LAWS.] All state laws that 119.10 apply to in-state tobacco product retailers shall apply to 119.11 Internet and mail-order sellers that sell into this state. 119.12 Subd. 8. [FORFEITURE.] Any tobacco product sold or 119.13 attempted to be sold in a delivery sale that does not meet the 119.14 requirements of this section is deemed to be contraband and is 119.15 subject to forfeiture in the same manner as and in accordance 119.16 with the provisions of section 297F.21. 119.17 Subd. 9. [CIVIL PENALTIES.] (a) A tobacco retailer or 119.18 distributor who violates this section or rules adopted under 119.19 this section is subject to the following fines: 119.20 (1) for the first violation, a fine of not more than 119.21 $1,000; and 119.22 (2) for the second and any subsequent violation, a fine of 119.23 not more than $5,000. 119.24 (b) A person who submits ordering information under 119.25 subdivision 2, paragraph (b), in another person's name is 119.26 subject to a fine of not more than $1,000. 119.27 Subd. 10. [ENFORCEMENT.] The attorney general may bring an 119.28 action to enforce this section and may seek injunctive relief, 119.29 including a preliminary or final injunction, and fines, 119.30 penalties, and equitable relief and may seek to prevent or 119.31 restrain actions in violation of this section by any person or 119.32 any person controlling such person. In addition, a violation of 119.33 this section is a violation of the Unlawful Trade Practices Act, 119.34 sections 325D.09 to 325D.16. 119.35 Sec. 11. [FLOOR STOCKS TAX.] 119.36 Subdivision 1. [CIGARETTES.] A floor stocks tax is imposed 120.1 on every retailer or cigarette subjobber, on the stamped 120.2 cigarettes in the retailer's or cigarette subjobber's possession 120.3 or under the retailer's or cigarette subjobber's control, at 120.4 12:01 a.m. on July 31, 2004. The tax is imposed at the 120.5 following rates: 120.6 (1) on cigarettes weighing not more than three pounds per 120.7 thousand, 13.5 mills on each cigarette; and 120.8 (2) on cigarettes weighing more than three pounds per 120.9 thousand, 27 mills on each cigarette. 120.10 Each retailer shall file a return with the commissioner, in the 120.11 form the commissioner prescribes, showing the cigarettes on hand 120.12 at 12:01 a.m. on August 1, 2004, and pay the tax due thereon by 120.13 September 1, 2004. Tax not paid by the due date bears interest 120.14 at the rate of one percent a month. 120.15 Subd. 2. [AUDIT AND ENFORCEMENT.] The tax imposed by this 120.16 section is subject to the audit, assessment, and collection 120.17 provisions applicable to the taxes imposed under Minnesota 120.18 Statutes, chapter 297F. The commissioner may require a 120.19 distributor to receive and maintain copies of floor stocks tax 120.20 returns filed by all retailers requesting a credit for returned 120.21 cigarettes. 120.22 Subd. 3. [DEPOSIT OF PROCEEDS.] Notwithstanding the 120.23 provisions of Minnesota Statutes, section 297F.10, the revenue 120.24 from the tax imposed under this section shall be deposited by 120.25 the commissioner in the general fund. 120.26 [EFFECTIVE DATE.] This section is effective the day 120.27 following final enactment. 120.28 ARTICLE 6 120.29 TAX INCREMENT FINANCING 120.30 Section 1. Minnesota Statutes 2003 Supplement, section 120.31 116J.556, is amended to read: 120.32 116J.556 [LOCAL MATCH REQUIREMENT.] 120.33(a)In order to qualify for a grant under sections 116J.551 120.34 to 116J.557, the municipality must pay for at least one-quarter 120.35 of the project costs as a local match. The municipality shall 120.36 pay an amount of the project costs equal to at least 12 percent 121.1 of the cleanup costs from the municipality's general fund, a 121.2 property tax levy for that purpose, or other unrestricted money 121.3 available to the municipality (excluding tax increments). These 121.4 unrestricted moneys may be spent for project costs, other than 121.5 cleanup costs, and qualify for the local match payment equal to 121.6 12 percent of cleanup costs. The rest of the local match may be 121.7 paid with tax increments, regional, state, or federal money 121.8 available for the redevelopment of brownfields or any other 121.9 money available to the municipality. 121.10(b) If the development authority establishes a tax121.11increment financing district or hazardous substance subdistrict121.12on the site to pay for part of the local match requirement, the121.13district or subdistrict must be decertified when an amount of121.14tax increments equal to no more than three times the costs of121.15implementing the response action plan for the site and the121.16administrative costs for the district or subdistrict have been121.17received, after deducting the amount of the state grant.121.18 [EFFECTIVE DATE.] This section is effective the day 121.19 following final enactment. 121.20 Sec. 2. Minnesota Statutes 2002, section 469.174, 121.21 subdivision 11, is amended to read: 121.22 Subd. 11. [HOUSING DISTRICT.] "Housing district" means a 121.23 type of tax increment financing district which consists of a 121.24 project, or a portion of a project, intended for occupancy, in 121.25 part, by persons or families of low and moderate income, as 121.26 defined in chapter 462A, Title II of the National Housing Act of 121.27 1934, the National Housing Act of 1959, the United States 121.28 Housing Act of 1937, as amended, Title V of the Housing Act of 121.29 1949, as amended, any other similar present or future federal, 121.30 state, or municipal legislation, or the regulations promulgated 121.31 under any of those acts. A district does not qualify as a121.32housing district under this subdivision if the fair market value121.33of the improvements which are constructed in the district for121.34commercial uses or for uses other than low and moderate income121.35housing consists of more than 20 percent of the total fair121.36market value of the planned improvements in the development plan122.1or agreement. The fair market value of the improvements may be122.2determined using the cost of construction, capitalized income,122.3or other appropriate method of estimating market value, and that 122.4 satisfies the requirements of section 469.1761. Housing project 122.5 means a project, or a portion of a project, that meets all of 122.6 the qualifications of a housing district under this subdivision, 122.7 whether or not actually established as a housing district. 122.8 [EFFECTIVE DATE.] This section is effective for districts 122.9 for which the request for certification was filed with the 122.10 county auditor after October 5, 1989, except (1) the new 122.11 language is effective for requests for certification made after 122.12 June 30, 2004, and (2) the fair market value of the improvements 122.13 which are constructed for commercial uses in a district for 122.14 which the request for certification was filed with the county 122.15 auditor after October 5, 1989, and before July 1, 2004, may not 122.16 exceed more than 20 percent of total fair market value of the 122.17 planned improvements in the development plan or agreement. 122.18 Sec. 3. Minnesota Statutes 2003 Supplement, section 122.19 469.174, subdivision 25, is amended to read: 122.20 Subd. 25. [INCREMENT.] "Increment," "tax increment," "tax 122.21 increment revenues," "revenues derived from tax increment," and 122.22 other similar terms for a district include: 122.23 (1) taxes paid by the captured net tax capacity, but 122.24 excluding any excess taxes, as computed under section 469.177; 122.25 (2) the proceeds from the sale or lease of property, 122.26 tangible or intangible, to the extent the property was purchased 122.27 by the authority with tax increments; 122.28 (3) principal and interest received on loans or other 122.29 advances made by the authority with tax increments;and122.30 (4) interest or other investment earnings on or from tax 122.31 increments; 122.32 (5) repayment or return of tax increments made to the 122.33 authority under agreements for districts for which the request 122.34 for certification was made after August 1, 1993; and 122.35 (6) the market value homestead credit paid to the authority 122.36 under section 273.1384. 123.1 [EFFECTIVE DATE.] This section is effective for tax 123.2 increment financing districts, regardless of when the request 123.3 for certification was made, including districts for which the 123.4 request for certification was made before August 1, 1979, 123.5 provided that the amendment to clause (2) applies only to the 123.6 extent that the underlying provisions of clause (2) apply to the 123.7 district and to the sale or lease under prior law. 123.8 Sec. 4. Minnesota Statutes 2002, section 469.175, 123.9 subdivision 4a, is amended to read: 123.10 Subd. 4a. [FILING PLAN WITH STATE.] (a) The authority must 123.11 file a copy of the tax increment financing plan and amendments 123.12 to the plan with the commissioner of revenue and the state 123.13 auditor. The authority must also file a copy of the development 123.14 plan or the project plan for the project area with the 123.15 commissioner of revenue. The commissioner of revenue shall123.16provide a copy of a plan to the state auditor upon requestand 123.17 the state auditor. 123.18 (b) Filing under this subdivision must be made within 60 123.19 days after the latest of: 123.20 (1) the filing of the request for certification of the 123.21 district; 123.22 (2) approval of the plan by the municipality; or 123.23 (3) adoption of the plan by the authority. 123.24 [EFFECTIVE DATE.] This section is effective for plans filed 123.25 after July 1, 2004. 123.26 Sec. 5. Minnesota Statutes 2002, section 469.176, 123.27 subdivision 4d, is amended to read: 123.28 Subd. 4d. [HOUSING DISTRICTS.] Revenue derived from tax 123.29 increment from a housing district must be used solely to finance 123.30 the cost of housing projects as defined insectionsections 123.31 469.174, subdivision 11, and 469.1761. The cost of public 123.32 improvements directly related to the housing projects and the 123.33 allocated administrative expenses of the authority may be 123.34 included in the cost of a housing project. 123.35 [EFFECTIVE DATE.] This section is effective for all 123.36 districts to which the provisions of Minnesota Statutes, section 124.1 469.1761, applies. 124.2 Sec. 6. Minnesota Statutes 2002, section 469.1761, 124.3 subdivision 1, is amended to read: 124.4 Subdivision 1. [REQUIREMENT IMPOSED.] (a) In order for a 124.5 tax increment financing district to qualify as a housing 124.6 district,: 124.7 (1) the income limitations provided in this section must be 124.8 satisfied; and 124.9 (2) no more than 20 percent of the square footage of 124.10 buildings that receive assistance from tax increments may 124.11 consist of commercial, retail, or other nonresidential uses. 124.12 (b) The requirements imposed by this section apply to 124.13residentialproperty receiving assistance financed with tax 124.14 increments, including interest reduction, land transfers at less 124.15 than the authority's cost of acquisition, utility service or 124.16 connections, roads, parking facilities, or other subsidies. The 124.17 provisions of this section do not apply to districts located in 124.18 a targeted area as defined in section 462C.02, subdivision 9, 124.19 clause (e). 124.20 [EFFECTIVE DATE.] This section is effective for districts 124.21 for which the request for certification was made after June 30, 124.22 2004. 124.23 Sec. 7. Minnesota Statutes 2002, section 469.1761, 124.24 subdivision 3, is amended to read: 124.25 Subd. 3. [RENTAL PROPERTY.] For residential rental 124.26 property, the property must satisfy the income requirements for 124.27 a qualified residential rental project as defined in section 124.28 142(d) of the Internal Revenue Code.A property also satisfies124.29the requirements of section 142(d) if 50 percent of the124.30residential units in the project are occupied by individuals124.31whose income is 80 percent or less of area median gross income.124.32The requirements of this subdivision apply for the duration of124.33the tax increment financing district.124.34 [EFFECTIVE DATE.] This section is effective for districts 124.35 for which the request for certification was made after June 30, 124.36 2004. 125.1 Sec. 8. Minnesota Statutes 2003 Supplement, section 125.2 469.177, subdivision 1, is amended to read: 125.3 Subdivision 1. [ORIGINAL NET TAX CAPACITY.] (a) Upon or 125.4 after adoption of a tax increment financing plan, the auditor of 125.5 any county in which the district is situated shall, upon request 125.6 of the authority, certify the original net tax capacity of the 125.7 tax increment financing district and that portion of the 125.8 district overlying any subdistrict as described in the tax 125.9 increment financing plan and shall certify in each year 125.10 thereafter the amount by which the original net tax capacity has 125.11 increased or decreased as a result of a change in tax exempt 125.12 status of property within the district and any subdistrict, 125.13 reduction or enlargement of the district or changes pursuant to 125.14 subdivision 4. 125.15 (b) If the classification under section 273.13 of property 125.16 located in a district changes to a classification that has a 125.17 different assessment ratio, the original net tax capacity of 125.18 that property must be redetermined at the time when its use is 125.19 changed as if the property had originally been classified in the 125.20 same class in which it is classified after its use is changed. 125.21 (c) The amount to be added to the original net tax capacity 125.22 of the district as a result of previously tax exempt real 125.23 property within the district becoming taxable equals the net tax 125.24 capacity of the real property as most recently assessed pursuant 125.25 to section 273.18 or, if that assessment was made more than one 125.26 year prior to the date of title transfer rendering the property 125.27 taxable, the net tax capacity assessed by the assessor at the 125.28 time of the transfer. If improvements are made to tax exempt 125.29 property after certification of the district and before the 125.30 parcel becomes taxable, the assessor shall, at the request of 125.31 the authority, separately assess the estimated market value of 125.32 the improvements. If the property becomes taxable, the county 125.33 auditor shall add to original net tax capacity, the net tax 125.34 capacity of the parcel, excluding the separately assessed 125.35 improvements. If substantial taxable improvements were made to 125.36 a parcel after certification of the district and if the property 126.1 later becomes tax exempt, in whole or part, as a result of the 126.2 authority acquiring the property through foreclosure or exercise 126.3 of remedies under a lease or other revenue agreement or as a 126.4 result of tax forfeiture, the amount to be added to the original 126.5 net tax capacity of the district as a result of the property 126.6 again becoming taxable is the amount of the parcel's value that 126.7 was included in original net tax capacity when the parcel was 126.8 first certified. The amount to be added to the original net tax 126.9 capacity of the district as a result of enlargements equals the 126.10 net tax capacity of the added real property as most recently 126.11 certified by the commissioner of revenue as of the date of 126.12 modification of the tax increment financing plan pursuant to 126.13 section 469.175, subdivision 4. 126.14 (d) If the net tax capacity of a property increases because 126.15 the property no longer qualifies under the Minnesota 126.16 Agricultural Property Tax Law, section 273.111; the Minnesota 126.17 Open Space Property Tax Law, section 273.112; or the 126.18 Metropolitan Agricultural Preserves Act, chapter 473H, or 126.19 because platted, unimproved property is improved orthree years126.20passmarket value is increased after approval of the plat under 126.21 section 273.11,subdivision 1subdivision 14, 14a, or 14b, the 126.22 increase in net tax capacity must be added to the original net 126.23 tax capacity. 126.24 (e) The amount to be subtracted from the original net tax 126.25 capacity of the district as a result of previously taxable real 126.26 property within the district becoming tax exempt, or a reduction 126.27 in the geographic area of the district, shall be the amount of 126.28 original net tax capacity initially attributed to the property 126.29 becoming tax exempt or being removed from the district. If the 126.30 net tax capacity of property located within the tax increment 126.31 financing district is reduced by reason of a court-ordered 126.32 abatement, stipulation agreement, voluntary abatement made by 126.33 the assessor or auditor or by order of the commissioner of 126.34 revenue, the reduction shall be applied to the original net tax 126.35 capacity of the district when the property upon which the 126.36 abatement is made has not been improved since the date of 127.1 certification of the district and to the captured net tax 127.2 capacity of the district in each year thereafter when the 127.3 abatement relates to improvements made after the date of 127.4 certification. The county auditor may specify reasonable form 127.5 and content of the request for certification of the authority 127.6 and any modification thereof pursuant to section 469.175, 127.7 subdivision 4. 127.8 (f) If a parcel of property contained a substandard 127.9 building that was demolished or removed and if the authority 127.10 elects to treat the parcel as occupied by a substandard building 127.11 under section 469.174, subdivision 10, paragraph (b), the 127.12 auditor shall certify the original net tax capacity of the 127.13 parcel using the greater of (1) the current net tax capacity of 127.14 the parcel, or (2) the estimated market value of the parcel for 127.15 the year in which the building was demolished or removed, but 127.16 applying the class rates for the current year. 127.17 (g) For a redevelopment district qualifying under section 127.18 469.174, subdivision 10, paragraph (a), clause (4), as a 127.19 qualified disaster area, the auditor shall certify the value of 127.20 the land as the original tax capacity for any parcel in the 127.21 district that contains a building that suffered substantial 127.22 damage as a result of the disaster or emergency. 127.23 [EFFECTIVE DATE.] This section is effective for land 127.24 platted on or after August 1, 1991. 127.25 Sec. 9. Minnesota Statutes 2002, section 469.1771, 127.26 subdivision 5, is amended to read: 127.27 Subd. 5. [DISPOSITION OF PAYMENTS.] If the authority does 127.28 not have sufficient increments or other available money to make 127.29 a payment required by this section, the municipality that 127.30 approved the district must use any available money to make the 127.31 payment including the levying of property taxes. Money received 127.32 by the county auditor under this section must be distributed as 127.33 excess increments under section 469.176, subdivision 2, 127.34 paragraph(a)(c), clause (4), except that if the county auditor 127.35 receives the payment after (1) 60 days from a municipality's 127.36 receipt of the state auditor's notification under subdivision 1, 128.1 paragraph (c), of noncompliance requiring the payment, or (2) 128.2 the commencement of an action by the county attorney to compel 128.3 the payment, then no distributions may be made to the 128.4 municipality that approved the tax increment financing district. 128.5 [EFFECTIVE DATE.] This section is effective at the same 128.6 time as the amendments to Minnesota Statutes, section 469.176, 128.7 subdivision 2, by Laws 2003, chapter 127, article 10, section 11. 128.8 Sec. 10. Minnesota Statutes 2002, section 469.178, 128.9 subdivision 1, is amended to read: 128.10 Subdivision 1. [GENERALLY.] Notwithstanding any other law, 128.11 no bonds, payment for which tax increment is pledged, shall be 128.12 issued in connection with any project for which tax increment 128.13 financing has been undertaken except as authorized in this 128.14 section. The proceeds from the bonds shall be used only in 128.15 accordance with section 469.176,subdivisionsubdivisions 4 to 128.16 4l, as if the proceeds were tax increment, except that a tax 128.17 increment financing plan need not be adopted for any project for 128.18 which tax increment financing has been undertaken prior to 128.19 August 1, 1979, pursuant to laws not requiring a tax increment 128.20 financing plan. The bonds are not included for purposes of 128.21 computing the net debt of any municipality. 128.22 [EFFECTIVE DATE.] This section is effective for tax 128.23 increment financing districts for which the request for 128.24 certification was made after August 1, 1979. 128.25 Sec. 11. Laws 1998, chapter 389, article 11, section 24, 128.26 subdivision 1, is amended to read: 128.27 Subdivision 1. [SPECIAL RULES.] (a) If the city elects 128.28 upon the adoption of the tax increment financing plan for the 128.29 district, the rules under this section apply to redevelopment or 128.30 soils condition tax increment financing districts established by 128.31 the city of New Brighton or a development authority of the city 128.32 in the area bounded on the north by the south boundary line of 128.33 tax increment district number 8 extended to Long Lake regional 128.34 park, on the east by interstate highway 35W, on the south by 128.35 interstate highway 694, and on the west by Long Lake regional 128.36 park. 129.1 (b) The five-year rule under Minnesota Statutes, section 129.2 469.1763, subdivision 3, is extended tonineten years for the 129.3 district. 129.4 (c) The limitations on spending increment outside of the 129.5 district under Minnesota Statutes, section 469.1763, subdivision 129.6 2, do not apply, but increments may only be expended on 129.7 improvements or activities within the area defined in paragraph 129.8 (a) and increments collected from parcels identified in 129.9 paragraph (d) may only be spent on eligible expenses within the 129.10 area consisting of those parcels, sanitary sewer relocation and 129.11 the cost of road improvements directly resulting from 129.12 development of the parcels, and for administrative expenses. 129.13 (d) The requirements for qualifying a redevelopment 129.14 district under Minnesota Statutes, section 469.174, subdivision 129.15 10, do not apply to the parcels identified as that part of 129.16 20-30-23-13-0005 lying east of Old Highway 8, 20-30-23-14-0001, 129.17 20-30-23-14-0002, 20-30-23-14-0004, 20-30-23-14-0003, 129.18 20-30-23-41-0001, 21-30-23-32-0009, 21-30-23-32-0010, 129.19 20-30-23-41-0015, 20-30-23-41-0003, 21-30-23-32-0013, 129.20 20-30-23-41-0004, 20-30-23-41-0016, 20-30-23-41-0005, 129.21 20-30-23-41-0006, 20-30-23-41-0007, 20-30-23-41-0014, 129.22 20-30-23-41-0010, and 20-30-23-44-0002. The area of each parcel 129.23 is deemed eligible for the purpose of qualifying for inclusion 129.24 in a redevelopment district. 129.25 [EFFECTIVE DATE.] This section is effective upon approval 129.26 by the governing bodies of the city of New Brighton and Ramsey 129.27 County and upon compliance by the city with Minnesota Statutes, 129.28 section 645.021, subdivision 3. 129.29 Sec. 12. Laws 1998, chapter 389, article 11, section 24, 129.30 subdivision 2, is amended to read: 129.31 Subd. 2. [EXPIRATION.] (a) The exception from the 129.32 limitations of Minnesota Statutes, section 469.1763, subdivision 129.33 2, expires 18 years after the receipt of the first increment 129.34 from a district to which the city has elected that this section 129.35 applies. 129.36 (b) The authority to approve tax increment financing plans 130.1 to establish a tax increment financing district or districts 130.2 under this section expires on December 31, 2008. 130.3 (c) If parcels identified in subdivision 1, paragraph (d), 130.4 are released from the development agreement without being 130.5 developed and the right to develop the parcels is returned to 130.6 the city, the authority to approve tax increment financing plans 130.7 and districts under this section for those parcels is extended 130.8 for five additional years from the date the development rights 130.9 are returned to the city. 130.10 [EFFECTIVE DATE.] This section is effective upon approval 130.11 by the governing bodies of the city of New Brighton and Ramsey 130.12 County and upon compliance by the city with Minnesota Statutes, 130.13 section 645.021, subdivision 3. 130.14 Sec. 13. [EXTENSION OF TIME TO EXPEND TAX INCREMENT.] 130.15 Notwithstanding any contrary provision of law or charter, 130.16 for tax increment financing district number 3, established on 130.17 December 19, 1994, by Brooklyn Center Resolution No. 94-273, 130.18 Minnesota Statutes, section 469.1763, subdivision 3, applies to 130.19 the district by permitting a period of 13 years for commencement 130.20 of activities within the district. 130.21 [EFFECTIVE DATE.] This section is effective upon approval 130.22 by the governing body of the city of Brooklyn Center and 130.23 compliance with Minnesota Statutes, section 645.021, subdivision 130.24 3. 130.25 Sec. 14. [CITY OF ROBBINSDALE; TIF.] 130.26 The governing body of the city of Robbinsdale and its 130.27 economic development authority may treat the building located at 130.28 the corner of Regent Avenue and County Road 9 in the city of 130.29 Robbinsdale and originally constructed as the Robbinsdale High 130.30 School along with the subsequent additions to and improvements 130.31 of that building as a structurally substandard building for 130.32 purposes of Minnesota Statutes, section 469.174, subdivision 10, 130.33 without regard to the requirements of paragraph (c) of that 130.34 subdivision. 130.35 [EFFECTIVE DATE.] This section is effective upon approval 130.36 by the governing body of the city of Robbinsdale under Minnesota 131.1 Statutes, section 645.021. 131.2 Sec. 15. [WABASHA TAX INCREMENT FINANCING DISTRICT.] 131.3 Subdivision 1. [DISTRICT EXTENSION.] The governing body of 131.4 the city of Wabasha may elect to extend the duration of its 131.5 redevelopment tax increment financing district number 3 by up to 131.6 three additional years. 131.7 Subd. 2. [FIVE-YEAR RULE.] The requirements of Minnesota 131.8 Statutes, section 469.1763, subdivision 3, that activities must 131.9 be undertaken within a five-year period from the date of 131.10 certification of a tax increment financing district must be 131.11 considered to be met for the city of Wabasha redevelopment tax 131.12 increment district number 3, if the activities are undertaken 131.13 within ten years from the date of certification of the district. 131.14 Subd. 3. [NATIONAL EAGLE CENTER.] Notwithstanding the 131.15 provisions of Minnesota Statutes, section 469.176, subdivision 131.16 4l, or any other law, the city of Wabasha may spend the proceeds 131.17 of tax increment bonds issued prior to January 1, 2000, to pay 131.18 the costs of acquiring and constructing a National Eagle Center 131.19 in the city. The city of Wabasha may also use tax increment 131.20 from its tax increment districts to pay the debt service on such 131.21 bonds, or any bonds issued to refund such bonds, subject to 131.22 legal restrictions on the pooling of tax increment. These bonds 131.23 may not be treated as preexisting obligations for purposes of 131.24 Minnesota Statutes, section 469.1794. 131.25 Subd. 4. [POOLING.] Except as otherwise specifically 131.26 provided in this section, all increments from district number 3 131.27 must be spent on activities within the district and 131.28 administrative expenses. 131.29 [EFFECTIVE DATE.] Subdivision 1 is effective upon 131.30 compliance with the provisions of Minnesota Statutes, sections 131.31 469.1782, subdivision 2, and 645.021. Subdivisions 2 and 3 are 131.32 effective upon compliance by the governing body of the city of 131.33 Wabasha with the provisions of Minnesota Statutes, section 131.34 645.021. 131.35 Sec. 16. [REPEALER.] 131.36 Minnesota Statutes 2002, sections 469.176, subdivision 1a; 132.1 and 469.1766, are repealed. 132.2 [EFFECTIVE DATE.] The repeal of Minnesota Statutes, section 132.3 469.1766, is effective for districts for which the request for 132.4 certification was made after August 1, 1993. The repeal of 132.5 Minnesota Statutes, section 469.176, subdivision 1a, is 132.6 effective the day following final enactment, provided that 132.7 Minnesota Statutes, section 469.176, subdivision 1a, is 132.8 satisfied for any district to which it applies, if bonds have 132.9 been issued, property acquired, or public improvements 132.10 constructed before the end of the three-year period, regardless 132.11 of whether the action was undertaken before or after 132.12 certification of the district. 132.13 ARTICLE 7 132.14 INTERNATIONAL ECONOMIC DEVELOPMENT ZONES 132.15 Section 1. Minnesota Statutes 2002, section 272.02, is 132.16 amended by adding a subdivision to read: 132.17 Subd. 73. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 132.18 PROPERTY.] (a) Improvements to real property, and personal 132.19 property, classified under section 273.13, subdivision 24, and 132.20 located within an international economic development zone 132.21 designated under section 469.322, are exempt from ad valorem 132.22 taxes levied under chapter 275, if the occupant of the property 132.23 is a qualified business, as defined in section 469.321. 132.24 (b) The exemption applies beginning for the first 132.25 assessment year after designation of the international economic 132.26 development zone. The exemption applies to each assessment year 132.27 that begins during the duration of the international economic 132.28 development zone and to property occupied by July 1 of the 132.29 assessment year by a qualified business for the duration 132.30 permitted under section 469.324, subdivision 2. 132.31 Sec. 2. Minnesota Statutes 2002, section 290.06, is 132.32 amended by adding a subdivision to read: 132.33 Subd. 32. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE JOB 132.34 CREDIT.] A taxpayer that is a qualified business, as defined in 132.35 section 469.321, subdivision 6, is allowed a credit as 132.36 determined under section 469.325 against the tax imposed by this 133.1 chapter. 133.2 [EFFECTIVE DATE.] This section is effective the day 133.3 following final enactment. 133.4 Sec. 3. Minnesota Statutes 2002, section 290.191, is 133.5 amended by adding a subdivision to read: 133.6 Subd. 13. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 133.7 A qualified business as defined under section 469.321 may 133.8 exclude from: 133.9 (1) the numerator of its payroll factor the amount of its 133.10 international economic development zone payroll; and 133.11 (2) the numerator of its property factor the amount of its 133.12 property with a situs in the international economic development 133.13 zone. 133.14 (b) The provisions of this subdivision apply to a qualified 133.15 business for the duration provided under section 469.324. 133.16 [EFFECTIVE DATE.] This section is effective the day 133.17 following final enactment. 133.18 Sec. 4. Minnesota Statutes 2002, section 297A.68, is 133.19 amended by adding a subdivision to read: 133.20 Subd. 41. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 133.21 Purchases of tangible personal property or taxable services by a 133.22 qualified business, as defined in section 469.321, are exempt if 133.23 the property or services are primarily used or consumed in an 133.24 international economic development zone designated under section 133.25 469.322. 133.26 (b) Purchase and use of construction materials and supplies 133.27 for construction of improvements to real property in an 133.28 international economic development zone are exempt if the 133.29 improvements after completion of construction are to be used in 133.30 the conduct of a qualified business, as defined in section 133.31 469.321. This exemption applies regardless of whether the 133.32 purchases are made by the business or a contractor. 133.33 (c) The exemptions under this subdivision apply to a local 133.34 sales and use tax, regardless of whether the local tax is 133.35 imposed on sales taxable under this chapter or in another law, 133.36 ordinance, or charter provision. 134.1 (d) This subdivision applies to sales, if the purchase was 134.2 made and delivery received during the period provided under 134.3 section 469.324, subdivision 2. 134.4 [EFFECTIVE DATE.] This section is effective for sales made 134.5 on or after the day following final enactment. 134.6 Sec. 5. [469.321] [DEFINITIONS.] 134.7 Subdivision 1. [SCOPE.] For purposes of sections 469.321 134.8 to 469.327, the following terms have the meanings given. 134.9 Subd. 2. [FOREIGN TRADE ZONE.] "Foreign trade zone" means 134.10 a foreign trade zone designated pursuant to United States Code, 134.11 title 19, section 81b, for the right to use the powers provided 134.12 in United States Code, title 19, sections 81a to 81u, or a 134.13 subzone authorized by the foreign trade zone. 134.14 Subd. 3. [FOREIGN TRADE ZONE AUTHORITY.] "Foreign trade 134.15 zone authority" means the Greater Metropolitan Foreign Trade 134.16 Zone Commission number 119, a joint powers authority created by 134.17 the county of Hennepin, the cities of Minneapolis and 134.18 Bloomington, and the Metropolitan Airports Commission, under the 134.19 authority of section 469.059 or 469.101, which includes any 134.20 other political subdivisions that enter into the authority after 134.21 its creation. 134.22 Subd. 4. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE.] An 134.23 "international economic development zone" or "zone" is a zone so 134.24 designated under section 469.322. 134.25 Subd. 5. [PERSON.] "Person" includes an individual, 134.26 corporation, partnership, limited liability company, 134.27 association, or any other entity. 134.28 Subd. 6. [QUALIFIED BUSINESS.] (a) "Qualified business" 134.29 means a person carrying on a trade or business at a place of 134.30 business located within an international economic development 134.31 zone that is: 134.32 (1) engaged in the furtherance of international export or 134.33 import of goods; and 134.34 (2) certified by the foreign trade zone authority as a 134.35 trade or business that furthers the purpose of developing 134.36 international distribution capacity and capability. 135.1 (b) A person that relocates a trade or business from within 135.2 Minnesota but outside an international economic development zone 135.3 into an international economic development zone is not a 135.4 qualified business, unless the business: 135.5 (1)(i) increases full-time employment in the first full 135.6 year of operation within the international economic development 135.7 zone by at least 20 percent measured relative to the operations 135.8 that were relocated and maintains the required level of 135.9 employment for each year that tax incentives under section 135.10 469.324 are claimed; or 135.11 (ii) makes a capital investment in the property located 135.12 within a zone equal to at least ten percent of the gross 135.13 revenues of the operations that were relocated in the 135.14 immediately proceeding taxable year; and 135.15 (2) enters a binding written agreement with the foreign 135.16 trade zone authority that: 135.17 (i) pledges that the business will meet the requirements of 135.18 clause (1); 135.19 (ii) provides for repayment of all tax benefits enumerated 135.20 under section 469.324 to the business under the procedures in 135.21 section 469.326, if the requirements of clause (1) are not met 135.22 for the taxable year or for taxes payable during a year in which 135.23 the requirements were not met; and 135.24 (iii) contains any other terms the foreign trade zone 135.25 authority determines appropriate. 135.26 Clause (1) of this paragraph does not apply to a freight 135.27 forwarder. 135.28 Subd. 7. [REGIONAL DISTRIBUTION CENTER.] A "regional 135.29 distribution center" is a distribution center developed within a 135.30 foreign trade zone. The regional distribution center must have 135.31 as its primary purpose to facilitate gathering of freight for 135.32 the purpose of centralizing the functions necessary for the 135.33 shipment of freight in international commerce, including, but 135.34 not limited to, security and customs functions. 135.35 Subd. 8. [RELOCATE.] (a) "Relocate" means that a trade or 135.36 business: 136.1 (1) ceases one or more operations or functions at another 136.2 location in Minnesota and begins performing substantially the 136.3 same operations or functions at a location in an international 136.4 economic development zone; or 136.5 (2) reduces employment at another location in Minnesota 136.6 during a period starting one year before and ending one year 136.7 after it begins operations in an international economic 136.8 development zone and its employees in the international economic 136.9 development zone are engaged in the same line of business as the 136.10 employees at the location where it reduced employment. 136.11 (b) "Relocate" does not include an expansion by a business 136.12 that establishes a new facility that does not replace or 136.13 supplant an existing operation or employment, in whole or in 136.14 part. 136.15 (c) "Trade or business" includes any business entity that 136.16 is substantially similar in operation or ownership to the 136.17 business entity seeking to be a qualified business. 136.18 Subd. 9. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE PAYROLL 136.19 FACTOR.] "International economic development zone payroll 136.20 factor" or "international economic development zone payroll" is 136.21 that portion of the payroll factor under section 290.191 that 136.22 represents: 136.23 (1) wages or salaries paid to an individual for services 136.24 performed in an international economic development zone; or 136.25 (2) wages or salaries paid to individuals working from 136.26 offices within an international economic development zone, if 136.27 their employment requires them to work outside the zone and the 136.28 work is incidental to the work performed by the individual 136.29 within the zone. 136.30 Subd. 10. [FREIGHT FORWARDER.] "Freight forwarder" is a 136.31 business that, for compensation, ensures that goods produced or 136.32 sold by another business move from point of origin to point of 136.33 destination. 136.34 [EFFECTIVE DATE.] This section is effective the day 136.35 following final enactment. 136.36 Sec. 6. [469.322] [DESIGNATION OF INTERNATIONAL ECONOMIC 137.1 DEVELOPMENT ZONE.] 137.2 (a) An area designated as a foreign trade zone may be 137.3 designated by the foreign trade zone authority as an 137.4 international economic development zone if within the zone a 137.5 regional distribution center is being developed pursuant to 137.6 section 469.323. The zone must consist of contiguous area of 137.7 not less than 500 acres and not more than 1,000 acres. The 137.8 designation authority under this section is limited to one zone. 137.9 (b) In making the designation, the foreign trade zone 137.10 authority, in consultation with the Minnesota Department of 137.11 Transportation and the Metropolitan Council, shall consider 137.12 access to major transportation routes, consistency with current 137.13 state transportation and air cargo planning, adequacy of the 137.14 size of the site, access to airport facilities, present and 137.15 future capacity at the designated airport, the capability to 137.16 meet integrated present and future air cargo, security, and 137.17 inspection services, and access to other infrastructure and 137.18 financial incentives. The border of the international economic 137.19 development zone must be no more than 60 miles distant or 90 137.20 minutes drive time from the border of the Minneapolis-St. Paul 137.21 International Airport. The county in which the zone is located 137.22 must be a member of the foreign trade zone authority. 137.23 (c) Prior to a final site designation, a transportation 137.24 impact study based on the regional model and utilizing traffic 137.25 forecasting and assignments must be conducted. The results must 137.26 be used to evaluate the effects of the proposed use on the 137.27 transportation system and identify any needed improvements. If 137.28 the site is in the metropolitan area the study must also 137.29 evaluate the effect of the transportation impacts on the 137.30 Metropolitan Transportation System plan as well as the 137.31 comprehensive plans of the municipalities that would be affected. 137.32 [EFFECTIVE DATE.] This section is effective the day 137.33 following final enactment. 137.34 Sec. 7. [469.323] [FOREIGN TRADE ZONE AUTHORITY POWERS.] 137.35 Subdivision 1. [DEVELOPMENT OF REGIONAL DISTRIBUTION 137.36 CENTER.] The foreign trade zone authority is responsible for 138.1 creating a development plan for the regional distribution 138.2 center. The regional distribution center must be developed with 138.3 the purpose of expanding, on a regional basis, international 138.4 distribution capacity and capability. The foreign trade zone 138.5 authority shall consult with municipalities that have indicated 138.6 to the authority an interest in locating the international 138.7 economic development zone within their boundaries, as well as 138.8 interested businesses, potential financiers, and appropriate 138.9 state and federal agencies. 138.10 Subd. 2. [PORT AUTHORITY POWERS.] The governing body of 138.11 the foreign trade zone authority may establish a port authority 138.12 that has the same powers as a port authority established under 138.13 section 469.049. If the foreign trade zone authority 138.14 establishes a port authority, the governing body of the foreign 138.15 trade zone authority may exercise all powers granted to a city 138.16 by sections 469.048 to 469.068, except it may not impose or 138.17 request imposition of a property tax levy under section 469.053 138.18 by any city. 138.19 [EFFECTIVE DATE.] This section is effective the day 138.20 following final enactment. 138.21 Sec. 8. [469.324] [TAX INCENTIVES IN INTERNATIONAL 138.22 ECONOMIC DEVELOPMENT ZONE.] 138.23 Subdivision 1. [AVAILABILITY.] Qualified businesses that 138.24 operate in an international economic development zone, 138.25 individuals who invest in a regional distribution center or 138.26 qualified businesses that operate in an international economic 138.27 development zone, and property located in an international 138.28 economic development zone qualify for: 138.29 (1) exemption from the state sales and use tax and any 138.30 local sales and use taxes on qualifying purchases as provided in 138.31 section 297A.68, subdivision 41; 138.32 (2) exemption from the property tax as provided in section 138.33 272.02, subdivision 73; 138.34 (3) the jobs credit allowed under section 469.325; 138.35 (4) the corporate franchise tax exemption under section 138.36 290.191, subdivision 13. 139.1 Subd. 2. [DURATION.] (a) Except as provided in paragraph 139.2 (b), the jobs credit described in subdivision 1, clause (3), and 139.3 the corporate franchise exemption under subdivision 1, clause 139.4 (4), is available for no more than eight consecutive taxable 139.5 years for any taxpayer. The sales and use tax exemption 139.6 described in subdivision 1, clause (1), is available for each 139.7 taxpayer that claims it for taxes otherwise payable on 139.8 transactions during a period of eight years from the date when 139.9 the first exemption is claimed by that taxpayer. The property 139.10 tax exemption described under subdivision 1, clause (2), is 139.11 available for any parcel of property for eight consecutive taxes 139.12 payable years. No incentives described in subdivision 1, 139.13 clauses (1) to (4), are available after December 31, 2020. 139.14 (b) For taxpayers that are freight forwarders, the 139.15 durations provided under paragraph (a) are reduced to four years. 139.16 Sec. 9. [469.325] [JOBS CREDIT.] 139.17 Subdivision 1. [CREDIT ALLOWED.] A qualified business is 139.18 allowed a credit against the taxes imposed under chapter 290. 139.19 The credit equals seven percent of the: 139.20 (1) lesser of: 139.21 (i) zone payroll for the taxable year, less the zone 139.22 payroll for the base year; or 139.23 (ii) total Minnesota payroll for the taxable year, less 139.24 total Minnesota payroll for the base year; minus 139.25 (2) $30,000 multiplied by the number of full-time 139.26 equivalent employees that the qualified business employs in the 139.27 international economic development zone for the taxable year, 139.28 minus the number of full-time equivalent employees the business 139.29 employed in the zone in the base year, but not less than zero. 139.30 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 139.31 the following terms have the meanings given. 139.32 (b) "Base year" means the taxable year beginning during the 139.33 calendar year prior to the calendar year in which the zone 139.34 designation took effect. 139.35 (c) "Full-time equivalent employees" means the equivalent 139.36 of annualized expected hours of work equal to 2,080 hours. 140.1 (d) "Minnesota payroll" means the wages or salaries 140.2 attributed to Minnesota under section 290.191, subdivision 12, 140.3 for the qualified business or the unitary business of which the 140.4 qualified business is a part, whichever is greater. 140.5 (e) "Zone payroll" means wages or salaries used to 140.6 determine the zone payroll factor for the qualified business, 140.7 less the amount of compensation attributable to any employee 140.8 that exceeds $100,000. 140.9 Subd. 3. [INFLATION ADJUSTMENT.] For taxable years 140.10 beginning after December 31, 2005, the dollar amounts in 140.11 subdivision 1, clause (2), and subdivision 2, paragraph (e), are 140.12 annually adjusted for inflation. The commissioner of revenue 140.13 shall adjust the amounts by the percentage determined under 140.14 section 290.06, subdivision 2d, for the taxable year. 140.15 Subd. 4. [REFUNDABLE.] If the amount of the credit exceeds 140.16 the liability for tax under chapter 290, the commissioner of 140.17 revenue shall refund the excess to the qualified business. 140.18 Subd. 5. [APPROPRIATION.] An amount sufficient to pay the 140.19 refunds authorized by this section is appropriated to the 140.20 commissioner of revenue from the general fund. 140.21 [EFFECTIVE DATE.] This section is effective for taxable 140.22 years beginning after December 31, 2004. 140.23 Sec. 10. [469.326] [REPAYMENT OF TAX BENEFITS.] 140.24 Subdivision 1. [REPAYMENT OBLIGATION.] A person must repay 140.25 the amount of the tax reduction received under section 469.324, 140.26 subdivision 1, clauses (1) and (2), or a refund received under 140.27 section 469.325, during the two years immediately before it 140.28 ceased to operate in the zone, if the person ceased to operate 140.29 its facility located within the zone or otherwise ceases to be 140.30 or is not a qualified business. 140.31 Subd. 2. [DISPOSITION OF REPAYMENT.] The repayment must be 140.32 paid to the state to the extent it represents a state tax 140.33 reduction and to the county to the extent it represents a 140.34 property tax reduction. Any amount repaid to the state must be 140.35 deposited in the general fund. Any amount repaid to the county 140.36 for the property tax exemption must be distributed to the local 141.1 governments with authority to levy taxes in the zone in the same 141.2 manner provided for distribution of payment of delinquent 141.3 property taxes. Any repayment of local sales or use taxes must 141.4 be repaid to the jurisdiction imposing the local sales or use 141.5 tax. 141.6 Subd. 3. [REPAYMENT PROCEDURES.] (a) For the repayment of 141.7 taxes imposed under chapter 290 or 297A or local taxes collected 141.8 under section 297A.99, a person must file an amended return with 141.9 the commissioner of revenue and pay any taxes required to be 141.10 repaid within 30 days after ceasing to be a qualified business. 141.11 The amount required to be repaid is determined by calculating 141.12 the tax for the period for which repayment is required without 141.13 regard to the tax reductions allowed under section 469.324. 141.14 (b) For the repayment of property taxes, the county auditor 141.15 shall prepare a tax statement for the person, applying the 141.16 applicable tax extension rates for each payable year and provide 141.17 a copy to the business. The person must pay the taxes to the 141.18 county treasurer within 30 days after receipt of the tax 141.19 statement. The taxpayer may appeal the valuation and 141.20 determination of the property tax to the tax court within 30 141.21 days after receipt of the tax statement. 141.22 (c) The provisions of chapters 270 and 289A relating to the 141.23 commissioner of revenue's authority to audit, assess, and 141.24 collect the tax and to hear appeals apply to the repayment 141.25 required under paragraph (a). The commissioner may impose civil 141.26 penalties as provided in chapter 289A, and the additional tax 141.27 and penalties are subject to interest at the rate provided in 141.28 section 270.75, from 30 days after ceasing to do business in the 141.29 zone until the date the tax is paid. 141.30 (d) If a property tax is not repaid under paragraph (b), 141.31 the county treasurer shall add the amount required to be repaid 141.32 to the property taxes assessed against the property for payment 141.33 in the year following the year in which the treasurer discovers 141.34 that the person ceased to operate in the international economic 141.35 development zone. 141.36 (e) For determining the tax required to be repaid, a tax 142.1 reduction is deemed to have been received on the date that the 142.2 tax would have been due if the person had not been entitled to 142.3 the tax reduction. 142.4 (f) The commissioner of revenue may assess the repayment of 142.5 taxes under paragraph (c) at any time within two years after the 142.6 person ceases to be a qualified business, or within any period 142.7 of limitations for the assessment of tax under section 289A.38, 142.8 whichever is later. 142.9 Subd. 4. [WAIVER AUTHORITY.] The commissioner may waive 142.10 all or part of a repayment, if the commissioner of revenue, in 142.11 consultation with the foreign trade zone authority and 142.12 appropriate officials from the state and local government units, 142.13 determines that requiring repayment of the tax is not in the 142.14 best interest of the state or local government and the business 142.15 ceased operating as a result of circumstances beyond its 142.16 control, including, but not limited to: 142.17 (1) a natural disaster; 142.18 (2) unforeseen industry trends; or 142.19 (3) loss of a major supplier or customer. 142.20 [EFFECTIVE DATE.] This section is effective the day 142.21 following final enactment. 142.22 Sec. 11. [469.327] [REPORTING REQUIREMENTS.] 142.23 Before designation of an international economic development 142.24 zone under section 469.322, the foreign trade zone authority 142.25 shall establish performance goals for the zone. These goals 142.26 must set out, at a minimum, the amount of investment, the number 142.27 of jobs, and the amount of freight handled expected to be 142.28 attained at the end of three, five, and 10 year periods by the 142.29 zone. The authority must annually report to the commissioner of 142.30 the Department of Employment and Economic Development on its 142.31 progress in attaining these goals. 142.32 [EFFECTIVE DATE.] This section is effective the day 142.33 following final enactment. 142.34 ARTICLE 8 142.35 DEPARTMENT OF REVENUE POLICY PROVISIONS 142.36 Section 1. Minnesota Statutes 2002, section 16D.10, is 143.1 amended to read: 143.2 16D.10 [CASE REVIEWER.] 143.3 Subdivision 1. [DUTIES.] The commissioner shall make a 143.4 case reviewer available to debtors. The reviewer must be 143.5 available to answer a debtor's questions concerning the 143.6 collection process and to review the collection activity taken. 143.7 If the reviewer reasonably believes that the particular action 143.8 being taken is unreasonable or unfair, the reviewer may make 143.9 recommendations to the commissioner in regard to the collection 143.10 action. 143.11 Subd. 2. [AUTHORITY TO ISSUE DEBTOR ASSISTANCE ORDER.] On 143.12 application filed by a debtor with the case reviewer, in the 143.13 form, manner, and in the time prescribed by the commissioner, 143.14 and after thorough investigation, the case reviewer may issue a 143.15 debtor assistance order if, in the determination of the case 143.16 reviewer, the manner in which the state debt collection laws are 143.17 being administered is creating or will create an unjust and 143.18 inequitable result for the debtor. Debtor assistance orders are 143.19 governed by the provisions relating to taxpayer assistance 143.20 orders under section 270.273. 143.21 Subd. 3. [TRANSFER OF DUTIES TO TAXPAYER RIGHTS ADVOCATE.] 143.22 All duties and authority of the case reviewer under subdivisions 143.23 1 and 2 are transferred to the taxpayer rights advocate. 143.24 [EFFECTIVE DATE.] This section is effective the day 143.25 following final enactment. 143.26 Sec. 2. Minnesota Statutes 2002, section 270.02, 143.27 subdivision 3, is amended to read: 143.28 Subd. 3. [POWERS, ORGANIZATION, ASSISTANTS.] Subject to 143.29 the provisions of this chapter and other applicable laws the 143.30 commissioner shall have power to organize the department with 143.31 such divisions and other agencies as the commissioner deems 143.32 necessary and to appoint one deputy commissioner, a department 143.33 secretary, directors of divisions, and such other officers, 143.34 employees, and agents as the commissioner may deem necessary to 143.35 discharge the functions of the department, define the duties of 143.36 such officers, employees, and agents, and delegate to them any 144.1 of the commissioner's powers or duties, subject to the 144.2 commissioner's control and under such conditions as the 144.3 commissioner may prescribe. Appointments to exercise delegated 144.4 power to sign documents which require the signature of the 144.5 commissioner or a delegate by law shall be by written order 144.6 filed with the secretary of state. The delegations of authority 144.7 granted by the commissioner remain in effect until revoked by 144.8 the commissioner or a successor commissioner. 144.9 [EFFECTIVE DATE.] This section is effective the day 144.10 following final enactment. 144.11 Sec. 3. Minnesota Statutes 2003 Supplement, section 144.12 270.06, is amended to read: 144.13 270.06 [POWERS AND DUTIES.] 144.14 The commissioner of revenue shall: 144.15 (1) have and exercise general supervision over the 144.16 administration of the assessment and taxation laws of the state, 144.17 over assessors, town, county, and city boards of review and 144.18 equalization, and all other assessing officers in the 144.19 performance of their duties, to the end that all assessments of 144.20 property be made relatively just and equal in compliance with 144.21 the laws of the state; 144.22 (2) confer with, advise, and give the necessary 144.23 instructions and directions to local assessors and local boards 144.24 of review throughout the state as to their duties under the laws 144.25 of the state; 144.26 (3) direct proceedings, actions, and prosecutions to be 144.27 instituted to enforce the laws relating to the liability and 144.28 punishment of public officers and officers and agents of 144.29 corporations for failure or negligence to comply with the 144.30 provisions of the laws of this state governing returns of 144.31 assessment and taxation of property, and cause complaints to be 144.32 made against local assessors, members of boards of equalization, 144.33 members of boards of review, or any other assessing or taxing 144.34 officer, to the proper authority, for their removal from office 144.35 for misconduct or negligence of duty; 144.36 (4) require county attorneys to assist in the commencement 145.1 of prosecutions in actions or proceedings for removal, 145.2 forfeiture and punishment for violation of the laws of this 145.3 state in respect to the assessment and taxation of property in 145.4 their respective districts or counties; 145.5 (5) require town, city, county, and other public officers 145.6 to report information as to the assessment of property, 145.7 collection of taxes received from licenses and other sources, 145.8 and such other information as may be needful in the work of the 145.9 Department of Revenue, in such form and upon such blanks as the 145.10 commissioner may prescribe; 145.11 (6) require individuals, copartnerships, companies, 145.12 associations, and corporations to furnish information concerning 145.13 their capital, funded or other debt, current assets and 145.14 liabilities, earnings, operating expenses, taxes, as well as all 145.15 other statements now required by law for taxation purposes; 145.16 (7) subpoena witnesses, at a time and place reasonable 145.17 under the circumstances, to appear and give testimony, and to 145.18 produce books, records, papers and documents for inspection and 145.19 copying relating to any matter which the commissioner may have 145.20 authority to investigate or determine; 145.21 (8) issue a subpoena which does not identify the person or 145.22 persons with respect to whose liability the subpoena is issued, 145.23 but only if (a) the subpoena relates to the investigation of a 145.24 particular person or ascertainable group or class of persons, 145.25 (b) there is a reasonable basis for believing that such person 145.26 or group or class of persons may fail or may have failed to 145.27 comply with any law administered by the commissioner, (c) the 145.28 information sought to be obtained from the examination of the 145.29 records (and the identity of the person or persons with respect 145.30 to whose liability the subpoena is issued) is not readily 145.31 available from other sources, (d) the subpoena is clear and 145.32 specific as to the information sought to be obtained, and (e) 145.33 the information sought to be obtained is limited solely to the 145.34 scope of the investigation. Provided further that the party 145.35 served with a subpoena which does not identify the person or 145.36 persons with respect to whose tax liability the subpoena is 146.1 issued shall have the right, within 20 days after service of the 146.2 subpoena, to petition the district court for the judicial 146.3 district in which lies the county in which that party is located 146.4 for a determination as to whether the commissioner of revenue 146.5 has complied with all the requirements in (a) to (e), and thus, 146.6 whether the subpoena is enforceable. If no such petition is 146.7 made by the party served within the time prescribed, the 146.8 subpoena shall have the force and effect of a court order; 146.9 (9) cause the deposition of witnesses residing within or 146.10 without the state, or absent therefrom, to be taken, upon notice 146.11 to the interested party, if any, in like manner that depositions 146.12 of witnesses are taken in civil actions in the district court, 146.13 in any matter which the commissioner may have authority to 146.14 investigate or determine; 146.15 (10) investigate the tax laws of other states and countries 146.16 and to formulate and submit to the legislature such legislation 146.17 as the commissioner may deem expedient to prevent evasions of 146.18 assessment and taxing laws, and secure just and equal taxation 146.19 and improvement in the system of assessment and taxation in this 146.20 state; 146.21 (11) consult and confer with the governor upon the subject 146.22 of taxation, the administration of the laws in regard thereto, 146.23 and the progress of the work of the Department of Revenue, and 146.24 furnish the governor, from time to time, such assistance and 146.25 information as the governor may require relating to tax matters; 146.26 (12) transmit to the governor, on or before the third 146.27 Monday in December of each even-numbered year, and to each 146.28 member of the legislature, on or before November 15 of each 146.29 even-numbered year, the report of the Department of Revenue for 146.30 the preceding years, showing all the taxable property in the 146.31 state and the value of the same, in tabulated form; 146.32 (13) inquire into the methods of assessment and taxation 146.33 and ascertain whether the assessors faithfully discharge their 146.34 duties, particularly as to their compliance with the laws 146.35 requiring the assessment of all property not exempt from 146.36 taxation; 147.1 (14) administer and enforce the assessment and collection 147.2 of state taxes and fees, including the use of any remedy 147.3 available to nongovernmental creditors, and, from time to time, 147.4 make, publish, and distribute rules for the administration and 147.5 enforcement of laws administered by the commissioner and state 147.6 tax laws. The rules have the force of law; 147.7 (15) prepare blank forms for the returns required by state 147.8 tax law and distribute them throughout the state, furnishing 147.9 them subject to charge on application; 147.10 (16) prescribe rules governing the qualification and 147.11 practice of agents, attorneys, or other persons representing 147.12 taxpayers before the commissioner. The rules may require that 147.13 those persons, agents, and attorneys show that they are of good 147.14 character and in good repute, have the necessary qualifications 147.15 to give taxpayers valuable services, and are otherwise competent 147.16 to advise and assist taxpayers in the presentation of their case 147.17 before being recognized as representatives of taxpayers. After 147.18 due notice and opportunity for hearing, the commissioner may 147.19 suspend and bar from further practice before the commissioner 147.20 any person, agent, or attorney who is shown to be incompetent or 147.21 disreputable, who refuses to comply with the rules, or who with 147.22 intent to defraud, willfully or knowingly deceives, misleads, or 147.23 threatens a taxpayer or prospective taxpayer, by words, 147.24 circular, letter, or by advertisement. This clause does not 147.25 curtail the rights of individuals to appear in their own behalf 147.26 or partners or corporations' officers to appear in behalf of 147.27 their respective partnerships or corporations; 147.28 (17) appoint agents as the commissioner considers necessary 147.29 to make examinations and determinations. The agents have the 147.30 rights and powers conferred on the commissioner to subpoena, 147.31 examine, and copy books, records, papers, or memoranda, subpoena 147.32 witnesses, administer oaths and affirmations, and take 147.33 testimony. In addition to administrative subpoenas of the 147.34 commissioner and the agents, upon demand of the commissioner or 147.35 an agent, the court administrator of any district court shall 147.36 issue a subpoena for the attendance of a witness or the 148.1 production of books, papers, records, or memoranda before the 148.2 agent for inspection and copying. Disobedience of a court 148.3 administrator's subpoena shall be punished by the district court 148.4 of the district in which the subpoena is issued, or in the case 148.5 of a subpoena issued by the commissioner or an agent, by the 148.6 district court of the district in which the party served with 148.7 the subpoena is located, in the same manner as contempt of the 148.8 district court; 148.9 (18) appoint and employ additional help, purchase supplies 148.10 or materials, or incur other expenditures in the enforcement of 148.11 state tax laws as considered necessary. The salaries of all 148.12 agents and employees provided for in this chapter shall be fixed 148.13 by the appointing authority, subject to the approval of the 148.14 commissioner of administration; 148.15 (19) execute and administer any agreement with the 148.16 secretary of the treasury of the United States or a 148.17 representative of another state regarding the exchange of 148.18 information and administration of the tax laws; 148.19 (20) authorize the use of unmarked motor vehicles to 148.20 conduct seizures or criminal investigations pursuant to the 148.21 commissioner's authority;and148.22 (21) exercise other powers and perform other duties 148.23 required of or imposed upon the commissioner of revenue by law; 148.24 and 148.25 (22) negotiate with other member states as to the amount of 148.26 the monetary allowance for sellers and certified service 148.27 providers who purchase certified software for sales tax 148.28 collection as described in the streamlined sales tax agreement. 148.29 [EFFECTIVE DATE.] This section is effective the day 148.30 following final enactment. 148.31 Sec. 4. [270.0611] [SUFFICIENCY OF NOTICE OF DETERMINATION 148.32 OR ACTION OF COMMISSIONER OF REVENUE.] 148.33 When a method of notification of a written determination or 148.34 action of the commissioner is not specifically provided for by 148.35 law, notice of the determination or action sent postage prepaid 148.36 by United States mail to the taxpayer or other person affected 149.1 by the determination or action at the taxpayer's or person's 149.2 last known address is sufficient. If the taxpayer or person 149.3 being notified is deceased or is under a legal disability, or if 149.4 a corporation being notified has terminated its existence, 149.5 notice to the last known address of the taxpayer, person, or 149.6 corporation is sufficient, unless the department has been 149.7 provided with a new address by a party authorized to receive 149.8 notices from the commissioner. 149.9 [EFFECTIVE DATE.] This section is effective for notices 149.10 sent on or after the day following final enactment. 149.11 Sec. 5. Minnesota Statutes 2002, section 270.69, 149.12 subdivision 4, is amended to read: 149.13 Subd. 4. [PERIOD OF LIMITATIONS.] The lien imposed by this 149.14 section shall, notwithstanding any other provision of law to the 149.15 contrary, be enforceable from the time the lien arises and for 149.16 ten years from the date of filing the notice of lien, which must 149.17 be filed by the commissioner within five years after the date of 149.18 assessment of the tax or final administrative or judicial 149.19 determination of the assessment. A notice of lien filed in one 149.20 county may be transcribed to the secretary of state or to any 149.21 other county within ten years after the date of its filing, but 149.22 the transcription shall not extend the period during which the 149.23 lien is enforceable. A notice of lien may be renewed by the 149.24 commissioner before the expiration of the ten-year period for an 149.25 additional ten years. The taxpayer must receive written notice 149.26 of the renewal. 149.27 [EFFECTIVE DATE.] This section is effective the day 149.28 following final enactment. 149.29 Sec. 6. Minnesota Statutes 2002, section 270B.01, 149.30 subdivision 8, is amended to read: 149.31 Subd. 8. [MINNESOTA TAX LAWS.] For purposes of this 149.32 chapter only, unless expressly stated otherwise, "Minnesota tax 149.33 laws" means: 149.34 (1) the taxes, refunds, and fees administered by or paid to 149.35 the commissioner under chapters 115B (except taxes imposed under 149.36 sections 115B.21 to 115B.24), 289A (except taxes imposed under 150.1 sections 298.01, 298.015, and 298.24), 290, 290A, 291, 295, 150.2 297A, and 297H, or any similar Indian tribal tax administered by 150.3 the commissioner pursuant to any tax agreement between the state 150.4 and the Indian tribal government, and includes any laws for the 150.5 assessment, collection, and enforcement of those taxes, refunds, 150.6 and fees; and 150.7 (2) section 273.1315. 150.8 [EFFECTIVE DATE.] This section is effective the day 150.9 following final enactment. 150.10 Sec. 7. Minnesota Statutes 2003 Supplement, section 150.11 270B.12, subdivision 13, is amended to read: 150.12 Subd. 13. [COUNTY ASSESSORS; CLASS 1B HOMESTEADS.] The 150.13 commissioner may disclose to a county assessor, and to the 150.14 assessor's designated agents or employees, a listing of parcels 150.15 of property qualifying for the class 1b property tax 150.16 classification under section 273.13, subdivision 22, and the 150.17 names and addresses of qualified applicants. 150.18 [EFFECTIVE DATE.] This section is effective the day 150.19 following final enactment. 150.20 Sec. 8. Minnesota Statutes 2003 Supplement, section 150.21 272.02, subdivision 65, is amended to read: 150.22 Subd. 65. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 150.23 PROPERTY.] (a) Improvements to real property, and personal 150.24 property, classified under section 273.13, subdivision 24, and 150.25 located within a biotechnology and health sciences industry zone 150.26 are exempt from ad valorem taxes levied under chapter 275, as 150.27 provided in this subdivision. 150.28 (b) For property to qualify for exemption under paragraph 150.29 (a), the occupant must be a qualified business, as defined in 150.30 section 469.330. 150.31 (c) The exemption applies beginning for the first 150.32 assessment year after designation of the biotechnology and 150.33 health sciences industry zone by the commissioner of employment 150.34 and economic development. The exemption applies to each 150.35 assessment year that begins during the duration of the 150.36 biotechnology and health sciences industry zone and to property 151.1 occupied by July 1 of the assessment year by a qualified 151.2 business. This exemption does not apply to: 151.3 (1) a levy under section 475.61 or similar levy provisions 151.4 under any other law to pay general obligation bonds; or 151.5 (2) a levy under section 126C.17, if the levy was approved 151.6 by the voters before the designation of the biotechnology and 151.7 health sciences industry zone. 151.8 (d) The exemption does not apply to taxes imposed by a 151.9 city, town, or county, unless the governing body adopts a 151.10 resolution granting the exemption. A city, town, or county may 151.11 provide a complete property tax exemption, partial property tax 151.12 exemption, or no property tax exemption to qualified businesses 151.13 in the biotechnology and health sciences industry zone. "City" 151.14 includes a statutory or home rule charter city. 151.15 (e) For property located in a tax increment financing 151.16 district, the county shall not adjust the original net tax 151.17 capacity of the district under section 469.177, subdivision 1, 151.18 paragraph (a), upon the expiration of an exemption under this 151.19 subdivision. 151.20 [EFFECTIVE DATE.] This section is effective beginning for 151.21 property taxes assessed in 2004, payable in 2005. 151.22 Sec. 9. Minnesota Statutes 2002, section 289A.12, 151.23 subdivision 3, is amended to read: 151.24 Subd. 3. [RETURNS OR REPORTS BY PARTNERSHIPS, FIDUCIARIES, 151.25 AND S CORPORATIONS.] (a) Partnerships must file a return with 151.26 the commissioner for each taxable year. The return must conform 151.27 to the requirements of section 290.311, and must include the 151.28 names and addresses of the partners entitled to a distributive 151.29 share in their taxable net income, gain, loss, or credit, and 151.30 the amount of the distributive share to which each is entitled. 151.31 A partnership required to file a return for a partnership 151.32 taxable year must furnish a copy of the information required to 151.33 be shown on the return to a person who is a partner at any time 151.34 during the taxable year, on or before the day on which the 151.35 return for the taxable year was filed. A partnership with more 151.36 than 100 partners that is required to file a federal partnership 152.1 return electronically under Code of Federal Regulations, title 152.2 26, section 301.6011-3 (2003), must also file the return due 152.3 under this section electronically. If a return required to be 152.4 filed electronically is filed on paper, the return is still 152.5 valid but a penalty of $50 for each partner over 100 partners is 152.6 imposed for failing to file electronically. The commissioner 152.7 may waive the penalty if the partnership can demonstrate that 152.8 filing the return electronically creates a hardship. 152.9 (b) The fiduciary of an estate or trust making the return 152.10 required to be filed under section 289A.08, subdivision 2, for a 152.11 taxable year must give a beneficiary who receives a distribution 152.12 from the estate or trust with respect to the taxable year or to 152.13 whom any item with respect to the taxable year is allocated, a 152.14 statement containing the information required to be shown on the 152.15 return, on or before the date on which the return was filed. 152.16 (c) An S corporation must file a return with the 152.17 commissioner for a taxable year during which an election under 152.18 section 290.9725 is in effect, stating specifically the names 152.19 and addresses of the persons owning stock in the corporation at 152.20 any time during the taxable year, the number of shares of stock 152.21 owned by a shareholder at all times during the taxable year, the 152.22 shareholder's pro rata share of each item of the corporation for 152.23 the taxable year, and other information the commissioner 152.24 requires. An S corporation required to file a return under this 152.25 paragraph for any taxable year must furnish a copy of the 152.26 information shown on the return to the person who is a 152.27 shareholder at any time during the taxable year, on or before 152.28 the day on which the return for the taxable year was filed. 152.29 (d) The partnership or S corporation return must be signed 152.30 by someone designated by the partnership or S corporation. 152.31 [EFFECTIVE DATE.] This section is effective for taxable 152.32 years beginning after December 31, 2003. 152.33 Sec. 10. Minnesota Statutes 2002, section 289A.31, 152.34 subdivision 2, is amended to read: 152.35 Subd. 2. [JOINT INCOME TAX RETURNS.] (a) If a joint income 152.36 tax return is made by a husband and wife, the liability for the 153.1 tax is joint and several. A spouse who qualifies for relief 153.2 from a liability attributable to an underpayment under section 153.3 6015(b) of the Internal Revenue Code is relieved of the state 153.4 income tax liability on the underpayment. 153.5 (b) In the case of individuals who were a husband and wife 153.6 prior to the dissolution of their marriage or their legal 153.7 separation, or prior to the death of one of the individuals, for 153.8 tax liabilities reported on a joint or combined return, the 153.9 liability of each person is limited to the proportion of the tax 153.10 due on the return that equals that person's proportion of the 153.11 total tax due if the husband and wife filed separate returns for 153.12 the taxable year. This provision is effective only when the 153.13 commissioner receives written notice of the marriage 153.14 dissolution, legal separation, or death of a spouse from the 153.15 husband or wife. No refund may be claimed by an ex-spouse, 153.16 legally separated or widowed spouse for any taxes paid more than 153.17 60 days before receipt by the commissioner of the written notice. 153.18 (c) A request for calculation of separate liability 153.19 pursuant to paragraph (b) for taxes reported on a return must be 153.20 made within six years after the due date of the return. For 153.21 calculation of separate liability for taxes assessed by the 153.22 commissioner under section 289A.35 or 289A.37, the request must 153.23 be made within six years after the date of assessment. The 153.24 commissioner is not required to calculate separate liability if 153.25 the remaining unpaid liability for which recalculation is 153.26 requested is $100 or less. 153.27 [EFFECTIVE DATE.] This section is effective for requests 153.28 for relief made on or after the day following final enactment. 153.29 Sec. 11. Minnesota Statutes 2002, section 289A.56, is 153.30 amended by adding a subdivision to read: 153.31 Subd. 7. [BIOTECHNOLOGY AND BORDER CITY ZONE 153.32 REFUNDS.] Notwithstanding subdivision 3, for refunds payable 153.33 under sections 297A.68, subdivision 38, and 469.1734, 153.34 subdivision 6, interest is computed from 90 days after the 153.35 refund claim is filed with the commissioner. 153.36 [EFFECTIVE DATE.] This section is effective for refund 154.1 claims filed on or after July 1, 2004. 154.2 Sec. 12. Minnesota Statutes 2003 Supplement, section 154.3 290.01, subdivision 19d, is amended to read: 154.4 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 154.5 TAXABLE INCOME.] For corporations, there shall be subtracted 154.6 from federal taxable income after the increases provided in 154.7 subdivision 19c: 154.8 (1) the amount of foreign dividend gross-up added to gross 154.9 income for federal income tax purposes under section 78 of the 154.10 Internal Revenue Code; 154.11 (2) the amount of salary expense not allowed for federal 154.12 income tax purposes due to claiming the federal jobs credit 154.13 under section 51 of the Internal Revenue Code; 154.14 (3) any dividend (not including any distribution in 154.15 liquidation) paid within the taxable year by a national or state 154.16 bank to the United States, or to any instrumentality of the 154.17 United States exempt from federal income taxes, on the preferred 154.18 stock of the bank owned by the United States or the 154.19 instrumentality; 154.20 (4) amounts disallowed for intangible drilling costs due to 154.21 differences between this chapter and the Internal Revenue Code 154.22 in taxable years beginning before January 1, 1987, as follows: 154.23 (i) to the extent the disallowed costs are represented by 154.24 physical property, an amount equal to the allowance for 154.25 depreciation under Minnesota Statutes 1986, section 290.09, 154.26 subdivision 7, subject to the modifications contained in 154.27 subdivision 19e; and 154.28 (ii) to the extent the disallowed costs are not 154.29 represented by physical property, an amount equal to the 154.30 allowance for cost depletion under Minnesota Statutes 1986, 154.31 section 290.09, subdivision 8; 154.32 (5) the deduction for capital losses pursuant to sections 154.33 1211 and 1212 of the Internal Revenue Code, except that: 154.34 (i) for capital losses incurred in taxable years beginning 154.35 after December 31, 1986, capital loss carrybacks shall not be 154.36 allowed; 155.1 (ii) for capital losses incurred in taxable years beginning 155.2 after December 31, 1986, a capital loss carryover to each of the 155.3 15 taxable years succeeding the loss year shall be allowed; 155.4 (iii) for capital losses incurred in taxable years 155.5 beginning before January 1, 1987, a capital loss carryback to 155.6 each of the three taxable years preceding the loss year, subject 155.7 to the provisions of Minnesota Statutes 1986, section 290.16, 155.8 shall be allowed; and 155.9 (iv) for capital losses incurred in taxable years beginning 155.10 before January 1, 1987, a capital loss carryover to each of the 155.11 five taxable years succeeding the loss year to the extent such 155.12 loss was not used in a prior taxable year and subject to the 155.13 provisions of Minnesota Statutes 1986, section 290.16, shall be 155.14 allowed; 155.15 (6) an amount for interest and expenses relating to income 155.16 not taxable for federal income tax purposes, if (i) the income 155.17 is taxable under this chapter and (ii) the interest and expenses 155.18 were disallowed as deductions under the provisions of section 155.19 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 155.20 federal taxable income; 155.21 (7) in the case of mines, oil and gas wells, other natural 155.22 deposits, and timber for which percentage depletion was 155.23 disallowed pursuant to subdivision 19c, clause (11), a 155.24 reasonable allowance for depletion based on actual cost. In the 155.25 case of leases the deduction must be apportioned between the 155.26 lessor and lessee in accordance with rules prescribed by the 155.27 commissioner. In the case of property held in trust, the 155.28 allowable deduction must be apportioned between the income 155.29 beneficiaries and the trustee in accordance with the pertinent 155.30 provisions of the trust, or if there is no provision in the 155.31 instrument, on the basis of the trust's income allocable to 155.32 each; 155.33 (8) for certified pollution control facilities placed in 155.34 service in a taxable year beginning before December 31, 1986, 155.35 and for which amortization deductions were elected under section 155.36 169 of the Internal Revenue Code of 1954, as amended through 156.1 December 31, 1985, an amount equal to the allowance for 156.2 depreciation under Minnesota Statutes 1986, section 290.09, 156.3 subdivision 7; 156.4 (9) amounts included in federal taxable income that are due 156.5 to refunds of income, excise, or franchise taxes based on net 156.6 income or related minimum taxes paid by the corporation to 156.7 Minnesota, another state, a political subdivision of another 156.8 state, the District of Columbia, or a foreign country or 156.9 possession of the United States to the extent that the taxes 156.10 were added to federal taxable income under section 290.01, 156.11 subdivision 19c, clause (1), in a prior taxable year; 156.12 (10) 80 percent of royalties, fees, or other like income 156.13 accrued or received from a foreign operating corporation or a 156.14 foreign corporation which is part of the same unitary business 156.15 as the receiving corporation; 156.16 (11) income or gains from the business of mining as defined 156.17 in section 290.05, subdivision 1, clause (a), that are not 156.18 subject to Minnesota franchise tax; 156.19 (12) the amount of handicap access expenditures in the 156.20 taxable year which are not allowed to be deducted or capitalized 156.21 under section 44(d)(7) of the Internal Revenue Code; 156.22 (13) the amount of qualified research expenses not allowed 156.23 for federal income tax purposes under section 280C(c) of the 156.24 Internal Revenue Code, but only to the extent that the amount 156.25 exceeds the amount of the credit allowed under section 156.26 290.068 or 469.339; 156.27 (14) the amount of salary expenses not allowed for federal 156.28 income tax purposes due to claiming the Indian employment credit 156.29 under section 45A(a) of the Internal Revenue Code; 156.30 (15) the amount of any refund of environmental taxes paid 156.31 under section 59A of the Internal Revenue Code; 156.32 (16) for taxable years beginning before January 1, 2008, 156.33 the amount of the federal small ethanol producer credit allowed 156.34 under section 40(a)(3) of the Internal Revenue Code which is 156.35 included in gross income under section 87 of the Internal 156.36 Revenue Code; 157.1 (17) for a corporation whose foreign sales corporation, as 157.2 defined in section 922 of the Internal Revenue Code, constituted 157.3 a foreign operating corporation during any taxable year ending 157.4 before January 1, 1995, and a return was filed by August 15, 157.5 1996, claiming the deduction under section 290.21, subdivision 157.6 4, for income received from the foreign operating corporation, 157.7 an amount equal to 1.23 multiplied by the amount of income 157.8 excluded under section 114 of the Internal Revenue Code, 157.9 provided the income is not income of a foreign operating 157.10 company; 157.11 (18) any decrease in subpart F income, as defined in 157.12 section 952(a) of the Internal Revenue Code, for the taxable 157.13 year when subpart F income is calculated without regard to the 157.14 provisions of section 614 of Public Law 107-147; and 157.15 (19) in each of the five tax years immediately following 157.16 the tax year in which an addition is required under subdivision 157.17 19c, clause (16), an amount equal to one-fifth of the delayed 157.18 depreciation. For purposes of this clause, "delayed 157.19 depreciation" means the amount of the addition made by the 157.20 taxpayer under subdivision 19c, clause (16). The resulting 157.21 delayed depreciation cannot be less than zero. 157.22 [EFFECTIVE DATE.] This section is effective for tax years 157.23 beginning after December 31, 2003. 157.24 Sec. 13. Minnesota Statutes 2002, section 290.9705, 157.25 subdivision 1, is amended to read: 157.26 Subdivision 1. [WITHHOLDING OF PAYMENTS TO OUT-OF-STATE 157.27 CONTRACTORS.] (a) In this section, "person" means a person, 157.28 corporation, or cooperative, the state of Minnesota and its 157.29 political subdivisions, and a city, county, and school district 157.30 in Minnesota. 157.31 (b) A person who in the regular course of business is 157.32 hiring, contracting, or having a contract with a nonresident 157.33 person or foreign corporation, as defined in Minnesota Statutes 157.34 1986, section 290.01, subdivision 5, to perform construction 157.35 work in Minnesota, shall deduct and withhold eight percent of 157.36every paymentcumulative calendar year payments to the 158.1 contractorif the contract exceeds or can reasonably be expected158.2to exceed $100,000which exceed $50,000. 158.3 [EFFECTIVE DATE.] This section is effective for payments 158.4 made after December 31, 2004. 158.5 Sec. 14. Minnesota Statutes 2003 Supplement, section 158.6 290C.10, is amended to read: 158.7 290C.10 [WITHDRAWAL PROCEDURES.] 158.8 An approved claimant under the sustainable forest incentive 158.9 program for a minimum of four years may notify the commissioner 158.10 of the intent to terminate enrollment. Within 90 days of 158.11 receipt of notice to terminate enrollment, the commissioner 158.12 shall inform the claimant in writing, acknowledging receipt of 158.13 this notice and indicating the effective date of termination 158.14 from the sustainable forest incentive program. Termination of 158.15 enrollment in the sustainable forest incentive program occurs on 158.16 January 1 of the fifth calendar year that begins after receipt 158.17 by the commissioner of the termination notice. After the 158.18 commissioner issues an effective date of termination, a claimant 158.19 wishing to continue the land's enrollment in the sustainable 158.20 forest incentive program beyond the termination date must apply 158.21 for enrollment as prescribed in section 290C.04. A claimant who 158.22 withdraws a parcel of land from this program may not reenroll 158.23 the parcel for a period of three years. Within 90 days after 158.24 the termination date, the commissioner shall execute and 158.25 acknowledge a document releasing the land from the covenant 158.26 required under this chapter. The document must be mailed to the 158.27 claimant and is entitled to be recorded. The commissioner may 158.28 allow early withdrawal from the Sustainable Forest Incentive Act 158.29 without penaltyin cases of condemnationwhen the state of 158.30 Minnesota, any local government unit, or any other entity which 158.31 has the right of eminent domain acquires title or possession to 158.32 the land for a public purpose notwithstanding the provisions of 158.33 this section. In the case of such acquisition, the commissioner 158.34 shall execute and acknowledge a document releasing the land 158.35 acquired by the state, local government unit, or other entity 158.36 from the covenant. All other enrolled land must remain in the 159.1 program. 159.2 [EFFECTIVE DATE.] This section is effective the day 159.3 following final enactment. 159.4 Sec. 15. Minnesota Statutes 2002, section 297A.995, 159.5 subdivision 6, is amended to read: 159.6 Subd. 6. [AGREEMENT REQUIREMENTS.] The commissioner of 159.7 revenue shall not enter into the agreement unless the agreement 159.8 requires each state to abide by the following requirements: 159.9 (a) [UNIFORM STATE RATE.] The agreement must set 159.10 restrictions to achieve more uniform state rates through the 159.11 following: 159.12 (1) limiting the number of state rates; 159.13 (2) eliminating maximums on the amount of state tax that is 159.14 due on a transaction; and 159.15 (3) eliminating thresholds on the application of state tax. 159.16 (b) [UNIFORM STANDARDS.] The agreement must establish 159.17 uniform standards for the following: 159.18 (1) the sourcing of transactions to taxing jurisdictions; 159.19 (2) the administration of exempt sales; 159.20 (3) the allowances a seller can take for bad debts; and 159.21 (4) sales and use tax returns and remittances. 159.22 (c) [UNIFORM DEFINITIONS.] The agreement must require 159.23 states to develop and adopt uniform definitions of sales and use 159.24 tax terms. The definitions must enable a state to preserve its 159.25 ability to make policy choices not inconsistent with the uniform 159.26 definitions. 159.27 (d) [CENTRAL REGISTRATION.] The agreement must provide a 159.28 central, electronic registration system that allows a seller to 159.29 register to collect and remit sales and use taxes for all 159.30 signatory states. 159.31 (e) [NO NEXUS ATTRIBUTION.] The agreement must provide 159.32 that registration with the central registration system and the 159.33 collection of sales and use taxes in the signatory states will 159.34 not be used as a factor in determining whether the seller has 159.35 nexus with a state for any tax. 159.36 (f) [LOCAL SALES AND USE TAXES.] The agreement must 160.1 provide for reduction of the burdens of complying with local 160.2 sales and use taxes through the following: 160.3 (1) restricting and eliminating variances between the state 160.4 and local tax bases; 160.5 (2) requiring states to administer any sales and use taxes 160.6 levied by local jurisdictions within the state so that sellers 160.7 collecting and remitting these taxes will not have to register 160.8 or file returns with, remit funds to, or be subject to 160.9 independent audits from local taxing jurisdictions; 160.10 (3) restricting the frequency of changes in the local sales 160.11 and use tax rates and setting effective dates for the 160.12 application of local jurisdictional boundary changes to local 160.13 sales and use taxes; and 160.14 (4) providing notice of changes in local sales and use tax 160.15 rates and of changes in the boundaries of local taxing 160.16 jurisdictions. 160.17 (g) [MONETARY ALLOWANCES.] The agreement must outline any 160.18 monetary allowances that are to be provided by the states to 160.19 sellers or certified service providers. The allowances must be 160.20 funded from the money collected by the seller or certified 160.21 service provider and must be subtracted by the seller or 160.22 certified service provider before remitting the tax collected to 160.23 the Department of Revenue. 160.24 (h) [STATE COMPLIANCE.] The agreement must require each 160.25 state to certify compliance with the terms of the agreement 160.26 prior to joining and to maintain compliance, under the laws of 160.27 the member state, with all provisions of the agreement while a 160.28 member. 160.29 (i) [CONSUMER PRIVACY.] The agreement must require each 160.30 state to adopt a uniform policy for certified service providers 160.31 that protects the privacy of consumers and maintains the 160.32 confidentiality of tax information. 160.33 (j) [ADVISORY COUNCILS.] The agreement must provide for 160.34 the appointment of an advisory council of private sector 160.35 representatives and an advisory council of nonmember state 160.36 representatives to consult with in the administration of the 161.1 agreement. 161.2 [EFFECTIVE DATE.] This section is effective the day 161.3 following final enactment. 161.4 Sec. 16. Minnesota Statutes 2002, section 469.1734, 161.5 subdivision 6, is amended to read: 161.6 Subd. 6. [SALES TAX EXEMPTION; EQUIPMENT; CONSTRUCTION 161.7 MATERIALS.] (a) The gross receipts from the sale of machinery 161.8 and equipment and repair parts are exempt from taxation under 161.9 chapter 297A, if the machinery and equipment: 161.10 (1) are used in connection with a trade or business; 161.11 (2) are placed in service in a city that is authorized to 161.12 designate a zone under section 469.1731, regardless of whether 161.13 the machinery and equipment are used in a zone; and 161.14 (3) have a useful life of 12 months or more. 161.15 (b) The gross receipts from the sale of construction 161.16 materials are exempt, if they are used to construct: 161.17 (1) a facility for use in a trade or business located in a 161.18 city that is authorized to designate a zone under section 161.19 469.1731, regardless of whether the facility is located in a 161.20 zone; or 161.21 (2) housing that is located in a zone. 161.22 The exemptions under this paragraph apply regardless of whether 161.23 the purchase is made by the owner, the user, or a contractor. 161.24 (c) A purchaser may claim an exemption under this 161.25 subdivision for tax on the purchases up to, but not exceeding: 161.26 (1) the amount of the tax credit certificates received from 161.27 the city, less 161.28 (2) any tax credit certificates used under the provisions 161.29 of subdivisions 4 and 5, and section 469.1732, subdivision 2. 161.30 (d) The tax on sales of items exempted under this 161.31 subdivision shall be imposed and collected as if the applicable 161.32 rate under section 297A.62 applied. Upon application by the 161.33 purchaser, on forms prescribed by the commissioner, a refund 161.34 equal to the tax paid shall be paid to the purchaser. The 161.35 application must include sufficient information to permit the 161.36 commissioner to verify the sales tax paid and the eligibility of 162.1 the claimant to receive the credit. No more than two 162.2 applications for refunds may be filed under this subdivision in 162.3 a calendar year. The provisions of section 289A.40 apply to the 162.4 refunds payable under this subdivision. There is annually 162.5 appropriated to the commissioner of revenue the amount required 162.6 to make the refunds, which must be deducted from the amount of 162.7 the city's allocation under section 469.169, subdivision 12, 162.8 that remains available and its limitation under section 469.1735. 162.9 The amount to be refunded shall bear interest at the rate in 162.10 section 270.76 from 90 days after the date the refund claim is 162.11 filed with the commissioner. 162.12 [EFFECTIVE DATE.] This section is effective for refund 162.13 claims filed on or after July 1, 2004. 162.14 Sec. 17. Minnesota Statutes 2003 Supplement, section 162.15 469.310, subdivision 11, is amended to read: 162.16 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 162.17 means a person carrying on a trade or business at a place of 162.18 business located within a job opportunity building zone. A 162.19 person is a qualified business only on those parcels of land for 162.20 which it has entered into a business subsidy agreement, as 162.21 required under section 469.313, with the appropriate local 162.22 government unit in which the parcels are located. 162.23 (b) A person that relocates a trade or business from 162.24 outside a job opportunity building zone into a zone is not a 162.25 qualified business, unless the business: 162.26 (1)(i) increases full-time employment in the first full 162.27 year of operation within the job opportunity building zone by at 162.28 least 20 percent measured relative to the operations that were 162.29 relocated and maintains the required level of employment for 162.30 each year the zone designation applies; or 162.31 (ii) makes a capital investment in the property located 162.32 within a zone equivalent to ten percent of the gross revenues of 162.33 operation that were relocated in the immediately preceding 162.34 taxable year; and 162.35 (2) enters a binding written agreement with the 162.36 commissioner that: 163.1 (i) pledges the business will meet the requirements of 163.2 clause (1); 163.3 (ii) provides for repayment of all tax benefits enumerated 163.4 under section 469.315 to the business under the procedures in 163.5 section 469.319, if the requirements of clause (1) are not met 163.6 for the taxable year or for taxes payable during the year in 163.7 which the requirements were not met; and 163.8 (iii) contains any other terms the commissioner determines 163.9 appropriate. 163.10 (c) A business is not a qualified business if, at its 163.11 location or locations in the zone, the business is primarily 163.12 engaged in making retail sales to purchasers who are physically 163.13 present at the business's zone location. 163.14 [EFFECTIVE DATE.] The amendment to paragraph (a) of this 163.15 section is effective retroactively from June 9, 2003. Paragraph 163.16 (c) of this section is effective the day following final 163.17 enactment and applies to any business entering a business 163.18 subsidy agreement for a job opportunity development zone after 163.19 that date. 163.20 Sec. 18. Minnesota Statutes 2003 Supplement, section 163.21 469.330, subdivision 11, is amended to read: 163.22 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 163.23 means a person carrying on a trade or business at a 163.24 biotechnology and health sciences industry facility located 163.25 within a biotechnology and health sciences industry zone. A 163.26 person is a qualified business only on those parcels of land for 163.27 which it has entered into a business subsidy agreement, as 163.28 required under section 469.333, with the appropriate local 163.29 government unit in which the parcels are located. 163.30 (b) A person that relocates a biotechnology and health 163.31 sciences industry facility from outside a biotechnology and 163.32 health sciences industry zone into a zone is not a qualified 163.33 business, unless the business: 163.34 (1)(i) increases full-time employment in the first full 163.35 year of operation within the biotechnology and health sciences 163.36 industry zone by at least 20 percent measured relative to the 164.1 operations that were relocated and maintains the required level 164.2 of employment for each year the zone designation applies; or 164.3 (ii) makes a capital investment in the property located 164.4 within a zone equivalent to ten percent of the gross revenues of 164.5 operation that were relocated in the immediately preceding 164.6 taxable year; and 164.7 (2) enters a binding written agreement with the 164.8 commissioner that: 164.9 (i) pledges the business will meet the requirements of 164.10 clause (1); 164.11 (ii) provides for repayment of all tax benefits enumerated 164.12 under section 469.336 to the business under the procedures in 164.13 section 469.340, if the requirements of clause (1) are not met; 164.14 and 164.15 (iii) contains any other terms the commissioner determines 164.16 appropriate. 164.17 [EFFECTIVE DATE.] This section is effective retroactively 164.18 from June 9, 2003. 164.19 Sec. 19. Minnesota Statutes 2003 Supplement, section 164.20 469.337, is amended to read: 164.21 469.337 [CORPORATE FRANCHISE TAX EXEMPTION.] 164.22 (a) A qualified business is exempt from taxation under 164.23 section 290.02, the alternative minimum tax under section 164.24 290.0921, and the minimum fee under section 290.0922, on the 164.25 portion of its income attributable to operations of a qualified 164.26 business within the biotechnology and health sciences industry 164.27 zone. This exemption is determined as follows: 164.28 (1) for purposes of the tax imposed under section 290.02, 164.29 by multiplying its taxable net income by its zone percentage and 164.30 subtracting the result in determining taxable income; 164.31 (2) for purposes of the alternative minimum tax under 164.32 section 290.0921, by multiplying its alternative minimum taxable 164.33 income by its zone percentage and reducing alternative minimum 164.34 taxable income by this amount; and 164.35 (3) for purposes of the minimum fee under section 290.0922, 164.36 by excluding zone property and payrollin the zonefrom the 165.1 computations of the fee. The qualified business is exempt from 165.2 the minimum fee if all of its property is located in the zone 165.3 and all of its payroll is zone payroll. 165.4 (b) No subtraction is allowed under this section in excess 165.5 of 20 percent of the sum of the corporation's biotechnology and 165.6 health sciences industry zone payroll and the adjusted basis of 165.7 the property at the time that the property is first used in the 165.8 biotechnology and health sciences industry zone by the 165.9 corporation. 165.10 (c) No reduction in tax is allowed in excess of the amount 165.11 allocated under section 469.335. 165.12 [EFFECTIVE DATE.] This section is effective for tax years 165.13 beginning after December 31, 2003. 165.14 Sec. 20. Minnesota Statutes 2002, section 473F.02, 165.15 subdivision 2, is amended to read: 165.16 Subd. 2. [AREA.] "Area" means the territory included 165.17 within the boundaries of Anoka, Carver, Dakota excluding the 165.18 city of Northfield, Hennepin, Ramsey, Scott excluding the city 165.19 of New Prague, and Washington Counties, excluding lands 165.20 constituting a major or an intermediate airport as defined under 165.21 section 473.625. 165.22 [EFFECTIVE DATE.] This section is effective for taxes 165.23 payable in 2005 and thereafter. 165.24 Sec. 21. [REPEALER.] 165.25 Laws 1975, chapter 287, section 5, and Laws 2003, chapter 165.26 127, article 9, section 9, subdivision 4, are repealed. 165.27 [EFFECTIVE DATE.] This section is effective without local 165.28 approval for taxes payable in 2005 and thereafter. 165.29 ARTICLE 9 165.30 MISCELLANEOUS 165.31 Section 1. Minnesota Statutes 2003 Supplement, section 165.32 16A.152, subdivision 2, is amended to read: 165.33 Subd. 2. [ADDITIONAL REVENUES; PRIORITY.] (a) If on the 165.34 basis of a forecast of general fund revenues and expenditures, 165.35 the commissioner of finance determines that there will be a 165.36 positive unrestricted budgetary general fund balance at the 166.1 close of the biennium, the commissioner of finance must allocate 166.2 money to the following accounts and purposes in priority order: 166.3 (1) the cash flow account established in subdivision 1 166.4 until that account reaches $350,000,000;and166.5 (2) the budget reserve account established in subdivision 166.6 1a until that account reaches $653,000,000; 166.7 (3) the amount necessary to eliminate all or a portion of 166.8 the property tax revenue recognition shift in section 123B.75, 166.9 subdivision 5; and 166.10 (4) the amount necessary to increase the aid payment 166.11 schedule for school district aids and credits payments in 166.12 section 127A.45 to not more than 90 percent. 166.13 (b) The amounts necessary to meet the requirements of this 166.14 section are appropriated from the general fund within two weeks 166.15 after the forecast is released or, in the case of transfers 166.16 under paragraph (a), clauses (3) and (4), as necessary to meet 166.17 the appropriations schedules otherwise established in statute. 166.18 (c) To the extent that a positive unrestricted budgetary 166.19 general fund balance is projected, appropriations under this 166.20 section must be made before any transfer is made under section 166.21 16A.1522. 166.22 (d) The commissioner of finance shall certify the total 166.23 dollar amount of the reductions under paragraph (a), clauses (3) 166.24 and (4), to the commissioner of education. The commissioner of 166.25 education shall increase the aid payment percentage and reduce 166.26 the property tax shift percentage by these amounts and apply 166.27 those reductions to the current fiscal year and thereafter. 166.28 [EFFECTIVE DATE.] This section is effective the day 166.29 following final enactment. 166.30 Sec. 2. Minnesota Statutes 2002, section 168A.02, 166.31 subdivision 2, is amended to read: 166.32 Subd. 2. [NO VEHICLE REGISTRATION WITHOUT TITLE.] The 166.33 department shall not register or renew the registration of a 166.34 vehicle for which a certificate of title is required unless a 166.35 certificate of title has been issued to the owneror, an 166.36 application therefor has been delivered to and approved by the 167.1 department, or the vehicle has a Minnesota certificate of title 167.2 and is being held for resale by a dealer under section 168A.11. 167.3 Sec. 3. Minnesota Statutes 2002, section 168A.11, 167.4 subdivision 1, is amended to read: 167.5 Subdivision 1. [APPLICATIONREQUIREMENTS UPON SUBSEQUENT 167.6 TRANSFER.] (a)IfA dealer who buys a vehicle and holds it for 167.7 resaleand procures the certificate of title from the owner, and167.8complies with subdivision 2 hereof, the dealerneed not apply 167.9 for a certificate of title, but. Upon transferring the vehicle 167.10 to another person, other than by the creation of a security 167.11 interest, the dealer shall promptly execute the assignment and 167.12 warranty of title by a dealer, showing the names and addresses 167.13 of the transferee and of any secured party holding a security 167.14 interest created or reserved at the time of the resale, and the 167.15 date of the security agreement in the spaces provided therefor 167.16 on the certificate of title or secure reassignment. 167.17 (b) If a dealer elects to apply for a certificate of title 167.18 on a vehicle held for resale, the dealer need not register the 167.19 vehicle but shall pay one month's registration tax. If a dealer 167.20 elects to apply for a certificate of title on a vehicle held for 167.21 resale, the department shall not place any legend on the title 167.22 that no motor vehicle sales tax was paid by the dealer, but may 167.23 indicate on the title whether the vehicle is a new or used 167.24 vehicle. 167.25 (c) With respect to motor vehicles subject to the 167.26 provisions of section 325E.15, the dealer shall also, in the 167.27 space provided therefor on the certificate of title or secure 167.28 reassignment, state the true cumulative mileage registered on 167.29 the odometer or that the exact mileage is unknown if the 167.30 odometer reading is known by the transferor to be different from 167.31 the true mileage. 167.32(c)(d) The transferee shall complete the application for 167.33 title section on the certificate of title or separate title 167.34 application form prescribed by the department. The dealer shall 167.35 mail or deliver the certificate to the registrar or deputy 167.36 registrar with the transferee's application for a new 168.1 certificate and appropriate taxes and fees, within ten business 168.2 days. 168.3 (e) With respect to vehicles sold to buyers who will remove 168.4 the vehicle from this state, the dealer shall remove any license 168.5 plates from the vehicle, issue a 31-day temporary permit 168.6 pursuant to section 168.091, and notify the registrar within 48 168.7 hours of the sale that the vehicle has been removed from this 168.8 state. The notification must be made in an electronic format 168.9 prescribed by the registrar. The dealer may contract with a 168.10 deputy registrar for the notification of sale to an out-of-state 168.11 buyer. The deputy registrar may charge a fee not to exceed $7 168.12 per transaction to provide this service. 168.13 Sec. 4. Minnesota Statutes 2002, section 168A.11, 168.14 subdivision 2, is amended to read: 168.15 Subd. 2. [PURCHASE RECEIPTNOTIFICATION ON VEHICLE HELD 168.16 FOR RESALE.]A dealer, on buying a vehicle for which the seller168.17does not present a certificate of title, shall at the time of168.18taking delivery of the vehicle execute a purchase receipt for168.19the vehicle in a format designated by the department, and168.20deliver a copy to the seller. In a format and at a time168.21prescribed by the registrar, the dealer shall notify the168.22registrar that the vehicle is being held for resale by the168.23dealer.Within 48 hours of acquiring a vehicle titled and 168.24 registered in Minnesota, a dealer shall notify the registrar 168.25 that the dealership is holding the vehicle for resale. The 168.26 notification must be made electronically as prescribed by the 168.27 registrar. The dealer may contract this service to a deputy 168.28 registrar and the registrar may charge a fee not to exceed $7 168.29 per transaction to provide this service. 168.30 Sec. 5. Minnesota Statutes 2002, section 168A.11, is 168.31 amended by adding a subdivision to read: 168.32 Subd. 4. [CENTRALIZED RECORD KEEPING.] Three or more new 168.33 motor vehicle dealers under common management or control may 168.34 designate to the department in writing a single location for 168.35 maintaining the records required by this section that are more 168.36 than 12 months old. The records must be open to inspection by a 169.1 representative of the department or a peace officer during 169.2 reasonable business hours. The location must be at the 169.3 established place of business of one of the affiliated dealers 169.4 or at a location within Minnesota not further than 25 miles from 169.5 the established place of business of one of the affiliated 169.6 dealers. 169.7 Sec. 6. Minnesota Statutes 2002, section 240.30, is 169.8 amended by adding a subdivision to read: 169.9 Subd. 11. [FRANCHISE FEE.] As a condition of operating a 169.10 card club under this section, the licensee must pay a fee to the 169.11 commission equal to five percent of the gross revenues, less any 169.12 refunds, for charges imposed under subdivision 4. Payment, 169.13 collection, and administration of the fee must be made in the 169.14 same manner and under the terms provided under section 240.15 169.15 for the tax on pari-mutuel pools. The commission shall deposit 169.16 all of the revenues from the fee in the state treasury and 169.17 amounts deposited must be credited to the general fund. The 169.18 amount of the fee under this subdivision does not reduce the 169.19 obligation to set aside revenues from the card club under 169.20 section 240.135. 169.21 [EFFECTIVE DATE.] This section is effective for charges and 169.22 revenues received after June 30, 2004. 169.23 Sec. 7. Minnesota Statutes 2003 Supplement, section 169.24 270.30, subdivision 1, is amended to read: 169.25 Subdivision 1. [SCOPE.](a)This section applies to a 169.26 person whooffers,provides, or facilitates the provision of169.27refund anticipation loans, as part of or in connection with the169.28provision oftax preparation services. 169.29(b) This section does not apply to:169.30(1) a tax preparer who provides tax preparation services169.31for fewer than six clients in a calendar year;169.32(2) the provision by a person of tax preparation services169.33to a spouse, parent, grandparent, child, or sibling; and169.34(3) the provision of services by an employee for an169.35employer.169.36 Sec. 8. Minnesota Statutes 2003 Supplement, section 170.1 270.30, subdivision 5, is amended to read: 170.2 Subd. 5. [ITEMIZED BILL REQUIRED.] A tax preparer who 170.3 provides services for a fee or other consideration must provide 170.4 an itemized statement of the charges for services, at least 170.5 separately stating the charges for: 170.6 (1) return preparation; 170.7 (2) electronic filing; and 170.8 (3) providing or facilitating a refund anticipation loan. 170.9 Sec. 9. Minnesota Statutes 2003 Supplement, section 170.10 270.30, subdivision 8, is amended to read: 170.11 Subd. 8. [EXEMPTIONS; ENFORCEMENT PROVISIONS.] The 170.12 provisions of subdivisions 3, 6, and 7 do not apply to: 170.13 (1) an attorney admitted to practice under section 481.01; 170.14 (2) a certified public accountant holding a certificate 170.15 under section 326A.04 or a person issued a permit to practice 170.16 under section 326A.05; 170.17 (3) a person designated as a registered accounting 170.18 practitioner under Minnesota Rules, part 1105.6600, or a 170.19 registered accounting practitioner firm issued a permit under 170.20 Minnesota Rules, part 1105.7100; 170.21 (4) an enrolled agent who has passed the special enrollment 170.22 examination administered by the Internal Revenue Service;and170.23 (5) any fiduciary, or the regular employees of a fiduciary, 170.24 while acting on behalf of the fiduciary estate, the testator, 170.25 trustor, grantor, or beneficiaries of them; 170.26 (6) a tax preparer who provides tax preparation services 170.27 for fewer than six clients in a calendar year; 170.28 (7) a person who provides tax preparation services to a 170.29 spouse, parent, grandparent, child, or sibling; and 170.30 (8) an employee who provides tax preparation services for 170.31 an employer. 170.32 Sec. 10. Minnesota Statutes 2003 Supplement, section 170.33 291.03, subdivision 1, is amended to read: 170.34 Subdivision 1. [TAX AMOUNT.] (a) The tax imposed shall be 170.35 an amount equal to the proportion of the maximum credit computed 170.36 under section 2011 of the Internal Revenue Code, as amended 171.1 through December 31, 2000, for state death taxes as the 171.2 Minnesota gross estate bears to the value of the federal gross 171.3 estate. The tax determined under this paragraph shall not be 171.4 greater than the federal estate tax computed under section 2001 171.5 of the Internal Revenue Code after the allowance of the federal 171.6 credits allowed under section 2010 of the Internal Revenue Code 171.7 of 1986, as amended through December 31, 2000. 171.8 (b) For the purposes of this section, the following are not 171.9 allowed in computing the tax under this chapter: 171.10 (1) expenses which are deducted for federal income tax 171.11 purposes under section 642(g) of the Internal Revenue Code as 171.12 amended through December 31,2002, are not allowable in171.13computing the tax under this chapter.2003; and 171.14 (2) state death taxes which are deducted under section 2058 171.15 of the Internal Revenue Code as amended through December 31, 171.16 2003; 171.17 (c) For qualified terminable interest property, as defined 171.18 in section 2056(b)(7) of the Internal Revenue Code, the executor 171.19 may make an election for purposes of the tax under this chapter 171.20 that is different than the amount elected for federal estate tax 171.21 purposes. The election must be made on the return for tax under 171.22 this chapter and is irrevocable. All tax under this chapter 171.23 must be determined using the qualified terminable interest 171.24 property election made on the Minnesota return. 171.25 [EFFECTIVE DATE.] This section is effective for decedents 171.26 dying after December 31, 2004. 171.27 Sec. 11. Minnesota Statutes 2002, section 298.24, 171.28 subdivision 1, is amended to read: 171.29 Subdivision 1. (a) For concentrate produced in 2001, 2002, 171.30 and 2003, there is imposed upon taconite and iron sulphides, and 171.31 upon the mining and quarrying thereof, and upon the production 171.32 of iron ore concentrate therefrom, and upon the concentrate so 171.33 produced, a tax of $2.103 per gross ton of merchantable iron ore 171.34 concentrate produced therefrom. 171.35 (b) For concentrates produced in 2004 and subsequent years, 171.36 the tax rate shall be equal to the preceding year's tax rate 172.1 plus an amount equal to the preceding year's tax rate multiplied 172.2 by the percentage increase in the implicit price deflator from 172.3 the fourth quarter of the second preceding year to the fourth 172.4 quarter of the preceding year. "Implicit price deflator" means 172.5 the implicit price deflator for the gross domestic product 172.6 prepared by the Bureau of Economic Analysis of the United States 172.7 Department of Commerce. 172.8 (c) On concentrates produced in 1997 and thereafter, an 172.9 additional tax is imposed equal to three cents per gross ton of 172.10 merchantable iron ore concentrate for each one percent that the 172.11 iron content of the product exceeds 72 percent, when dried at 172.12 212 degrees Fahrenheit. 172.13 (d) The tax shall be imposed on the average of the 172.14 production for the current year and the previous two years. The 172.15 rate of the tax imposed will be the current year's tax rate. 172.16 This clause shall not apply in the case of the closing of a 172.17 taconite facility if the property taxes on the facility would be 172.18 higher if this clause and section 298.25 were not applicable. 172.19 (e) If the tax or any part of the tax imposed by this 172.20 subdivision is held to be unconstitutional, a tax of $2.103 per 172.21 gross ton of merchantable iron ore concentrate produced shall be 172.22 imposed. 172.23 (f) Consistent with the intent of this subdivision to 172.24 impose a tax based upon the weight of merchantable iron ore 172.25 concentrate, the commissioner of revenue may indirectly 172.26 determine the weight of merchantable iron ore concentrate 172.27 included in fluxed pellets by subtracting the weight of the 172.28 limestone, dolomite, or olivine derivatives or other basic flux 172.29 additives included in the pellets from the weight of the 172.30 pellets. For purposes of this paragraph, "fluxed pellets" are 172.31 pellets produced in a process in which limestone, dolomite, 172.32 olivine, or other basic flux additives are combined with 172.33 merchantable iron ore concentrate. No subtraction from the 172.34 weight of the pellets shall be allowed for binders, mineral and 172.35 chemical additives other than basic flux additives, or moisture. 172.36 (g)(1) Notwithstanding any other provision of this 173.1 subdivision, for the first two years of a plant's commercial 173.2 production of direct reduced ore, no tax is imposed under this 173.3 section. As used in this paragraph, "commercial production" is 173.4 production of more than 50,000 tons of direct reduced ore in the 173.5 current year or in any prior year, and "direct reduced ore" is 173.6 ore that results in a product that has an iron content of at 173.7 least 75 percent. For the third year of a plant's commercial 173.8 production of direct reduced ore, the rate to be applied to 173.9 direct reduced ore is 25 percent of the rate otherwise 173.10 determined under this subdivision. For the fourth 173.11suchcommercial production year, the rate is 50 percent of the 173.12 rate otherwise determined under this subdivision; for the 173.13 fifthsuchcommercial production year, the rate is 75 percent of 173.14 the rate otherwise determined under this subdivision; and for 173.15 all subsequent commercial production years, the full rate is 173.16 imposed. 173.17 (2) Subject to clause (1), production of direct reduced ore 173.18 in this state is subject to the tax imposed by this section, but 173.19 if that production is not produced by a producer of taconite or 173.20 iron sulfides, the production of taconite or iron sulfides 173.21 consumed in the production of direct reduced iron in this state 173.22 is not subject to the tax imposed by this section on taconite or 173.23 iron sulfides. 173.24 (3) Notwithstanding any other provision of this 173.25 subdivision, no tax is imposed under this section during the 173.26 facility's noncommercial production of direct reduced ore. 173.27 [EFFECTIVE DATE.] This section is effective for direct 173.28 reduced ore produced after the date of final enactment. 173.29 Sec. 12. Minnesota Statutes 2003 Supplement, section 173.30 469.335, is amended to read: 173.31 469.335 [APPLICATION FOR TAX BENEFITS.] 173.32 (a) To claim a tax credit or exemption against a state tax 173.33 under section 469.336, clauses (2) through (5), a business must 173.34 apply to the commissioner for a tax credit certificate. As a 173.35 condition of its application, the business must agree to furnish 173.36 information to the commissioner that is sufficient to verify the 174.1 eligibility for any credits or exemptions claimed. The total 174.2 amount of the state tax credits and exemptions allowed for the 174.3 specified period may not exceed the amount of the tax credit 174.4 certificates provided by the commissioner to the business. The 174.5 commissioner must verify to the commissioner of revenue the 174.6 amount of tax exemptions or credits for which each business is 174.7 eligible. 174.8 (b) A tax credit certificate issued under this section may 174.9 specify the particular tax exemptions or credits against a state 174.10 tax that the qualified business is eligible to claim under 174.11 section 469.336, clauses (2) through (5), and the amount of each 174.12 exemption or credit allowed. 174.13 (c) The commissioner may issue$1,000,000$2,000,000 of tax 174.14 credits or exemptions in fiscal year 2004. Any tax credits or 174.15 exemptions not awarded in fiscal year 2004 may be awarded in 174.16 fiscal year 2005. 174.17 (d) A qualified business must use the tax credits or tax 174.18 exemptions granted under this section by the later of the end of 174.19 the state fiscal year or the taxpayer's tax year in which the 174.20 credits or exemptions are granted. 174.21 [EFFECTIVE DATE.] This section is effective the day 174.22 following final enactment. 174.23 Sec. 13. Laws 2000, chapter 391, section 1, subdivision 1, 174.24 is amended to read: 174.25 Subdivision 1. [TASK FORCE; MEMBERSHIP.] (a) The secretary 174.26 of state shallestablishserve as the chair of a task force of 174.27 15 members to study and make recommendations for the 174.28 establishment of a system for the electronic filing and 174.29 recording of real estate documents. Members who are appointed 174.30 under this section shall serve for a term of two years 174.31 commencing on June 30, 2004. Upon expiration of their term, 174.32 members may be reappointed for an additional year by their 174.33 appointing authority. Two county board members to be appointed 174.34 by the Association of Minnesota Counties, including one board 174.35 member from within the seven-county metropolitan area, as 174.36 designated under Minnesota Statutes, section 16E.02, shall serve 175.1 as the vice-chairs of the task force. The task force must 175.2 include: 175.3 (1)two members of the senate appointed by the subcommittee175.4on committees of the committee on rules and administration and175.5two members of the house appointed by the speaker of the house;175.6(2) representatives of county recorders and otherthree 175.7 county government officials appointed by the Association of 175.8 County Officers, including one county recorder, one county 175.9 auditor, and one county treasurer; 175.10 (2) the commissioner of administration or the designee of 175.11 the commissioner; 175.12 (3) seven members from the private sector appointed by the 175.13 chair, including representatives of: 175.14 (i) real estate attorneys, real estate agents, and public 175.15 and private land surveyors; 175.16(4) representatives of(ii) title companies, mortgage 175.17 companies, and other real estate lenders; and 175.18(5) a representative of the Minnesota historical society175.19and other state and local government archivists;175.20(6)(iii) technical and industry experts in electronic 175.21 commerce and electronic records management and preservation; and 175.22(7) representatives of federal government-sponsored175.23enterprises active in the real estate industry;175.24(8) the commissioner of revenue; and175.25(9) other members appointed by the secretary of state175.26 (4) a representative selected by the Minnesota Historical 175.27 Society. 175.28 (b) The task force may refer items to subcommittees. The 175.29 chair shall appoint the membership of a subcommittee. An 175.30 individual may be appointed to serve on a subcommittee without 175.31 serving on the task force. 175.32 (c) Any member of the task force representing a 175.33 jurisdiction or private interest receiving funding from the task 175.34 force in any way must resign from the task force and be replaced 175.35 by the member's appointing authority. 175.36 Sec. 14. Laws 2000, chapter 391, section 1, subdivision 2, 176.1 as amended by Laws 2002, chapter 365, section 5, is amended to 176.2 read: 176.3 Subd. 2. [STUDY AND RECOMMENDATIONS.] The task force shall 176.4 study and make recommendations regarding implementation of a 176.5 system for electronic filing and recording of real estate 176.6 documents and shall consider: 176.7 (1) technology and computer needs; 176.8 (2) legal issues such as authenticity, security, timing and 176.9 priority of recordings, and the relationship between electronic 176.10 and paper recording systems; 176.11 (3) cost-effectiveness of electronic recording systems; 176.12 (4) timetable and plan for implementing an electronic 176.13 recording system, considering types of documents and entities 176.14 using the system and volume of recordings; 176.15 (5) permissive versus mandatory systems; and 176.16 (6) other relevant issues identified by the task force. 176.17 The task force shall submit a report to the legislature by 176.18 January 15, 2001, outlining a proposed work plan and budget for 176.19 consideration by the legislature. By January 15, 2005, the task 176.20 force shall provide an updated report to the legislature 176.21 containing a revised work plan and budget. The task force 176.22 expires June 30,20042007. 176.23 Sec. 15. Laws 2001, First Special Session chapter 10, 176.24 article 2, section 77, the effective date, as amended by Laws 176.25 2002, chapter 365, section 7, is amended to read: 176.26 [EFFECTIVE DATE.] This section is effective only between 176.27 August 1, 2001, and June 30,20042007. 176.28 Sec. 16. Laws 2002, chapter 365, section 9, is amended to 176.29 read: 176.30 Sec. 9. [EFFECTIVE DATES AND APPLICATION.] 176.31 The amendments made by sections 3 and 4 are effective until 176.32 June 30,20042007, for documents last acknowledged ten or more 176.33 days after the date of final enactment of this act; or filed 45 176.34 days or more after the date of final enactment. Sections 6 to 8 176.35 are effective the day following final enactment. 176.36 Sec. 17. Laws 2003, First Special Session chapter 1, 177.1 article 2, section 123, is amended to read: 177.2 Sec. 123. [REAL ESTATE FILING SURCHARGE.] 177.3 All funds collected during the fiscal year ending June 30, 177.4 2007, the fiscal year ending June 30, 2006, the fiscal year 177.5 ending June 30, 2005, the fiscal year ending June 30, 2004, and 177.6 funds collected in the fiscal year ending June 30, 2003, that 177.7 carry forward into the fiscal year ending June 30, 2004, 177.8 pursuant to the additional 50-cent surcharges imposed by Laws 177.9 2001, First Special Session chapter 10, article 2, section 77, 177.10 and Laws 2002, chapter 365, as amended by this act, are 177.11 appropriated to the legislative coordinating commission for the 177.12 real estate task force established by Laws 2000, chapter 391, 177.13 for the purposes set forth in Laws 2001, First Special Session 177.14 chapter 10, article 2, sections 98 to 101. $25,000 in each 177.15 fiscal year from those funds are to be retained by the 177.16 legislative coordinating commission for the services described 177.17 in Laws 2001, First Special Session chapter 10, article 2, 177.18 section 99. 177.19 Sec. 18. [TASK FORCE TRANSITION.] 177.20 The members of the electronic real estate document task 177.21 force created in Laws 2000, chapter 391, section 1, who are 177.22 serving on the task force on the effective date of this act 177.23 shall end their service on that date unless reappointed or 177.24 designated under section 13. 177.25 Sec. 19. [GAMING MACHINES; IN-LIEU TAX; CONTRACTS.] 177.26 If a bill providing for gaming machines at a racetrack is 177.27 enacted in a 2004 regular or special session, then, 177.28 notwithstanding any other law to the contrary: 177.29 (1) from July 1, 2005, to June 30, 2007, the state lottery 177.30 must on or before the 20th day of each month transmit to the 177.31 commissioner of revenue an amount equal to at least the adjusted 177.32 gross revenue from the operation of gaming machines multiplied 177.33 by 36.7 percent; and 177.34 (2) from July 1, 2005, to June 30, 2007, contracts for the 177.35 location of gaming machines must provide for compensation to the 177.36 racetrack in an amount equal to 48.3 percent of adjusted gross 178.1 gaming machine revenue. 178.2 [EFFECTIVE DATE.] This section is effective at the same 178.3 time as any bill that provides for gaming machines at a 178.4 racetrack and is enacted in a 2004 regular or special session. 178.5 Sec. 20. [FUNDS TRANSFER.] 178.6 Subdivision 1. [BUDGET RESERVE TO CASH FLOW.] On July 2, 178.7 2004, the commissioner of finance shall transfer $350,000,000 178.8 from the general fund budget reserve account under Minnesota 178.9 Statutes, section 16A.152, subdivision 1a, to the cash flow 178.10 reserve account under Minnesota Statutes, section 16A.152, 178.11 subdivision 1. 178.12 Subd. 2. [GENERAL FUND TO BUDGET RESERVE.] On or before 178.13 July 2, 2004, the commissioner of finance shall transfer 178.14 $8,566,000 from the general fund to the budget reserve account 178.15 under Minnesota Statutes, section 16A.152, subdivision 1a. 178.16 Sec. 21. [FEDERAL FUNDS.] 178.17 The first $167,000,000 of the general fund appropriation in 178.18 fiscal year 2004 for general education aid is from general 178.19 revenue sharing with states and their local governments provided 178.20 to Minnesota in the 2003 Jobs and Growth Tax Relief 178.21 Reconciliation Act. 178.22 Sec. 22. [APPROPRIATIONS.] 178.23 Subdivision 1. [TAX COMPLIANCE INITIATIVE.] (a) $3,678,000 178.24 is appropriated to the commissioner of revenue in fiscal year 178.25 2005 for additional activities to identify and collect tax 178.26 liabilities from individuals and businesses that currently do 178.27 not pay all taxes owed. $800,000 of this amount is for 178.28 corporate compliance related to foreign operating corporations. 178.29 $120,000 of this amount is considered a onetime appropriation. 178.30 The base for this additional activity is $3,558,000 per year. 178.31 (b) This initiative is expected to result in new general 178.32 fund revenues of $16,000,000 for the biennium ending June 30, 178.33 2005, and $16,000,000 annually thereafter. 178.34 (c) The commissioner must provide written reports to the 178.35 chairs of the house Taxes and senate Taxes Committees, and to 178.36 the chairs of the house and senate committees with jurisdiction 179.1 over state government finance, in compliance with Minnesota 179.2 Statutes, sections 3.195 and 3.197, by March 1, 2005, and 179.3 January 15, 2006. The reports must address the following 179.4 performance indicators: 179.5 (1) the number of corporations noncompliant with the 179.6 corporate tax system each year and the percentage and dollar 179.7 amounts of valid tax liabilities collected; 179.8 (2) the number of businesses noncompliant with the sales 179.9 and use tax system and the percentage and dollar amounts of the 179.10 valid tax liabilities collected; and 179.11 (3) the number of insurers, agents, or others that are 179.12 noncompliant with insurance tax statutes and cases resolved and 179.13 the percentage and dollar amounts of valid tax liabilities 179.14 collected. 179.15 The reports must also identify base level expenditures and 179.16 staff positions related to compliance and audit activities, 179.17 including baseline information as of January 1, 2002. The 179.18 reports must provide this information at the budget activity 179.19 level. 179.20 Subd. 2. [PROPERTY TAX REFUND STUDY.] $50,000 is 179.21 appropriated from the general fund for fiscal year 2005 to the 179.22 commissioner of revenue for the study of the percentage that 179.23 property taxes constitute of rent. This is a onetime 179.24 appropriation and is not added to the base. 179.25 Subd. 3. [INCOME AND HOME VALUE DATASET.] $50,000 is 179.26 appropriated from the general fund for fiscal year 2005 to the 179.27 commissioner of revenue to prepare a dataset linking homeowners' 179.28 incomes and the estimated market values of their homes. The 179.29 commissioner shall prepare the dataset using Minnesota tax data 179.30 gathered directly from taxpayers, counties, and sources other 179.31 than the Internal Revenue Service. This is a onetime 179.32 appropriation and is not added to the base. 179.33 Sec. 23. [EFFECTIVE DATE.] 179.34 Sections 13 to 18 are effective the day following final 179.35 enactment. 179.36 ARTICLE 10 180.1 PROPERTY TAXES TECHNICAL 180.2 Section 1. Minnesota Statutes 2003 Supplement, section 180.3 4A.02, is amended to read: 180.4 4A.02 [STATE DEMOGRAPHER.] 180.5 (a) The director shall appoint a state demographer. The 180.6 demographer must be professionally competent in demography and 180.7 must possess demonstrated ability based upon past performance. 180.8 (b) The demographer shall: 180.9 (1) continuously gather and develop demographic data 180.10 relevant to the state; 180.11 (2) design and test methods of research and data 180.12 collection; 180.13 (3) periodically prepare population projections for the 180.14 state and designated regions and periodically prepare 180.15 projections for each county or other political subdivision of 180.16 the state as necessary to carry out the purposes of this 180.17 section; 180.18 (4) review, comment on, and prepare analysis of population 180.19 estimates and projections made by state agencies, political 180.20 subdivisions, other states, federal agencies, or nongovernmental 180.21 persons, institutions, or commissions; 180.22 (5) serve as the state liaison with the United States 180.23 Bureau of the Census, coordinate state and federal demographic 180.24 activities to the fullest extent possible, and aid the 180.25 legislature in preparing a census data plan and form for each 180.26 decennial census; 180.27 (6) compile an annual study of population estimates on the 180.28 basis of county, regional, or other political or geographical 180.29 subdivisions as necessary to carry out the purposes of this 180.30 section and section 4A.03; 180.31 (7) by January 1 of each year, issue a report to the 180.32 legislature containing an analysis of the demographic 180.33 implications of the annual population study and population 180.34 projections; 180.35 (8) prepare maps for all counties in the state, all 180.36 municipalities with a population of 10,000 or more, and other 181.1 municipalities as needed for census purposes, according to scale 181.2 and detail recommended by the United States Bureau of the 181.3 Census, with the maps of cities showing precinct boundaries; 181.4 (9) prepare an estimate of population and of the number of 181.5 households for each governmental subdivision for which the 181.6 Metropolitan Council does not prepare an annual estimate, and 181.7 convey the estimates to the governing body of each political 181.8 subdivision byMayJune 1 of each year; 181.9 (10) direct, under section 414.01, subdivision 14, and 181.10 certify population and household estimates of annexed or 181.11 detached areas of municipalities or towns after being notified 181.12 of the order or letter of approval by the director; 181.13 (11) prepare, for any purpose for which a population 181.14 estimate is required by law or needed to implement a law, a 181.15 population estimate of a municipality or town whose population 181.16 is affected by action under section 379.02 or 414.01, 181.17 subdivision 14; and 181.18 (12) prepare an estimate of average household size for each 181.19 statutory or home rule charter city with a population of 2,500 181.20 or more byMayJune 1 of each year. 181.21 (c) A governing body may challenge an estimate made under 181.22 paragraph (b) by filing their specific objections in writing 181.23 with the state demographer by June1024. If the challenge does 181.24 not result in an acceptable estimateby June 24, the governing 181.25 body may have a special census conducted by the United States 181.26 Bureau of the Census. The political subdivision must notify the 181.27 state demographer by July 1 of its intent to have the special 181.28 census conducted. The political subdivision must bear all costs 181.29 of the special census. Results of the special census must be 181.30 received by the state demographer by the next April 15 to be 181.31 used in that year'sMayJune 1 estimate to the political 181.32 subdivision under paragraph (b). 181.33 (d) The state demographer shall certify the estimates of 181.34 population and number of households to the commissioner of 181.35 revenue by July 15 each year, including any estimates still 181.36 under objection. No changes in population or household 182.1 estimates made after July 15 in an aid calculation year shall be 182.2 considered in determining aids under sections 477A.011 to 182.3 477A.014. Clerical errors in certification or use of the 182.4 estimates and counts established as of July 15 in the aid 182.5 calculation year are subject to correction under section 182.6 477A.014. 182.7 [EFFECTIVE DATE.] This section is effective the day 182.8 following final enactment. 182.9 Sec. 2. Minnesota Statutes 2003 Supplement, section 182.10 168A.05, subdivision 1a, is amended to read: 182.11 Subd. 1a. [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 182.12 PAYMENT.] In the case of a manufactured home as defined in 182.13 section 327.31, subdivision 6, the department shall not issue a 182.14 certificate of title unless the application under section 182.15 168A.04 is accompanied with a statement from the county auditor 182.16 or county treasurer where the manufactured home is presently 182.17 located, stating that all manufactured home personal property 182.18 taxes levied on the unit in the name of the current owner at the 182.19 time of transfer have been paid. For this purpose, manufactured 182.20 home personal property taxes are treated as levied on January 1 182.21 of the payable year. 182.22 [EFFECTIVE DATE.] This section is effective the day 182.23 following final enactment. 182.24 Sec. 3. Minnesota Statutes 2002, section 270B.12, 182.25 subdivision 9, is amended to read: 182.26 Subd. 9. [COUNTY ASSESSORS; HOMESTEAD APPLICATION, 182.27 DETERMINATION, AND INCOME TAX STATUS.] (a) If, as a result of an 182.28 audit, the commissioner determines that a person is a Minnesota 182.29 nonresident or part-year resident for income tax purposes, the 182.30 commissioner may disclose the person's name, address, and Social 182.31 Security number to the assessor of any political subdivision in 182.32 the state, when there is reason to believe that the person may 182.33 have claimed or received homestead property tax benefits for a 182.34 corresponding assessment year in regard to property apparently 182.35 located in the assessor's jurisdiction. 182.36 (b) To the extent permitted by section 273.124, subdivision 183.1 1, paragraph (a), the Department of Revenue may verify to a 183.2 county assessor whether an individual who is requesting or 183.3 receiving a homestead classification has filed a Minnesota 183.4 income tax return as a resident for the most recent taxable year 183.5 for which the information is available. 183.6 [EFFECTIVE DATE.] This section is effective the day 183.7 following final enactment. 183.8 Sec. 4. Minnesota Statutes 2002, section 272.01, 183.9 subdivision 2, is amended to read: 183.10 Subd. 2. (a) When any real or personal property which is 183.11 exempt from ad valorem taxes, and taxes in lieu thereof, is 183.12 leased, loaned, or otherwise made available and used by a 183.13 private individual, association, or corporation in connection 183.14 with a business conducted for profit, there shall be imposed a 183.15 tax, for the privilege of so using or possessing such real or 183.16 personal property, in the same amount and to the same extent as 183.17 though the lessee or user was the owner of such property. 183.18 (b) The tax imposed by this subdivision shall not apply to: 183.19 (1) property leased or used as a concession in or relative 183.20 to the use in whole or part of a public park, market, 183.21 fairgrounds, port authority, economic development authority 183.22 established under chapter 469, municipal auditorium, municipal 183.23 parking facility, municipal museum, or municipal stadium; 183.24 (2) property of an airport owned by a city, town, county, 183.25 or group thereof which is: 183.26 (i) leased to or used by any person or entity including a 183.27 fixed base operator; and 183.28 (ii) used as a hangar for the storage or repair of aircraft 183.29 or to provide aviation goods, services, or facilities to the 183.30 airport or general public; 183.31 the exception from taxation provided in this clause does not 183.32 apply to: 183.33 (i) property located at an airport owned or operated by the 183.34 Metropolitan Airports Commission or by a city of over 50,000 183.35 population according to the most recent federal census or such a 183.36 city's airport authority; 184.1 (ii) hangars leased by a private individual, association, 184.2 or corporation in connection with a business conducted for 184.3 profit other than an aviation-related business; or 184.4 (iii) facilities leased by a private individual, 184.5 association, or corporation in connection with a business for 184.6 profit, that consists of a major jet engine repair facility 184.7 financed, in whole or part, with the proceeds of state bonds and 184.8 located in a tax increment financing district; 184.9 (3) property constituting or used as a public pedestrian 184.10 ramp or concourse in connection with a public airport;or184.11 (4) property constituting or used as a passenger check-in 184.12 area or ticket sale counter, boarding area, or luggage claim 184.13 area in connection with a public airport but not the airports 184.14 owned or operated by the Metropolitan Airports Commission or 184.15 cities of over 50,000 population or an airport authority 184.16 therein. Real estate owned by a municipality in connection with 184.17 the operation of a public airport and leased or used for 184.18 agricultural purposes is not exempt; 184.19 (5) property leased, loaned, or otherwise made available to 184.20 a private individual, corporation, or association under a 184.21 cooperative farming agreement made pursuant to section 97A.135; 184.22 or 184.23 (6) property leased, loaned, or otherwise made available to 184.24 a private individual, corporation, or association under section 184.25 272.68, subdivision 4. 184.26 (c) Taxes imposed by this subdivision are payable as in the 184.27 case of personal property taxes and shall be assessed to the 184.28 lessees or users of real or personal property in the same manner 184.29 as taxes assessed to owners of real or personal property, except 184.30 that such taxes shall not become a lien against the property. 184.31 When due, the taxes shall constitute a debt due from the lessee 184.32 or user to the state, township, city, county, and school 184.33 district for which the taxes were assessed and shall be 184.34 collected in the same manner as personal property taxes. If 184.35 property subject to the tax imposed by this subdivision is 184.36 leased or used jointly by two or more persons, each lessee or 185.1 user shall be jointly and severally liable for payment of the 185.2 tax. 185.3 (d) The tax on real property of the state or any of its 185.4 political subdivisions that is leased by a private individual, 185.5 association, or corporation and becomes taxable under this 185.6 subdivision or other provision of law must be assessed and 185.7 collected as a personal property assessment. The taxes do not 185.8 become a lien against the real property. 185.9 [EFFECTIVE DATE.] This section is effective the day 185.10 following final enactment. 185.11 Sec. 5. Minnesota Statutes 2002, section 272.02, 185.12 subdivision 1a, is amended to read: 185.13 Subd. 1a. [LIMITATIONS ON EXEMPTIONS.] The exemptions 185.14 granted by subdivision 1 are subject to the limits contained in 185.15 the other subdivisions of this section, section 272.025,or185.16273.13, subdivision 25, paragraph (c), clause (1) or (2), or185.17paragraph (d), clause (2)and all other provisions of applicable 185.18 law. 185.19 [EFFECTIVE DATE.] This section is effective the day 185.20 following final enactment. 185.21 Sec. 6. Minnesota Statutes 2002, section 272.02, 185.22 subdivision 7, is amended to read: 185.23 Subd. 7. [INSTITUTIONS OF PUBLIC CHARITY.] Institutions of 185.24 purely public charity are exemptexcept parcels of property185.25containing structures and the structures described in section185.26273.13, subdivision 25, paragraph (e), other than those that185.27qualify for exemption under subdivision 26. In determining 185.28 whether rental housing property qualifies for exemption under 185.29 this subdivision, the following are not gifts or donations to 185.30 the owner of the rental housing: 185.31 (1) rent assistance provided by the government to or on 185.32 behalf of tenants, and 185.33 (2) financing assistance or tax credits provided by the 185.34 government to the owner on condition that specific units or a 185.35 specific quantity of units be set aside for persons or families 185.36 with certain income characteristics. 186.1 [EFFECTIVE DATE.] This section is effective for taxes 186.2 payable in 2004 and thereafter. 186.3 Sec. 7. Minnesota Statutes 2002, section 272.02, is 186.4 amended by adding a subdivision to read: 186.5 Subd. 68. [PROPERTY SUBJECT TO TACONITE PRODUCTION TAX OR 186.6 NET PROCEEDS TAX.] (a) Except for mineral interests taxed under 186.7 section 273.165, and except for lands taxed under section 186.8 298.26, real and personal property described in section 298.25 186.9 is exempt to the extent the tax on taconite and iron sulphides 186.10 under section 298.24 is described in section 298.25 as being in 186.11 lieu of other taxes on such property. This exemption applies 186.12 for taxes payable in each year that the tax under section 298.24 186.13 is payable with respect to such property. 186.14 (b) Except for mineral interests taxed under section 186.15 273.165, deposits of mineral, metal, or energy resources the 186.16 mining of which is subject to taxation under section 298.015 are 186.17 exempt. This exemption applies for taxes payable in each year 186.18 that the tax under section 298.015 is payable with respect to 186.19 such property. 186.20 [EFFECTIVE DATE.] This section is effective the day 186.21 following final enactment. 186.22 Sec. 8. Minnesota Statutes 2002, section 272.02, is 186.23 amended by adding a subdivision to read: 186.24 Subd. 69. [RELIGIOUS CORPORATIONS.] Personal and real 186.25 property that a religious corporation, formed under section 186.26 317A.909, necessarily uses for a religious purpose is exempt to 186.27 the extent provided in section 317A.909, subdivision 3. 186.28 [EFFECTIVE DATE.] This section is effective the day 186.29 following final enactment. 186.30 Sec. 9. Minnesota Statutes 2002, section 272.02, is 186.31 amended by adding a subdivision to read: 186.32 Subd. 70. [CHILDREN'S HOMES.] Personal and real property 186.33 owned by a corporation formed under section 317A.907 is exempt 186.34 to the extent provided in section 317A.907, subdivision 7. 186.35 [EFFECTIVE DATE.] This section is effective the day 186.36 following final enactment. 187.1 Sec. 10. Minnesota Statutes 2002, section 272.02, is 187.2 amended by adding a subdivision to read: 187.3 Subd. 71. [HOUSING AND REDEVELOPMENT AUTHORITY AND TRIBAL 187.4 HOUSING AUTHORITY PROPERTY.] Property owned by a housing and 187.5 redevelopment authority described in chapter 469, or by a 187.6 designated housing authority described in section 469.040, 187.7 subdivision 5, is exempt to the extent provided in chapter 469. 187.8 [EFFECTIVE DATE.] This section is effective the day 187.9 following final enactment. 187.10 Sec. 11. Minnesota Statutes 2002, section 273.124, 187.11 subdivision 8, is amended to read: 187.12 Subd. 8. [HOMESTEAD OWNED BY OR LEASED TO FAMILY FARM 187.13 CORPORATION, JOINT FARM VENTURE, LIMITED LIABILITY COMPANY, OR 187.14 PARTNERSHIP.] (a) Each family farm corporation, each; each joint 187.15 family farm venture,; and each limited liability company, and187.16eachor partnershipoperatingwhich operates a family farm; is 187.17 entitled to class 1b under section 273.13, subdivision 22, 187.18 paragraph (b), or class 2a assessment for one homestead occupied 187.19 by a shareholder, member, or partner thereof who is residing on 187.20 the land, and actively engaged in farming of the land owned by 187.21 the family farm corporation, joint family farm venture, limited 187.22 liability company, or partnershipoperating a family farm. 187.23 Homestead treatment applies even if legal title to the property 187.24 is in the name of the family farm corporation, joint family farm 187.25 venture, limited liability company, or partnershipoperating the187.26family farm, and not in the name of the person residing on it. 187.27 "Family farm corporation," "family farm," and "partnership 187.28 operating a family farm" have the meanings given in section 187.29 500.24, except that the number of allowable shareholders, 187.30 members, or partners under this subdivision shall not exceed 187.31 12. "Limited liability company" has the meaning contained in 187.32 sections 322B.03, subdivision 28, and 500.24, subdivision 2, 187.33 paragraphs (l) and (m). "Joint family farm venture" means a 187.34 cooperative agreement among two or more farm enterprises 187.35 authorized to operate a family farm under section 500.24. 187.36 (b) In addition to property specified in paragraph (a), any 188.1 other residences owned by family farm corporations, joint family 188.2 farm ventures, limited liability companies, or partnerships 188.3operating a family farmdescribed in paragraph (a) which are 188.4 located on agricultural land and occupied as homesteads by its 188.5 shareholders, members, or partners who are actively engaged in 188.6 farming on behalf of that corporation, joint farm venture, 188.7 limited liability company, or partnership must also be assessed 188.8 as class 2a property or as class 1b property under section 188.9 273.13. 188.10 (c) Agricultural property that is owned by a member, 188.11 partner, or shareholder of a family farm corporation or joint 188.12 family farm venture, limited liability company operating a 188.13 family farm, or by a partnership operating a family farm and 188.14 leased to the family farm corporation, limited liability 188.15 company,orpartnershipoperating a family farm, or joint farm 188.16 venture, as defined in paragraph (a), is eligible for 188.17 classification as class 1b or class 2a under section 273.13, if 188.18 the owner is actually residing on the property, and is actually 188.19 engaged in farming the land on behalf of that corporation, joint 188.20 farm venture, limited liability company, or partnership. This 188.21 paragraph applies without regard to any legal possession rights 188.22 of the family farm corporation, joint family farm venture, 188.23 limited liability company, or partnershipoperating a family188.24farmunder the lease. 188.25 [EFFECTIVE DATE.] This section is effective the day 188.26 following final enactment. 188.27 Sec. 12. Minnesota Statutes 2002, section 273.19, 188.28 subdivision 1a, is amended to read: 188.29 Subd. 1a. For purposes of this section, a lease includes 188.30 any agreement, except a cooperative farming agreement pursuant 188.31 to section 97A.135, subdivision 3, or a lease executed pursuant 188.32 to section 272.68, subdivision 4, permitting a nonexempt person 188.33 or entity to use the property, regardless of whether the 188.34 agreement is characterized as a lease. A lease has a "term of 188.35 at least one year" if the term is for a period of less than one 188.36 year and the lease permits the parties to renew the lease 189.1 without requiring that similar terms for leasing the property 189.2 will be offered to other applicants or bidders through a 189.3 competitive bidding or other form of offer to potential lessees 189.4 or users. 189.5 [EFFECTIVE DATE.] This section is effective the day 189.6 following final enactment. 189.7 Sec. 13. Minnesota Statutes 2002, section 274.14, is 189.8 amended to read: 189.9 274.14 [LENGTH OF SESSION; RECORD.] 189.10The county board of equalization or the special board of189.11equalization appointed by it shall meet during the last ten189.12meeting days in June. For this purpose, "meeting days" are189.13defined as any day of the week excluding Saturday and Sunday.189.14 The board may meet on any ten consecutive meeting days in June, 189.15 after the second Friday in June, if. The actual meeting dates 189.16aremust be contained on the valuation notices mailed to each 189.17 property owner in the countyunderas provided in section 189.18 273.121. For this purpose, "meeting days" is defined as any day 189.19 of the week excluding Saturday and Sunday. No action taken by 189.20 the county board of review after June 30 is valid, except for 189.21 corrections permitted in sections 273.01 and 274.01. The county 189.22 auditor shall keep an accurate record of the proceedings and 189.23 orders of the board. The record must be published like other 189.24 proceedings of county commissioners. A copy of the published 189.25 record must be sent to the commissioner of revenue, with the 189.26 abstract of assessment required by section 274.16. 189.27 [EFFECTIVE DATE.] This section is effective the day 189.28 following final enactment. 189.29 Sec. 14. Minnesota Statutes 2002, section 275.065, 189.30 subdivision 1a, is amended to read: 189.31 Subd. 1a. [OVERLAPPING JURISDICTIONS.] In the case of a 189.32 taxing authority lying in two or more counties, the home county 189.33 auditor shall certify the proposed levy and the proposed local 189.34 tax rate to the other county auditor bySeptember 20October 5. 189.35 The home county auditor must estimate the levy or rate in 189.36 preparing the notices required in subdivision 3, if the other 190.1 county has not certified the appropriate information. If 190.2 requested by the home county auditor, the other county auditor 190.3 must furnish an estimate to the home county auditor. 190.4 [EFFECTIVE DATE.] This section is effective the day 190.5 following final enactment. 190.6 Sec. 15. Minnesota Statutes 2002, section 275.07, 190.7 subdivision 1, is amended to read: 190.8 Subdivision 1. [CERTIFICATION OF LEVY.] (a) Except as 190.9 provided under paragraph (b), the taxes voted by cities, 190.10 counties, school districts, and special districts shall be 190.11 certified by the proper authorities to the county auditor on or 190.12 before five working days after December 20 in each year. A town 190.13 must certify the levy adopted by the town board to the county 190.14 auditor by September 15 each year. If the town board modifies 190.15 the levy at a special town meeting after September 15, the town 190.16 board must recertify its levy to the county auditor on or before 190.17 five working days after December 20.The taxes certified shall190.18not be reduced by the county auditor by the aid received under190.19section 273.1398, subdivision 2, but shall be reduced by the190.20county auditor by the aid received under section 273.1398,190.21subdivision 3.If a city, town, county, school district, or 190.22 special district fails to certify its levy by that date, its 190.23 levy shall be the amount levied by it for the preceding year. 190.24 (b)(i) The taxes voted by counties under sections 103B.241, 190.25 103B.245, and 103B.251 shall be separately certified by the 190.26 county to the county auditor on or before five working days 190.27 after December 20 in each year. The taxes certified shall not 190.28 be reduced by the county auditor by the aid received under 190.29 section 273.1398, subdivisions 2 and 3. If a county fails to 190.30 certify its levy by that date, its levy shall be the amount 190.31 levied by it for the preceding year. 190.32 (ii) For purposes of the proposed property tax notice under 190.33 section 275.065 and the property tax statement under section 190.34 276.04, for the first year in which the county implements the 190.35 provisions of this paragraph, the county auditor shall reduce 190.36 the county's levy for the preceding year to reflect any amount 191.1 levied for water management purposes under clause (i) included 191.2 in the county's levy. 191.3 [EFFECTIVE DATE.] This section is effective the day 191.4 following final enactment. 191.5 Sec. 16. Minnesota Statutes 2002, section 275.07, 191.6 subdivision 4, is amended to read: 191.7 Subd. 4. [REPORT TO COMMISSIONER.] (a) On or before 191.8 October 8 of each year, the county auditor shall report to the 191.9 commissioner of revenue the proposed levy certified by local 191.10 units of government under section 275.065, subdivision 1. If 191.11 any taxing authorities have notified the county auditor that 191.12 they are in the process of negotiating an agreement for sharing, 191.13 merging, or consolidating services but that when the proposed 191.14 levy was certified under section 275.065, subdivision 1c, the 191.15 agreement was not yet finalized, the county auditor shall supply 191.16 that information to the commissioner when filing the report 191.17 under this section and shall recertify the affected levies as 191.18 soon as practical after October 10. 191.19 (b) On or before January 15 of each year, the county 191.20 auditor shall report to the commissioner of revenue the final 191.21 levy certified by local units of government under subdivision 1. 191.22 (c) The levies must be reported in the manner prescribed by 191.23 the commissioner.The reports must show a total levy and the191.24amount of each special levy.191.25 [EFFECTIVE DATE.] This section is effective the day 191.26 following final enactment. 191.27 Sec. 17. Minnesota Statutes 2003 Supplement, section 191.28 276.112, is amended to read: 191.29 276.112 [STATE PROPERTY TAXES; COUNTY TREASURER.] 191.30 On or before January 25 each year, for the period ending 191.31 December 31 of the prior year, and on or before two business 191.32 days before June2930 each year, for the period ending on the 191.33 most recent settlement day determined in section 276.09, and on 191.34 or before December 2 each year, for the period ending November 191.35 20, the county treasurer must make full settlement with the 191.36 county auditor according to sections 276.09, 276.10, and 276.111 192.1 for all receipts of state property taxes levied under section 192.2 275.025, and must transmit those receipts to the commissioner of 192.3 revenue by electronic means. 192.4 [EFFECTIVE DATE.] This section is effective the day 192.5 following final enactment. 192.6 Sec. 18. Minnesota Statutes 2002, section 282.016, is 192.7 amended to read: 192.8 282.016 [PROHIBITED PURCHASERS.] 192.9No(a) A county auditor, county treasurer, county attorney, 192.10 court administrator of the district court,orcounty assessor 192.11or, supervisor of assessments,ordeputy or clerk or an employee 192.12 of such officer,and noa commissioner for tax-forfeited lands 192.13 or an assistant to such commissionermay, must not become a 192.14 purchaser, either personally or as an agent or attorney for 192.15 another person, of the properties offered for sale under the 192.16 provisions of this chapter, either personally, or as agent or192.17attorney for any other person, except thatin the county for 192.18 which the person performs duties. A person prohibited from 192.19 purchasing property under this section must not directly or 192.20 indirectly have another person purchase it on behalf of the 192.21 prohibited purchaser for the prohibited purchaser's benefit or 192.22 gain. 192.23 (b) Notwithstanding paragraph (a), such officer, deputy, 192.24court administratorclerk, or employee or commissioner for 192.25 tax-forfeited lands or assistant to such commissioner may (1) 192.26 purchase lands owned by that official at the time the state 192.27 became the absolute owner thereof or (2) bid upon and purchase 192.28 forfeited property offered for sale under the alternate sale 192.29 procedure described in section 282.01, subdivision 7a. 192.30 [EFFECTIVE DATE.] This section is effective the day 192.31 following final enactment. 192.32 Sec. 19. Minnesota Statutes 2002, section 282.21, is 192.33 amended to read: 192.34 282.21 [FORM OF CONVEYANCE.] 192.35 When any sale has been made under sections 282.14 to 192.36 282.22, upon payment in full of the purchase price, appropriate 193.1 conveyance in fee in such form as may be prescribed by the 193.2 attorney general shall be issued by the commissioner of finance 193.3 to the purchaser or the purchaser's assigns and this conveyance 193.4 shall have the force and effect of a patent from the state. 193.5 [EFFECTIVE DATE.] This section is effective the day 193.6 following final enactment. 193.7 Sec. 20. Minnesota Statutes 2002, section 282.224, is 193.8 amended to read: 193.9 282.224 [FORM OF CONVEYANCE.] 193.10 When any sale has been made under sections 282.221 to 193.11 282.226, upon payment in full of the purchase price, appropriate 193.12 conveyance in fee, in such form as may be prescribed by the 193.13 attorney general, shall be issued by the commissioner of natural 193.14 resources to the purchaser or the purchaser's assignee, and the 193.15 conveyance shall have the force and effect of a patent from the 193.16 state. 193.17 [EFFECTIVE DATE.] This section is effective the day 193.18 following final enactment. 193.19 Sec. 21. Minnesota Statutes 2002, section 282.301, is 193.20 amended to read: 193.21 282.301 [RECEIPTS FOR PAYMENTS.] 193.22 When any sale has been made under sections 282.012 and 193.23 282.241 to 282.324, the purchaser shall receive from the county 193.24 auditor at the time of repurchase a receipt, in such form as may 193.25 be prescribed by the attorney general. When the purchase price 193.26 of a parcel of land shall be paid in full, the following facts 193.27 shall be certified by the county auditor to the commissioner of 193.28 revenue of the state of Minnesota: the description of land, the 193.29 date of sale, the name of the purchaser or the purchaser's 193.30 assignee, and the date when the final installment of the 193.31 purchase price was paid. Upon payment in full of the purchase 193.32 price, the purchaser or the assignee shall receive a quitclaim 193.33 deed from the state, to be executed by the commissioner of 193.34 revenue. The deed must be sent to the county auditor who shall 193.35 have it recorded before it is forwarded to the purchaser. 193.36 Failure to make any payment herein required shall constitute 194.1 default and upon such default and cancellation in accord with 194.2 section 282.40, the right, title and interest of the purchaser 194.3 or the purchaser's heirs, representatives, or assigns in such 194.4 parcel shall terminate. 194.5 [EFFECTIVE DATE.] This section is effective the day 194.6 following final enactment. 194.7 Sec. 22. [473.24] [POPULATION ESTIMATES.] 194.8 (a) The Metropolitan Council shall prepare an estimate of 194.9 population and of the number of households for each city and 194.10 town in the metropolitan area annually and convey the estimates 194.11 to the governing body of each city or town by June 1 each year. 194.12 In the case of a city or town that is located partly within and 194.13 partly without the metropolitan area, the Metropolitan Council 194.14 shall estimate the proportion of the total population and number 194.15 of households that reside within the area. The Metropolitan 194.16 Council may prepare an estimate of the population and of the 194.17 number of households for any other political subdivision located 194.18 in the metropolitan area. 194.19 (b) A governing body may challenge an estimate made under 194.20 this section by filing its specific objections in writing with 194.21 the Metropolitan Council by June 24. If the challenge does not 194.22 result in an acceptable estimate, the governing body may have a 194.23 special census conducted by the United States Bureau of the 194.24 Census. The political subdivision must notify the Metropolitan 194.25 Council on or before July 1 of its intent to have the special 194.26 census conducted. The political subdivision must bear all costs 194.27 of the special census. Results of the special census must be 194.28 received by the Metropolitan Council by the next April 15 to be 194.29 used in that year's June 1 estimate under this section. The 194.30 Metropolitan Council shall certify the estimates of population 194.31 and number of households to the state demographer and to the 194.32 commissioner of revenue by July 15 each year, including any 194.33 estimates still under objection. 194.34 (c) No changes in population or household estimates after 194.35 July 15 in an aid calculation year shall be considered in 194.36 determining aids under sections 477A.011 to 477A.014. Clerical 195.1 errors in certification or use of the estimates and counts 195.2 established as of July 15 in the aid calculation year are 195.3 subject to correction under section 477A.014. 195.4 [EFFECTIVE DATE.] This section is effective the day 195.5 following final enactment. 195.6 Sec. 23. Minnesota Statutes 2002, section 473F.02, 195.7 subdivision 7, is amended to read: 195.8 Subd. 7. [POPULATION.] "Population" means the most recent 195.9 estimate of the population of a municipality made by the 195.10 Metropolitan Council under section 473.24 and filed with the 195.11 commissioner of revenue as of July115 of the year in which a 195.12 municipality's distribution net tax capacity is calculated.The195.13council shall annually estimate the population of each195.14municipality as of a date which it determines and, in the case195.15of a municipality which is located partly within and partly195.16without the area, the proportion of the total which resides195.17within the area, and shall promptly thereafter file its195.18estimates with the commissioner of revenue.195.19 [EFFECTIVE DATE.] This section is effective the day 195.20 following final enactment. 195.21 Sec. 24. Minnesota Statutes 2003 Supplement, section 195.22 477A.011, subdivision 36, is amended to read: 195.23 Subd. 36. [CITY AID BASE.] (a) Except as otherwise 195.24 provided in this subdivision, "city aid base" is zero. 195.25 (b) The city aid base for any city with a population less 195.26 than 500 is increased by $40,000 for aids payable in calendar 195.27 year 1995 and thereafter, and the maximum amount of total aid it 195.28 may receive under section 477A.013, subdivision 9, paragraph 195.29 (c), is also increased by $40,000 for aids payable in calendar 195.30 year 1995 only, provided that: 195.31 (i) the average total tax capacity rate for taxes payable 195.32 in 1995 exceeds 200 percent; 195.33 (ii) the city portion of the tax capacity rate exceeds 100 195.34 percent; and 195.35 (iii) its city aid base is less than $60 per capita. 195.36 (c) The city aid base for a city is increased by $20,000 in 196.1 1998 and thereafter and the maximum amount of total aid it may 196.2 receive under section 477A.013, subdivision 9, paragraph (c), is 196.3 also increased by $20,000 in calendar year 1998 only, provided 196.4 that: 196.5 (i) the city has a population in 1994 of 2,500 or more; 196.6 (ii) the city is located in a county, outside of the 196.7 metropolitan area, which contains a city of the first class; 196.8 (iii) the city's net tax capacity used in calculating its 196.9 1996 aid under section 477A.013 is less than $400 per capita; 196.10 and 196.11 (iv) at least four percent of the total net tax capacity, 196.12 for taxes payable in 1996, of property located in the city is 196.13 classified as railroad property. 196.14 (d) The city aid base for a city is increased by $200,000 196.15 in 1999 and thereafter and the maximum amount of total aid it 196.16 may receive under section 477A.013, subdivision 9, paragraph 196.17 (c), is also increased by $200,000 in calendar year 1999 only, 196.18 provided that: 196.19 (i) the city was incorporated as a statutory city after 196.20 December 1, 1993; 196.21 (ii) its city aid base does not exceed $5,600; and 196.22 (iii) the city had a population in 1996 of 5,000 or more. 196.23 (e) The city aid base for a city is increased by $450,000 196.24 in 1999 to 2008 and the maximum amount of total aid it may 196.25 receive under section 477A.013, subdivision 9, paragraph (c), is 196.26 also increased by $450,000 in calendar year 1999 only, provided 196.27 that: 196.28 (i) the city had a population in 1996 of at least 50,000; 196.29 (ii) its population had increased by at least 40 percent in 196.30 the ten-year period ending in 1996; and 196.31 (iii) its city's net tax capacity for aids payable in 1998 196.32 is less than $700 per capita. 196.33 (f)Beginning in 2004, the city aid base for a city is196.34equal to the sum of its city aid base in 2003 and the amount of196.35additional aid it was certified to receive under section 477A.06196.36in 2003. For 2004 only, the maximum amount of total aid a city197.1may receive under section 477A.013, subdivision 9, paragraph197.2(c), is also increased by the amount it was certified to receive197.3under section 477A.06 in 2003.197.4(g)The city aid base for a city is increased by $150,000 197.5 for aids payable in 2000 and thereafter, and the maximum amount 197.6 of total aid it may receive under section 477A.013, subdivision 197.7 9, paragraph (c), is also increased by $150,000 in calendar year 197.8 2000 only, provided that: 197.9 (1) the city has a population that is greater than 1,000 197.10 and less than 2,500; 197.11 (2) its commercial and industrial percentage for aids 197.12 payable in 1999 is greater than 45 percent; and 197.13 (3) the total market value of all commercial and industrial 197.14 property in the city for assessment year 1999 is at least 15 197.15 percent less than the total market value of all commercial and 197.16 industrial property in the city for assessment year 1998. 197.17(h)(g) The city aid base for a city is increased by 197.18 $200,000 in 2000 and thereafter, and the maximum amount of total 197.19 aid it may receive under section 477A.013, subdivision 9, 197.20 paragraph (c), is also increased by $200,000 in calendar year 197.21 2000 only, provided that: 197.22 (1) the city had a population in 1997 of 2,500 or more; 197.23 (2) the net tax capacity of the city used in calculating 197.24 its 1999 aid under section 477A.013 is less than $650 per 197.25 capita; 197.26 (3) the pre-1940 housing percentage of the city used in 197.27 calculating 1999 aid under section 477A.013 is greater than 12 197.28 percent; 197.29 (4) the 1999 local government aid of the city under section 197.30 477A.013 is less than 20 percent of the amount that the formula 197.31 aid of the city would have been if the need increase percentage 197.32 was 100 percent; and 197.33 (5) the city aid base of the city used in calculating aid 197.34 under section 477A.013 is less than $7 per capita. 197.35(i)(h) The city aid base for a city is increased by 197.36 $102,000 in 2000 and thereafter, and the maximum amount of total 198.1 aid it may receive under section 477A.013, subdivision 9, 198.2 paragraph (c), is also increased by $102,000 in calendar year 198.3 2000 only, provided that: 198.4 (1) the city has a population in 1997 of 2,000 or more; 198.5 (2) the net tax capacity of the city used in calculating 198.6 its 1999 aid under section 477A.013 is less than $455 per 198.7 capita; 198.8 (3) the net levy of the city used in calculating 1999 aid 198.9 under section 477A.013 is greater than $195 per capita; and 198.10 (4) the 1999 local government aid of the city under section 198.11 477A.013 is less than 38 percent of the amount that the formula 198.12 aid of the city would have been if the need increase percentage 198.13 was 100 percent. 198.14(j)(i) The city aid base for a city is increased by 198.15 $32,000 in 2001 and thereafter, and the maximum amount of total 198.16 aid it may receive under section 477A.013, subdivision 9, 198.17 paragraph (c), is also increased by $32,000 in calendar year 198.18 2001 only, provided that: 198.19 (1) the city has a population in 1998 that is greater than 198.20 200 but less than 500; 198.21 (2) the city's revenue need used in calculating aids 198.22 payable in 2000 was greater than $200 per capita; 198.23 (3) the city net tax capacity for the city used in 198.24 calculating aids available in 2000 was equal to or less than 198.25 $200 per capita; 198.26 (4) the city aid base of the city used in calculating aid 198.27 under section 477A.013 is less than $65 per capita; and 198.28 (5) the city's formula aid for aids payable in 2000 was 198.29 greater than zero. 198.30(k)(j) The city aid base for a city is increased by $7,200 198.31 in 2001 and thereafter, and the maximum amount of total aid it 198.32 may receive under section 477A.013, subdivision 9, paragraph 198.33 (c), is also increased by $7,200 in calendar year 2001 only, 198.34 provided that: 198.35 (1) the city had a population in 1998 that is greater than 198.36 200 but less than 500; 199.1 (2) the city's commercial industrial percentage used in 199.2 calculating aids payable in 2000 was less than ten percent; 199.3 (3) more than 25 percent of the city's population was 60 199.4 years old or older according to the 1990 census; 199.5 (4) the city aid base of the city used in calculating aid 199.6 under section 477A.013 is less than $15 per capita; and 199.7 (5) the city's formula aid for aids payable in 2000 was 199.8 greater than zero. 199.9(l)(k) The city aid base for a city is increased by 199.10 $45,000 in 2001 and thereafter and by an additional $50,000 in 199.11 calendar years 2002 to 2011, and the maximum amount of total aid 199.12 it may receive under section 477A.013, subdivision 9, paragraph 199.13 (c), is also increased by $45,000 in calendar year 2001 only, 199.14 and by $50,000 in calendar year 2002 only, provided that: 199.15 (1) the net tax capacity of the city used in calculating 199.16 its 2000 aid under section 477A.013 is less than $810 per 199.17 capita; 199.18 (2) the population of the city declined more than two 199.19 percent between 1988 and 1998; 199.20 (3) the net levy of the city used in calculating 2000 aid 199.21 under section 477A.013 is greater than $240 per capita; and 199.22 (4) the city received less than $36 per capita in aid under 199.23 section 477A.013, subdivision 9, for aids payable in 2000. 199.24(m)(l) The city aid base for a city with a population of 199.25 10,000 or more which is located outside of the seven-county 199.26 metropolitan area is increased in 2002 and thereafter, and the 199.27 maximum amount of total aid it may receive under section 199.28 477A.013, subdivision 9, paragraph (b) or (c), is also increased 199.29 in calendar year 2002 only, by an amount equal to the lesser of: 199.30 (1)(i) the total population of the city, as determined by 199.31 the United States Bureau of the Census, in the 2000 census, (ii) 199.32 minus 5,000, (iii) times 60; or 199.33 (2) $2,500,000. 199.34(n)(m) The city aid base is increased by $50,000 in 2002 199.35 and thereafter, and the maximum amount of total aid it may 199.36 receive under section 477A.013, subdivision 9, paragraph (c), is 200.1 also increased by $50,000 in calendar year 2002 only, provided 200.2 that: 200.3 (1) the city is located in the seven-county metropolitan 200.4 area; 200.5 (2) its population in 2000 is between 10,000 and 20,000; 200.6 and 200.7 (3) its commercial industrial percentage, as calculated for 200.8 city aid payable in 2001, was greater than 25 percent. 200.9(o)(n) The city aid base for a city is increased by 200.10 $150,000 in calendar years 2002 to 2011 and the maximum amount 200.11 of total aid it may receive under section 477A.013, subdivision 200.12 9, paragraph (c), is also increased by $150,000 in calendar year 200.13 2002 only, provided that: 200.14 (1) the city had a population of at least 3,000 but no more 200.15 than 4,000 in 1999; 200.16 (2) its home county is located within the seven-county 200.17 metropolitan area; 200.18 (3) its pre-1940 housing percentage is less than 15 200.19 percent; and 200.20 (4) its city net tax capacity per capita for taxes payable 200.21 in 2000 is less than $900 per capita. 200.22(p)(o) The city aid base for a city is increased by 200.23 $200,000 beginning in calendar year 2003 and the maximum amount 200.24 of total aid it may receive under section 477A.013, subdivision 200.25 9, paragraph (c), is also increased by $200,000 in calendar year 200.26 2003 only, provided that the city qualified for an increase in 200.27 homestead and agricultural credit aid under Laws 1995, chapter 200.28 264, article 8, section 18. 200.29(q)(p) The city aid base for a city is increased by 200.30 $200,000 in 2004 only and the maximum amount of total aid it may 200.31 receive under section 477A.013, subdivision 9, is also increased 200.32 by $200,000 in calendar year 2004 only, if the city is the site 200.33 of a nuclear dry cask storage facility. 200.34(r)(q) The city aid base for a city is increased by 200.35 $10,000 in 2004 and thereafter and the maximum total aid it may 200.36 receive under section 477A.013, subdivision 9, is also increased 201.1 by $10,000 in calendar year 2004 only, if the city was included 201.2 in a federal major disaster designation issued on April 1, 1998, 201.3 and its pre-1940 housing stock was decreased by more than 40 201.4 percent between 1990 and 2000. 201.5 [EFFECTIVE DATE.] This section is effective beginning with 201.6 aids payable in 2004. 201.7 Sec. 25. Minnesota Statutes 2003 Supplement, section 201.8 477A.03, subdivision 2b, is amended to read: 201.9 Subd. 2b. [COUNTIES.] (a) For aids payable in calendar 201.10 year 2005 and thereafter, the total aids paid to counties under 201.11 section 477A.0124, subdivision 3, are limited to $100,500,000. 201.12 Each calendar year, $500,000 shall be retained by the 201.13 commissioner of revenue to make reimbursements to the 201.14 commissioner of finance for payments made under section 611.27. 201.15 For calendar year 2004,the amount shall be$500,000 is 201.16 appropriated from the general fund for this purpose in addition 201.17 to the payments authorized under section 477A.0124, subdivision 201.18 1. For calendar year 2005 and subsequent years, the amount 201.19 shall be deducted from the appropriationunder this paragraph201.20 for section 477A.0124, subdivision 1. The reimbursements shall 201.21 be to defray the additional costs associated with court-ordered 201.22 counsel under section 611.27. Any retained amounts not used for 201.23 reimbursement in a year shall be included in the next 201.24 distribution of county need aid that is certified to the county 201.25 auditors for the purpose of property tax reduction for the next 201.26 taxes payable year. 201.27 (b) For aids payable in 2005 and thereafter, the total aids 201.28 under section 477A.0124, subdivision 4, are limited to 201.29 $105,000,000. The commissioner of finance shall bill the 201.30 commissioner of revenue for the cost of preparation of local 201.31 impact notes as required by section 3.987, not to exceed 201.32 $207,000 in fiscal year 2004 and thereafter. The commissioner 201.33 of education shall bill the commissioner of revenue for the cost 201.34 of preparation of local impact notes for school districts as 201.35 required by section 3.987, not to exceed $7,000 in fiscal year 201.36 2004 and thereafter. For aids payable in 2004, $214,000 is 202.1 appropriated from the general fund for this purpose. For aids 202.2 payable in 2005 and thereafter, the commissioner of revenue 202.3 shall deduct the amounts billed under this paragraph from the 202.4 appropriation under thisparagraphsection for section 202.5 477A.0124, subdivision 4. The amounts deducted are appropriated 202.6 to the commissioner of finance and the commissioner of education 202.7 for the preparation of local impact notes. 202.8 [EFFECTIVE DATE.] This section is effective for aids 202.9 payable in 2004 and thereafter. 202.10 Sec. 26. Laws 2003, First Special Session chapter 21, 202.11 article 5, section 13, is amended to read: 202.12 Sec. 13. [2004 CITY AID REDUCTIONS.] 202.13 The commissioner of revenue shall compute an aid reduction 202.14 amount for 2004 for each city as provided in this section. 202.15 The initial aid reduction amount for each city is the 202.16 amount by which the city's aid distribution under Minnesota 202.17 Statutes, section 477A.013, and related provisions payable in 202.18 2003 exceeds the city's 2004 distribution under those provisions. 202.19 The minimum aid reduction amount for a city is the amount 202.20 of its reduction in 2003 under section 12. If a city receives 202.21 an increase to its city aid base under Minnesota Statutes, 202.22 section 477A.011, subdivision 36, its minimum aid reduction is 202.23 reduced by an equal amount. 202.24 The maximum aid reduction amount for a city is an amount 202.25 equal to 14 percent of the city's total 2004 levy plus aid 202.26 revenue base, except that if the city has a city net tax 202.27 capacity for aids payable in 2004, as defined in Minnesota 202.28 Statutes, section 477A.011, subdivision 20, of $700 per capita 202.29 or less, the maximum aid reduction shall not exceed an amount 202.30 equal to 13 percent of the city's total 2004 levy plus aid 202.31 revenue base. 202.32 If the initial aid reduction amount for a city is less than 202.33 the minimum aid reduction amount for that city, the final aid 202.34 reduction amount for the city is the sum of the initial aid 202.35 reduction amount and the lesser of the amount of the city's 202.36 payable 2004 reimbursement under Minnesota Statutes, section 203.1 273.1384, or the difference between the minimum and initial aid 203.2 reduction amounts for the city, and the amount of the final aid 203.3 reduction in excess of the initial aid reduction is deducted 203.4 from the city's reimbursements pursuant to Minnesota Statutes, 203.5 section 273.1384. 203.6 If the initial aid reduction amount for a city is greater 203.7 than the maximum aid reduction amount for the city, the city 203.8 receives an additional distribution under this section equal to 203.9 the result of subtracting the maximum aid reduction amount from 203.10 the initial aid reduction amount. This distribution shall be 203.11 paid in equal installments in 2004 on the dates specified in 203.12 Minnesota Statutes, section 477A.015. The amount necessary for 203.13 these additional distributions is appropriated to the 203.14 commissioner of revenue from the general fund in fiscal year 203.15 2005. 203.16The initial aid reduction is applied to the city's203.17distribution pursuant to Minnesota Statutes, section 477A.013,203.18and any aid reduction in excess of the initial aid reduction is203.19applied to the city's reimbursements pursuant to Minnesota203.20Statutes, section 273.1384.203.21 To the extent that sufficient information is available on 203.22 each payment date in 2004, the commissioner of revenue shall pay 203.23 the reimbursements reduced under this section in equal 203.24 installments on the payment dates provided in law. 203.25 [EFFECTIVE DATE.] This section is effective for aids 203.26 payable in 2004. 203.27 Sec. 27. Laws 2003, First Special Session chapter 21, 203.28 article 6, section 9, is amended to read: 203.29 Sec. 9. [DEFINITIONS.] 203.30 (a) For purposes of sections 9 to 15, the following terms 203.31 have the meanings given them in this section. 203.32 (b) The 2003 and 2004 "levy plus aid revenue base" for a 203.33 county is the sum of that county's certified property tax levy 203.34 for taxes payable in 2003, plus the sum of the amounts the 203.35 county was certified to receive in the designated calendar year 203.36 as: 204.1 (1) homestead and agricultural credit aid under Minnesota 204.2 Statutes, section 273.1398, subdivision 2, plus any additional 204.3 aid under section 16, minus the amount calculated under section 204.4 273.1398, subdivision 4a, paragraph (b), for counties in 204.5 judicial districts one, three, six, and ten, and 25 percent of 204.6 the amount calculated under section 273.1398, subdivision 4a, 204.7 paragraph (b), for counties in judicial districts two and four; 204.8 (2) the amount of county manufactured home homestead and 204.9 agricultural credit aid computed for the county for payment in 204.10 2003 under section 273.166; 204.11 (3) criminal justice aid under Minnesota Statutes, section 204.12 477A.0121; 204.13 (4) family preservation aid under Minnesota Statutes, 204.14 section 477A.0122; 204.15 (5) taconite aids under Minnesota Statutes, sections 298.28 204.16 and 298.282, including any aid which was required to be placed 204.17 in a special fund for expenditure in the next succeeding year; 204.18 and 204.19 (6) county program aid under section 477A.0124, exclusive 204.20 of the attached machinery aid component. 204.21 [EFFECTIVE DATE.] This section is effective for aids 204.22 payable in 2004. 204.23 Sec. 28. [REPEALER.] 204.24 Minnesota Statutes 2002, sections 273.19, subdivision 5; 204.25 274.05; 275.15; and 283.07, are repealed effective the day 204.26 following final enactment. 204.27 ARTICLE 11 204.28 SALES AND USE TAXES TECHNICAL 204.29 Section 1. Minnesota Statutes 2002, section 289A.38, 204.30 subdivision 6, is amended to read: 204.31 Subd. 6. [OMISSION IN EXCESS OF 25 PERCENT.] Additional 204.32 taxes may be assessed within 6-1/2 years after the due date of 204.33 the return or the date the return was filed, whichever is later, 204.34 if: 204.35 (1) the taxpayer omits from gross income an amount properly 204.36 includable in it that is in excess of 25 percent of the amount 205.1 of gross income stated in the return; 205.2 (2) the taxpayer omits from a sales, use, or withholding 205.3 tax return an amount of taxes in excess of 25 percent of the 205.4 taxes reported in the return; or 205.5 (3) the taxpayer omits from the gross estate assets in 205.6 excess of 25 percent of the gross estate reported in the return. 205.7 [EFFECTIVE DATE.] This section is effective the day 205.8 following final enactment. 205.9 Sec. 2. Minnesota Statutes 2003 Supplement, section 205.10 289A.40, subdivision 2, is amended to read: 205.11 Subd. 2. [BAD DEBT LOSS.] If a claim relates to an 205.12 overpayment because of a failure to deduct a loss due to a bad 205.13 debt or to a security becoming worthless, the claim is 205.14 considered timely if filed within seven years from the date 205.15 prescribed for the filing of the return. A claim relating to an 205.16 overpayment of taxes under chapter 297A must be filed within 205.17 3-1/2 years from the date prescribed for filing the return, plus 205.18 any extensions granted for filing the return, but only if filed 205.19 within the extended time. The refund or credit is limited to 205.20 the amount of overpayment attributable to the loss. "Bad debt" 205.21 for purposes of this subdivision, has the same meaning as that 205.22 term is used in United States Code, title 26, section 166, 205.23 except that for a claim relating to an overpayment of taxes 205.24 under chapter 297A the following are excluded from the 205.25 calculation of bad debt: financing charges or interest; sales 205.26 or use taxes charged on the purchase price; uncollectible 205.27 amounts on property that remain in the possession of the seller 205.28 until the full purchase price is paid; expenses incurred in 205.29 attempting to collect any debt; and repossessed property. 205.30 [EFFECTIVE DATE.] For claims relating to an overpayment of 205.31 taxes under chapter 297A, this section is effective for sales 205.32 and purchases made on or after January 1, 2004; for all other 205.33 bad debts or claims, this section is effective on or after July 205.34 1, 2003. 205.35 Sec. 3. Minnesota Statutes 2003 Supplement, section 205.36 297A.668, subdivision 1, is amended to read: 206.1 Subdivision 1. [ APPLICABILITY.] The provisions of this 206.2 section apply regardless of the characterization of a product as 206.3 tangible personal property, a digital good, or a service; but do 206.4 not apply to telecommunications services,or the sales of motor 206.5 vehicles, watercraft, aircraft, modular homes, manufactured206.6homes, or mobile homes. These provisions only apply to 206.7 determine a seller's obligation to pay or collect and remit a 206.8 sales or use tax with respect to the seller's sale of a 206.9 product. These provisions do not affect the obligation of a 206.10 seller as purchaser to remit tax on the use of the product. 206.11 [EFFECTIVE DATE.] This section is effective the day 206.12 following final enactment. 206.13 Sec. 4. Minnesota Statutes 2003 Supplement, section 206.14 297A.668, subdivision 3, is amended to read: 206.15 Subd. 3. [LEASE OR RENTAL OF TANGIBLE PERSONAL PROPERTY.] 206.16 The lease or rental of tangible personal property, other than 206.17 property identified in subdivision 4 or 5, shall be sourced as 206.18 required in paragraphs (a) to (c). 206.19 (a) For a lease or rental that requires recurring periodic 206.20 payments, the first periodic payment is sourced the same as a 206.21 retail sale in accordance with the provisions of subdivision62. 206.22 Periodic payments made subsequent to the first payment are 206.23 sourced to the primary property location for each period covered 206.24 by the payment. The primary property location must be as 206.25 indicated by an address for the property provided by the lessee 206.26 that is available to the lessor from its records maintained in 206.27 the ordinary course of business, when use of this address does 206.28 not constitute bad faith. The property location must not be 206.29 altered by intermittent use at different locations, such as use 206.30 of business property that accompanies employees on business 206.31 trips and service calls. 206.32 (b) For a lease or rental that does not require recurring 206.33 periodic payments, the payment is sourced the same as a retail 206.34 sale in accordance with the provisions of subdivision 2. 206.35 (c) This subdivision does not affect the imposition or 206.36 computation of sales or use tax on leases or rentals based on a 207.1 lump sum or accelerated basis, or on the acquisition of property 207.2 for lease. 207.3 [EFFECTIVE DATE.] This section is effective for sales and 207.4 purchases made on or after January 1, 2004. 207.5 Sec. 5. Minnesota Statutes 2003 Supplement, section 207.6 297A.668, subdivision 5, is amended to read: 207.7 Subd. 5. [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 207.8 including lease or rental, of transportation equipment shall be 207.9 sourced the same as a retail sale in accordance with the 207.10 provisions of subdivision 2, notwithstanding the exclusion of 207.11 lease or rental in subdivision 2. 207.12 (b) "Transportation equipment" means any of the following: 207.13 (1) locomotives and railcars that are utilized for the 207.14 carriage of persons or property in interstate commerce;and/or207.15 (2) trucks and truck-tractors with a gross vehicle weight 207.16 rating (GVWR) of 10,001 pounds or greater, trailers, 207.17 semitrailers, or passenger buses that are: 207.18 (i) registered through the international registration plan; 207.19 and 207.20 (ii) operated under authority of a carrier authorized and 207.21 certified by the United States Department of Transportation or 207.22 another federal authority to engage in the carriage of persons 207.23 or property in interstate commerce; 207.24 (3) aircraft that are operated by air carriers authorized 207.25 and certificated by the United States Department of 207.26 Transportation or another federal or a foreign authority to 207.27 engage in the carriage of persons or property in interstate 207.28 commerce; or 207.29 (4) containers designed for use on and component parts 207.30 attached or secured on the transportation equipment described in 207.31 items (1) through (3). 207.32 [EFFECTIVE DATE.] This section is effective for sales and 207.33 purchases made on or after January 1, 2004. 207.34 Sec. 6. Minnesota Statutes 2003 Supplement, section 207.35 297A.669, subdivision 16, is amended to read: 207.36 Subd. 16. [SERVICE ADDRESS.] "Service address," for 208.1 purposes of this section, means: 208.2 (1) the location of the telecommunications equipment to 208.3 which a customer's call is charged and from which the call 208.4 originates or terminates, regardless of where the call is billed 208.5 or paid; 208.6 (2) if the location in paragraph(a)(1) is not known, 208.7 service address means the origination point of the signal of the 208.8 telecommunications services first identified by either the 208.9 seller's telecommunications system or in information received by 208.10 the seller from its service provider, where the system used to 208.11 transport the signals is not that of the seller; or 208.12 (3) if the location in paragraphs(a)(1) and(b)(2) is 208.13 not known, the service address means the location of the 208.14 customer's place of primary use. 208.15 [EFFECTIVE DATE.] This section is effective for sales and 208.16 purchases made on or after January 1, 2004. 208.17 Sec. 7. Minnesota Statutes 2003 Supplement, section 208.18 297A.68, subdivision 2, is amended to read: 208.19 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 208.20 (a) Materials stored, used, or consumed in industrial production 208.21 of personal property intended to be sold ultimately at retail 208.22 are exempt, whether or not the item so used becomes an 208.23 ingredient or constituent part of the property produced. 208.24 Materials that qualify for this exemption include, but are not 208.25 limited to, the following: 208.26 (1) chemicals, including chemicals used for cleaning food 208.27 processing machinery and equipment; 208.28 (2) materials, including chemicals, fuels, and electricity 208.29 purchased by persons engaged in industrial production to treat 208.30 waste generated as a result of the production process; 208.31 (3) fuels, electricity, gas, and steam used or consumed in 208.32 the production process, except that electricity, gas, or steam 208.33 used for space heating, cooling, or lighting is exempt if (i) it 208.34 is in excess of the average climate control or lighting for the 208.35 production area, and (ii) it is necessary to produce that 208.36 particular product; 209.1 (4) petroleum products and lubricants; 209.2 (5) packaging materials, including returnable containers 209.3 used in packaging food and beverage products; 209.4 (6) accessory tools, equipment, and other items that are 209.5 separate detachable units with an ordinary useful life of less 209.6 than 12 months used in producing a direct effect upon the 209.7 product; and 209.8 (7) the following materials, tools, and equipment used in 209.9 metalcasting: crucibles, thermocouple protection sheaths and 209.10 tubes, stalk tubes, refractory materials, molten metal filters 209.11 and filter boxes, degassing lances, and base blocks. 209.12 (b) This exemption does not include: 209.13 (1) machinery, equipment, implements, tools, accessories, 209.14 appliances, contrivances and furniture and fixtures, except 209.15 those listed in paragraph (a), clause (6); and 209.16 (2) petroleum and special fuels used in producing or 209.17 generating power for propelling ready-mixed concrete trucks on 209.18 the public highways of this state. 209.19 (c) Industrial production includes, but is not limited to, 209.20 research, development, design or production of any tangible 209.21 personal property, manufacturing, processing (other than by 209.22 restaurants and consumers) of agricultural products (whether 209.23 vegetable or animal), commercial fishing, refining, smelting, 209.24 reducing, brewing, distilling, printing, mining, quarrying, 209.25 lumbering, generating electricity, the production of road 209.26 building materials, and the research, development, design, or 209.27 production of computer software. Industrial production does not 209.28 include painting, cleaning, repairing or similar processing of 209.29 property except as part of the original manufacturing process. 209.30 Industrial production does not include the furnishing of 209.31 services listed in section 297A.61, subdivision 3, paragraph 209.32 (g), clause (6), items (i) to (vi) and (viii). 209.33 [EFFECTIVE DATE.] This section is effective the day 209.34 following final enactment. 209.35 Sec. 8. Minnesota Statutes 2003 Supplement, section 209.36 297A.68, subdivision 5, is amended to read: 210.1 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 210.2 exempt. The tax must be imposed and collected as if the rate 210.3 under section 297A.62, subdivision 1, applied, and then refunded 210.4 in the manner provided in section 297A.75. 210.5 "Capital equipment" means machinery and equipment purchased 210.6 or leased, and used in this state by the purchaser or lessee 210.7 primarily for manufacturing, fabricating, mining, or refining 210.8 tangible personal property to be sold ultimately at retail if 210.9 the machinery and equipment are essential to the integrated 210.10 production process of manufacturing, fabricating, mining, or 210.11 refining. Capital equipment also includes machinery and 210.12 equipment used primarily to electronically transmit results 210.13 retrieved by a customer of an on-line computerized data 210.14 retrieval system. 210.15 (b) Capital equipment includes, but is not limited to: 210.16 (1) machinery and equipment used to operate, control, or 210.17 regulate the production equipment; 210.18 (2) machinery and equipment used for research and 210.19 development, design, quality control, and testing activities; 210.20 (3) environmental control devices that are used to maintain 210.21 conditions such as temperature, humidity, light, or air pressure 210.22 when those conditions are essential to and are part of the 210.23 production process; 210.24 (4) materials and supplies used to construct and install 210.25 machinery or equipment; 210.26 (5) repair and replacement parts, including accessories, 210.27 whether purchased as spare parts, repair parts, or as upgrades 210.28 or modifications to machinery or equipment; 210.29 (6) materials used for foundations that support machinery 210.30 or equipment; 210.31 (7) materials used to construct and install special purpose 210.32 buildings used in the production process; 210.33 (8) ready-mixed concrete equipment in which the ready-mixed 210.34 concrete is mixed as part of the delivery process regardless if 210.35 mounted on a chassis and leases of ready-mixed concrete trucks; 210.36 and 211.1 (9) machinery or equipment used for research, development, 211.2 design, or production of computer software. 211.3 (c) Capital equipment does not include the following: 211.4 (1) motor vehicles taxed under chapter 297B; 211.5 (2) machinery or equipment used to receive or store raw 211.6 materials; 211.7 (3) building materials, except for materials included in 211.8 paragraph (b), clauses (6) and (7); 211.9 (4) machinery or equipment used for nonproduction purposes, 211.10 including, but not limited to, the following: plant security, 211.11 fire prevention, first aid, and hospital stations; support 211.12 operations or administration; pollution control; and plant 211.13 cleaning, disposal of scrap and waste, plant communications, 211.14 space heating, cooling, lighting, or safety; 211.15 (5) farm machinery and aquaculture production equipment as 211.16 defined by section 297A.61, subdivisions 12 and 13; 211.17 (6) machinery or equipment purchased and installed by a 211.18 contractor as part of an improvement to real property;or211.19 (7) machinery and equipment used by restaurants in the 211.20 furnishing, preparing, or serving of prepared foods as defined 211.21 in section 297A.61, subdivision 31; 211.22 (8) machinery and equipment used to furnish the services 211.23 listed in section 297A.61, subdivision 3, paragraph (g), clause 211.24 (6), items (i) to (vi) and (viii); or 211.25 (9) any other item that is not essential to the integrated 211.26 process of manufacturing, fabricating, mining, or refining. 211.27 (d) For purposes of this subdivision: 211.28 (1) "Equipment" means independent devices or tools separate 211.29 from machinery but essential to an integrated production 211.30 process, including computers and computer software, used in 211.31 operating, controlling, or regulating machinery and equipment; 211.32 and any subunit or assembly comprising a component of any 211.33 machinery or accessory or attachment parts of machinery, such as 211.34 tools, dies, jigs, patterns, and molds. 211.35 (2) "Fabricating" means to make, build, create, produce, or 211.36 assemble components or property to work in a new or different 212.1 manner. 212.2 (3) "Integrated production process" means a process or 212.3 series of operations through which tangible personal property is 212.4 manufactured, fabricated, mined, or refined. For purposes of 212.5 this clause, (i) manufacturing begins with the removal of raw 212.6 materials from inventory and ends when the last process prior to 212.7 loading for shipment has been completed; (ii) fabricating begins 212.8 with the removal from storage or inventory of the property to be 212.9 assembled, processed, altered, or modified and ends with the 212.10 creation or production of the new or changed product; (iii) 212.11 mining begins with the removal of overburden from the site of 212.12 the ores, minerals, stone, peat deposit, or surface materials 212.13 and ends when the last process before stockpiling is completed; 212.14 and (iv) refining begins with the removal from inventory or 212.15 storage of a natural resource and ends with the conversion of 212.16 the item to its completed form. 212.17 (4) "Machinery" means mechanical, electronic, or electrical 212.18 devices, including computers and computer software, that are 212.19 purchased or constructed to be used for the activities set forth 212.20 in paragraph (a), beginning with the removal of raw materials 212.21 from inventory through completion of the product, including 212.22 packaging of the product. 212.23 (5) "Machinery and equipment used for pollution control" 212.24 means machinery and equipment used solely to eliminate, prevent, 212.25 or reduce pollution resulting from an activity described in 212.26 paragraph (a). 212.27 (6) "Manufacturing" means an operation or series of 212.28 operations where raw materials are changed in form, composition, 212.29 or condition by machinery and equipment and which results in the 212.30 production of a new article of tangible personal property. For 212.31 purposes of this subdivision, "manufacturing" includes the 212.32 generation of electricity or steam to be sold at retail. 212.33 (7) "Mining" means the extraction of minerals, ores, stone, 212.34 or peat. 212.35 (8) "On-line data retrieval system" means a system whose 212.36 cumulation of information is equally available and accessible to 213.1 all its customers. 213.2 (9) "Primarily" means machinery and equipment used 50 213.3 percent or more of the time in an activity described in 213.4 paragraph (a). 213.5 (10) "Refining" means the process of converting a natural 213.6 resource to an intermediate or finished product, including the 213.7 treatment of water to be sold at retail. 213.8 [EFFECTIVE DATE.] This section is effective the day 213.9 following final enactment. 213.10 Sec. 9. Minnesota Statutes 2003 Supplement, section 213.11 297A.68, subdivision 39, is amended to read: 213.12 Subd. 39. [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 213.13 tangible personal property or services is exempt from tax or a 213.14 tax rate increase for a period of six months from the effective 213.15 date of the law change that results in the imposition of the tax 213.16 or the tax rate increase under this chapter if: 213.17 (1) the act imposing the tax or increasing the tax rate 213.18 does not have transitional effective date language for existing 213.19 construction contracts and construction bids; and 213.20 (2) the requirements of paragraph (b) are met. 213.21 (b) A sale is tax exempt under paragraph (a) if it meets 213.22 the requirements of either clause (1) or (2): 213.23 (1) For a construction contract: 213.24 (i) the goods or services sold must be used for the 213.25 performance of a bona fide written lump sum or fixed price 213.26 construction contract; 213.27 (ii) the contract must be entered into before the date the 213.28 goods or services become subject to the sales tax or the tax 213.29 rate was increased; 213.30 (iii) the contract must not provide for allocation of 213.31 future taxes; and 213.32 (iv) for each qualifying contract the contractor must give 213.33 the seller documentation of the contract on which an exemption 213.34 is to be claimed. 213.35 (2) For a construction bid: 213.36 (i) the goods or services sold must be used pursuant to an 214.1 obligation of a bid or bids; 214.2 (ii) the bid or bids must be submitted and accepted before 214.3 the date the goods or services became subject to the sales 214.4 tax or the tax rate was increased; 214.5 (iii) the bid or bids must not be able to be withdrawn, 214.6 modified, or changed without forfeiting a bond; and 214.7 (iv) for each qualifying bid, the contractor must give the 214.8 seller documentation of the bid on which an exemption is to be 214.9 claimed. 214.10 [EFFECTIVE DATE.] This section is effective the day 214.11 following final enactment. 214.12 Sec. 10. [REPEALER.] 214.13 Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200, 214.14 subparts 5 and 6; 8130.0400, subpart 9; 8130.1200, subparts 5 214.15 and 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1 214.16 and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200; 214.17 8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 214.18 5; and 8130.8800, subpart 4, are repealed. 214.19 [EFFECTIVE DATE.] This section is effective the day 214.20 following final enactment. 214.21 ARTICLE 12 214.22 SPECIAL TAXES TECHNICAL 214.23 Section 1. Minnesota Statutes 2002, section 287.04, is 214.24 amended to read: 214.25 287.04 [EXEMPTIONS.] 214.26 The tax imposed by section 287.035 does not apply to: 214.27 (a) A decree of marriage dissolution or an instrument made 214.28 pursuant to it. 214.29 (b) A mortgage given to correct a misdescription of the 214.30 mortgaged property. 214.31 (c) A mortgage or other instrument that adds additional 214.32 security for the same debt for which mortgage registry tax has 214.33 been paid. 214.34 (d) A contract for the conveyance of any interest in real 214.35 property, including a contract for deed. 214.36 (e) A mortgage secured by real property subject to the 215.1 minerals production tax of sections 298.24 to 298.28. 215.2 (f) The principal amount of a mortgage loan made under a 215.3 low and moderate income or other affordable housing program, if 215.4 the mortgagee is a federal, state, or local government agency. 215.5 (g) Mortgages granted by fraternal benefit societies 215.6 subject to section 64B.24. 215.7 (h) A mortgage amendment or extension, as defined in 215.8 section 287.01. 215.9 (i) An agricultural mortgage if the proceeds of the loan 215.10 secured by the mortgage are used to acquire or improve real 215.11 property classified under section 273.13, subdivision 23, 215.12 paragraph (a), or (b), clause (1), (2), or (3). 215.13 (j) A mortgage on an armory building as set forth in 215.14 section 193.147. 215.15 [EFFECTIVE DATE.] This section is effective the day 215.16 following final enactment. 215.17 Sec. 2. Minnesota Statutes 2002, section 295.50, 215.18 subdivision 4, is amended to read: 215.19 Subd. 4. [HEALTH CARE PROVIDER.] (a) "Health care 215.20 provider" means: 215.21 (1) a person whose health care occupation is regulated or 215.22 required to be regulated by the state of Minnesota furnishing 215.23 any or all of the following goods or services directly to a 215.24 patient or consumer: medical, surgical, optical, visual, 215.25 dental, hearing, nursing services, drugs, laboratory, diagnostic 215.26 or therapeutic services; 215.27 (2) a person who provides goods and services not listed in 215.28 clause (1) that qualify for reimbursement under the medical 215.29 assistance program provided under chapter 256B; 215.30 (3) a staff model health plan company; 215.31 (4) an ambulance service required to be licensed; or 215.32 (5) a person who sells or repairs hearing aids and related 215.33 equipment or prescription eyewear. 215.34 (b) Health care provider does not include: 215.35 (1) hospitals; medical supplies distributors, except as 215.36 specified under paragraph (a), clause (5); nursing homes 216.1 licensed under chapter 144A or licensed in any other 216.2 jurisdiction; pharmacies; surgical centers; bus and taxicab 216.3 transportation, or any other providers of transportation 216.4 services other than ambulance services required to be licensed; 216.5 supervised living facilities for persons with mental retardation 216.6 or related conditions, licensed under Minnesota Rules, parts 216.7 4665.0100 to 4665.9900;residential care homes licensed under216.8chapter 144Bhousing with services establishments required to be 216.9 registered under chapter 144D; board and lodging establishments 216.10 providing only custodial services that are licensed under 216.11 chapter 157 and registered under section 157.17 to provide 216.12 supportive services or health supervision services; adult foster 216.13 homes as defined in Minnesota Rules, part 9555.5105; day 216.14 training and habilitation services for adults with mental 216.15 retardation and related conditions as defined in section 252.41, 216.16 subdivision 3; boarding care homes, as defined in Minnesota 216.17 Rules, part 4655.0100; and adult day care centers as defined in 216.18 Minnesota Rules, part 9555.9600; 216.19 (2) home health agencies as defined in Minnesota Rules, 216.20 part 9505.0175, subpart 15; a person providing personal care 216.21 services and supervision of personal care services as defined in 216.22 Minnesota Rules, part 9505.0335; a person providing private duty 216.23 nursing services as defined in Minnesota Rules, part 9505.0360; 216.24 and home care providers required to be licensed under chapter 216.25 144A; 216.26 (3) a person who employs health care providers solely for 216.27 the purpose of providing patient services to its employees; and 216.28 (4) an educational institution that employs health care 216.29 providers solely for the purpose of providing patient services 216.30 to its students if the institution does not receive fee for 216.31 service payments or payments for extended coverage. 216.32 [EFFECTIVE DATE.] This section is effective the day 216.33 following final enactment. 216.34 Sec. 3. Minnesota Statutes 2002, section 296A.22, is 216.35 amended by adding a subdivision to read: 216.36 Subd. 9. [ABATEMENT OF PENALTY.] (a) The commissioner may 217.1 by written order abate any penalty imposed under this section, 217.2 if in the commissioner's opinion there is reasonable cause to do 217.3 so. 217.4 (b) A request for abatement of penalty must be filed with 217.5 the commissioner within 60 days of the date the notice stating 217.6 that a penalty has been imposed was mailed to the taxpayer's 217.7 last known address. 217.8 (c) If the commissioner issues an order denying a request 217.9 for abatement of penalty, the taxpayer may file an 217.10 administrative appeal as provided in section 296A.25 or appeal 217.11 to tax court as provided in section 271.06. If the commissioner 217.12 does not issue an order on the abatement request within 60 days 217.13 from the date the request is received, the taxpayer may appeal 217.14 to tax court as provided in section 271.06. 217.15 [EFFECTIVE DATE.] This section is effective for penalties 217.16 imposed on or after the day following final enactment. 217.17 Sec. 4. Minnesota Statutes 2002, section 297E.01, 217.18 subdivision 5, is amended to read: 217.19 Subd. 5. [DISTRIBUTOR.] "Distributor" means a distributor 217.20 as defined in section 349.12, subdivision 11, or a person or 217.21 linked bingo game provider who markets, sells, or provides 217.22 gambling product to a person or entity for resale or use at the 217.23 retail level. 217.24 [EFFECTIVE DATE.] This section is effective the day 217.25 following final enactment. 217.26 Sec. 5. Minnesota Statutes 2002, section 297E.01, 217.27 subdivision 7, is amended to read: 217.28 Subd. 7. [GAMBLING PRODUCT.] "Gambling product" means 217.29 bingo hard cards, bingo paper, orsheets, or linked bingo paper 217.30 sheets; pull-tabs; tipboards; paddletickets and paddleticket 217.31 cards; raffle tickets; or any other ticket, card, board, 217.32 placard, device, or token that represents a chance, for which 217.33 consideration is paid, to win a prize. 217.34 [EFFECTIVE DATE.] This section is effective the day 217.35 following final enactment. 217.36 Sec. 6. Minnesota Statutes 2002, section 297E.01, is 218.1 amended by adding a subdivision to read: 218.2 Subd. 9a. [LINKED BINGO GAME.] "Linked bingo game" means a 218.3 bingo game played at two or more locations where licensed 218.4 organizations are authorized to conduct bingo, when there is a 218.5 common prize pool and a common selection of numbers or symbols 218.6 conducted at one location, and when the results of the selection 218.7 are transmitted to all participating locations by satellite, 218.8 telephone, or other means by a linked bingo game provider. 218.9 [EFFECTIVE DATE.] This section is effective the day 218.10 following final enactment. 218.11 Sec. 7. Minnesota Statutes 2002, section 297E.01, is 218.12 amended by adding a subdivision to read: 218.13 Subd. 9b. [LINKED BINGO GAME PROVIDER.] "Linked bingo game 218.14 provider" means any person who provides the means to link bingo 218.15 prizes in a linked bingo game, who provides linked bingo paper 218.16 sheets to the participating organizations, who provides linked 218.17 bingo prize management, and who provides the linked bingo game 218.18 system. 218.19 [EFFECTIVE DATE.] This section is effective the day 218.20 following final enactment. 218.21 Sec. 8. Minnesota Statutes 2002, section 297E.07, is 218.22 amended to read: 218.23 297E.07 [INSPECTION RIGHTS.] 218.24 At any reasonable time, without notice and without a search 218.25 warrant, the commissioner may enter a place of business of a 218.26 manufacturer, distributor,ororganization, or linked bingo game 218.27 provider; any site from which pull-tabs or tipboards or other 218.28 gambling equipment or gambling product are being manufactured, 218.29 stored, or sold; or any site at which lawful gambling is being 218.30 conducted, and inspect the premises, books, records, and other 218.31 documents required to be kept under this chapter to determine 218.32 whether or not this chapter is being fully complied with. If 218.33 the commissioner is denied free access to or is hindered or 218.34 interfered with in making an inspection of the place of 218.35 business, books, or records, the permit of the distributor may 218.36 be revoked by the commissioner, and the license of the 219.1 manufacturer, the distributor,orthe organization, or linked 219.2 bingo game provider may be revoked by the board. 219.3 [EFFECTIVE DATE.] This section is effective the day 219.4 following final enactment. 219.5 Sec. 9. Minnesota Statutes 2003 Supplement, section 219.6 297F.08, subdivision 12, is amended to read: 219.7 Subd. 12. [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 219.8 person may not transport or cause to be transported from this 219.9 state cigarettes for sale in another state without first 219.10 affixing to the cigarettes the stamp required by the state in 219.11 which the cigarettes are to be sold or paying any other excise 219.12 tax on the cigarettes imposed by the state in which the 219.13 cigarettes are to be sold. 219.14 (b) A person may not affix to cigarettes the stamp required 219.15 by another state or pay any other excise tax on the cigarettes 219.16 imposed by another state if the other state prohibits stamps 219.17 from being affixed to the cigarettes, prohibits the payment of 219.18 any other excise tax on the cigarettes, or prohibits the sale of 219.19 the cigarettes. 219.20 (c) Not later than 15 days after the end of each calendar 219.21 quarter, a person who transports or causes to be transported 219.22 from this state cigarettes for sale in another state shall 219.23 submit to the commissioner a report identifying the quantity and 219.24 style of each brand of the cigarettes transported or caused to 219.25 be transported in the preceding calendar quarter, and the name 219.26 and address of each recipient of the cigarettes. This reporting 219.27 requirement only relates to cigarettes manufactured by companies 219.28 that are not original or subsequent participating manufacturers 219.29 in the Master Settlement Agreement with other states. 219.30 (d) For purposes of this section, "person" has the meaning 219.31 given in section 297F.01, subdivision 12. Person does not 219.32 include any common or contract carrier, or public warehouse that 219.33 is not owned, in whole or in part, directly or indirectly by 219.34 such person, and does not include a manufacturer thathas219.35entered intois an original or subsequent participating 219.36 manufacturer in the Master Settlement Agreement with other 220.1 states. 220.2 [EFFECTIVE DATE.] This section is effective the day 220.3 following final enactment. 220.4 Sec. 10. Minnesota Statutes 2003 Supplement, section 220.5 297F.09, subdivision 1, is amended to read: 220.6 Subdivision 1. [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 220.7 or before the 18th day of each calendar month, a distributor 220.8 with a place of business in this state shall file a return with 220.9 the commissioner showing the quantity of cigarettes manufactured 220.10 or brought in from outside the state or purchased during the 220.11 preceding calendar month and the quantity of cigarettes sold or 220.12 otherwise disposed of in this state and outside this state 220.13 during that month. A licensed distributor outside this state 220.14 shall in like manner file a return showing the quantity of 220.15 cigarettes shipped or transported into this state during the 220.16 preceding calendar month. Returns must be made in the form and 220.17 manner prescribed by the commissioner and must contain any other 220.18 information required by the commissioner. The return must be 220.19 accompanied by a remittance for the full unpaid tax liability 220.20 shown by it.The return for the May liability and 85 percent of220.21the estimated June liability is due on the date payment of the220.22tax is due.For distributors subject to the accelerated tax 220.23 payment requirements in subdivision 10, the return for the May 220.24 liability is due two business days before June 30th of the year 220.25 and the return for the June liability is due on or before August 220.26 18th of the year. 220.27 [EFFECTIVE DATE.] This section is effective the day 220.28 following final enactment. 220.29 Sec. 11. Minnesota Statutes 2003 Supplement, section 220.30 297F.09, subdivision 2, is amended to read: 220.31 Subd. 2. [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 220.32 On or before the 18th day of each calendar month, a distributor 220.33 with a place of business in this state shall file a return with 220.34 the commissioner showing the quantity and wholesale sales price 220.35 of each tobacco product: 220.36 (1) brought, or caused to be brought, into this state for 221.1 sale; and 221.2 (2) made, manufactured, or fabricated in this state for 221.3 sale in this state, during the preceding calendar month. 221.4 Every licensed distributor outside this state shall in like 221.5 manner file a return showing the quantity and wholesale sales 221.6 price of each tobacco product shipped or transported to 221.7 retailers in this state to be sold by those retailers, during 221.8 the preceding calendar month. Returns must be made in the form 221.9 and manner prescribed by the commissioner and must contain any 221.10 other information required by the commissioner. The return must 221.11 be accompanied by a remittance for the full tax liability 221.12 shown.The return for the May liability and 85 percent of the221.13estimated June liability is due on the date payment of the tax221.14is due.For distributors subject to the accelerated tax payment 221.15 requirements in subdivision 10, the return for the May liability 221.16 is due two business days before June 30th of the year and the 221.17 return for the June liability is due on or before August 18th of 221.18 the year. 221.19 [EFFECTIVE DATE.] This section is effective the day 221.20 following final enactment. 221.21 Sec. 12. Minnesota Statutes 2002, section 297I.01, is 221.22 amended by adding a subdivision to read: 221.23 Subd. 13a. [REINSURANCE.] "Reinsurance" is insurance 221.24 whereby an insurance company, for a consideration, agrees to 221.25 indemnify another insurance company against all or part of the 221.26 loss which the latter may sustain under the policy or policies 221.27 which it has issued. 221.28 [EFFECTIVE DATE.] This section is effective the day 221.29 following final enactment. 221.30 Sec. 13. Minnesota Statutes 2002, section 297I.05, 221.31 subdivision 4, is amended to read: 221.32 Subd. 4. [MUTUALPROPERTY AND CASUALTYCOMPANIES WITH 221.33 TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 221.34 tax is imposed on mutualproperty and casualtycompanies that 221.35 had total assets greater than $5,000,000 at the end of the 221.36 calendar year but that had total assets less than $1,600,000,000 222.1 on December 31, 1989. The rate of tax is equal to: 222.2 (1) two percent of gross premiums less return premiums on 222.3 all direct business received by the insurer or agents of the 222.4 insurer in Minnesota for life insurance, in cash or otherwise, 222.5 during the year; and 222.6 (2) 1.26 percent of gross premiums less return premiums on 222.7 all other direct business received by the insurer or agents of 222.8 the insurer in Minnesota, in cash or otherwise, during the year. 222.9 [EFFECTIVE DATE.] This section is effective for returns, 222.10 taxes, surcharges, and estimated payments required to be filed 222.11 or paid for tax years beginning on or after January 1, 2004. 222.12 Sec. 14. Minnesota Statutes 2002, section 297I.05, 222.13 subdivision 5, is amended to read: 222.14 Subd. 5. [HEALTH MAINTENANCE ORGANIZATIONS, NONPROFIT 222.15 HEALTH SERVICE PLAN CORPORATIONS, AND COMMUNITY INTEGRATED 222.16 SERVICE NETWORKS.] (a)Health maintenance organizations,222.17community integrated service networks, and nonprofit health care222.18service plan corporations are exempt from the tax imposed under222.19this section for premiums received in calendar years 2001 to222.202003.222.21(b) For calendar years after 2003,A tax is imposed on 222.22 health maintenance organizations, community integrated service 222.23 networks, and nonprofit health care service plan corporations. 222.24 The rate of tax is equal to one percent of gross premiums less 222.25 return premiums on all direct business received by the 222.26 organization, network, or corporation or its agents in 222.27 Minnesota, in cash or otherwise, in the calendar year. 222.28(c) In approving the premium rates as required in sections222.2962L.08, subdivision 8, and 62A.65, subdivision 3, the222.30commissioners of health and commerce shall ensure that any222.31exemption from tax as described in paragraph (a) is reflected in222.32the premium rate.222.33(d)(b) The commissioner shall deposit all revenues, 222.34 including penalties and interest, collected under this chapter 222.35 from health maintenance organizations, community integrated 222.36 service networks, and nonprofit health service plan corporations 223.1 in the health care access fund. Refunds of overpayments of tax 223.2 imposed by this subdivision must be paid from the health care 223.3 access fund. There is annually appropriated from the health 223.4 care access fund to the commissioner the amount necessary to 223.5 make any refunds of the tax imposed under this subdivision. 223.6 [EFFECTIVE DATE.] This section is effective January 1, 2004. 223.7 Sec. 15. [REPEALER.] 223.8 Minnesota Statutes 2002, section 297E.12, subdivision 10, 223.9 is repealed effective the day following final enactment. 223.10 ARTICLE 13 223.11 MISCELLANEOUS TECHNICAL 223.12 Section 1. Minnesota Statutes 2002, section 270.65, is 223.13 amended to read: 223.14 270.65 [DATE OF ASSESSMENT; DEFINITION.] 223.15 For purposes of taxes administered by the commissioner, the 223.16 term "date of assessment" means the date a liability reported on 223.17 a return was entered into the records of the commissioner or the 223.18 date a return should have been filed, whichever is later; or, in 223.19 the case of taxes determined by the commissioner, "date of 223.20 assessment" means the date of the order assessing taxes or date 223.21 of the return made by the commissioner; or, in the case of an 223.22 amended return filed by the taxpayer, the assessment date is the 223.23 date additional liability reported on the return, if any, was 223.24 entered into the records of the commissioner; or, in the case of 223.25 a consent agreement signed by the taxpayer under section 270.67, 223.26 subdivision 3, the assessment date is the notice date shown on 223.27 the agreement; or, in the case of a check from a taxpayer that 223.28 is dishonored and results in an erroneous refund being given to 223.29 the taxpayer, remittance of the check is deemed to be an 223.30 assessment and the "date of assessment" is the date the check 223.31 was received by the commissioner. 223.32 [EFFECTIVE DATE.] This section is effective the day 223.33 following final enactment. 223.34 Sec. 2. Minnesota Statutes 2003 Supplement, section 223.35 289A.19, subdivision 4, is amended to read: 223.36 Subd. 4. [ESTATE TAX RETURNS.]When in the commissioner's224.1judgment good cause exists, the commissioner may extend the time224.2for filing an estate tax return for not more than six months.224.3 When an extension to file the federal estate tax return has been 224.4 granted under section 6081 of the Internal Revenue Code, the 224.5 time for filing the estate tax return is extended for that 224.6 period. If the estate requests an extension to file an estate 224.7 tax return within the time provided in section 289A.18, 224.8 subdivision 3, the commissioner shall extend the time for filing 224.9 the estate tax return for six months. 224.10 [EFFECTIVE DATE.] This section is effective for estates of 224.11 decedents dying after December 31, 2003. 224.12 Sec. 3. Minnesota Statutes 2002, section 289A.37, 224.13 subdivision 5, is amended to read: 224.14 Subd. 5. [SUFFICIENCY OF NOTICE.] An order of assessment, 224.15 sent postage prepaid by United States mail to the taxpayer at 224.16 the taxpayer's last known address, or sent by electronic mail to 224.17 the taxpayer's last known electronic mailing address as provided 224.18 for in section 325L.08, is sufficient even if the taxpayer is 224.19 deceased or is under a legal disability, or, in the case of a 224.20 corporation, has terminated its existence, unless the department 224.21 has been provided with a new address by a party authorized to 224.22 receive notices of assessment. 224.23 [EFFECTIVE DATE.] This section is effective the day 224.24 following final enactment. 224.25 Sec. 4. Minnesota Statutes 2002, section 289A.60, 224.26 subdivision 6, is amended to read: 224.27 Subd. 6. [PENALTY FOR FAILURE TO FILE, FALSE OR FRAUDULENT 224.28 RETURN, EVASION.] If a person, with intent to evade or defeat a 224.29 tax or payment of tax, fails to file a return, files a false or 224.30 fraudulent return, or attempts in any other manner to evade or 224.31 defeat a tax or payment of tax, there is imposed on the person a 224.32 penalty equal to 50 percent of the tax, less amounts paid by the 224.33 person on the basis of the false or fraudulent return, if any, 224.34 due for the period to which the return related. 224.35 [EFFECTIVE DATE.] This section is effective the day 224.36 following final enactment. 225.1 Sec. 5. Minnesota Statutes 2003 Supplement, section 225.2 290.01, subdivision 19a, is amended to read: 225.3 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 225.4 individuals, estates, and trusts, there shall be added to 225.5 federal taxable income: 225.6 (1)(i) interest income on obligations of any state other 225.7 than Minnesota or a political or governmental subdivision, 225.8 municipality, or governmental agency or instrumentality of any 225.9 state other than Minnesota exempt from federal income taxes 225.10 under the Internal Revenue Code or any other federal statute; 225.11 and 225.12 (ii) exempt-interest dividends as defined in section 225.13 852(b)(5) of the Internal Revenue Code, except the portion of 225.14 the exempt-interest dividends derived from interest income on 225.15 obligations of the state of Minnesota or its political or 225.16 governmental subdivisions, municipalities, governmental agencies 225.17 or instrumentalities, but only if the portion of the 225.18 exempt-interest dividends from such Minnesota sources paid to 225.19 all shareholders represents 95 percent or more of the 225.20 exempt-interest dividends that are paid by the regulated 225.21 investment company as defined in section 851(a) of the Internal 225.22 Revenue Code, or the fund of the regulated investment company as 225.23 defined in section 851(g) of the Internal Revenue Code, making 225.24 the payment; and 225.25 (iii) for the purposes of items (i) and (ii), interest on 225.26 obligations of an Indian tribal government described in section 225.27 7871(c) of the Internal Revenue Code shall be treated as 225.28 interest income on obligations of the state in which the tribe 225.29 is located; 225.30 (2) the amount of income taxes paid or accrued within the 225.31 taxable year under this chapter andincomethe amount of taxes 225.32 based on net income paid to any other state or to any province 225.33 or territory of Canada, to the extent allowed as a deduction 225.34 under section 63(d) of the Internal Revenue Code, but the 225.35 addition may not be more than the amount by which the itemized 225.36 deductions as allowed under section 63(d) of the Internal 226.1 Revenue Code exceeds the amount of the standard deduction as 226.2 defined in section 63(c) of the Internal Revenue Code. For the 226.3 purpose of this paragraph, the disallowance of itemized 226.4 deductions under section 68 of the Internal Revenue Code of 226.5 1986, income tax is the last itemized deduction disallowed; 226.6 (3) the capital gain amount of a lump sum distribution to 226.7 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 226.8 Reform Act of 1986, Public Law 99-514, applies; 226.9 (4) the amount of income taxes paid or accrued within the 226.10 taxable year under this chapter andincometaxes based on net 226.11 income paid to any other state or any province or territory of 226.12 Canada, to the extent allowed as a deduction in determining 226.13 federal adjusted gross income. For the purpose of this 226.14 paragraph, income taxes do not include the taxes imposed by 226.15 sections 290.0922, subdivision 1, paragraph (b), 290.9727, 226.16 290.9728, and 290.9729; 226.17 (5) the amount of expense, interest, or taxes disallowed 226.18 pursuant to section 290.10; 226.19 (6) the amount of a partner's pro rata share of net income 226.20 which does not flow through to the partner because the 226.21 partnership elected to pay the tax on the income under section 226.22 6242(a)(2) of the Internal Revenue Code; and 226.23 (7) 80 percent of the depreciation deduction allowed under 226.24 section 168(k) of the Internal Revenue Code. For purposes of 226.25 this clause, if the taxpayer has an activity that in the taxable 226.26 year generates a deduction for depreciation under section 168(k) 226.27 and the activity generates a loss for the taxable year that the 226.28 taxpayer is not allowed to claim for the taxable year, "the 226.29 depreciation allowed under section 168(k)" for the taxable year 226.30 is limited to excess of the depreciation claimed by the activity 226.31 under section 168(k) over the amount of the loss from the 226.32 activity that is not allowed in the taxable year. In succeeding 226.33 taxable years when the losses not allowed in the taxable year 226.34 are allowed, the depreciation under section 168(k) is allowed. 226.35 [EFFECTIVE DATE.] This section is effective for tax years 226.36 beginning after December 31, 2003. 227.1 Sec. 6. Minnesota Statutes 2002, section 290.06, 227.2 subdivision 22, is amended to read: 227.3 Subd. 22. [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 227.4 taxpayer who is liable for taxes based onor measured bynet 227.5 income to another state, as provided in paragraphs (b) through 227.6 (f), upon income allocated or apportioned to Minnesota, is 227.7 entitled to a credit for the tax paid to another state if the 227.8 tax is actually paid in the taxable year or a subsequent taxable 227.9 year. A taxpayer who is a resident of this state pursuant to 227.10 section 290.01, subdivision 7,clause (2)paragraph (b), and who 227.11 is subject to income tax as a resident in the state of the 227.12 individual's domicile is not allowed this credit unless the 227.13 state of domicile does not allow a similar credit. 227.14 (b) For an individual, estate, or trust, the credit is 227.15 determined by multiplying the tax payable under this chapter by 227.16 the ratio derived by dividing the income subject to tax in the 227.17 other state that is also subject to tax in Minnesota while a 227.18 resident of Minnesota by the taxpayer's federal adjusted gross 227.19 income, as defined in section 62 of the Internal Revenue Code, 227.20 modified by the addition required by section 290.01, subdivision 227.21 19a, clause (1), and the subtraction allowed by section 290.01, 227.22 subdivision 19b, clause (1), to the extent the income is 227.23 allocated or assigned to Minnesota under sections 290.081 and 227.24 290.17. 227.25 (c) If the taxpayer is an athletic team that apportions all 227.26 of its income under section 290.17, subdivision 5, the credit is 227.27 determined by multiplying the tax payable under this chapter by 227.28 the ratio derived from dividing the total net income subject to 227.29 tax in the other state by the taxpayer's Minnesota taxable 227.30 income. 227.31 (d) The credit determined under paragraph (b) or (c) shall 227.32 not exceed the amount of tax so paid to the other state on the 227.33 gross income earned within the other state subject to tax under 227.34 this chapter, nor shall the allowance of the credit reduce the 227.35 taxes paid under this chapter to an amount less than what would 227.36 be assessed if such income amount was excluded from taxable net 228.1 income. 228.2 (e) In the case of the tax assessed on a lump sum 228.3 distribution under section 290.032, the credit allowed under 228.4 paragraph (a) is the tax assessed by the other state on the lump 228.5 sum distribution that is also subject to tax under section 228.6 290.032, and shall not exceed the tax assessed under section 228.7 290.032. To the extent the total lump sum distribution defined 228.8 in section 290.032, subdivision 1, includes lump sum 228.9 distributions received in prior years or is all or in part an 228.10 annuity contract, the reduction to the tax on the lump sum 228.11 distribution allowed under section 290.032, subdivision 2, 228.12 includes tax paid to another state that is properly apportioned 228.13 to that distribution. 228.14 (f) If a Minnesota resident reported an item of income to 228.15 Minnesota and is assessed tax in such other state on that same 228.16 income after the Minnesota statute of limitations has expired, 228.17 the taxpayer shall receive a credit for that year under 228.18 paragraph (a), notwithstanding any statute of limitations to the 228.19 contrary. The claim for the credit must be submitted within one 228.20 year from the date the taxes were paid to the other state. The 228.21 taxpayer must submit sufficient proof to show entitlement to a 228.22 credit. 228.23 (g) For the purposes of this subdivision, a resident 228.24 shareholder of a corporation treated as an "S" corporation under 228.25 section 290.9725, must be considered to have paid a tax imposed 228.26 on the shareholder in an amount equal to the shareholder's pro 228.27 rata share of any net income tax paid by the S corporation to 228.28 another state. For the purposes of the preceding sentence, the 228.29 term "net income tax" means any tax imposed on or measured by a 228.30 corporation's net income. 228.31 (h) For the purposes of this subdivision, a resident 228.32 partner of an entity taxed as a partnership under the Internal 228.33 Revenue Code must be considered to have paid a tax imposed on 228.34 the partner in an amount equal to the partner's pro rata share 228.35 of any net income tax paid by the partnership to another state. 228.36 For purposes of the preceding sentence, the term "net income" 229.1 tax means any tax imposed on or measured by a partnership's net 229.2 income. 229.3 (i) For the purposes of this subdivision, "another state": 229.4 (1) includes: 229.5 (i) the District of Columbia; and 229.6 (ii) a province or territory of Canada; but 229.7 (2) excludes Puerto Rico and the several territories 229.8 organized by Congress. 229.9 (j) The limitations on the credit in paragraphs (b), (c), 229.10 and (d), are imposed on a state by state basis. 229.11 (k) For a tax imposed by a province or territory of Canada, 229.12 the tax for purposes of this subdivision is the excess of the 229.13 tax over the amount of the foreign tax credit allowed under 229.14 section 27 of the Internal Revenue Code. In determining the 229.15 amount of the foreign tax credit allowed, the net income taxes 229.16 imposed by Canada on the income are deducted first. Any 229.17 remaining amount of the allowable foreign tax credit reduces the 229.18 provincial or territorial tax that qualifies for the credit 229.19 under this subdivision. 229.20 [EFFECTIVE DATE.] This section is effective for tax years 229.21 beginning after December 31, 2003. 229.22 Sec. 7. Minnesota Statutes 2003 Supplement, section 229.23 290.0674, subdivision 1, is amended to read: 229.24 Subdivision 1. [CREDIT ALLOWED.] An individual is allowed 229.25 a credit against the tax imposed by this chapter in an amount 229.26 equal to 75 percent of the amount paid for education-related 229.27 expenses for a qualifying child in kindergarten through grade 229.28 12. For purposes of this section, "education-related expenses" 229.29 means: 229.30 (1) fees or tuition for instruction by an instructor under 229.31 section 120A.22, subdivision 10, clause (1), (2), (3), (4), or 229.32 (5), or a member of the Minnesota Music Teachers Association, 229.33 and who is not a lineal ancestor or sibling of the dependent for 229.34 instruction outside the regular school day or school year, 229.35 including tutoring, driver's education offered as part of school 229.36 curriculum, regardless of whether it is taken from a public or 230.1 private entity or summer camps, in grade or age appropriate 230.2 curricula that supplement curricula and instruction available 230.3 during the regular school year, that assists a dependent to 230.4 improve knowledge of core curriculum areas or to expand 230.5 knowledge and skills under thegraduation rule under section230.6120B.02, paragraph (e), clauses (1) to (7), (9), and (10)230.7 required academic standards under section 120B.021, subdivision 230.8 1, and the elective standard under section 120B.022, subdivision 230.9 1, clause (3), and that do not include the teaching of religious 230.10 tenets, doctrines, or worship, the purpose of which is to 230.11 instill such tenets, doctrines, or worship; 230.12 (2) expenses for textbooks, including books and other 230.13 instructional materials and equipment purchased or leased for 230.14 use in elementary and secondary schools in teaching only those 230.15 subjects legally and commonly taught in public elementary and 230.16 secondary schools in this state. "Textbooks" does not include 230.17 instructional books and materials used in the teaching of 230.18 religious tenets, doctrines, or worship, the purpose of which is 230.19 to instill such tenets, doctrines, or worship, nor does it 230.20 include books or materials for extracurricular activities 230.21 including sporting events, musical or dramatic events, speech 230.22 activities, driver's education, or similar programs; 230.23 (3) a maximum expense of $200 per family for personal 230.24 computer hardware, excluding single purpose processors, and 230.25 educational software that assists a dependent to improve 230.26 knowledge of core curriculum areas or to expand knowledge and 230.27 skills under thegraduation rule under section 120B.02required 230.28 academic standards under section 120B.021, subdivision 1, and 230.29 the elective standard under section 120B.022, subdivision 1, 230.30 clause (3), purchased for use in the taxpayer's home and not 230.31 used in a trade or business regardless of whether the computer 230.32 is required by the dependent's school; and 230.33 (4) the amount paid to others for transportation of a 230.34 qualifying child attending an elementary or secondary school 230.35 situated in Minnesota, North Dakota, South Dakota, Iowa, or 230.36 Wisconsin, wherein a resident of this state may legally fulfill 231.1 the state's compulsory attendance laws, which is not operated 231.2 for profit, and which adheres to the provisions of the Civil 231.3 Rights Act of 1964 and chapter 363A. 231.4 For purposes of this section, "qualifying child" has the 231.5 meaning given in section 32(c)(3) of the Internal Revenue Code. 231.6 [EFFECTIVE DATE.] This section is effective for tax years 231.7 beginning after December 31, 2003. 231.8 Sec. 8. Minnesota Statutes 2002, section 290.92, 231.9 subdivision 1, is amended to read: 231.10 Subdivision 1. [DEFINITIONS.] (1) [WAGES.] For purposes 231.11 of this section, the term "wages" means the same as that term is 231.12 defined in section 3401(a) and (f) of the Internal Revenue Code. 231.13 (2) [PAYROLL PERIOD.] For purposes of this section the 231.14 term "payroll period" means a period for which a payment of 231.15 wages is ordinarily made to the employee by the employee's 231.16 employer, and the term "miscellaneous payroll period" means a 231.17 payroll period other than a daily, weekly, biweekly, 231.18 semimonthly, monthly, quarterly, semiannual, or annual payroll 231.19 period. 231.20 (3) [EMPLOYEE.] For purposes of this section the term 231.21 "employee" means any resident individual performing services for 231.22 an employer, either within or without, or both within and 231.23 without the state of Minnesota, and every nonresident individual 231.24 performing services within the state of Minnesota, the 231.25 performance of which services constitute, establish, and 231.26 determine the relationship between the parties as that of 231.27 employer and employee. As used in the preceding sentence, the 231.28 term "employee" includes an officer of a corporation, and an 231.29 officer, employee, or elected official of the United States, a 231.30 state, or any political subdivision thereof, or the District of 231.31 Columbia, or any agency or instrumentality of any one or more of 231.32 the foregoing. 231.33 (4) [EMPLOYER.] For purposes of this section the term 231.34 "employer" means any person, including individuals, fiduciaries, 231.35 estates, trusts, partnerships, limited liability companies, and 231.36 corporations transacting business in or deriving any income from 232.1 sources within the state of Minnesota for whom an individual 232.2 performs or performed any service, of whatever nature, as the 232.3 employee of such person, except that if the person for whom the 232.4 individual performs or performed the services does not have 232.5legalcontrol of the payment of the wages for such services, the 232.6 term "employer," except for purposes of paragraph (1), means the 232.7 person havinglegalcontrol of the payment of such wages. As 232.8 used in the preceding sentence, the term "employer" includes any 232.9 corporation, individual, estate, trust, or organization which is 232.10 exempt from taxation under section 290.05 and further includes, 232.11 but is not limited to, officers of corporations who havelegal232.12 control, either individually or jointly with another or others, 232.13 of the payment of the wages. 232.14 (5) [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For 232.15 purposes of this section, the term "number of withholding 232.16 exemptions claimed" means the number of withholding exemptions 232.17 claimed in a withholding exemption certificate in effect under 232.18 subdivision 5, except that if no such certificate is in effect, 232.19 the number of withholding exemptions claimed shall be considered 232.20 to be zero. 232.21 [EFFECTIVE DATE.] This section is effective the day 232.22 following final enactment. 232.23 Sec. 9. Minnesota Statutes 2002, section 290C.05, is 232.24 amended to read: 232.25 290C.05 [ANNUAL CERTIFICATION.] 232.26 On or before July 1 of each year, beginning with the year 232.27 after the claimant has received an approved application, the 232.28 commissioner shall send each claimant enrolled under the 232.29 sustainable forest incentive program a certification form. The 232.30 claimant must sign the certification, attesting that the 232.31 requirements and conditions for continued enrollment in the 232.32 program are currently being met, and must return the signed 232.33 certification form to the commissioner by August 15 of that same 232.34 year.Failure toIf the claimant does not return an annual 232.35 certification form by the due dateshall result in removal of232.36the lands from the provisions of the sustainable forest233.1incentive program, and the imposition of any applicable removal233.2penalty, the provisions in section 290C.11 apply.The claimant233.3may appeal the removal and any associated penalty according to233.4the procedures and within the time allowed under this chapter.233.5 [EFFECTIVE DATE.] This section is effective the day 233.6 following final enactment. 233.7 Sec. 10. [290C.055] [LENGTH OF COVENANT.] 233.8 The covenant remains in effect for a minimum of eight 233.9 years. If land is removed from the program after it has been 233.10 enrolled for less than four years, the covenant remains in 233.11 effect for eight years from the date recorded. 233.12 In the case of land that has been enrolled for more than 233.13 four years and is removed from the program for any reason, there 233.14 is a four-year waiting period to end the covenant. The covenant 233.15 remains in effect until January 1 of the fifth calendar year 233.16 that begins after the date that: 233.17 (1) the commissioner receives notification from the 233.18 claimant that the claimant wishes to be removed from the program 233.19 under section 290C.10, or 233.20 (2) the date that land is removed from the program under 233.21 section 290C.11. 233.22 Notwithstanding the other provisions of this section, the 233.23 covenant is terminated at the same time that land is removed 233.24 from the program due to acquisition of title or possession for a 233.25 public purpose under section 290C.10. 233.26 [EFFECTIVE DATE.] This section is effective the day 233.27 following final enactment. 233.28 Sec. 11. Minnesota Statutes 2002, section 325D.33, 233.29 subdivision 6, is amended to read: 233.30 Subd. 6. [VIOLATIONS.] If the commissioner determines that 233.31 a distributor is violating any provision of this chapter, the 233.32 commissioner must give the distributor a written warning 233.33 explaining the violation and an explanation of what must be done 233.34 to comply with this chapter. Within ten days of issuance of the 233.35 warning, the distributor must notify the commissioner that the 233.36 distributor has complied with the commissioner's recommendation 234.1 or request that the commissioner set the issue for a hearing 234.2 pursuant to chapter 14. If a hearing is requested, the hearing 234.3 shall be scheduled within 20 days of the request and the 234.4 recommendation of the administrative law judge shall be issued 234.5 within five working days of the close of the hearing. The 234.6 commissioner's final determination shall be issued within five 234.7 working days of the receipt of the administrative law judge's 234.8 recommendation. If the commissioner's final determination is 234.9 adverse to the distributor and the distributor does not comply 234.10 within ten days of receipt of the commissioner's final 234.11 determination, the commissioner may order the distributor to 234.12 immediately cease the stamping of cigarettes. As soon as 234.13 practicable after the order, the commissioner must remove the 234.14 meter and any unapplied cigarette stamps from the premises of 234.15 the distributor. 234.16 If within ten days of issuance of the written warning the 234.17 distributor has not complied with the commissioner's 234.18 recommendation or requested a hearing, the commissioner may 234.19 order the distributor to immediately cease the stamping of 234.20 cigarettes and remove the meter and unapplied stamps from the 234.21 distributor's premises. 234.22If, within any 12-month period, the commissioner has issued234.23three written warnings to any distributor, even if the234.24distributor has complied within ten days, the commissioner shall234.25notify the distributor of the commissioner's intent to revoke234.26the distributor's license for a continuing course of conduct234.27contrary to this chapter. For purposes of this paragraph, a234.28written warning that was ultimately resolved by removal of the234.29warning by the commissioner is not deemed to be a warning. The234.30commissioner must notify the distributor of the date and time of234.31a hearing pursuant to chapter 14 at least 20 days before the234.32hearing is held. The hearing must provide an opportunity for234.33the distributor to show cause why the license should not be234.34revoked. If the commissioner revokes a distributor's license,234.35the commissioner shall not issue a new license to that234.36distributor for 180 days.235.1 [EFFECTIVE DATE.] This section is effective the day 235.2 following final enactment. 235.3 Sec. 12. Minnesota Statutes 2002, section 473.843, 235.4 subdivision 5, is amended to read: 235.5 Subd. 5. [PENALTIES; ENFORCEMENT.] The audit, penalty, and 235.6 enforcement provisions applicable to corporate franchise taxes 235.7 imposed under chapter 290 apply to the fees imposed under this 235.8 section. The commissioner of revenue shall administer the 235.9 provisions. 235.10 [EFFECTIVE DATE.] This section is effective the day 235.11 following final enactment. 235.12 Sec. 13. [REPEALER.] 235.13 Minnesota Rules, parts 8093.2000 and 8093.3000, are 235.14 repealed. 235.15 [EFFECTIVE DATE.] This section is effective the day 235.16 following final enactment. 235.17 ARTICLE 14 235.18 BLUE WATERS 235.19 Section 1. Minnesota Statutes 2003 Supplement, section 235.20 273.13, subdivision 23, is amended to read: 235.21 Subd. 23. [CLASS 2.] (a) Class 2a property is agricultural 235.22 land including any improvements that is homesteaded. The market 235.23 value of the house and garage and immediately surrounding one 235.24 acre of land has the same class rates as class 1a property under 235.25 subdivision 22. The value of the remaining land including 235.26 improvements up to and including $600,000 market value has a net 235.27 class rate of 0.55 percent of market value. The remaining 235.28 property over $600,000 market value has a class rate of one 235.29 percent of market value. 235.30 (b) Class 2b property is (1) real estate, rural in 235.31 character and used exclusively for growing trees for timber, 235.32 lumber, and wood and wood products; (2) real estate that is not 235.33 improved with a structure and is used exclusively for growing 235.34 trees for timber, lumber, and wood and wood products, if the 235.35 owner has participated or is participating in a cost-sharing 235.36 program for afforestation, reforestation, or timber stand 236.1 improvement on that particular property, administered or 236.2 coordinated by the commissioner of natural resources; (3) real 236.3 estate that is nonhomestead agricultural land; or (4) a landing 236.4 area or public access area of a privately owned public use 236.5 airport. Class 2b property has a net class rate of one percent 236.6 of market value. 236.7 (c) Agricultural land as used in this section means 236.8 contiguous acreage of ten acres or more, used during the 236.9 preceding year for agricultural purposes. "Agricultural 236.10 purposes" as used in this section means the raising or 236.11 cultivation of agricultural products. "Agricultural purposes" 236.12 also includes enrollment in the Reinvest in Minnesota program 236.13 under sections 103F.501 to 103F.535 or the federal Conservation 236.14 Reserve Program as contained in Public Law 99-198 if the 236.15 property was classified as agricultural (i) under this 236.16 subdivision for the assessment year 2002 or (ii) in the year 236.17 prior to its enrollment. Contiguous acreage on the same parcel, 236.18 or contiguous acreage on an immediately adjacent parcel under 236.19 the same ownership, may also qualify as agricultural land, but 236.20 only if it is pasture, timber, waste, unusable wild land, or 236.21 land included in state or federal farm programs. Agricultural 236.22 classification for property shall be determined excluding the 236.23 house, garage, and immediately surrounding one acre of land, and 236.24 shall not be based upon the market value of any residential 236.25 structures on the parcel or contiguous parcels under the same 236.26 ownership. 236.27 (d) Real estate, excluding the house, garage, and 236.28 immediately surrounding one acre of land, of less than ten acres 236.29 which is exclusively and intensively used for raising or 236.30 cultivating agricultural products, shall be considered as 236.31 agricultural land. 236.32 Land shall be classified as agricultural even if all or a 236.33 portion of the agricultural use of that property is the leasing 236.34 to, or use by another person for agricultural purposes. 236.35 Classification under this subdivision is not determinative 236.36 for qualifying under section 273.111. 237.1 The property classification under this section supersedes, 237.2 for property tax purposes only, any locally administered 237.3 agricultural policies or land use restrictions that define 237.4 minimum or maximum farm acreage. 237.5 (e) The term "agricultural products" as used in this 237.6 subdivision includes production for sale of: 237.7 (1) livestock, dairy animals, dairy products, poultry and 237.8 poultry products, fur-bearing animals, horticultural and nursery 237.9 stock, fruit of all kinds, vegetables, forage, grains, bees, and 237.10 apiary products by the owner; 237.11 (2) fish bred for sale and consumption if the fish breeding 237.12 occurs on land zoned for agricultural use; 237.13 (3) the commercial boarding of horses if the boarding is 237.14 done in conjunction with raising or cultivating agricultural 237.15 products as defined in clause (1); 237.16 (4) property which is owned and operated by nonprofit 237.17 organizations used for equestrian activities, excluding racing; 237.18 (5) game birds and waterfowl bred and raised for use on a 237.19 shooting preserve licensed under section 97A.115; 237.20 (6) insects primarily bred to be used as food for animals; 237.21 (7) trees, grown for sale as a crop, and not sold for 237.22 timber, lumber, wood, or wood products; and 237.23 (8) maple syrup taken from trees grown by a person licensed 237.24 by the Minnesota Department of Agriculture under chapter 28A as 237.25 a food processor. 237.26 (f) If a parcel used for agricultural purposes is also used 237.27 for commercial or industrial purposes, including but not limited 237.28 to: 237.29 (1) wholesale and retail sales; 237.30 (2) processing of raw agricultural products or other goods; 237.31 (3) warehousing or storage of processed goods; and 237.32 (4) office facilities for the support of the activities 237.33 enumerated in clauses (1), (2), and (3), 237.34 the assessor shall classify the part of the parcel used for 237.35 agricultural purposes as class 1b, 2a, or 2b, whichever is 237.36 appropriate, and the remainder in the class appropriate to its 238.1 use. The grading, sorting, and packaging of raw agricultural 238.2 products for first sale is considered an agricultural purpose. 238.3 A greenhouse or other building where horticultural or nursery 238.4 products are grown that is also used for the conduct of retail 238.5 sales must be classified as agricultural if it is primarily used 238.6 for the growing of horticultural or nursery products from seed, 238.7 cuttings, or roots and occasionally as a showroom for the retail 238.8 sale of those products. Use of a greenhouse or building only 238.9 for the display of already grown horticultural or nursery 238.10 products does not qualify as an agricultural purpose. 238.11 The assessor shall determine and list separately on the 238.12 records the market value of the homestead dwelling and the one 238.13 acre of land on which that dwelling is located. If any farm 238.14 buildings or structures are located on this homesteaded acre of 238.15 land, their market value shall not be included in this separate 238.16 determination. 238.17 (g) To qualify for classification under paragraph (b), 238.18 clause (4), a privately owned public use airport must be 238.19 licensed as a public airport under section 360.018. For 238.20 purposes of paragraph (b), clause (4), "landing area" means that 238.21 part of a privately owned public use airport properly cleared, 238.22 regularly maintained, and made available to the public for use 238.23 by aircraft and includes runways, taxiways, aprons, and sites 238.24 upon which are situated landing or navigational aids. A landing 238.25 area also includes land underlying both the primary surface and 238.26 the approach surfaces that comply with all of the following: 238.27 (i) the land is properly cleared and regularly maintained 238.28 for the primary purposes of the landing, taking off, and taxiing 238.29 of aircraft; but that portion of the land that contains 238.30 facilities for servicing, repair, or maintenance of aircraft is 238.31 not included as a landing area; 238.32 (ii) the land is part of the airport property; and 238.33 (iii) the land is not used for commercial or residential 238.34 purposes. 238.35 The land contained in a landing area under paragraph (b), clause 238.36 (4), must be described and certified by the commissioner of 239.1 transportation. The certification is effective until it is 239.2 modified, or until the airport or landing area no longer meets 239.3 the requirements of paragraph (b), clause (4). For purposes of 239.4 paragraph (b), clause (4), "public access area" means property 239.5 used as an aircraft parking ramp, apron, or storage hangar, or 239.6 an arrival and departure building in connection with the airport. 239.7 (h) Class 2c property consists of any parcel or contiguous 239.8 parcels of unimproved real estate, excluding agricultural land 239.9 classified under this subdivision, that meets all the criteria 239.10 in clauses (1) to (5): 239.11 (1) the property consists of at least 200 contiguous feet 239.12 of unimproved real estate that borders a meandered lake as 239.13 defined in section 103G.005, subdivision 15, paragraph (a), 239.14 clause (3); 239.15 (2) the unimproved real estate is located within 400 feet 239.16 from the ordinary high water elevation of the public waters. 239.17 For purposes of this clause, "unimproved" means that the 239.18 property, or that portion of the property qualifying under this 239.19 paragraph, contains no structures, that there are no docks or 239.20 landings on its shoreline, and that the natural terrain and 239.21 vegetation has not been disturbed, or has been restored to 239.22 native vegetation; 239.23 (3) the property is either (i) the homestead of the owner, 239.24 the owner's spouse, or the owner or spouse's son or daughter, or 239.25 (ii) has been in possession of the owner, the owner's spouse, or 239.26 the owner's or spouse's son or daughter for a period of at least 239.27 seven years prior to application for benefits under this 239.28 section; 239.29 (4) the owner files an application with the county assessor 239.30 by July 1 for classification under this paragraph for the 239.31 subsequent assessment year; and 239.32 (5) the owner of the property signs a covenant agreement 239.33 and files the covenant with the county assessor in the county 239.34 where the property is located. The covenant agreement must 239.35 include all of the following: 239.36 (i) legal description of the area to which the covenant 240.1 applies; 240.2 (ii) name and address of the owner; 240.3 (iii) a statement that the land described in the covenant 240.4 must be kept as undeveloped land for the duration of the 240.5 covenant; 240.6 (iv) a statement that the landowner may initiate expiration 240.7 of the covenant agreement by notifying the county assessor, in 240.8 writing, with the date of expiration which must be at least 240.9 eight years from the date of the expiration notice; 240.10 (v) a statement that the covenant is binding on the owner 240.11 or owner's successor or assignee and runs with the land; and 240.12 (vi) a witnessed signature of the owner covenanting to keep 240.13 the land in its undeveloped state as it existed on the date the 240.14 covenant was signed. 240.15 Upon expiration of a covenant agreement in clause (5), the 240.16 property is subject to additional taxes. The amount of 240.17 additional taxes due on the property equals the difference 240.18 between the taxes actually levied and the taxes that would have 240.19 been imposed if the property had been valued and classified as 240.20 if class 2c did not apply. The additional taxes must be 240.21 extended against the property on the tax list for the current 240.22 year. No interest or penalties may be levied on the additional 240.23 taxes if timely paid, and the additional taxes must be levied 240.24 only with respect to the last seven years that the property was 240.25 valued and assessed under this paragraph. For purposes of this 240.26 paragraph, "timely paid" means paid (A) within 60 days after 240.27 notification from the county that the property no longer 240.28 qualifies, or (B) prior to the recording of the conveyance of 240.29 the property, whichever is earlier. 240.30 The tax imposed under this paragraph is a lien on the 240.31 property assessed to the same extent and for the same duration 240.32 as other real property taxes. The tax must be extended by the 240.33 county auditor and, when payable, be collected and distributed 240.34 in the same manner provided by law for the collection and 240.35 distribution of other property taxes. 240.36 Class 2c has a class rate of 0.8 percent of market value. 241.1 [EFFECTIVE DATE.] This section is effective for the 2005 241.2 assessment and thereafter, for taxes payable in 2006 and 241.3 thereafter.