HF 4302

as introduced - 93rd Legislature (2023 - 2024) Posted on 02/26/2024 02:21pm

A bill for an act
relating to taxation; making various policy and technical changes to individual
income and corporate franchise taxes, sales and use taxes, property taxes and local
government aids, and other miscellaneous taxes and tax-related provisions;
amending Minnesota Statutes 2022, sections 116U.27, subdivision 2; 270C.445,
subdivision 6; 273.13, subdivision 22; 289A.12, subdivision 18; 297A.66,
subdivision 3, by adding a subdivision; 297I.20, subdivision 4; 375.192, subdivision
2; Minnesota Statutes 2023 Supplement, sections 290.01, subdivision 19; 290.0132,
subdivisions 26, 34; 290.0134, subdivision 20; 290.0693, subdivisions 1, 6, 8;
290.0695, subdivision 2; 297E.06, subdivision 4; 477A.35, subdivision 6; Laws
2023, chapter 1, sections 22; 28.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

INDIVIDUAL INCOME AND CORPORATE FRANCHISE TAXES

Section 1.

Minnesota Statutes 2022, section 116U.27, subdivision 2, is amended to read:

Subd. 2.

Credit allowed.

A taxpayer is eligible for a credit up to 25 percent of eligible
production costs paid in deleted text begin a taxable year deleted text end new text begin any consecutive 12-month period as described in
subdivision 1, paragraph (h) new text end . A taxpayer may only claim a credit if the taxpayer was issued
a credit certificate under subdivision 4.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2022.
new text end

Sec. 2.

Minnesota Statutes 2023 Supplement, section 290.01, subdivision 19, is amended
to read:

Subd. 19.

Net income.

(a) For a trust or estate taxable under section 290.03, and a
corporation taxable under section 290.02, the term "net income" means the federal taxable
income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through
the date named in this subdivision, incorporating the federal effective dates of changes to
the Internal Revenue Code and any elections made by the taxpayer in accordance with the
Internal Revenue Code in determining federal taxable income for federal income tax
purposes, and with the modifications provided in sections 290.0131 to 290.0136.

(b) For an individual, the term "net income" means federal adjusted gross income with
the modifications provided in sections 290.0131, 290.0132, and 290.0135 to 290.0137.

(c) In the case of a regulated investment company or a fund thereof, as defined in section
851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue
Code must be applied by allowing a deduction for capital gain dividends and exempt-interest
dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code;
and

(3) the deduction for dividends paid must also be applied in the amount of any
undistributed capital gains which the regulated investment company elects to have treated
as provided in section 852(b)(3)(D) of the Internal Revenue Code.

(d) The net income of a real estate investment trust as defined and limited by section
856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

(e) The net income of a designated settlement fund as defined in section 468B(d) of the
Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal
Revenue Code.

(f) The Internal Revenue Code of 1986, as amended through May 1, 2023, applies for
taxable years beginning after December 31, 1996.

(g) Except as otherwise provided, references to the Internal Revenue Code in this
subdivision and sections 290.0131 to 290.0136 mean the code in effect for purposes of
determining net income for the applicable year.

(h) In the case of a partnership electing to file a composite return under section 289A.08,
subdivision 7, "net income" means the partner's share of federal adjusted gross income from
the partnership modified by the additions provided in section 290.0131, subdivisions 8 to
10, 16, and 17, and the subtractions provided in: (1) section 290.0132, subdivisions 9, 27,
deleted text begin and deleted text end 28, new text begin and 31, new text end to the extent the amount is assignable or allocable to Minnesota under section
290.17; and (2) section 290.0132, subdivision 14. The subtraction allowed under section
290.0132, subdivision 9, is only allowed on the composite tax computation to the extent
the electing partner would have been allowed the subtraction.

(i) In the case of a qualifying entity electing to pay the pass-through entity tax under
section 289A.08, subdivision 7a, "net income" means the qualifying owner's share of federal
adjusted gross income from the qualifying entity modified by the additions provided in
section 290.0131, subdivisions 5, 8 to 10, 16, and 17, and the subtractions provided in: (1)
section 290.0132, subdivisions 3, 9, 27, deleted text begin and deleted text end 28, new text begin and 31, new text end to the extent the amount is assignable
or allocable to Minnesota under section 290.17; and (2) section 290.0132, subdivision 14.
The subtraction allowed under section 290.0132, subdivision 9, is only allowed on the
pass-through entity tax computation to the extent the qualifying owners would have been
allowed the subtraction. deleted text begin The income of both a resident and nonresident qualifying owner
is allocated and assigned to this state as provided for nonresident partners and shareholders
under sections 290.17, 290.191, and 290.20.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2022.
new text end

Sec. 3.

Minnesota Statutes 2023 Supplement, section 290.0132, subdivision 26, is amended
to read:

Subd. 26.

Social Security benefits.

(a) A taxpayer is allowed a subtraction equal to the
greater of the simplified subtraction allowed under paragraph (b) or the alternate subtraction
determined under paragraph (e).

(b) A taxpayer's simplified subtraction equals the amount of taxable social security
benefits, as reduced under paragraphs (c) and (d).

(c) For a taxpayer other than a married taxpayer filing a separate return with adjusted
gross income above the phaseout threshold, the simplified subtraction is reduced by ten
percent for each $4,000 of adjusted gross income, or fraction thereof, in excess of the
phaseout threshold. The phaseout threshold equals:

(1) $100,000 for a married taxpayer filing a joint return or surviving spouse;

(2) $78,000 for a single or head of household taxpayer; and

(3) for a married taxpayer filing a separate return, half the amount for a married taxpayer
filing a joint return.

(d) For a married taxpayer filing a separate return, the simplified subtraction is reduced
by ten percent for each $2,000 of adjusted gross income, or fraction thereof, in excess of
the phaseout threshold.

(e) A taxpayer's alternate subtraction equals the lesser of taxable Social Security benefits
or a maximum subtraction subject to the limits under paragraphs (f), (g), and (h).

(f) For married taxpayers filing a joint return and surviving spouses, the maximum
subtraction under paragraph deleted text begin (c) deleted text end new text begin (e) new text end equals $5,840. The maximum subtraction is reduced by
20 percent of provisional income over $88,630. In no case is the subtraction less than zero.

(g) For single or head-of-household taxpayers, the maximum subtraction under paragraph
deleted text begin (c) deleted text end new text begin (e) new text end equals $4,560. The maximum subtraction is reduced by 20 percent of provisional
income over $69,250. In no case is the subtraction less than zero.

(h) For married taxpayers filing separate returns, the maximum subtraction under
paragraph deleted text begin (c) deleted text end new text begin (e) new text end equals one-half the maximum subtraction for joint returns under paragraph
(f). The maximum subtraction is reduced by 20 percent of provisional income over one-half
the threshold amount specified in paragraph (d). In no case is the subtraction less than zero.

(i) For purposes of this subdivision, "provisional income" means modified adjusted gross
income as defined in section 86(b)(2) of the Internal Revenue Code, plus one-half of the
taxable Social Security benefits received during the taxable year, and "Social Security
benefits" has the meaning given in section 86(d)(1) of the Internal Revenue Code.

(j) The commissioner shall adjust the phaseout threshold amounts in paragraphs (c) deleted text begin and
(d) deleted text end new text begin , clauses (1) and (2), new text end as provided in section 270C.22. The statutory year is taxable year
2023. The maximum subtraction and threshold amounts as adjusted must be rounded to the
nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10
amount.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2022.
new text end

Sec. 4.

Minnesota Statutes 2023 Supplement, section 290.0132, subdivision 34, is amended
to read:

Subd. 34.

Qualified retirement benefits.

(a) The amount of qualified public pension
income is a subtraction. The subtraction in this section is limited to:

(1) $25,000 for a married taxpayer filing a joint return or surviving spouse; or

(2) $12,500 for all other filers.

(b) For a taxpayer with adjusted gross income above the phaseout threshold, the
subtraction is reduced by ten percent for each $2,000 of adjusted gross income, or fraction
thereof, in excess of the threshold. The phaseout threshold equals:

(1) $100,000 for a married taxpayer filing a joint return or surviving spouse;

(2) $78,000 for a single or head of household taxpayer; or

(3) for a married taxpayer filing a separate return, half the amount for a married taxpayer
filing a joint return.

(c) For the purposes of this section, "qualified public pension income" means any amount
received:

(1) by a former basic member or the survivor of a former basic member, as an annuity
or survivor benefit, from a pension plan governed by chapter 353, 353E, 354, or 354A,
provided that the annuity or benefit is based on service for which the member or survivor
deleted text begin is not also receiving deleted text end new text begin did not earn new text end Social Security benefits;

(2) as an annuity or survivor benefit from the legislators plan under chapter 3A, the State
Patrol retirement plan under chapter 352B, or the public employees police and fire plan
under sections 353.63 to 353.666, provided that the annuity or benefit is based on service
for which the member or survivor deleted text begin is not also receiving deleted text end new text begin did not earn new text end Social Security benefits;

(3) from any retirement system administered by the federal government that is based on
service for which the recipient or the recipient's survivor deleted text begin is not also receiving deleted text end new text begin did not earn new text end
Social Security benefits; or

(4) from a public retirement system of or created by another state or any of its political
subdivisions, or the District of Columbia, if the income tax laws of the other state or district
permit a similar deduction or exemption or a reciprocal deduction or exemption of a
retirement or pension benefit received from a public retirement system of or created by this
state or any political subdivision of this state.

(d) The commissioner must annually adjust the subtraction limits in paragraph (a) and
the phaseout thresholds in paragraph (b), as provided in section 270C.22. The statutory year
is taxable year 2023.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2023 Supplement, section 290.0134, subdivision 20, is amended
to read:

Subd. 20.

Delayed business interest.

(a) For each taxable year an addition is required
under section deleted text begin 290.0131, subdivision 19 deleted text end new text begin 290.0133, subdivision 15 new text end , the amount of the addition,
less the sum of all amounts subtracted under this paragraph in all prior taxable years, that
does not exceed the limitation on business interest in section 163(j) of the Internal Revenue
Code of 1986, as amended through December 15, 2022, notwithstanding the special rule in
section 163(j)(10) of the Internal Revenue Code, is a subtraction. Any excess is a delayed
business interest carryforward, the entire amount of which must be carried to the earliest
taxable year. No subtraction is allowed under this paragraph for taxable years beginning
after December 31, 2022.

(b) For each of the five taxable years beginning after December 31, 2022, there is allowed
a subtraction equal to one-fifth of the sum of all carryforward amounts that remain after the
expiration of paragraph (a).

(c) Entities that are part of a combined reporting group under the unitary rules of section
290.17, subdivision 4, must compute deductions and additions as required under section
290.34, subdivision 5.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2019.
new text end

Sec. 6.

Minnesota Statutes 2023 Supplement, section 290.0693, subdivision 1, is amended
to read:

Subdivision 1.

Definitions.

(a) For the purposes of this section, the following terms have
the meanings given.

(b) "Dependent" means any individual who is considered a dependent under sections
151 and 152 of the Internal Revenue Code new text begin and was claimed by the taxpayer as a dependent new text end .

(c) "Disability" has the meaning given in section 290A.03, subdivision 10.

(d) "Exemption amount" means the exemption amount under section 290.0121,
subdivision 1, paragraph (b).

(e) "Gross rent" means rent paid for the right of occupancy, at arm's length, of a
homestead, exclusive of charges for any medical services furnished by the landlord as a
part of the rental agreement, whether expressly set out in the rental agreement or not. The
gross rent of a resident of a nursing home or intermediate care facility is $600 per month.
The gross rent of a resident of an adult foster care home is $930 per month. The commissioner
shall annually adjust the amounts in this paragraph as provided in section 270C.22. The
statutory year is 2023. If the landlord and tenant have not dealt with each other at arm's
length and the commissioner determines that the gross rent charged was excessive, the
commissioner may adjust the gross rent to a reasonable amount for purposes of this section.

(f) "Homestead" has the meaning given in section 290A.03, subdivision 6.

(g) "Household" has the meaning given in section 290A.03, subdivision 4.

(h) "Household income" means all income received by all persons of a household in a
taxable year while members of the household, other than income of a dependent.

(i) "Income" means adjusted gross income, minus:

(1) for the taxpayer's first dependent, the exemption amount multiplied by 1.4;

(2) for the taxpayer's second dependent, the exemption amount multiplied by 1.3;

(3) for the taxpayer's third dependent, the exemption amount multiplied by 1.2;

(4) for the taxpayer's fourth dependent, the exemption amount multiplied by 1.1;

(5) for the taxpayer's fifth dependent, the exemption amount; and

(6) if the taxpayer or taxpayer's spouse had a disability or attained the age of 65 on or
before the close of the taxable year, the exemption amount.

(j) "Rent constituting property taxes" means 17 percent of the gross rent actually paid
in cash, or its equivalent, or the portion of rent paid in lieu of property taxes, in any taxable
year by a claimant for the right of occupancy of the claimant's Minnesota homestead in the
taxable year, and which rent constitutes the basis, in the succeeding taxable year of a claim
for a credit under this section by the claimant. If an individual occupies a homestead with
another person or persons not related to the individual as the individual's spouse or as
dependents, and the other person or persons are residing at the homestead under a rental or
lease agreement with the individual, the amount of rent constituting property tax for the
individual equals that portion not covered by the rental agreement.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2023.
new text end

Sec. 7.

Minnesota Statutes 2023 Supplement, section 290.0693, subdivision 6, is amended
to read:

Subd. 6.

Residents of nursing homes, intermediate care facilities, long-term care
facilities, or facilities accepting housing support payments.

(a) A taxpayer must not claim
a credit under this section if the taxpayer is a resident of a nursing home, intermediate care
facility, long-term residential facility, or a facility that accepts housing support payments
whose rent constituting property taxes is paid pursuant to the Supplemental Security Income
program under title XVI of the Social Security Act, the Minnesota supplemental aid program
under sections 256D.35 to 256D.54, the medical assistance program pursuant to title XIX
of the Social Security Act, or the housing support program under chapter 256I.

(b) If only a portion of the rent constituting property taxes is paid by these programs,
the resident is eligible for a credit, but the credit calculated must be multiplied by a fraction,
the numerator of which is adjusted gross income, deleted text begin reduced by the total amount of income
from the above sources other than vendor payments under the medical assistance program deleted text end
and the denominator of which is adjusted gross income, plus vendor payments under the
medical assistance program, to determine the allowable credit.

(c) Notwithstanding paragraphs (a) and (b), if the taxpayer was a resident of the nursing
home, intermediate care facility, long-term residential facility, or facility for which the rent
was paid for the claimant by the housing support program for only a portion of the taxable
year covered by the claim, the taxpayer may compute rent constituting property taxes by
disregarding the rent constituting property taxes from the nursing home or facility and may
use only that amount of rent constituting property taxes or property taxes payable relating
to that portion of the year when the taxpayer was not in the facility. The taxpayer's household
income is the income for the entire taxable year covered by the claim.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2023.
new text end

Sec. 8.

Minnesota Statutes 2023 Supplement, section 290.0693, subdivision 8, is amended
to read:

Subd. 8.

One claimant per household.

Only one taxpayer per household per year is
entitled to claim a credit under this section. new text begin In the case of a married couple filing a joint
return, the couple may claim a credit under this section based on the total amount of both
spouses' gross rent. new text end In the case of a married taxpayer filing a separate return, only one spouse
may claim the credit under this section. The credit amount for the spouse that claims the
credit must be calculated based on household income and not solely on the income of the
spouse.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2023.
new text end

Sec. 9.

Minnesota Statutes 2023 Supplement, section 290.0695, subdivision 2, is amended
to read:

Subd. 2.

Credit allowed; limitation; carryover.

(a) An eligible taxpayer is allowed a
credit against tax due under this chapter equal to 50 percent of deleted text begin eligible expenses, not to
exceed $3,000 per mile, multiplied by the number of miles of railroad track owned or leased
within the state by the eligible taxpayer for which the taxpayer made deleted text end new text begin the new text end qualified railroad
reconstruction or replacement expenditures deleted text begin as of the close of the taxable year for which the
credit is claimed deleted text end new text begin made by an eligible taxpayer within this state during the taxable year for
which the credit is claimed new text end .

new text begin (b) The credit allowed under paragraph (a) for any taxable year must not exceed the
product of:
new text end

new text begin (1) $3,000, multiplied by;
new text end

new text begin (2) the number of miles of railroad track owned or leased by the eligible taxpayer within
this state as of the close of the taxable year for which the taxpayer made qualified railroad
reconstruction or replacement expenditures for which the credit is claimed.
new text end

deleted text begin (b) deleted text end new text begin (c) new text end If the amount of the credit determined under this section for any taxable year
exceeds the liability for tax under this chapter, the excess is a credit carryover to each of
the five succeeding taxable years. The entire amount of the excess unused credit for the
taxable year must be carried first to the earliest of the taxable years to which the credit may
be carried and then to each successive year to which the credit may be carried. The amount
of the unused credit that may be added under this paragraph must not exceed the taxpayer's
liability for tax less the credit for the taxable year.

deleted text begin (c) deleted text end new text begin (d) new text end An eligible taxpayer claiming a credit under this section may not also claim the
credit under section 297I.20, subdivision 6, for the same qualified railroad reconstruction
or replacement expenditures.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years beginning
after December 31, 2022.
new text end

Sec. 10.

Laws 2023, chapter 1, section 22, is amended to read:

Sec. 22. TEMPORARY ADDITIONS AND SUBTRACTIONS; INDIVIDUALS,
ESTATES, AND TRUSTS.

(a) For the purposes of this section:

(1) "subtraction" has the meaning given in Minnesota Statutes, section 290.0132,
subdivision 1, and the rules in that subdivision apply to this section;

(2) "addition" has the meaning given in Minnesota Statutes, section 290.0131, subdivision
1, and the rules in that subdivision apply to this section; and

(3) the definitions in Minnesota Statutes, section 290.01, apply to this section.

(b) The following amounts are subtractions:

(1) the amount of wages used for the calculation of the employee retention credit for
employers affected by qualified disasters, to the extent not deducted from income, under
Public Law 116-94, division Q, section 203, or Public Law 116-260, division EE, section
303;

(2) the amount of wages used for the calculation of the payroll credit for required paid
sick leave, to the extent not deducted from income, under Public Law 116-127, section
7001, as amended by section 9641 of Public Law 117-2;

(3) the amount of wages or expenses used for the calculation of the payroll credit for
required paid family leave, to the extent not deducted from income, under Public Law
116-127, section 7003, as amended by section 9641 of Public Law 117-2;

(4) the amount of wages used for the calculation of the employee retention credit for
employers subject to closure due to COVID-19, to the extent not deducted from income,
under Public Law 116-136, section 2301, as amended by Public Law 116-260, division EE,
section 207, and Public Law 117-2, section 9651; and

(5) the amount required to be added to gross income to claim the credit in section 6432
of the Internal Revenue Code.

(c) The following amounts are additions:

(1) the amount subtracted for qualified tuition expenses under section 222 of the Internal
Revenue Code, as amended by Public Law 116-94, division Q, section 104;

(2) the amount of above the line charitable contributions deducted under section 2204
of Public Law 116-136;

(3) the amount of meal expenses in excess of the 50 percent limitation under section
274(n)(1) of the Internal Revenue Code allowed under subsection (n), paragraph (2),
subparagraph (D), of that section; and

(4) the amount of charitable contributions deducted from federal taxable income by a
trust for taxable year 2020 under Public Law 116-136, section 2205(a).

(d) The commissioner of revenue must apply the subtractions in paragraph (b) and the
additions in paragraph (c), when calculating the following:

(1) the percentage under Minnesota Statutes, section 290.06, subdivision 2c, paragraph
(e);

(2) a taxpayer's alternative minimum taxable income under Minnesota Statutes, section
290.091; and

(3) "income" deleted text begin as defined in Minnesota Statutes, section 289A.08, subdivision 7, paragraph
(j), deleted text end for the purposes of determining the tax for composite filers and the pass-through entity
tax new text begin , means the partner's share of federal adjusted gross income from the partnership modified
by the additions provided in Minnesota Statutes, section 290.0131, subdivisions 8 to 10,
16, 17, and 19, and the subtractions provided in (i) Minnesota Statutes, section 290.0132,
subdivisions 9, 27, and 28, to the extent the amount is assignable or allocable to Minnesota
under Minnesota Statutes, section 290.17; and (ii) Minnesota Statutes, section 290.0132,
subdivision 14. The subtraction allowed under Minnesota Statutes, section 290.0132,
subdivision 9, is only allowed on the composite tax computation to the extent the electing
partner would have been allowed the subtraction new text end .

(e) For the purpose of calculating property tax refunds under Minnesota Statutes, chapter
290A, any amounts allowed as a subtraction in paragraph (b) are excluded from "income,"
as defined in Minnesota Statutes, section 290A.03, subdivision 3.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively at the same time the changes
in Laws 2023, chapter 1, section 22, were effective for federal purposes.
new text end

ARTICLE 2

SALES AND USE TAXES

Section 1.

Minnesota Statutes 2022, section 297A.66, subdivision 3, is amended to read:

Subd. 3.

Marketplace provider liability.

deleted text begin (a) deleted text end A marketplace provider is deemed the
retailer or seller for all retail sales it facilitates, and is subject to audit on the retail sales it
facilitates if it is required to collect sales and use taxes and remit them to the commissioner
under subdivision 2, paragraphs (b) and (c).

deleted text begin (b) A marketplace provider is not liable for failing to file, collect, and remit sales and
use taxes to the commissioner if the marketplace provider demonstrates that the error was
due to incorrect or insufficient information given to the marketplace provider by the retailer.
This paragraph does not apply if the marketplace provider and the marketplace retailer are
related as defined in subdivision 4, paragraph (b).
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2024
new text end

Sec. 2.

Minnesota Statutes 2022, section 297A.66, is amended by adding a subdivision to
read:

new text begin Subd. 3a. new text end

new text begin Marketplace provider relief. new text end

new text begin (a) A marketplace provider is relieved of liability
for failure to collect the correct amount of sales or use tax, with respect to sales on behalf
of marketplace sellers, to the extent that the marketplace provider can demonstrate that the
error was due to incorrect information given to the marketplace provider by the marketplace
seller, unless the marketplace provider and the marketplace seller are affiliated persons. To
qualify for the liability relief under this subdivision, a marketplace provider must have
received erroneous information from a marketplace seller that prevented the marketplace
provider from properly determining the correct tax amount owed. A marketplace provider
does not qualify for the liability relief under this subdivision when a marketplace seller
provided information that was correct, but was incomplete or insufficient to make the proper
taxability determination.
new text end

new text begin (b) If the marketplace provider is relieved of liability under paragraph (a), the marketplace
seller is solely liable for the amount of uncollected tax due.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2024
new text end

ARTICLE 3

PROPERTY TAXES AND LOCAL GOVERNMENT AIDS

Section 1.

Minnesota Statutes 2022, section 273.13, subdivision 22, is amended to read:

Subd. 22.

Class 1.

(a) Except as provided in subdivision 23 and in paragraphs (b) and
(c), real estate which is residential and used for homestead purposes is class 1a. In the case
of a duplex or triplex in which one of the units is used for homestead purposes, the entire
property is deemed to be used for homestead purposes. The market value of class 1a property
must be determined based upon the value of the house, garage, and land.

The first $500,000 of market value of class 1a property has a net classification rate of
one percent of its market value; and the market value of class 1a property that exceeds
$500,000 has a classification rate of 1.25 percent of its market value.

(b) Class 1b property includes homestead real estate or homestead manufactured homes
used for the purposes of a homestead by:

(1) any person who is blind as defined in section 256D.35, or the person who is blind
and the spouse of the person who is blind;

(2) any person who is permanently and totally disabled or by the person with a disability
and the spouse of the person with a disability; or

(3) the surviving spouse of a veteran who was permanently and totally disabled
homesteading a property classified under this paragraph for taxes payable in 2008.

Property is classified and assessed under clause (2) only if the government agency or
income-providing source certifies, upon the request of the homestead occupant, that the
homestead occupant satisfies the disability requirements of this paragraph, and that the
property is not eligible for the valuation exclusion under subdivision 34.

Property is classified and assessed under paragraph (b) only if the commissioner of
revenue or the county assessor certifies that the homestead occupant satisfies the requirements
of this paragraph.

Permanently and totally disabled for the purpose of this subdivision means a condition
which is permanent in nature and totally incapacitates the person from working at an
occupation which brings the person an income. The first $50,000 market value of class 1b
property has a net classification rate of .45 percent of its market value. The remaining market
value of class 1b property is classified as class 1a new text begin , new text end deleted text begin or deleted text end class 2a property, new text begin or class 4d(2)
new text end whichever is appropriate.

(c) Class 1c property is commercial use real and personal property that abuts public
water as defined in section 103G.005, subdivision 15, or abuts a state trail administered by
the Department of Natural Resources, and is devoted to temporary and seasonal residential
occupancy for recreational purposes but not devoted to commercial purposes for more than
250 days in the year preceding the year of assessment, and that includes a portion used as
a homestead by the owner, which includes a dwelling occupied as a homestead by a
shareholder of a corporation that owns the resort, a partner in a partnership that owns the
resort, or a member of a limited liability company that owns the resort even if the title to
the homestead is held by the corporation, partnership, or limited liability company. For
purposes of this paragraph, property is devoted to a commercial purpose on a specific day
if any portion of the property, excluding the portion used exclusively as a homestead, is
used for residential occupancy and a fee is charged for residential occupancy. Class 1c
property must contain three or more rental units. A "rental unit" is defined as a cabin,
condominium, townhouse, sleeping room, or individual camping site equipped with water
and electrical hookups for recreational vehicles. Class 1c property must provide recreational
activities such as the rental of ice fishing houses, boats and motors, snowmobiles, downhill
or cross-country ski equipment; provide marina services, launch services, or guide services;
or sell bait and fishing tackle. Any unit in which the right to use the property is transferred
to an individual or entity by deeded interest, or the sale of shares or stock, no longer qualifies
for class 1c even though it may remain available for rent. A camping pad offered for rent
by a property that otherwise qualifies for class 1c is also class 1c, regardless of the term of
the rental agreement, as long as the use of the camping pad does not exceed 250 days. If
the same owner owns two separate parcels that are located in the same township, and one
of those properties is classified as a class 1c property and the other would be eligible to be
classified as a class 1c property if it was used as the homestead of the owner, both properties
will be assessed as a single class 1c property; for purposes of this sentence, properties are
deemed to be owned by the same owner if each of them is owned by a limited liability
company, and both limited liability companies have the same membership. The portion of
the property used as a homestead is class 1a property under paragraph (a). The remainder
of the property is classified as follows: the first $600,000 of market value is tier I, the next
$1,700,000 of market value is tier II, and any remaining market value is tier III. The
classification rates for class 1c are: tier I, 0.50 percent; tier II, 1.0 percent; and tier III, 1.25
percent. Owners of real and personal property devoted to temporary and seasonal residential
occupancy for recreation purposes in which all or a portion of the property was devoted to
commercial purposes for not more than 250 days in the year preceding the year of assessment
desiring classification as class 1c, must submit a declaration to the assessor designating the
cabins or units occupied for 250 days or less in the year preceding the year of assessment
by January 15 of the assessment year. Those cabins or units and a proportionate share of
the land on which they are located must be designated as class 1c as otherwise provided.
The remainder of the cabins or units and a proportionate share of the land on which they
are located must be designated as class 3a commercial. The owner of property desiring
designation as class 1c property must provide guest registers or other records demonstrating
that the units for which class 1c designation is sought were not occupied for more than 250
days in the year preceding the assessment if so requested. The portion of a property operated
as a (1) restaurant, (2) bar, (3) gift shop, (4) conference center or meeting room, and (5)
other nonresidential facility operated on a commercial basis not directly related to temporary
and seasonal residential occupancy for recreation purposes does not qualify for class 1c.

(d) Class 1d property includes structures that meet all of the following criteria:

(1) the structure is located on property that is classified as agricultural property under
section 273.13, subdivision 23;

(2) the structure is occupied exclusively by seasonal farm workers during the time when
they work on that farm, and the occupants are not charged rent for the privilege of occupying
the property, provided that use of the structure for storage of farm equipment and produce
does not disqualify the property from classification under this paragraph;

(3) the structure meets all applicable health and safety requirements for the appropriate
season; and

(4) the structure is not salable as residential property because it does not comply with
local ordinances relating to location in relation to streets or roads.

The market value of class 1d property has the same classification rates as class 1a property
under paragraph (a).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment year 2025 and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2022, section 375.192, subdivision 2, is amended to read:

Subd. 2.

Procedure, conditions.

Upon written application by the owner of any property,
the county board may grant the reduction or abatement of estimated market valuation or
taxes and of any costs, penalties, or interest on them as the board deems just and equitable
and order the refund in whole or part of any taxes, costs, penalties, or interest which have
been erroneously or unjustly paid. Except as provided in sections 469.1812 to 469.1815,
no reduction or abatement may be granted on the basis of providing an incentive for economic
development or redevelopment. Except as provided in section 375.194, the county board
may consider and grant reductions or abatements on applications only as they relate to taxes
payable in the current year and the two prior years; provided that reductions or abatements
for the two prior years shall be considered or granted only for (i) clerical errors, or (ii) when
the taxpayer fails to file for a reduction or an adjustment due to hardship, as determined by
the county board. The application must include the Social Security number new text begin or individual
taxpayer identification number new text end of the applicant. The Social Security number deleted text begin is deleted text end new text begin and individual
taxpayer identification number are new text end private data on individuals as defined by section 13.02,
subdivision 12. All applications must be approved by the county assessor, or, if the property
is located in a city of the first or second class having a city assessor, by the city assessor,
and by the county auditor before consideration by the county board, except that the part of
the application which is for the abatement of penalty or interest must be approved by the
county treasurer and county auditor. Approval by the county or city assessor is not required
for abatements of penalty or interest. No reduction, abatement, or refund of any special
assessments made or levied by any municipality for local improvements shall be made
unless it is also approved by the board of review or similar taxing authority of the
municipality. On any reduction or abatement when the reduction of taxes, costs, penalties,
and interest exceed $10,000, the county board shall give notice within 20 days to the school
board and the municipality in which the property is located. The notice must describe the
property involved, the actual amount of the reduction being sought, and the reason for the
reduction.

An appeal may not be taken to the Tax Court from any order of the county board made
in the exercise of the discretionary authority granted in this section.

The county auditor shall notify the commissioner of revenue of all abatements resulting
from the erroneous classification of real property, for tax purposes, as nonhomestead property.
For the abatements relating to the current year's tax processed through June 30, the auditor
shall notify the commissioner on or before July 31 of that same year of all abatement
applications granted. For the abatements relating to the current year's tax processed after
June 30 through the balance of the year, the auditor shall notify the commissioner on or
before the following January 31 of all applications granted. The county auditor shall submit
a form containing the Social Security number new text begin or individual taxpayer identification number
new text end of the applicant and such other information the commissioner prescribes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for abatement applications
filed in 2023 and thereafter.
new text end

Sec. 3.

Minnesota Statutes 2023 Supplement, section 477A.35, subdivision 6, is amended
to read:

Subd. 6.

Administration.

(a) The commissioner of revenue must compute the amount
of aid payable to each tier I city and county under this section. deleted text begin By August 1 of each year,
the commissioner must certify the distribution factors of each tier I city and county to be
used in the following year. The commissioner must pay local affordable housing aid annually
at the times provided in section 477A.015, distributing the amounts available on the
immediately preceding June 1 under the accounts established in section 477A.37, subdivisions
2 and 3. deleted text end new text begin On or before September 1 of each year, the commissioner of revenue must certify
the amount to be paid to each tier I city and county in that year. By July 15, 2024, and
annually thereafter, the commissioner of management and budget must certify to the
commissioner of revenue the balances in the accounts established in section 477A.37,
subdivisions 2 and 3, as of the immediately preceding June 1. The commissioner of revenue
must pay the full amount of aid on October 1 annually.
new text end

(b) Beginning in 2025, tier I cities and counties shall submit a report annually, no later
than December 1 of each year, to the Minnesota Housing Finance Agency. The report must
include documentation of the location of any unspent funds distributed under this section
and of qualifying projects completed or planned with funds under this section. If a tier I
city or county fails to submit a report, if a tier I city or county fails to spend funds within
the timeline imposed under subdivision 5, paragraph (b), or if a tier I city or county uses
funds for a project that does not qualify under this section, the Minnesota Housing Finance
Agency shall notify the Department of Revenue and the cities and counties that must repay
funds under paragraph (c) by February 15 of the following year.

(c) By May 15, after receiving notice from the Minnesota Housing Finance Agency, a
tier I city or county must pay to the Minnesota Housing Finance Agency funds the city or
county received under this section if the city or county:

(1) fails to spend the funds within the time allowed under subdivision 5, paragraph (b);

(2) spends the funds on anything other than a qualifying project; or

(3) fails to submit a report documenting use of the funds.

(d) The commissioner of revenue must stop distributing funds to a tier I city or county
that, in three consecutive years, the Minnesota Housing Finance Agency has reported,
pursuant to paragraph (b), to have failed to use funds, misused funds, or failed to report on
its use of funds.

(e) The commissioner may resume distributing funds to a tier I city or county to which
the commissioner has stopped payments in the year following the August 1 after the
Minnesota Housing Finance Agency certifies that the city or county has submitted
documentation of plans for a qualifying project.

(f) By June 1, any funds paid to the Minnesota Housing Finance Agency under paragraph
(c) must be deposited in the housing development fund. Funds deposited under this paragraph
are appropriated to the commissioner of the Minnesota Housing Finance Agency for use
on the family homeless prevention and assistance program under section 462A.204, the
economic development and housing challenge program under section 462A.33, and the
workforce and affordable homeownership development program under section 462A.38.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2024 and thereafter.
new text end

ARTICLE 4

MISCELLANEOUS

Section 1.

Minnesota Statutes 2022, section 270C.445, subdivision 6, is amended to read:

Subd. 6.

Enforcement; administrative order; penalties; cease and desist.

(a) The
commissioner may impose an administrative penalty of not more than $1,000 per violation
of subdivision 3 or 5, or section 270C.4451, provided that a penalty may not be imposed
for any conduct for which a tax preparer penalty is imposed under section 289A.60,
subdivision 13. The commissioner may terminate a tax preparer's authority to transmit
returns electronically to the state, if the commissioner determines the tax preparer engaged
in a pattern and practice of violating this section. Imposition of a penalty under this paragraph
is subject to the contested case procedure under chapter 14. The commissioner shall collect
the penalty in the same manner as the income tax. There is no right to make a claim for
refund under section 289A.50 of the penalty imposed under this paragraph. Penalties imposed
under this paragraph are public data.

(b) In addition to the penalty under paragraph (a), if the commissioner determines that
a tax preparer has violated subdivision 3 or 5, or section 270C.4451, the commissioner may
issue an administrative order to the tax preparer requiring the tax preparer to cease and
desist from committing the violation. The administrative order may include an administrative
penalty provided in paragraph (a).

(c) If the commissioner issues an administrative order under paragraph (b), the
commissioner must send the order to the tax preparer addressed to the last known address
of the tax preparer.

(d) A cease and desist order under paragraph (b) must:

(1) describe the act, conduct, or practice committed and include a reference to the law
that the act, conduct, or practice violates; and

(2) provide notice that the tax preparer may request a hearing as provided in this
subdivision.

(e) Within 30 days after the commissioner issues an administrative order under paragraph
(b), the tax preparer may request a hearing to review the commissioner's action. The request
for hearing must be made in writing and must be served on the commissioner at the address
specified in the order. The hearing request must specifically state the reasons for seeking
review of the order. The date on which a request for hearing is served by mail is the postmark
date on the envelope in which the request for hearing is mailed.

(f) If a tax preparer does not timely request a hearing regarding an administrative order
issued under paragraph (b), the order becomes a final order of the commissioner and is not
subject to review by any court or agency.

(g) If a tax preparer timely requests a hearing regarding an administrative order issued
under paragraph (b), the hearing must be commenced new text begin by the issuance of a notice of and
order for hearing by the commissioner new text end within deleted text begin ten deleted text end new text begin 30 new text end days after the commissioner receives
the request for a hearing.

(h) A hearing timely requested under paragraph (e) is subject to the contested case
procedure under chapter 14, as modified by this subdivision. The administrative law judge
must issue a report containing findings of fact, conclusions of law, and a recommended
order within deleted text begin ten deleted text end new text begin 30 new text end days after the completion of the hearing, the receipt of late-filed exhibits,
or the submission of written arguments, whichever is later.

(i) Within deleted text begin five deleted text end new text begin 15 new text end days of the date of the administrative law judge's report issued under
paragraph (h), any party aggrieved by the administrative law judge's report may submit
written exceptions and arguments to the commissioner. Within deleted text begin 15 deleted text end new text begin 45 new text end days after receiving
the administrative law judge's report, the commissioner must issue an order vacating,
modifying, or making final the administrative order.

(j) The commissioner and the tax preparer requesting a hearing may by agreement
lengthen any time periods prescribed in paragraphs (g) to (i).

(k) An administrative order issued under paragraph (b) is in effect until it is modified
or vacated by the commissioner or an appellate court. The administrative hearing provided
by paragraphs (e) to (i) and any appellate judicial review as provided in chapter 14 constitute
the exclusive remedy for a tax preparer aggrieved by the order.

(l) The commissioner may impose an administrative penalty, in addition to the penalty
under paragraph (a), up to $5,000 per violation of a cease and desist order issued under
paragraph (b). Imposition of a penalty under this paragraph is subject to the contested case
procedure under chapter 14. Within 30 days after the commissioner imposes a penalty under
this paragraph, the tax preparer assessed the penalty may request a hearing to review the
penalty order. The request for hearing must be made in writing and must be served on the
commissioner at the address specified in the order. The hearing request must specifically
state the reasons for seeking review of the order. The cease and desist order issued under
paragraph (b) is not subject to review in a proceeding to challenge the penalty order under
this paragraph. The date on which a request for hearing is served by mail is the postmark
date on the envelope in which the request for hearing is mailed. If the tax preparer does not
timely request a hearing, the penalty order becomes a final order of the commissioner and
is not subject to review by any court or agency. A penalty imposed by the commissioner
under this paragraph may be collected and enforced by the commissioner as an income tax
liability. There is no right to make a claim for refund under section 289A.50 of the penalty
imposed under this paragraph. A penalty imposed under this paragraph is public data.

(m) If a tax preparer violates a cease and desist order issued under paragraph (b), the
commissioner may terminate the tax preparer's authority to transmit returns electronically
to the state. Termination under this paragraph is public data.

(n) A cease and desist order issued under paragraph (b) is public data when it is a final
order.

(o) Notwithstanding any other law, the commissioner may impose a penalty or take other
action under this subdivision against a tax preparer, with respect to a return, within the
period to assess tax on that return as provided by sections 289A.38 to 289A.382.

(p) Notwithstanding any other law, the imposition of a penalty or any other action against
a tax preparer under this subdivision, other than with respect to a return, must be taken by
the commissioner within five years of the violation of statute.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for penalties assessed and orders issued
after the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2022, section 289A.12, subdivision 18, is amended to read:

Subd. 18.

deleted text begin Returns deleted text end new text begin Return new text end by qualified heirs.

A qualified heir, as defined in section
291.03, subdivision 8, paragraph (c), must file deleted text begin two returns deleted text end new text begin a return new text end with the commissioner
attesting that no disposition or cessation as provided by section 291.03, subdivision 11,
paragraph (a), occurred. deleted text begin The first return must be filed no earlier than 24 months and no later
than 26 months after the decedent's death. deleted text end The deleted text begin second deleted text end return must be filed no earlier than
36 months and no later than 39 months after the decedent's death.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2023 Supplement, section 297E.06, subdivision 4, is amended
to read:

Subd. 4.

Annual audit deleted text begin , deleted text end new text begin and new text end certified inventory deleted text begin , and cash count deleted text end .

(a) An organization
licensed under chapter 349 with gross receipts from lawful gambling of more than $750,000
in any year must have an annual financial audit of its lawful gambling activities and funds
for that year. For the purposes of this subdivision, "gross receipts" does not include a licensed
organization's receipts from electronic pull-tabs regulated under chapter 349 provided the
electronic pull-tab manufacturer has completed an annual system and organization controls
audit, containing standards that must incorporate and be consistent with standards prescribed
by the American Institute of Certified Public Accountants.

(b) The commissioner may require a financial audit of the lawful gambling activities
and funds of an organization licensed under chapter 349, with gross receipts less than
$750,000 annually, when an organization has:

(1) failed to timely file required gambling tax returns;

(2) failed to timely pay the gambling tax or regulatory fee;

(3) filed fraudulent gambling tax returns;

(4) failed to take corrective actions required by the commissioner; or

(5) failed to otherwise comply with this chapter.

(c) Audits under this subdivision must be performed by an independent accountant firm
licensed in accordance with chapter 326A.

(d) An organization licensed under chapter 349 must perform an annual certified inventory
deleted text begin and cash count deleted text end new text begin report new text end at the end of its fiscal year and submit the report to the commissioner
within 30 days after the end of its fiscal year. The report shall be on a form prescribed by
the commissioner.

(e) The commissioner of revenue shall prescribe standards for the audits deleted text begin , deleted text end new text begin and new text end certified
inventory deleted text begin , and cash count reports deleted text end new text begin report new text end required under this subdivision. The standards may
vary based on the gross receipts of the organization. The standards must incorporate and
be consistent with standards prescribed by the American Institute of Certified Public
Accountants. A complete, true, and correct copy of the audits deleted text begin , deleted text end new text begin and new text end certified inventory deleted text begin , and
cash count deleted text end report must be filed as prescribed by the commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2024.
new text end

Sec. 4.

Minnesota Statutes 2022, section 297I.20, subdivision 4, is amended to read:

Subd. 4.

Film production credit.

(a) A taxpayer may claim a credit against the premiums
tax imposed under this chapter equal to the amount indicated on the credit certificate
statement issued to the company under section 116U.27. If the amount of the credit exceeds
the taxpayer's liability for tax under this chapter, the excess is a credit carryover to each of
the five succeeding taxable years. The entire amount of the excess unused credit for the
taxable year must be carried first to the earliest of the taxable years to which the credit may
be carried and then to each successive year to which the credit may be carried. This credit
does not affect the calculation of fire state aid under section 477B.03 and police state aid
under section 477C.03.

(b) This subdivision expires January 1, deleted text begin 2025 deleted text end new text begin 2031 new text end , for taxable years beginning after and
premiums received after December 31, deleted text begin 2024 deleted text end new text begin 2030 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Laws 2023, chapter 1, section 28, is amended to read:

Sec. 28. EXTENSION OF STATUTE OF LIMITATIONS.

(a) Notwithstanding any law to the contrary, a taxpayer whose tax liability changes as
a result of this act may file an amended return by December 31, 2023. The commissioner
may review and assess the return of a taxpayer covered by this provision for the later of:

(1) the periods under Minnesota Statutes, sections 289A.38; deleted text begin 289.39 deleted text end new text begin 289A.39 new text end , subdivision
3; and 289A.40; or

(2) one year from the time the amended return is filed as a result of a change in tax
liability under this section.

(b) Interest on any additional liabilities as a result of any provision in this act accrue
beginning on January 1, 2024.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively at the same time the changes
incorporated in Laws 2023, chapter 1, were effective for federal purposes.
new text end