HF 1261

1st Engrossment - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:46am

A bill for an act
relating to taxation; providing for state property tax system benchmarks, critical
indicators, and principles; establishing a property tax working group; amending
Minnesota Statutes 2008, section 477A.03, subdivision 2b; proposing coding for
new law in Minnesota Statutes, chapter 270C.

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

Section 1.

new text begin [270C.991] PROPERTY TAX SYSTEM BENCHMARKS AND
CRITICAL INDICATORS.
new text end

new text begin Subdivision 1. new text end

new text begin Purpose. new text end

new text begin State policy makers should be provided with the tools to
create a more accountable and efficient property tax system. This section provides the
principles and available tools necessary to work toward achieving that goal and establishes
a property tax working group that is charged with the responsibility of making advisory
recommendations on various aspects of the property tax system.
new text end

new text begin Subd. 2. new text end

new text begin Property tax principles. new text end

new text begin To better evaluate the various property tax
proposals that come before the legislature, the following basic property tax principles
should be taken into consideration:
new text end

new text begin (1) transparent and understandable;
new text end

new text begin (2) simple and efficient;
new text end

new text begin (3) fair and equitable, on both horizontal and vertical equity;
new text end

new text begin (4) stable and predictable;
new text end

new text begin (5) compliance and accountability;
new text end

new text begin (6) competitive, both nationally and globally; and
new text end

new text begin (7) responsive to economic conditions.
new text end

new text begin Subd. 3. new text end

new text begin Major indicators. new text end

new text begin There are many different types of indicators available
to legislators to evaluate tax legislation. Some are determined annually and are statutorily
required. Although others are done on a less frequent basis and may be somewhat
outdated, they are still useful to have available as benchmarks when legislators are
contemplating changes. Each tool has its own limitation, and no one tool is perfect or
should be used independently. Some of the tools measure the global characteristics of the
entire tax system, while others are only a measure of the property tax impacts and its
administration. The following is a list of the available major indicators:
new text end

new text begin (1) property tax principles scale, the components of which are listed in subdivision
2, are based on rankings as they relate to the various features of the property tax system;
new text end

new text begin (2) price of government report, as required under section 16A.102, which contains
information on taxes and other revenue relative to personal income;
new text end

new text begin (3) tax incidence report, as required under section 270C.13, which measures the
tax progressivity through the suits index;
new text end

new text begin (4) tax expenditure budget and report, as required under section 270C.11, which
contains the numerous tax expenditure items and the amount of tax revenue for gone
from each item;
new text end

new text begin (5) state tax rankings, prepared by various public and private organizations;
new text end

new text begin (6) property tax levy plus aid data, and market value and net tax capacity data, by
taxing district for current and past years;
new text end

new text begin (7) effective tax rate (tax as a percent of market value) and the equalized effective
tax rate (effective tax rate adjusted for assessment differences);
new text end

new text begin (8) assessment sales ratio study, as required under section 127A.48, measures
assessment levels for most property types by comparing a property's sales price to the
assessor's estimated market value;
new text end

new text begin (9) "Voss" database, which matches homeowner property taxes and household
income;
new text end

new text begin (10) revenue estimates and state fiscal notes prepared on bill proposals; and
new text end

new text begin (11) local impact notes, with improved local analysis as described in subdivision 7.
new text end

new text begin Subd. 4. new text end

new text begin Property tax working group. new text end

new text begin (a) A property tax working group is
established as provided in this subdivision. The goals of the working group are:
new text end

new text begin (1) to investigate ways to simplify the property tax system and make advisory
recommendations on ways to make the system more understandable;
new text end

new text begin (2) to reexamine the property tax calendar to determine what changes could be made
to shorten the two-year cycle from assessment through property tax collection; and
new text end

new text begin (3) to determine the cost versus the benefits of the various property tax components,
including property classifications, credits, aids, exclusions, exemptions, and abatements,
and to suggest ways to achieve some of the goals in simpler and more cost-efficient ways.
new text end

new text begin (b) The 12-member working group shall consist of the following members:
new text end

new text begin (1) two state representatives, both appointed by the chair of the house tax committee,
one from the majority party and one from the minority party;
new text end

new text begin (2) two senators, both appointed by the chair of the senate tax committee, one from
the majority party and one from the minority party;
new text end

new text begin (3) the commissioner of revenue, or designee;
new text end

new text begin (4) one person, appointed by the Association of Minnesota Counties;
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new text begin (5) one person, appointed by the League of Minnesota Cities;
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new text begin (6) one person, appointed by the Minnesota Association of Townships;
new text end

new text begin (7) one person, appointed by the Minnesota Chamber of Commerce;
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new text begin (8) one person, appointed by the Minnesota Association of Assessing Officers; and
new text end

new text begin (9) two private citizens, one under 65 years of age, and one over the age of 65, both
appointed by the commissioner of revenue.
new text end

new text begin The commissioner of revenue shall chair the initial meeting, and the working
group shall elect a chair at that initial meeting. The working group will meet at the call
of the chair. Members of the working group shall serve without compensation. Chapter
13D does not apply to meetings of the working group. Meetings of the working group
must be open to the public and the working group must provide notice of a meeting to
potentially interested persons at least seven days before the meeting. A meeting of the
council occurs when a quorum is present.
new text end

new text begin (c) The working group shall make its advisory recommendations to the chairs of
the house of representatives and senate tax committees on or before February 1, 2011, at
which time the working group shall be finished and this subdivision expires.
new text end

new text begin Subd. 5. new text end

new text begin Tax committee review and resolution. new text end

new text begin On or before March 1, 2011,
and every two years thereafter, the house and senate tax committees must review the
major indicators as contained in subdivision 3, and any advisory recommendations from
the property tax working group, and ascertain the accountability and efficiency of the
property tax system. The house of representatives and senate tax committees shall prepare
a resolution on targets and benchmarks for use during the current biennium.
new text end

new text begin Subd. 6. new text end

new text begin Department of Revenue; revenue estimates. new text end

new text begin As provided under
section 270C.11, subdivision 5, the Department of Revenue is required to prepare an
estimate of the effect on the state's tax revenues which result from the passage of a
legislative bill establishing, extending, or restricting a tax expenditure. Beginning with
the 2010 legislative session, those revenue estimates must also identify how the property
tax principles, contained in subdivision 2, apply to the proposed tax changes. The
commissioner of revenue shall develop a scale for measuring the appropriate principles
for each proposed change. The department shall quantify the effects, if possible, or at a
minimum, shall identify the relevant factors so that legislators are made aware of possible
outcomes, including administrative difficulties and cost. The interaction of property tax
shifting should be identified and quantified to the degree possible.
new text end

new text begin Subd. 7. new text end

new text begin Local impact notes. new text end

new text begin Local impact notes are statements that provide
information about changes in local government responsibility, administration, and cost
due to changes in state law.
new text end

new text begin The local impact note process seeks the participation of political subdivisions to
gather information as needed by the legislature. The local impact network of political
subdivisions shall consist of at least one representative association from Minnesota
counties, cities, towns, and school districts, and other members as needed. They shall,
among other things, work with the legislature and the commissioner of finance to analyze:
new text end

new text begin (1) changes in tax revenues for local governments;
new text end

new text begin (2) changes in expenditures for local governments, including program and
administration costs; and
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new text begin (3) incidences of tax shifting, including identifying the target audience (taxpayers
who will benefit from the tax shift) and the impact audience (taxpayers who will bear the
burden of the tax shift).
new text end

new text begin In addition, for tax bills, the local impact network of political subdivisions shall rate
the impact on Minnesota's tax system using the tax principles contained in subdivision 2.
new text end

new text begin Some of the cost for preparing this information shall be distributed to the local
impact network as provided under section 477A.03, subdivision 2b, paragraph (b).
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. 2.

Minnesota Statutes 2008, section 477A.03, subdivision 2b, is amended to read:

Subd. 2b.

Counties.

(a) For aids payable in 2009 and thereafter, the total aid
payable under section 477A.0124, subdivision 3, is $111,500,000 minus one-half of the
total aid amount determined under section 477A.0124, subdivision 5, paragraph (b),
subject to adjustment in subdivision 5. Each calendar year, $500,000 shall be retained
by the commissioner of revenue to make reimbursements to the commissioner of finance
for payments made under section 611.27. For calendar year 2004, the amount shall
be in addition to the payments authorized under section 477A.0124, subdivision 1.
For calendar year 2005 and subsequent years, the amount shall be deducted from the
appropriation under this paragraph. The reimbursements shall be to defray the additional
costs associated with court-ordered counsel under section 611.27. Any retained amounts
not used for reimbursement in a year shall be included in the next distribution of county
need aid that is certified to the county auditors for the purpose of property tax reduction
for the next taxes payable year.

(b) For aids payable in 2009 and thereafter, the total aid under section 477A.0124,
subdivision 4, is $116,132,923 minus one-half of the total aid amount determined under
section 477A.0124, subdivision 5, paragraph (b), subject to adjustment in subdivision
5. The commissioner of finance shall bill the commissioner of revenue for the cost of
preparation of local impact notes as required by section 3.987, not to exceed $207,000 in
fiscal year 2004 and thereafter. The commissioner of education shall bill the commissioner
of revenue for the cost of preparation of local impact notes for school districts as
required by section 3.987, not to exceed $7,000 in fiscal year 2004 and thereafter. The
commissioner of revenue shall deduct the amounts billed under this paragraph from
the appropriation under this paragraph. The amounts deducted are appropriated to the
commissioner of finance and the commissioner of education for the preparation of local
impact notes. new text begin The commissioner of finance shall annually use at least $150,000 of the
$207,000 appropriation to contract with the representative associations for counties, cities,
and towns to establish a local impact network of political subdivisions for preparing local
impact notes to provide information to the legislature.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for fiscal year 2010 and thereafter.
new text end