1.1                          A bill for an act 
  1.2             relating to taxation; taconite production tax; setting 
  1.3             a permanent tax rate; increasing and making permanent 
  1.4             certain distributions to the taconite economic 
  1.5             development fund; amending Minnesota Statutes 1995 
  1.6             Supplement, sections 298.24, subdivision 1; and 
  1.7             298.28, subdivision 9a. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1995 Supplement, section 
  1.10  298.24, subdivision 1, is amended to read: 
  1.11     Subdivision 1.  (a) For concentrate produced in 1992, 1993, 
  1.12  1994, and 1995 there is imposed upon taconite and iron 
  1.13  sulphides, and upon the mining and quarrying thereof, and upon 
  1.14  the production of iron ore concentrate therefrom, and upon the 
  1.15  concentrate so produced, a tax of $2.054 per gross ton of 
  1.16  merchantable iron ore concentrate produced therefrom.  
  1.17     (b) For concentrates produced in 1996 and subsequent years, 
  1.18  the tax rate shall be equal to the preceding year's tax rate 
  1.19  plus an amount equal to the preceding year's tax rate multiplied 
  1.20  by the percentage increase in the implicit price deflator from 
  1.21  the fourth quarter of the second preceding year to the fourth 
  1.22  quarter of the preceding year.  "Implicit price deflator" for 
  1.23  the gross national product means the implicit price deflator 
  1.24  prepared by the bureau of economic analysis of the United States 
  1.25  Department of Commerce.  
  1.26     (c) The tax shall be imposed on the average of the 
  2.1   production for the current year and the previous two years.  The 
  2.2   rate of the tax imposed will be the current year's tax 
  2.3   rate determined under this subdivision.  This clause paragraph 
  2.4   shall not apply in the case of the closing of a taconite 
  2.5   facility if the property taxes on the facility would be higher 
  2.6   if this clause and section 298.25 were not applicable.  
  2.7      (d) (c) If the tax or any part of the tax imposed by this 
  2.8   subdivision is held to be unconstitutional, a tax of $2.054 per 
  2.9   gross ton of merchantable iron ore concentrate produced shall be 
  2.10  imposed.  
  2.11     (e) (d) Consistent with the intent of this subdivision to 
  2.12  impose a tax based upon the weight of merchantable iron ore 
  2.13  concentrate, the commissioner of revenue may indirectly 
  2.14  determine the weight of merchantable iron ore concentrate 
  2.15  included in fluxed pellets by subtracting the weight of the 
  2.16  limestone, dolomite, or olivine derivatives or other basic flux 
  2.17  additives included in the pellets from the weight of the 
  2.18  pellets.  For purposes of this paragraph, "fluxed pellets" are 
  2.19  pellets produced in a process in which limestone, dolomite, 
  2.20  olivine, or other basic flux additives are combined with 
  2.21  merchantable iron ore concentrate.  No subtraction from the 
  2.22  weight of the pellets shall be allowed for binders, mineral and 
  2.23  chemical additives other than basic flux additives, or moisture. 
  2.24     (f) (e)(1) Notwithstanding any other provision of this 
  2.25  subdivision, for the first five years of a plant's production of 
  2.26  direct reduced ore, the rate of the tax on direct reduced ore is 
  2.27  determined under this paragraph.  As used in this paragraph, 
  2.28  "direct reduced ore" is ore that results in a product that has 
  2.29  an iron content of at least 75 percent.  The rate to be applied 
  2.30  to direct reduced ore is 25 percent of the rate otherwise 
  2.31  determined under this subdivision for the first 500,000 of 
  2.32  taxable tons for the production year, and 50 percent of the rate 
  2.33  otherwise determined for any remainder.  If the taxpayer had no 
  2.34  production in the two years prior to the the current production 
  2.35  year, the tonnage eligible to be taxed at 25 percent of the rate 
  2.36  otherwise determined under this subdivision is the first 166,667 
  3.1   tons.  If the taxpayer had some production in the year prior to 
  3.2   the current production year but no production in the second 
  3.3   prior year, the tonnage eligible to be taxed at 25 percent of 
  3.4   the rate otherwise determined under this subdivision is the 
  3.5   first 333,333 tons. 
  3.6      (2) Production of direct reduced ore in this state is 
  3.7   subject to the tax imposed by this section, but if that 
  3.8   production is not produced by a producer of taconite or iron 
  3.9   sulfides, the production of taconite or iron sulfides consumed 
  3.10  in the production of direct reduced iron in this state is not 
  3.11  subject to the tax imposed by this section on taconite or iron 
  3.12  sulfides. 
  3.13     (f) For purposes of distribution of the tax proceeds under 
  3.14  section 298.28, "implicit price deflator" means the implicit 
  3.15  price deflator prepared by the Bureau of Economic Analysis of 
  3.16  the United States Department of Commerce, from the fourth 
  3.17  quarter of the second preceding year to the fourth quarter of 
  3.18  the preceding year.  
  3.19     Sec. 2.  Minnesota Statutes 1995 Supplement, section 
  3.20  298.28, subdivision 9a, is amended to read: 
  3.21     Subd. 9a.  [TACONITE ECONOMIC DEVELOPMENT FUND.] (a) 
  3.22  15.4 20 cents per ton for distributions in 1994, 1995, 1996, and 
  3.23  1997 shall be paid to the taconite economic development fund.  
  3.24  No distribution shall be made under this paragraph in any year 
  3.25  in which total industry production falls below 30 million tons. 
  3.26     (b) An amount equal to 50 percent of the tax under section 
  3.27  298.24 for concentrate sold in the form of pellet chips and 
  3.28  fines not exceeding 5/16 inch in size and not including crushed 
  3.29  pellets shall be paid to the taconite economic development 
  3.30  fund.  The amount paid shall not exceed $700,000 annually for 
  3.31  all companies.  If the initial amount to be paid to the fund 
  3.32  exceeds this amount, each company's payment shall be prorated so 
  3.33  the total does not exceed $700,000. 
  3.34     Sec. 3.  [EFFECTIVE DATE.] 
  3.35     Section 1 is effective for concentrate produced in 1996 and 
  3.36  thereafter.  Section 2 is effective for distributions in 1997 
  4.1   and thereafter.