1.1                          A bill for an act 
  1.2             relating to taxation; providing for a permanent 
  1.3             procedure for a sales tax reduction or a sales tax 
  1.4             rebate to local governments; requiring local 
  1.5             governments to reduce property tax levies to reflect 
  1.6             any sales tax rebate; amending Minnesota Statutes 
  1.7             1998, sections 16A.152, subdivision 2; and 297A.02, 
  1.8             subdivision 1, and by adding a subdivision; Minnesota 
  1.9             Statutes 1999 Supplement, sections 16A.1522; and 
  1.10            275.71, subdivision 4.  
  1.11  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.12     Section 1.  Minnesota Statutes 1998, section 16A.152, 
  1.13  subdivision 2, is amended to read: 
  1.14     Subd. 2.  [ADDITIONAL REVENUES; PRIORITY.] If on the basis 
  1.15  of a forecast of general fund revenues and expenditures after 
  1.16  November 1 in an odd-numbered year, the commissioner of finance 
  1.17  determines that there will be a positive unrestricted budgetary 
  1.18  general fund balance at the close of the biennium, the 
  1.19  commissioner of finance must allocate money as follows: 
  1.20     (1) first, to the budget reserve until the total amount in 
  1.21  the account equals $622,000,000; then 
  1.22     (2) 60 percent to the property tax reform account 
  1.23  established in section 16A.1521; and 
  1.24     (3) 40 percent is the remainder as an unrestricted balance 
  1.25  in the general fund. 
  1.26     The amounts necessary to meet the requirements of this 
  1.27  section are appropriated from the general fund within two weeks 
  1.28  after the forecast is released. 
  2.1      Sec. 2.  Minnesota Statutes 1999 Supplement, section 
  2.2   16A.1522, is amended to read: 
  2.3      16A.1522 [REBATE REQUIREMENTS.] 
  2.4      Subdivision 1.  [FORECAST.] If, on the basis of a forecast 
  2.5   of general fund revenues and expenditures in November of an 
  2.6   even-numbered year or February of an odd-numbered year, the 
  2.7   commissioner projects a positive unrestricted budgetary general 
  2.8   fund balance at the close of the biennium that exceeds one-half 
  2.9   of one percent of total general fund biennial revenues, the 
  2.10  commissioner shall designate the entire balance as available for 
  2.11  the following purposes: 
  2.12     (1) first for either reducing the sales tax rate or 
  2.13  allowing a sales tax rebate on local government purchases under 
  2.14  subdivision 1a; and 
  2.15     (2) with the remainder used to provide a rebate to the 
  2.16  taxpayers of this state under subdivision 2.  In forecasting, 
  2.17  projecting, or designating the unrestricted budgetary general 
  2.18  fund balance or general fund biennial revenue under this 
  2.19  section, the commissioner shall not include any balance or 
  2.20  revenue attributable to settlement payments received after July 
  2.21  1, 1998, and before July 1, 2001, as defined in Section IIB of 
  2.22  the settlement document, filed May 18, 1998, in State v. Philip 
  2.23  Morris, Inc., No. C1-94-8565 (Minnesota District Court, Second 
  2.24  Judicial District). 
  2.25     Subd. 1a.  [SALES TAX REDUCTION OR REBATE.] (a) The general 
  2.26  sales and use tax rate in section 297A.02, subdivision 1, shall 
  2.27  be reduced as provided in section 297A.02, subdivision 1a, if 
  2.28  the forecast unrestricted general fund balance available in 
  2.29  subdivision 1 is sufficient to offset the revenue loss in the 
  2.30  next biennium that would be forecast to occur if the sales tax 
  2.31  rate and motor vehicle sales tax rate are reduced by one-half of 
  2.32  one percent.  The commissioner of revenue shall provide the 
  2.33  commissioner of finance with any information needed to make that 
  2.34  determination. 
  2.35     (b) If the revenue available in subdivision 1 is 
  2.36  insufficient to enact the rate reduction under paragraph (a), 
  3.1   the state shall use the revenue to refund taxes paid by local 
  3.2   governments on purchases made in the previous calendar year.  
  3.3   Sales tax paid on purchases made by local governments from 
  3.4   public service enterprise funds will not be eligible for the 
  3.5   refund.  The commissioner of revenue shall estimate the amount 
  3.6   of taxes paid by local governments in the previous calendar 
  3.7   year.  If the estimate exceeds the amount of revenue available 
  3.8   for the refund, the number of months in which purchases are 
  3.9   eligible for a refund will be reduced until the estimate is less 
  3.10  than or equal to the available revenue.  If the refund applies 
  3.11  only to a portion of the year, it will apply to purchases made 
  3.12  during the latest months of the year.  Each local government 
  3.13  shall provide the commissioner of revenue with the information 
  3.14  required and in the form requested to allow its refund to be 
  3.15  determined.  If the total amount of refunds requested exceed the 
  3.16  commissioner of revenue's estimate of the cost of the refunds, 
  3.17  all refunds shall be prorated so that the total refunds paid do 
  3.18  not exceed the commissioner of revenue's original estimate.  
  3.19  Refunds to local governments shall be made by August 1 of the 
  3.20  odd-numbered year and the local governments shall use any 
  3.21  refunds to reduce property taxes in that levy year, for taxes 
  3.22  payable in the following year.  
  3.23     Subd. 2.  [PLAN.] The remainder of any undesignated fund 
  3.24  balance forecast under subdivision 1 after implementation of 
  3.25  subdivision 1a shall be rebated to the taxpayers of this state.  
  3.26  If the commissioner designates an amount for rebate in either 
  3.27  forecast, the governor shall present a plan to the legislature 
  3.28  for rebating that amount.  The plan must provide for payments to 
  3.29  begin no later than August 15 of the odd-numbered year.  By 
  3.30  April 15 of each odd-numbered year, the legislature shall enact, 
  3.31  modify, or reject the plan presented by the governor. 
  3.32     Subd. 3.  [CERTIFICATION.] By July 15 of each odd-numbered 
  3.33  year, based on a preliminary analysis of the general fund 
  3.34  balance at the end of the fiscal year June 30, the commissioner 
  3.35  of finance shall certify to the commissioner of revenue the 
  3.36  amount available for rebate. 
  4.1      Subd. 4.  [TRANSFER TO TAX RELIEF ACCOUNT.] Any positive 
  4.2   unrestricted budgetary general fund balance on June 30 of an 
  4.3   odd-numbered year is appropriated to the commissioner for 
  4.4   transfer to the tax relief account. 
  4.5      Subd. 5.  [APPROPRIATION.] A sum sufficient to pay any 
  4.6   refunds under subdivision 1a, paragraph (b), or rebate due under 
  4.7   the plan enacted under subdivision 2 is appropriated from the 
  4.8   general fund to the commissioner of revenue. 
  4.9      Sec. 3.  Minnesota Statutes 1999 Supplement, section 
  4.10  275.71, subdivision 4, is amended to read: 
  4.11     Subd. 4.  [PROPERTY TAX LEVY LIMIT.] For taxes levied in 
  4.12  1998 and 1999 subsequent years, the property tax levy limit for 
  4.13  a local governmental unit is equal to its adjusted levy limit 
  4.14  base determined under subdivision 3 plus any additional levy 
  4.15  authorized under section 275.73, which is levied against net tax 
  4.16  capacity, reduced by the sum of (1) the total amount of aids 
  4.17  that the local governmental unit is certified to receive under 
  4.18  sections 477A.011 to 477A.014, (2) homestead and agricultural 
  4.19  aids it is certified to receive under section 273.1398, (3) 
  4.20  local performance aid it is certified to receive under section 
  4.21  477A.05, (4) taconite aids under sections 298.28 and 298.282 
  4.22  including any aid which was required to be placed in a special 
  4.23  fund for expenditure in the next succeeding year, (5) flood loss 
  4.24  aid under section 273.1383, and (6) low-income housing aid under 
  4.25  sections 477A.06 and 477A.065, and (7) any sales tax refund 
  4.26  received under section 16A.1522, subdivision 1a, during that 
  4.27  calendar year. 
  4.28     Sec. 4.  Minnesota Statutes 1998, section 297A.02, 
  4.29  subdivision 1, is amended to read: 
  4.30     Subdivision 1.  [GENERALLY.] Except as otherwise provided 
  4.31  in this chapter, there is imposed an excise tax of equal to the 
  4.32  difference between 6.5 percent and the sum of all percent 
  4.33  reductions calculated under subdivision 1a, of the gross 
  4.34  receipts from sales at retail made by any person in this state. 
  4.35     Sec. 5.  Minnesota Statutes 1998, section 297A.02, is 
  4.36  amended by adding a subdivision to read: 
  5.1      Subd. 1a.  [GENERAL SALES TAX RATE REDUCTION.] The general 
  5.2   sales tax rate in subdivision 1 shall be permanently reduced by 
  5.3   one-half of one percent whenever an unrestricted general fund 
  5.4   balance is forecast under section 16A.152, subdivision 1, and 
  5.5   the amount of the forecast balance exceeds the estimated revenue 
  5.6   loss that would occur in the following biennium due to the 
  5.7   decrease in the sales tax and motor vehicle sales tax rates.  
  5.8   The rate reduction is effective beginning with sales made 
  5.9   beginning on the first day of the next biennium after the 
  5.10  biennium in which the positive budget balance was forecast. 
  5.11     Sec. 6.  [EFFECTIVE DATE.] 
  5.12     Sections 1, 2, 4, and 5 are effective beginning with the 
  5.13  forecast in February 2001. 
  5.14     Section 3 is effective for taxes levied in 2001 and 
  5.15  subsequent years provided levy limits under section 275.70 to 
  5.16  275.74 are extended into those years.