1.1                          A bill for an act 
  1.2             relating to financing and operation of state and local 
  1.3             government; providing for job opportunity building 
  1.4             zones; providing for a biotechnology and health 
  1.5             services industry zone; changing income, corporate 
  1.6             franchise, estate, sales and use, motor vehicle sales, 
  1.7             property, minerals, gravel, cigarette and tobacco, 
  1.8             liquor, mortgage registry and deed, healthcare 
  1.9             provider, insurance premiums, hazardous waste 
  1.10            generator, and other taxes and tax provisions; 
  1.11            changing and providing powers and duties relating to 
  1.12            tax administration, collection, compliance, and 
  1.13            enforcement; updating provisions to the internal 
  1.14            revenue code;changing provisions relating to the state 
  1.15            elections campaign fund; changing June accelerated tax 
  1.16            liability provisions and extending the requirements to 
  1.17            other taxes; changing and providing for 
  1.18            intergovernmental aids; imposing levy limits; changing 
  1.19            truth in taxation provisions and providing for reverse 
  1.20            referenda; providing for economic development 
  1.21            incentives; changing tax increment financing 
  1.22            provisions; changing certain levy and other provisions 
  1.23            relating to the metropolitan council and the 
  1.24            metropolitan mosquito control district; authorizing 
  1.25            towns to impose certain charges; giving special powers 
  1.26            to the cities of Medford, Newport, Moorhead, Duluth, 
  1.27            and Hopkins; repealing certain local laws; 
  1.28            establishing a legislative commission on unnecessary 
  1.29            mandates; providing for funding adjustments for 
  1.30            certain state mandated programs; changing provisions 
  1.31            relating to local impact notes; abolishing or 
  1.32            providing for the expiration of certain funds and 
  1.33            accounts; providing for cash flow and budget reserve 
  1.34            accounts; providing for deposit of certain revenues in 
  1.35            the general fund; providing for data disclosure; 
  1.36            requiring studies and reports; providing for 
  1.37            appointments; authorizing grants; imposing penalties; 
  1.38            appropriating money; amending Minnesota Statutes 2002, 
  1.39            sections 3.842, subdivision 4a; 3.843; 3.986, 
  1.40            subdivision 4; 3.987, subdivision 1; 4A.02; 8.30; 
  1.41            10A.31, subdivisions 1, 3; 16A.152, subdivisions 1, 
  1.42            1b, 2, 7; 62J.694, subdivision 4; 115B.24, subdivision 
  1.43            8; 144.395, subdivision 3; 161.465; 168.27, 
  1.44            subdivision 4a; 168A.03; 168A.05, subdivision 1a; 
  1.45            216B.2424, subdivision 5; 270.06; 270.10, subdivision 
  1.46            1a; 270.60, subdivision 4; 270.67, subdivision 4; 
  2.1             270.69, by adding a subdivision; 270.701, subdivision 
  2.2             2, by adding a subdivision; 270.72, subdivision 2; 
  2.3             270A.03, subdivision 2; 270B.12, by adding a 
  2.4             subdivision; 272.02, subdivisions 31, 47, 48, 53, by 
  2.5             adding subdivisions; 272.029, by adding a subdivision; 
  2.6             272.12; 273.01; 273.05, subdivision 1; 273.061, by 
  2.7             adding subdivisions; 273.08; 273.11, subdivision 1a; 
  2.8             273.112, subdivision 3; 273.124, subdivisions 1, 14; 
  2.9             273.13, subdivisions 22, 23, 25; 273.1398, 
  2.10            subdivisions 4a, 4b, 4c, 6, 8; 273.372; 273.42, 
  2.11            subdivision 2; 274.01, subdivision 1; 274.13, 
  2.12            subdivision 1; 275.025, subdivisions 1, 3, 4; 275.065, 
  2.13            subdivisions 1, 1a, 1c, 3, 6, 8, by adding a 
  2.14            subdivision; 275.07, subdivision 1; 275.70, 
  2.15            subdivision 5; 275.71, subdivisions 2, 4, 5, 6; 
  2.16            275.72, subdivision 3; 275.73, subdivision 2; 275.74, 
  2.17            subdivision 3; 276.10; 276.11, subdivision 1; 277.20, 
  2.18            subdivision 2; 278.01, subdivision 4; 278.05, 
  2.19            subdivision 6; 279.06, subdivision 1; 281.17; 282.01, 
  2.20            subdivision 7a; 282.08; 287.12; 287.29, subdivision 1; 
  2.21            287.31, by adding a subdivision; 289A.02, subdivision 
  2.22            7; 289A.10, subdivision 1; 289A.18, subdivision 4; 
  2.23            289A.19, subdivision 4; 289A.20, subdivision 4; 
  2.24            289A.31, subdivisions 3, 4, 7, by adding a 
  2.25            subdivision; 289A.36, subdivision 7, by adding 
  2.26            subdivisions; 289A.40, subdivision 2; 289A.50, 
  2.27            subdivision 2a, by adding subdivisions; 289A.56, 
  2.28            subdivisions 3, 4; 289A.60, subdivisions 7, 15, by 
  2.29            adding a subdivision; 290.01, subdivisions 19, 19a, 
  2.30            19b, 19c, 19d, 29, 31; 290.05, subdivision 1; 290.06, 
  2.31            subdivisions 2c, 23, 24, by adding subdivisions; 
  2.32            290.067, subdivision 1; 290.0671, subdivision 1; 
  2.33            290.0675, subdivisions 2, 3; 290.0679, subdivision 2; 
  2.34            290.0802, subdivision 1; 290.091, subdivision 2; 
  2.35            290.0921, subdivision 3; 290.0922, subdivisions 2, 3; 
  2.36            290.17, subdivision 4; 290.191, subdivision 1; 
  2.37            290A.03, subdivisions 8, 15; 290C.02, subdivisions 3, 
  2.38            7; 290C.03; 290C.07; 290C.09; 290C.10; 290C.11; 
  2.39            291.005, subdivision 1; 291.03, subdivision 1; 295.50, 
  2.40            subdivision 9b; 295.53, subdivision 1; 295.58; 
  2.41            297A.61, subdivisions 3, 7, 10, 12, 17, 30, 31, 34, by 
  2.42            adding subdivisions; 297A.66, by adding a subdivision; 
  2.43            297A.665; 297A.668; 297A.67, subdivisions 2, 7, 8, by 
  2.44            adding a subdivision; 297A.68, subdivisions 2, 4, 5, 
  2.45            36, by adding subdivisions; 297A.69, subdivisions 2, 
  2.46            3, 4; 297A.70, subdivisions 8, 16; 297A.71, by adding 
  2.47            a subdivision; 297A.75, subdivision 4; 297A.81; 
  2.48            297A.82, subdivision 4; 297A.85; 297A.99, subdivisions 
  2.49            5, 10, 12; 297A.995, by adding a subdivision; 297B.01, 
  2.50            subdivision 7; 297B.025, subdivisions 1, 2; 297B.03; 
  2.51            297B.035, subdivision 1, by adding a subdivision; 
  2.52            297F.01, subdivisions 21a, 23; 297F.05, subdivision 1; 
  2.53            297F.06, subdivision 4; 297F.08, subdivision 7; 
  2.54            297F.09, subdivisions 1, 2, by adding a subdivision; 
  2.55            297F.10, subdivision 1; 297F.20, subdivisions 1, 2, 3, 
  2.56            6, 9; 297G.01, by adding a subdivision; 297G.03, 
  2.57            subdivision 1; 297G.09, by adding a subdivision; 
  2.58            297I.01, subdivision 9; 297I.20; 298.001, by adding a 
  2.59            subdivision; 298.01, subdivisions 3, 3a, 4; 298.015, 
  2.60            subdivisions 1, 2; 298.016, subdivision 4; 298.018; 
  2.61            298.24, subdivision 1; 298.27; 298.28, subdivisions 
  2.62            9a, 11; 298.75, subdivision 1; 325D.421, subdivision 
  2.63            2, by adding a subdivision; 349.16, by adding a 
  2.64            subdivision; 352.15, subdivision 1; 353.15, 
  2.65            subdivision 1; 354.10, subdivision 1; 354B.30; 
  2.66            354C.165; 366.011; 366.012; 469.169, by adding a 
  2.67            subdivision; 469.1731, subdivision 3; 469.174, 
  2.68            subdivisions 3, 6, 10, 25, by adding a subdivision; 
  2.69            469.175, subdivisions 1, 3, 4, 6; 469.176, 
  2.70            subdivisions 1c, 2, 3, 4d, 4l, 7; 469.1763, 
  2.71            subdivisions 1, 2, 3, 4, 6; 469.177, subdivisions 1, 
  3.1             12; 469.1771, subdivision 4, by adding a subdivision; 
  3.2             469.178, subdivision 7; 469.1791, subdivision 3; 
  3.3             469.1792, subdivisions 1, 2, 3; 469.1813, subdivision 
  3.4             8; 469.1815, subdivision 1; 473.167, subdivision 3; 
  3.5             473.246; 473.249, subdivision 1; 473.253, subdivision 
  3.6             1; 473.702; 473.711, subdivision 2a; 473F.07, 
  3.7             subdivision 4; 477A.011, subdivisions 34, 36, by 
  3.8             adding subdivisions; 477A.013, subdivisions 8, 9; 
  3.9             477A.03, subdivision 2; 515B.1-116; 611.27, 
  3.10            subdivisions 13, 15; Laws 1997, chapter 231, article 
  3.11            10, section 25; Laws 2001, First Special Session 
  3.12            chapter 5, article 3, section 61; Laws 2001, First 
  3.13            Special Session chapter 5, article 3, section 63; Laws 
  3.14            2001, First Special Session chapter 5, article 9, 
  3.15            section 12; Laws 2001, First Special Session chapter 
  3.16            5, article 12, section 95, as amended; Laws 2002, 
  3.17            chapter 377, article 6, section 4; Laws 2002, chapter 
  3.18            377, article 7, section 3; Laws 2002, chapter 377, 
  3.19            article 11, section 1; Laws 2002, chapter 377, article 
  3.20            12, section 17; proposing coding for new law in 
  3.21            Minnesota Statutes, chapters 3; 123A; 126C; 270; 273; 
  3.22            274; 275; 276; 290C; 297A; 297F; 469; 477A; repealing 
  3.23            Minnesota Statutes 2002, sections 270.691, subdivision 
  3.24            8; 273.138, subdivisions 2, 3, 6; 273.1398, 
  3.25            subdivisions 2, 2c, 4, 4d; 273.166; 274.04; 275.065, 
  3.26            subdivisions 3a, 4; 290.0671, subdivision 3; 290.0675, 
  3.27            subdivision 5; 294.01; 294.02; 294.021; 294.03; 
  3.28            294.06; 294.07; 294.08; 294.09; 294.10; 294.11; 
  3.29            294.12; 297A.61, subdivisions 14, 15; 297A.69, 
  3.30            subdivision 5; 297A.72, subdivision 1; 297A.97; 
  3.31            298.01, subdivisions 3c, 3d, 4d, 4e; 298.017; 298.24, 
  3.32            subdivision 3; 298.28, subdivisions 9, 9b, 10; 
  3.33            298.2961; 298.297; 325E.112, subdivision 2a; 473.711, 
  3.34            subdivision 2b; 477A.011, subdivision 37; 477A.0121; 
  3.35            477A.0122; 477A.0123; 477A.0132; 477A.03, subdivisions 
  3.36            3, 4; 477A.06; 477A.065; 477A.07; Laws 1984, chapter 
  3.37            652, section 2; Laws 2002, chapter 390, sections 36, 
  3.38            37, 38; Minnesota Rules, parts 8007.0300, subpart 3; 
  3.39            8009.7100; 8009.7200; 8009.7300; 8009.7400; 8092.1000; 
  3.40            8106.0100, subparts 11, 15, 16; 8106.0200; 8125.1000; 
  3.41            8125.1300, subpart 1; 8125.1400; 8130.0800, subparts 
  3.42            5, 12; 8130.1300; 8130.1600, subpart 5; 8130.1700, 
  3.43            subparts 3, 4; 8130.4800, subpart 2; 8130.7500, 
  3.44            subpart 5; 8130.8000; 8130.8300. 
  3.45  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  3.46                             ARTICLE 1 
  3.47                   JOB OPPORTUNITY BUILDING ZONES 
  3.48     Section 1.  Minnesota Statutes 2002, section 272.02, is 
  3.49  amended by adding a subdivision to read: 
  3.50     Subd. 56.  [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 
  3.51  Improvements to real property, and personal property, classified 
  3.52  under section 273.13, subdivision 24, and located within a job 
  3.53  opportunity building zone, designated under section 469.314, are 
  3.54  exempt from ad valorem taxes levied under chapter 275. 
  3.55     (b) Improvements to real property, and tangible personal 
  3.56  property, of an agricultural production facility located within 
  3.57  an agricultural processing facility zone, designated under 
  4.1   section 469.314, is exempt from ad valorem taxes levied under 
  4.2   chapter 275. 
  4.3      (c) For property to qualify for exemption under paragraph 
  4.4   (a), the occupant must be a qualified business, as defined in 
  4.5   section 469.310. 
  4.6      (d) The exemption applies beginning for the first 
  4.7   assessment year after designation of the job opportunity 
  4.8   building zone by the commissioner of trade and economic 
  4.9   development.  The exemption applies to each assessment year that 
  4.10  begins during the duration of the job opportunity building zone 
  4.11  and to property occupied by July 1 of the assessment year by a 
  4.12  qualified business.  This exemption does not apply to: 
  4.13     (1) the levy under section 475.61 or similar levy 
  4.14  provisions under any other law to pay general obligation bonds; 
  4.15  or 
  4.16     (2) a levy under section 126C.17, if the levy was approved 
  4.17  by the voters before the designation of the job opportunity 
  4.18  building zone. 
  4.19     <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
  4.20  property taxes assessed in 2004, payable in 2005. 
  4.21     Sec. 2.  Minnesota Statutes 2002, section 272.029, is 
  4.22  amended by adding a subdivision to read: 
  4.23     Subd. 7.  [EXEMPTION.] The tax imposed under this section 
  4.24  does not apply to electricity produced by wind energy conversion 
  4.25  systems located in a job opportunity building zone, designated 
  4.26  under section 469.314, for the duration of the zone.  The 
  4.27  exemption applies beginning for the first calendar year after 
  4.28  designation of the zone and applies to each calendar year that 
  4.29  begins during the designation of the zone. 
  4.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  4.31  following final enactment. 
  4.32     Sec. 3.  Minnesota Statutes 2002, section 290.01, 
  4.33  subdivision 19b, is amended to read: 
  4.34     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  4.35  individuals, estates, and trusts, there shall be subtracted from 
  4.36  federal taxable income: 
  5.1      (1) interest income on obligations of any authority, 
  5.2   commission, or instrumentality of the United States to the 
  5.3   extent includable in taxable income for federal income tax 
  5.4   purposes but exempt from state income tax under the laws of the 
  5.5   United States; 
  5.6      (2) if included in federal taxable income, the amount of 
  5.7   any overpayment of income tax to Minnesota or to any other 
  5.8   state, for any previous taxable year, whether the amount is 
  5.9   received as a refund or as a credit to another taxable year's 
  5.10  income tax liability; 
  5.11     (3) the amount paid to others, less the amount used to 
  5.12  claim the credit allowed under section 290.0674, not to exceed 
  5.13  $1,625 for each qualifying child in grades kindergarten to 6 and 
  5.14  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  5.15  textbooks, and transportation of each qualifying child in 
  5.16  attending an elementary or secondary school situated in 
  5.17  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  5.18  wherein a resident of this state may legally fulfill the state's 
  5.19  compulsory attendance laws, which is not operated for profit, 
  5.20  and which adheres to the provisions of the Civil Rights Act of 
  5.21  1964 and chapter 363.  For the purposes of this clause, 
  5.22  "tuition" includes fees or tuition as defined in section 
  5.23  290.0674, subdivision 1, clause (1).  As used in this clause, 
  5.24  "textbooks" includes books and other instructional materials and 
  5.25  equipment purchased or leased for use in elementary and 
  5.26  secondary schools in teaching only those subjects legally and 
  5.27  commonly taught in public elementary and secondary schools in 
  5.28  this state.  Equipment expenses qualifying for deduction 
  5.29  includes expenses as defined and limited in section 290.0674, 
  5.30  subdivision 1, clause (3).  "Textbooks" does not include 
  5.31  instructional books and materials used in the teaching of 
  5.32  religious tenets, doctrines, or worship, the purpose of which is 
  5.33  to instill such tenets, doctrines, or worship, nor does it 
  5.34  include books or materials for, or transportation to, 
  5.35  extracurricular activities including sporting events, musical or 
  5.36  dramatic events, speech activities, driver's education, or 
  6.1   similar programs.  For purposes of the subtraction provided by 
  6.2   this clause, "qualifying child" has the meaning given in section 
  6.3   32(c)(3) of the Internal Revenue Code; 
  6.4      (4) income as provided under section 290.0802; 
  6.5      (5) to the extent included in federal adjusted gross 
  6.6   income, income realized on disposition of property exempt from 
  6.7   tax under section 290.491; 
  6.8      (6) to the extent not deducted in determining federal 
  6.9   taxable income or used to claim the long-term care insurance 
  6.10  credit under section 290.0672, the amount paid for health 
  6.11  insurance of self-employed individuals as determined under 
  6.12  section 162(l) of the Internal Revenue Code, except that the 
  6.13  percent limit does not apply.  If the individual deducted 
  6.14  insurance payments under section 213 of the Internal Revenue 
  6.15  Code of 1986, the subtraction under this clause must be reduced 
  6.16  by the lesser of: 
  6.17     (i) the total itemized deductions allowed under section 
  6.18  63(d) of the Internal Revenue Code, less state, local, and 
  6.19  foreign income taxes deductible under section 164 of the 
  6.20  Internal Revenue Code and the standard deduction under section 
  6.21  63(c) of the Internal Revenue Code; or 
  6.22     (ii) the lesser of (A) the amount of insurance qualifying 
  6.23  as "medical care" under section 213(d) of the Internal Revenue 
  6.24  Code to the extent not deducted under section 162(1) of the 
  6.25  Internal Revenue Code or excluded from income or (B) the total 
  6.26  amount deductible for medical care under section 213(a); 
  6.27     (7) the exemption amount allowed under Laws 1995, chapter 
  6.28  255, article 3, section 2, subdivision 3; 
  6.29     (8) to the extent included in federal taxable income, 
  6.30  postservice benefits for youth community service under section 
  6.31  124D.42 for volunteer service under United States Code, title 
  6.32  42, sections 12601 to 12604; 
  6.33     (9) to the extent not deducted in determining federal 
  6.34  taxable income by an individual who does not itemize deductions 
  6.35  for federal income tax purposes for the taxable year, an amount 
  6.36  equal to 50 percent of the excess of charitable contributions 
  7.1   allowable as a deduction for the taxable year under section 
  7.2   170(a) of the Internal Revenue Code over $500; 
  7.3      (10) for taxable years beginning before January 1, 2008, 
  7.4   the amount of the federal small ethanol producer credit allowed 
  7.5   under section 40(a)(3) of the Internal Revenue Code which is 
  7.6   included in gross income under section 87 of the Internal 
  7.7   Revenue Code; 
  7.8      (11) for individuals who are allowed a federal foreign tax 
  7.9   credit for taxes that do not qualify for a credit under section 
  7.10  290.06, subdivision 22, an amount equal to the carryover of 
  7.11  subnational foreign taxes for the taxable year, but not to 
  7.12  exceed the total subnational foreign taxes reported in claiming 
  7.13  the foreign tax credit.  For purposes of this clause, "federal 
  7.14  foreign tax credit" means the credit allowed under section 27 of 
  7.15  the Internal Revenue Code, and "carryover of subnational foreign 
  7.16  taxes" equals the carryover allowed under section 904(c) of the 
  7.17  Internal Revenue Code minus national level foreign taxes to the 
  7.18  extent they exceed the federal foreign tax credit; and 
  7.19     (12) in each of the five tax years immediately following 
  7.20  the tax year in which an addition is required under subdivision 
  7.21  19a, clause (7), an amount equal to one-fifth of the delayed 
  7.22  depreciation.  For purposes of this clause, "delayed 
  7.23  depreciation" means the amount of the addition made by the 
  7.24  taxpayer under subdivision 19a, clause (7), minus the positive 
  7.25  value of any net operating loss under section 172 of the 
  7.26  Internal Revenue Code generated for the tax year of the 
  7.27  addition.  The resulting delayed depreciation cannot be less 
  7.28  than zero; and 
  7.29     (13) job opportunity building zone income as provided under 
  7.30  section 469.316. 
  7.31     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  7.32  years beginning after December 31, 2003. 
  7.33     Sec. 4.  Minnesota Statutes 2002, section 290.01, 
  7.34  subdivision 29, is amended to read: 
  7.35     Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
  7.36  means:  
  8.1      (1) for individuals, estates, and trusts, the same as 
  8.2   taxable net income; 
  8.3      (2) for corporations, the taxable net income less 
  8.4      (i) the net operating loss deduction under section 290.095; 
  8.5   and 
  8.6      (ii) the dividends received deduction under section 290.21, 
  8.7   subdivision 4; and 
  8.8      (iii) the exemption for operating in a job opportunity 
  8.9   building zone under section 469.317. 
  8.10     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  8.11  years beginning after December 31, 2003. 
  8.12     Sec. 5.  Minnesota Statutes 2002, section 290.06, 
  8.13  subdivision 2c, is amended to read: 
  8.14     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
  8.15  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
  8.16  married individuals filing joint returns and surviving spouses 
  8.17  as defined in section 2(a) of the Internal Revenue Code must be 
  8.18  computed by applying to their taxable net income the following 
  8.19  schedule of rates: 
  8.20     (1) On the first $25,680, 5.35 percent; 
  8.21     (2) On all over $25,680, but not over $102,030, 7.05 
  8.22  percent; 
  8.23     (3) On all over $102,030, 7.85 percent. 
  8.24     Married individuals filing separate returns, estates, and 
  8.25  trusts must compute their income tax by applying the above rates 
  8.26  to their taxable income, except that the income brackets will be 
  8.27  one-half of the above amounts.  
  8.28     (b) The income taxes imposed by this chapter upon unmarried 
  8.29  individuals must be computed by applying to taxable net income 
  8.30  the following schedule of rates: 
  8.31     (1) On the first $17,570, 5.35 percent; 
  8.32     (2) On all over $17,570, but not over $57,710, 7.05 
  8.33  percent; 
  8.34     (3) On all over $57,710, 7.85 percent. 
  8.35     (c) The income taxes imposed by this chapter upon unmarried 
  8.36  individuals qualifying as a head of household as defined in 
  9.1   section 2(b) of the Internal Revenue Code must be computed by 
  9.2   applying to taxable net income the following schedule of rates: 
  9.3      (1) On the first $21,630, 5.35 percent; 
  9.4      (2) On all over $21,630, but not over $86,910, 7.05 
  9.5   percent; 
  9.6      (3) On all over $86,910, 7.85 percent. 
  9.7      (d) In lieu of a tax computed according to the rates set 
  9.8   forth in this subdivision, the tax of any individual taxpayer 
  9.9   whose taxable net income for the taxable year is less than an 
  9.10  amount determined by the commissioner must be computed in 
  9.11  accordance with tables prepared and issued by the commissioner 
  9.12  of revenue based on income brackets of not more than $100.  The 
  9.13  amount of tax for each bracket shall be computed at the rates 
  9.14  set forth in this subdivision, provided that the commissioner 
  9.15  may disregard a fractional part of a dollar unless it amounts to 
  9.16  50 cents or more, in which case it may be increased to $1. 
  9.17     (e) An individual who is not a Minnesota resident for the 
  9.18  entire year must compute the individual's Minnesota income tax 
  9.19  as provided in this subdivision.  After the application of the 
  9.20  nonrefundable credits provided in this chapter, the tax 
  9.21  liability must then be multiplied by a fraction in which:  
  9.22     (1) the numerator is the individual's Minnesota source 
  9.23  federal adjusted gross income as defined in section 62 of the 
  9.24  Internal Revenue Code and increased by the additions required 
  9.25  under section 290.01, subdivision 19a, clauses (1) and (6), and 
  9.26  reduced by the subtraction under section 290.01, subdivision 
  9.27  19b, clause (13), and the Minnesota assignable portion of the 
  9.28  subtraction for United States government interest under section 
  9.29  290.01, subdivision 19b, clause (1), after applying the 
  9.30  allocation and assignability provisions of section 290.081, 
  9.31  clause (a), or 290.17; and 
  9.32     (2) the denominator is the individual's federal adjusted 
  9.33  gross income as defined in section 62 of the Internal Revenue 
  9.34  Code of 1986, increased by the amounts specified in section 
  9.35  290.01, subdivision 19a, clauses (1) and (6), and reduced by the 
  9.36  amounts specified in section 290.01, subdivision 19b, clause 
 10.1   clauses (1) and (13). 
 10.2      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 10.3   years beginning after December 31, 2003. 
 10.4      Sec. 6.  Minnesota Statutes 2002, section 290.06, is 
 10.5   amended by adding a subdivision to read: 
 10.6      Subd. 29.  [JOB OPPORTUNITY BUILDING ZONE JOB CREDIT.] A 
 10.7   taxpayer that is a qualified business, as defined in section 
 10.8   469.310, subdivision 11, is allowed a credit as determined under 
 10.9   section 469.318 against the tax imposed by this chapter. 
 10.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 10.11  following final enactment. 
 10.12     Sec. 7.  Minnesota Statutes 2002, section 290.067, 
 10.13  subdivision 1, is amended to read: 
 10.14     Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
 10.15  as a credit against the tax due from the taxpayer and a spouse, 
 10.16  if any, under this chapter an amount equal to the dependent care 
 10.17  credit for which the taxpayer is eligible pursuant to the 
 10.18  provisions of section 21 of the Internal Revenue Code subject to 
 10.19  the limitations provided in subdivision 2 except that in 
 10.20  determining whether the child qualified as a dependent, income 
 10.21  received as a Minnesota family investment program grant or 
 10.22  allowance to or on behalf of the child must not be taken into 
 10.23  account in determining whether the child received more than half 
 10.24  of the child's support from the taxpayer, and the provisions of 
 10.25  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
 10.26     (b) If a child who has not attained the age of six years at 
 10.27  the close of the taxable year is cared for at a licensed family 
 10.28  day care home operated by the child's parent, the taxpayer is 
 10.29  deemed to have paid employment-related expenses.  If the child 
 10.30  is 16 months old or younger at the close of the taxable year, 
 10.31  the amount of expenses deemed to have been paid equals the 
 10.32  maximum limit for one qualified individual under section 21(c) 
 10.33  and (d) of the Internal Revenue Code.  If the child is older 
 10.34  than 16 months of age but has not attained the age of six years 
 10.35  at the close of the taxable year, the amount of expenses deemed 
 10.36  to have been paid equals the amount the licensee would charge 
 11.1   for the care of a child of the same age for the same number of 
 11.2   hours of care.  
 11.3      (c) If a married couple: 
 11.4      (1) has a child who has not attained the age of one year at 
 11.5   the close of the taxable year; 
 11.6      (2) files a joint tax return for the taxable year; and 
 11.7      (3) does not participate in a dependent care assistance 
 11.8   program as defined in section 129 of the Internal Revenue Code, 
 11.9   in lieu of the actual employment related expenses paid for that 
 11.10  child under paragraph (a) or the deemed amount under paragraph 
 11.11  (b), the lesser of (i) the combined earned income of the couple 
 11.12  or (ii) the amount of the maximum limit for one qualified 
 11.13  individual under section 21(c) and (d) of the Internal Revenue 
 11.14  Code will be deemed to be the employment related expense paid 
 11.15  for that child.  The earned income limitation of section 21(d) 
 11.16  of the Internal Revenue Code shall not apply to this deemed 
 11.17  amount.  These deemed amounts apply regardless of whether any 
 11.18  employment-related expenses have been paid.  
 11.19     (d) If the taxpayer is not required and does not file a 
 11.20  federal individual income tax return for the tax year, no credit 
 11.21  is allowed for any amount paid to any person unless: 
 11.22     (1) the name, address, and taxpayer identification number 
 11.23  of the person are included on the return claiming the credit; or 
 11.24     (2) if the person is an organization described in section 
 11.25  501(c)(3) of the Internal Revenue Code and exempt from tax under 
 11.26  section 501(a) of the Internal Revenue Code, the name and 
 11.27  address of the person are included on the return claiming the 
 11.28  credit.  
 11.29  In the case of a failure to provide the information required 
 11.30  under the preceding sentence, the preceding sentence does not 
 11.31  apply if it is shown that the taxpayer exercised due diligence 
 11.32  in attempting to provide the information required. 
 11.33     In the case of a nonresident, part-year resident, or a 
 11.34  person who has earned income not subject to tax under this 
 11.35  chapter including earned income excluded pursuant to section 
 11.36  290.01, subdivision 19b, clause (13), the credit determined 
 12.1   under section 21 of the Internal Revenue Code must be allocated 
 12.2   based on the ratio by which the earned income of the claimant 
 12.3   and the claimant's spouse from Minnesota sources bears to the 
 12.4   total earned income of the claimant and the claimant's spouse. 
 12.5      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 12.6   years beginning after December 31, 2003. 
 12.7      Sec. 8.  Minnesota Statutes 2002, section 290.0671, 
 12.8   subdivision 1, is amended to read: 
 12.9      Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
 12.10  allowed a credit against the tax imposed by this chapter equal 
 12.11  to a percentage of earned income.  To receive a credit, a 
 12.12  taxpayer must be eligible for a credit under section 32 of the 
 12.13  Internal Revenue Code.  
 12.14     (b) For individuals with no qualifying children, the credit 
 12.15  equals 1.9125 percent of the first $4,620 of earned income.  The 
 12.16  credit is reduced by 1.9125 percent of earned income or modified 
 12.17  adjusted gross income, whichever is greater, in excess of 
 12.18  $5,770, but in no case is the credit less than zero. 
 12.19     (c) For individuals with one qualifying child, the credit 
 12.20  equals 8.5 percent of the first $6,920 of earned income and 8.5 
 12.21  percent of earned income over $12,080 but less than $13,450.  
 12.22  The credit is reduced by 5.73 percent of earned income or 
 12.23  modified adjusted gross income, whichever is greater, in excess 
 12.24  of $15,080, but in no case is the credit less than zero. 
 12.25     (d) For individuals with two or more qualifying children, 
 12.26  the credit equals ten percent of the first $9,720 of earned 
 12.27  income and 20 percent of earned income over $14,860 but less 
 12.28  than $16,800.  The credit is reduced by 10.3 percent of earned 
 12.29  income or modified adjusted gross income, whichever is greater, 
 12.30  in excess of $17,890, but in no case is the credit less than 
 12.31  zero. 
 12.32     (e) For a nonresident or part-year resident, the credit 
 12.33  must be allocated based on the percentage calculated under 
 12.34  section 290.06, subdivision 2c, paragraph (e). 
 12.35     (f) For a person who was a resident for the entire tax year 
 12.36  and has earned income not subject to tax under this 
 13.1   chapter including income excluded under section 290.01, 
 13.2   subdivision 19b, clause (13), the credit must be allocated based 
 13.3   on the ratio of federal adjusted gross income reduced by the 
 13.4   earned income not subject to tax under this chapter over federal 
 13.5   adjusted gross income. 
 13.6      (g) For tax years beginning after December 31, 2001, and 
 13.7   before December 31, 2004, the $5,770 in paragraph (b) is 
 13.8   increased to $6,770, the $15,080 in paragraph (c) is increased 
 13.9   to $16,080, and the $17,890 in paragraph (d) is increased to 
 13.10  $18,890 for married taxpayers filing joint returns. 
 13.11     (h) For tax years beginning after December 31, 2004, and 
 13.12  before December 31, 2007, the $5,770 in paragraph (b) is 
 13.13  increased to $7,770, the $15,080 in paragraph (c) is increased 
 13.14  to $17,080, and the $17,890 in paragraph (d) is increased to 
 13.15  $19,890 for married taxpayers filing joint returns. 
 13.16     (i) For tax years beginning after December 31, 2007, and 
 13.17  before December 31, 2010, the $5,770 in paragraph (b) is 
 13.18  increased to $8,770, the $15,080 in paragraph (c) is increased 
 13.19  to $18,080 and the $17,890 in paragraph (d) is increased to 
 13.20  $20,890 for married taxpayers filing joint returns. 
 13.21     (j) The commissioner shall construct tables showing the 
 13.22  amount of the credit at various income levels and make them 
 13.23  available to taxpayers.  The tables shall follow the schedule 
 13.24  contained in this subdivision, except that the commissioner may 
 13.25  graduate the transition between income brackets. 
 13.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 13.27  years beginning after December 31, 2003. 
 13.28     Sec. 9.  Minnesota Statutes 2002, section 290.091, 
 13.29  subdivision 2, is amended to read: 
 13.30     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 13.31  this section, the following terms have the meanings given: 
 13.32     (a) "Alternative minimum taxable income" means the sum of 
 13.33  the following for the taxable year: 
 13.34     (1) the taxpayer's federal alternative minimum taxable 
 13.35  income as defined in section 55(b)(2) of the Internal Revenue 
 13.36  Code; 
 14.1      (2) the taxpayer's itemized deductions allowed in computing 
 14.2   federal alternative minimum taxable income, but excluding: 
 14.3      (i) the charitable contribution deduction under section 170 
 14.4   of the Internal Revenue Code to the extent that the deduction 
 14.5   exceeds 1.3 percent of adjusted gross income, as defined in 
 14.6   section 62 of the Internal Revenue Code; 
 14.7      (ii) the medical expense deduction; 
 14.8      (iii) the casualty, theft, and disaster loss deduction; and 
 14.9      (iv) the impairment-related work expenses of a disabled 
 14.10  person; 
 14.11     (3) for depletion allowances computed under section 613A(c) 
 14.12  of the Internal Revenue Code, with respect to each property (as 
 14.13  defined in section 614 of the Internal Revenue Code), to the 
 14.14  extent not included in federal alternative minimum taxable 
 14.15  income, the excess of the deduction for depletion allowable 
 14.16  under section 611 of the Internal Revenue Code for the taxable 
 14.17  year over the adjusted basis of the property at the end of the 
 14.18  taxable year (determined without regard to the depletion 
 14.19  deduction for the taxable year); 
 14.20     (4) to the extent not included in federal alternative 
 14.21  minimum taxable income, the amount of the tax preference for 
 14.22  intangible drilling cost under section 57(a)(2) of the Internal 
 14.23  Revenue Code determined without regard to subparagraph (E); 
 14.24     (5) to the extent not included in federal alternative 
 14.25  minimum taxable income, the amount of interest income as 
 14.26  provided by section 290.01, subdivision 19a, clause (1); and 
 14.27     (6) the amount of addition required by section 290.01, 
 14.28  subdivision 19a, clause (7); 
 14.29     less the sum of the amounts determined under the following: 
 14.30     (1) interest income as defined in section 290.01, 
 14.31  subdivision 19b, clause (1); 
 14.32     (2) an overpayment of state income tax as provided by 
 14.33  section 290.01, subdivision 19b, clause (2), to the extent 
 14.34  included in federal alternative minimum taxable income; 
 14.35     (3) the amount of investment interest paid or accrued 
 14.36  within the taxable year on indebtedness to the extent that the 
 15.1   amount does not exceed net investment income, as defined in 
 15.2   section 163(d)(4) of the Internal Revenue Code.  Interest does 
 15.3   not include amounts deducted in computing federal adjusted gross 
 15.4   income; and 
 15.5      (4) amounts subtracted from federal taxable income as 
 15.6   provided by section 290.01, subdivision 19b, clause clauses (12) 
 15.7   and (13). 
 15.8      In the case of an estate or trust, alternative minimum 
 15.9   taxable income must be computed as provided in section 59(c) of 
 15.10  the Internal Revenue Code. 
 15.11     (b) "Investment interest" means investment interest as 
 15.12  defined in section 163(d)(3) of the Internal Revenue Code. 
 15.13     (c) "Tentative minimum tax" equals 6.4 percent of 
 15.14  alternative minimum taxable income after subtracting the 
 15.15  exemption amount determined under subdivision 3. 
 15.16     (d) "Regular tax" means the tax that would be imposed under 
 15.17  this chapter (without regard to this section and section 
 15.18  290.032), reduced by the sum of the nonrefundable credits 
 15.19  allowed under this chapter.  
 15.20     (e) "Net minimum tax" means the minimum tax imposed by this 
 15.21  section. 
 15.22     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 15.23  years beginning after December 31, 2003. 
 15.24     Sec. 10.  Minnesota Statutes 2002, section 290.0921, 
 15.25  subdivision 3, is amended to read: 
 15.26     Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
 15.27  "Alternative minimum taxable income" is Minnesota net income as 
 15.28  defined in section 290.01, subdivision 19, and includes the 
 15.29  adjustments and tax preference items in sections 56, 57, 58, and 
 15.30  59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
 15.31  corporation files a separate company Minnesota tax return, the 
 15.32  minimum tax must be computed on a separate company basis.  If a 
 15.33  corporation is part of a tax group filing a unitary return, the 
 15.34  minimum tax must be computed on a unitary basis.  The following 
 15.35  adjustments must be made. 
 15.36     (1) For purposes of the depreciation adjustments under 
 16.1   section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
 16.2   the basis for depreciable property placed in service in a 
 16.3   taxable year beginning before January 1, 1990, is the adjusted 
 16.4   basis for federal income tax purposes, including any 
 16.5   modification made in a taxable year under section 290.01, 
 16.6   subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 16.7   subdivision 7, paragraph (c). 
 16.8      For taxable years beginning after December 31, 2000, the 
 16.9   amount of any remaining modification made under section 290.01, 
 16.10  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 16.11  subdivision 7, paragraph (c), not previously deducted is a 
 16.12  depreciation allowance in the first taxable year after December 
 16.13  31, 2000. 
 16.14     (2) The portion of the depreciation deduction allowed for 
 16.15  federal income tax purposes under section 168(k) of the Internal 
 16.16  Revenue Code that is required as an addition under section 
 16.17  290.01, subdivision 19c, clause (16), is disallowed in 
 16.18  determining alternative minimum taxable income. 
 16.19     (3) The subtraction for depreciation allowed under section 
 16.20  290.01, subdivision 19d, clause (19), is allowed as a 
 16.21  depreciation deduction in determining alternative minimum 
 16.22  taxable income. 
 16.23     (4) The alternative tax net operating loss deduction under 
 16.24  sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
 16.25  not apply. 
 16.26     (5) The special rule for certain dividends under section 
 16.27  56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
 16.28     (6) The special rule for dividends from section 936 
 16.29  companies under section 56(g)(4)(C)(iii) does not apply. 
 16.30     (7) The tax preference for depletion under section 57(a)(1) 
 16.31  of the Internal Revenue Code does not apply. 
 16.32     (8) The tax preference for intangible drilling costs under 
 16.33  section 57(a)(2) of the Internal Revenue Code must be calculated 
 16.34  without regard to subparagraph (E) and the subtraction under 
 16.35  section 290.01, subdivision 19d, clause (4). 
 16.36     (9) The tax preference for tax exempt interest under 
 17.1   section 57(a)(5) of the Internal Revenue Code does not apply.  
 17.2      (10) The tax preference for charitable contributions of 
 17.3   appreciated property under section 57(a)(6) of the Internal 
 17.4   Revenue Code does not apply. 
 17.5      (11) For purposes of calculating the tax preference for 
 17.6   accelerated depreciation or amortization on certain property 
 17.7   placed in service before January 1, 1987, under section 57(a)(7) 
 17.8   of the Internal Revenue Code, the deduction allowable for the 
 17.9   taxable year is the deduction allowed under section 290.01, 
 17.10  subdivision 19e. 
 17.11     For taxable years beginning after December 31, 2000, the 
 17.12  amount of any remaining modification made under section 290.01, 
 17.13  subdivision 19e, not previously deducted is a depreciation or 
 17.14  amortization allowance in the first taxable year after December 
 17.15  31, 2004. 
 17.16     (12) For purposes of calculating the adjustment for 
 17.17  adjusted current earnings in section 56(g) of the Internal 
 17.18  Revenue Code, the term "alternative minimum taxable income" as 
 17.19  it is used in section 56(g) of the Internal Revenue Code, means 
 17.20  alternative minimum taxable income as defined in this 
 17.21  subdivision, determined without regard to the adjustment for 
 17.22  adjusted current earnings in section 56(g) of the Internal 
 17.23  Revenue Code. 
 17.24     (13) For purposes of determining the amount of adjusted 
 17.25  current earnings under section 56(g)(3) of the Internal Revenue 
 17.26  Code, no adjustment shall be made under section 56(g)(4) of the 
 17.27  Internal Revenue Code with respect to (i) the amount of foreign 
 17.28  dividend gross-up subtracted as provided in section 290.01, 
 17.29  subdivision 19d, clause (1), (ii) the amount of refunds of 
 17.30  income, excise, or franchise taxes subtracted as provided in 
 17.31  section 290.01, subdivision 19d, clause (10), or (iii) the 
 17.32  amount of royalties, fees or other like income subtracted as 
 17.33  provided in section 290.01, subdivision 19d, clause (11). 
 17.34     (14) Alternative minimum taxable income excludes the income 
 17.35  from operating in a job opportunity building zone as provided 
 17.36  under section 469.317. 
 18.1      Items of tax preference must not be reduced below zero as a 
 18.2   result of the modifications in this subdivision. 
 18.3      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 18.4   years beginning after December 31, 2003. 
 18.5      Sec. 11.  Minnesota Statutes 2002, section 290.0922, 
 18.6   subdivision 2, is amended to read: 
 18.7      Subd. 2.  [EXEMPTIONS.] The following entities are exempt 
 18.8   from the tax imposed by this section: 
 18.9      (1) corporations exempt from tax under section 290.05; 
 18.10     (2) real estate investment trusts; 
 18.11     (3) regulated investment companies or a fund thereof; and 
 18.12     (4) entities having a valid election in effect under 
 18.13  section 860D(b) of the Internal Revenue Code; 
 18.14     (5) town and farmers' mutual insurance companies; and 
 18.15     (6) cooperatives organized under chapter 308A that provide 
 18.16  housing exclusively to persons age 55 and over and are 
 18.17  classified as homesteads under section 273.124, subdivision 3; 
 18.18  and 
 18.19     (7) an entity, if for the taxable year all of its property 
 18.20  is located in a job opportunity building zone designated under 
 18.21  section 469.314 and all of its payroll is a job opportunity 
 18.22  building zone payroll under section 469.310. 
 18.23     Entities not specifically exempted by this subdivision are 
 18.24  subject to tax under this section, notwithstanding section 
 18.25  290.05.  
 18.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 18.27  years beginning after December 31, 2003. 
 18.28     Sec. 12.  Minnesota Statutes 2002, section 290.0922, 
 18.29  subdivision 3, is amended to read: 
 18.30     Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
 18.31  means the total sales apportioned to Minnesota pursuant to 
 18.32  section 290.191, subdivision 5, the total receipts attributed to 
 18.33  Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
 18.34  and/or the total sales or receipts apportioned or attributed to 
 18.35  Minnesota pursuant to any other apportionment formula applicable 
 18.36  to the taxpayer. 
 19.1      (b) "Minnesota property" means total Minnesota tangible 
 19.2   property as provided in section 290.191, subdivisions 9 to 11, 
 19.3   and any other tangible property located in Minnesota, but does 
 19.4   not include property located in a job opportunity building zone 
 19.5   designated under section 469.314.  Intangible property shall not 
 19.6   be included in Minnesota property for purposes of this section.  
 19.7   Taxpayers who do not utilize tangible property to apportion 
 19.8   income shall nevertheless include Minnesota property for 
 19.9   purposes of this section.  On a return for a short taxable year, 
 19.10  the amount of Minnesota property owned, as determined under 
 19.11  section 290.191, shall be included in Minnesota property based 
 19.12  on a fraction in which the numerator is the number of days in 
 19.13  the short taxable year and the denominator is 365.  
 19.14     (c) "Minnesota payrolls" means total Minnesota payrolls as 
 19.15  provided in section 290.191, subdivision 12, but does not 
 19.16  include job opportunity building zone payrolls under section 
 19.17  469.310, subdivision 8.  Taxpayers who do not utilize payrolls 
 19.18  to apportion income shall nevertheless include Minnesota 
 19.19  payrolls for purposes of this section. 
 19.20     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 19.21  years beginning after December 31, 2003. 
 19.22     Sec. 13.  Minnesota Statutes 2002, section 297A.68, is 
 19.23  amended by adding a subdivision to read: 
 19.24     Subd. 37.  [JOB OPPORTUNITY BUILDING ZONES.] (a) Purchases 
 19.25  of tangible personal property or taxable services by a qualified 
 19.26  business, as defined in section 469.310, are exempt if the 
 19.27  property or services are primarily used or consumed in a job 
 19.28  opportunity building zone designated under section 469.314. 
 19.29     (b) Purchase and use of construction materials and supplies 
 19.30  for construction of improvements to real property in a job 
 19.31  opportunity building zone are exempt if the improvements after 
 19.32  completion of construction are to be used in the conduct of a 
 19.33  qualified business, as defined in section 469.310.  This 
 19.34  exemption applies regardless of whether the purchases are made 
 19.35  by the business or a contractor. 
 19.36     (c) The exemptions under this subdivision apply to a local 
 20.1   sales and use tax regardless of whether the local sales tax is 
 20.2   imposed on the sales taxable as defined under this chapter. 
 20.3      (d) This subdivision applies to sales, if the purchase was 
 20.4   made and delivery received during the duration of the zone. 
 20.5      <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 20.6   on or after the day following final enactment. 
 20.7      Sec. 14.  Minnesota Statutes 2002, section 297B.03, is 
 20.8   amended to read: 
 20.9      297B.03 [EXEMPTIONS.] 
 20.10     There is specifically exempted from the provisions of this 
 20.11  chapter and from computation of the amount of tax imposed by it 
 20.12  the following:  
 20.13     (1) purchase or use, including use under a lease purchase 
 20.14  agreement or installment sales contract made pursuant to section 
 20.15  465.71, of any motor vehicle by the United States and its 
 20.16  agencies and instrumentalities and by any person described in 
 20.17  and subject to the conditions provided in section 297A.67, 
 20.18  subdivision 11; 
 20.19     (2) purchase or use of any motor vehicle by any person who 
 20.20  was a resident of another state or country at the time of the 
 20.21  purchase and who subsequently becomes a resident of Minnesota, 
 20.22  provided the purchase occurred more than 60 days prior to the 
 20.23  date such person began residing in the state of Minnesota and 
 20.24  the motor vehicle was registered in the person's name in the 
 20.25  other state or country; 
 20.26     (3) purchase or use of any motor vehicle by any person 
 20.27  making a valid election to be taxed under the provisions of 
 20.28  section 297A.90; 
 20.29     (4) purchase or use of any motor vehicle previously 
 20.30  registered in the state of Minnesota when such transfer 
 20.31  constitutes a transfer within the meaning of section 118, 331, 
 20.32  332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 
 20.33  1563(a) of the Internal Revenue Code of 1986, as amended through 
 20.34  December 31, 1999; 
 20.35     (5) purchase or use of any vehicle owned by a resident of 
 20.36  another state and leased to a Minnesota based private or for 
 21.1   hire carrier for regular use in the transportation of persons or 
 21.2   property in interstate commerce provided the vehicle is titled 
 21.3   in the state of the owner or secured party, and that state does 
 21.4   not impose a sales tax or sales tax on motor vehicles used in 
 21.5   interstate commerce; 
 21.6      (6) purchase or use of a motor vehicle by a private 
 21.7   nonprofit or public educational institution for use as an 
 21.8   instructional aid in automotive training programs operated by 
 21.9   the institution.  "Automotive training programs" includes motor 
 21.10  vehicle body and mechanical repair courses but does not include 
 21.11  driver education programs; 
 21.12     (7) purchase of a motor vehicle for use as an ambulance by 
 21.13  an ambulance service licensed under section 144E.10; 
 21.14     (8) purchase of a motor vehicle by or for a public library, 
 21.15  as defined in section 134.001, subdivision 2, as a bookmobile or 
 21.16  library delivery vehicle; 
 21.17     (9) purchase of a ready-mixed concrete truck; 
 21.18     (10) purchase or use of a motor vehicle by a town for use 
 21.19  exclusively for road maintenance, including snowplows and dump 
 21.20  trucks, but not including automobiles, vans, or pickup trucks; 
 21.21     (11) purchase or use of a motor vehicle by a corporation, 
 21.22  society, association, foundation, or institution organized and 
 21.23  operated exclusively for charitable, religious, or educational 
 21.24  purposes, except a public school, university, or library, but 
 21.25  only if the vehicle is: 
 21.26     (i) a truck, as defined in section 168.011, a bus, as 
 21.27  defined in section 168.011, or a passenger automobile, as 
 21.28  defined in section 168.011, if the automobile is designed and 
 21.29  used for carrying more than nine persons including the driver; 
 21.30  and 
 21.31     (ii) intended to be used primarily to transport tangible 
 21.32  personal property or individuals, other than employees, to whom 
 21.33  the organization provides service in performing its charitable, 
 21.34  religious, or educational purpose; 
 21.35     (12) purchase of a motor vehicle for use by a transit 
 21.36  provider exclusively to provide transit service is exempt if the 
 22.1   transit provider is either (i) receiving financial assistance or 
 22.2   reimbursement under section 174.24 or 473.384, or (ii) operating 
 22.3   under section 174.29, 473.388, or 473.405; 
 22.4      (13) purchase or use of a motor vehicle by a qualified 
 22.5   business, as defined in section 469.310, located in a job 
 22.6   opportunity building zone, if the motor vehicle is principally 
 22.7   garaged in the job opportunity building zone and is primarily 
 22.8   used as part of or in direct support of the person's operations 
 22.9   carried on in the job opportunity building zone.  The exemption 
 22.10  under this clause applies to sales, if the purchase was made and 
 22.11  delivery received during the duration of the job opportunity 
 22.12  building zone.  The exemption under this clause also applies to 
 22.13  any local sales and use tax. 
 22.14     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 22.15  after December 31, 2003. 
 22.16     Sec. 15.  [469.310] [DEFINITIONS.] 
 22.17     Subdivision 1.  [SCOPE.] For purposes of sections 469.310 
 22.18  to 469.320, the following terms have the meanings given. 
 22.19     Subd. 2.  [AGRICULTURAL PROCESSING FACILITY.] "Agricultural 
 22.20  processing facility" means one or more facilities or operations 
 22.21  that transform, package, sort, or grade livestock or livestock 
 22.22  products, agricultural commodities, or plants or plant products 
 22.23  into goods that are used for intermediate or final consumption 
 22.24  including goods for nonfood use, and surrounding property. 
 22.25     Subd. 3.  [APPLICANT.] "Applicant" means a local government 
 22.26  unit or units applying for designation of an area as a job 
 22.27  opportunity building zone or a joint powers board, established 
 22.28  under section 471.59, acting on behalf of two or more local 
 22.29  government units. 
 22.30     Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 22.31  commissioner of trade and economic development. 
 22.32     Subd. 5.  [DEVELOPMENT PLAN.] "Development plan" means a 
 22.33  plan meeting the requirements of section 469.311. 
 22.34     Subd. 6.  [JOB OPPORTUNITY BUILDING ZONE OR ZONE.] "Job 
 22.35  opportunity building zone" or "zone" means a zone designated by 
 22.36  the commissioner under section 469.314, and includes an 
 23.1   agricultural processing facility zone. 
 23.2      Subd. 7.  [JOB OPPORTUNITY BUILDING ZONE PERCENTAGE OR ZONE 
 23.3   PERCENTAGE.] "Job opportunity building zone percentage" or "zone 
 23.4   percentage" means the following fraction reduced to a percentage:
 23.5      (1) the numerator of the fraction is: 
 23.6      (i) the ratio of the taxpayer's property factor under 
 23.7   section 290.191 located in the zone for the taxable year over 
 23.8   the property factor numerator determined under section 290.191, 
 23.9   plus 
 23.10     (ii) the ratio of the taxpayer's job opportunity building 
 23.11  zone payroll factor under subdivision 8 over the payroll factor 
 23.12  numerator determined under section 290.191; and 
 23.13     (2) the denominator of the fraction is two. 
 23.14     When calculating the zone percentage for a business that is 
 23.15  part of a unitary business as defined under section 290.17, 
 23.16  subdivision 4, the denominator of the payroll and property 
 23.17  factors is the Minnesota payroll and property of the unitary 
 23.18  business as reported on the combined report under section 
 23.19  290.17, subdivision 4, paragraph (j). 
 23.20     Subd. 8.  [JOB OPPORTUNITY BUILDING ZONE PAYROLL 
 23.21  FACTOR.] "Job opportunity building zone payroll factor" or "job 
 23.22  opportunity building zone payroll" is that portion of the 
 23.23  payroll factor under section 290.191 that represents: 
 23.24     (1) wages or salaries paid to an individual for services 
 23.25  performed in a job opportunity building zone; or 
 23.26     (2) wages or salaries paid to individuals working from 
 23.27  offices within a job opportunity building zone if their 
 23.28  employment requires them to work outside the zone and the work 
 23.29  is incidental to the work performed by the individual within the 
 23.30  zone. 
 23.31     Subd. 9.  [LOCAL GOVERNMENT UNIT.] "Local government unit" 
 23.32  means a statutory or home rule charter city, county, town, iron 
 23.33  range resources and rehabilitation agency, regional development 
 23.34  commission, or a federally designated economic development 
 23.35  district. 
 23.36     Subd. 10.  [PERSON.] "Person" includes an individual, 
 24.1   corporation, partnership, limited liability company, 
 24.2   association, or any other entity. 
 24.3      Subd. 11.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
 24.4   means a person carrying on a trade or business at a place of 
 24.5   business located within a job opportunity building zone. 
 24.6      (b) A person that relocates a trade or business from 
 24.7   outside a job opportunity building zone into a zone is not a 
 24.8   qualified business, unless the business: 
 24.9      (1)(i) increases full-time employment in the first full 
 24.10  year of operation within the job opportunity building zone by at 
 24.11  least 20 percent measured relative to the operations that were 
 24.12  relocated and maintains the required level of employment for 
 24.13  each year the zone designation applies; or 
 24.14     (ii) makes a capital investment in the property located 
 24.15  within a zone equivalent to ten percent of the gross revenues of 
 24.16  operation that were relocated in the immediately preceding 
 24.17  taxable year; and 
 24.18     (2) enters a binding written agreement with the 
 24.19  commissioner that: 
 24.20     (i) pledges the business will meet the requirements of 
 24.21  clause (1); 
 24.22     (ii) provides for repayment of all tax benefits enumerated 
 24.23  under section 469.315 to the business under the procedures in 
 24.24  section 469.319, if the requirements of clause (1) are not met 
 24.25  for the taxable year or for taxes payable during the year in 
 24.26  which the requirements were not met; and 
 24.27     (iii) contains any other terms the commissioner determines 
 24.28  appropriate. 
 24.29     Subd. 12.  [RELOCATES.] (a) "Relocates" means that the 
 24.30  trade or business: 
 24.31     (1) ceases one or more operations or functions at another 
 24.32  location in Minnesota and begins performing substantially the 
 24.33  same operations or functions at a location in a job opportunity 
 24.34  building zone; or 
 24.35     (2) reduces employment at another location in Minnesota 
 24.36  during a period starting one year before and ending one year 
 25.1   after it begins operations in a job opportunity building zone 
 25.2   and its employees in the job opportunity building zone are 
 25.3   engaged in the same line of business as the employees at the 
 25.4   location where it reduced employment. 
 25.5      (b) "Relocate" does not include an expansion by a business 
 25.6   that establishes a new facility that does not replace or 
 25.7   supplant an existing operation or employment, in whole or in 
 25.8   part. 
 25.9      (c) "Trade or business" includes any business entity that 
 25.10  is substantially similar in operation or ownership to the 
 25.11  business entity seeking to be a qualified business under this 
 25.12  section. 
 25.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 25.14  following final enactment. 
 25.15     Sec. 16.  [469.311] [DEVELOPMENT PLAN.] 
 25.16     (a) An applicant for designation of a job opportunity 
 25.17  building zone must adopt a written development plan for the zone 
 25.18  before submitting the application to the commissioner. 
 25.19     (b) The development plan must contain, at least, the 
 25.20  following: 
 25.21     (1) a map of the proposed zone that indicates the 
 25.22  geographic boundaries of the zone, the total area, and present 
 25.23  use and conditions generally of the land and structures within 
 25.24  those boundaries; 
 25.25     (2) evidence of community support and commitment from local 
 25.26  government, local workforce investment boards, school districts, 
 25.27  and other education institutions, business groups, and the 
 25.28  public; 
 25.29     (3) a description of the methods proposed to increase 
 25.30  economic opportunity and expansion, facilitate infrastructure 
 25.31  improvement, reduce the local regulatory burden, and identify 
 25.32  job-training opportunities; 
 25.33     (4) current social, economic, and demographic 
 25.34  characteristics of the proposed zone and anticipated 
 25.35  improvements in education, health, human services, and 
 25.36  employment if the zone is created; 
 26.1      (5) a description of anticipated activity in the zone and 
 26.2   each subzone, including, but not limited to, industrial use, 
 26.3   industrial site reuse, commercial or retail use, and residential 
 26.4   use; and 
 26.5      (6) any other information required by the commissioner. 
 26.6      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 26.7   following final enactment. 
 26.8      Sec. 17.  [469.312] [JOB OPPORTUNITY BUILDING ZONES; 
 26.9   LIMITATIONS.] 
 26.10     Subdivision 1.  [MAXIMUM SIZE.] A job opportunity building 
 26.11  zone may not exceed 5,000 acres.  For a zone designated as an 
 26.12  agricultural processing facility zone, the zone also may not 
 26.13  exceed the size of a site necessary for the agricultural 
 26.14  processing facility, including ancillary operations and space 
 26.15  for expansion in the reasonably foreseeable future. 
 26.16     Subd. 2.  [SUBZONES.] The area of a job opportunity 
 26.17  building zone may consist of one or more noncontiguous areas or 
 26.18  subzones. 
 26.19     Subd. 3.  [OUTSIDE METROPOLITAN AREA.] The area of a job 
 26.20  opportunity building zone must be located outside of the 
 26.21  metropolitan area, as defined in section 473.121, subdivision 2. 
 26.22     Subd. 4.  [BORDER CITY DEVELOPMENT ZONES.] (a) The area of 
 26.23  a job opportunity building zone may not include the area of a 
 26.24  border city development zone designated under section 469.1731.  
 26.25  The city may remove property from a border city development zone 
 26.26  contingent upon the area being designated as a job opportunity 
 26.27  building zone.  Before removing a parcel of property from a 
 26.28  border city development zone, the city must obtain the written 
 26.29  consent to the removal from each recipient that is located on 
 26.30  the parcel and receives incentives under the border city 
 26.31  development zone.  Consent of any other property owner or 
 26.32  taxpayer in the border city development zone is not required. 
 26.33     (b) A city may not provide tax incentives under section 
 26.34  469.1734 to individuals or businesses for operations or activity 
 26.35  in a job opportunity building zone. 
 26.36     Subd. 5.  [DURATION LIMIT.] The maximum duration of a zone 
 27.1   is 12 years.  The applicant may request a shorter duration.  The 
 27.2   commissioner may specify a shorter duration, regardless of the 
 27.3   requested duration. 
 27.4      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 27.5   following final enactment. 
 27.6      Sec. 18.  [469.313] [APPLICATION FOR DESIGNATION.] 
 27.7      Subdivision 1.  [WHO MAY APPLY.] One or more local 
 27.8   government units, or a joint powers board under section 471.59, 
 27.9   acting on behalf of two or more units, may apply for designation 
 27.10  of an area as a job opportunity building zone.  All or part of 
 27.11  the area proposed for designation as a zone must be located 
 27.12  within the boundaries of each of the governmental units.  A 
 27.13  local government unit may not submit or have submitted on its 
 27.14  behalf more than one application for designation of a job 
 27.15  opportunity building zone. 
 27.16     Subd. 2.  [APPLICATION CONTENT.] The application must 
 27.17  include: 
 27.18     (1) a development plan meeting the requirements of section 
 27.19  469.311; 
 27.20     (2) the proposed duration of the zone, not to exceed 12 
 27.21  years; 
 27.22     (3) a resolution or ordinance adopted by each of the cities 
 27.23  or towns and the counties in which the zone is located, agreeing 
 27.24  to provide all of the local tax exemptions provided under 
 27.25  section 469.315; 
 27.26     (4) if the proposed zone includes area in a border city 
 27.27  development zone, written consent to removal of the property 
 27.28  from the border city development zone to the extent required by 
 27.29  section 469.312, subdivision 4; and 
 27.30     (5) supporting evidence to allow the commissioner to 
 27.31  evaluate the application under the criteria in section 469.314. 
 27.32     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 27.33  following final enactment. 
 27.34     Sec. 19.  [469.314] [DESIGNATION OF JOB OPPORTUNITY 
 27.35  BUILDING ZONES.] 
 27.36     Subdivision 1.  [COMMISSIONER TO DESIGNATE.] (a) The 
 28.1   commissioner, in consultation with the commissioner of revenue, 
 28.2   shall designate not more than ten job opportunity building 
 28.3   zones.  In making the designations, the commissioner shall 
 28.4   consider need and likelihood of success to yield the most 
 28.5   economic development and revitalization of economically 
 28.6   distressed rural areas of Minnesota. 
 28.7      (b) In addition to the designations under paragraph (a), 
 28.8   the commissioner may, in consultation with the commissioners of 
 28.9   agriculture and revenue, designate up to five agricultural 
 28.10  processing facility zones. 
 28.11     (c) The commissioner may, upon designation of a zone, 
 28.12  modify the development plan, including the boundaries of the 
 28.13  zone or subzones, if in the commissioner's opinion a modified 
 28.14  plan would better meet the objectives of the job opportunity 
 28.15  building zone program.  The commissioner shall notify the 
 28.16  applicant of the modification and provide a statement of the 
 28.17  reasons for the modifications. 
 28.18     Subd. 2.  [NEED INDICATORS.] (a) In evaluating applications 
 28.19  to determine the need for designation of a job opportunity 
 28.20  building zone, the commissioner shall consider the following 
 28.21  factors as indicators of need: 
 28.22     (1) the percentage of the population that is below 200 
 28.23  percent of the poverty rate, compared with the state as a whole; 
 28.24     (2) the extent to which the area's average weekly wage is 
 28.25  significantly lower than the state average weekly wage; 
 28.26     (3) the amount of property in or near the proposed zone 
 28.27  that is deteriorated or underutilized; 
 28.28     (4) the extent to which the median sale price of housing 
 28.29  units in the area is below the state median; 
 28.30     (5) the extent to which the median household income of the 
 28.31  area is lower than the state median household income; 
 28.32     (6) the extent to which the area experienced a population 
 28.33  loss during the 20-year period ending the year before the 
 28.34  application is made; 
 28.35     (7) the extent to which an area has experienced sudden or 
 28.36  severe job loss as a result of closing of businesses or other 
 29.1   employers; 
 29.2      (8) the extent to which property in the area would remain 
 29.3   underdeveloped or nonperforming due to physical characteristics; 
 29.4      (9) the extent to which the area has substantial real 
 29.5   property with adequate infrastructure and energy to support new 
 29.6   or expanded development; and 
 29.7      (10) the extent to which the business startup or expansion 
 29.8   rates are significantly lower than the respective rate for the 
 29.9   state.  
 29.10     (b) In applying the need indicators, the best available 
 29.11  data should be used.  If reported data are not available for the 
 29.12  proposed zone, data for the smallest area that is available and 
 29.13  includes the area of the proposed zone may be used.  The 
 29.14  commissioner may require applicants to provide data to 
 29.15  demonstrate how the area meets one or more of the indicators of 
 29.16  need. 
 29.17     Subd. 3.  [SUCCESS INDICATORS.] In determining the 
 29.18  likelihood of success of a proposed zone, the commissioner shall 
 29.19  consider: 
 29.20     (1) the strength and viability of the proposed development 
 29.21  goals, objectives, and strategies in the development plan; 
 29.22     (2) whether the development plan is creative and innovative 
 29.23  in comparison to other applications; 
 29.24     (3) local public and private commitment to development of 
 29.25  the proposed zone and the potential cooperation of surrounding 
 29.26  communities; 
 29.27     (4) existing resources available to the proposed zone; 
 29.28     (5) how the designation of the zone would relate to other 
 29.29  economic and community development projects and to regional 
 29.30  initiatives or programs; 
 29.31     (6) how the regulatory burden will be eased for businesses 
 29.32  operating in the proposed zone; 
 29.33     (7) proposals to establish and link job creation and job 
 29.34  training; and 
 29.35     (8) the extent to which the development is directed at 
 29.36  encouraging and that designation of the zone is likely to result 
 30.1   in the creation of high-paying jobs. 
 30.2      Subd. 4.  [DESIGNATION SCHEDULE.] (a) The schedule in 
 30.3   paragraphs (b) to (e) applies to the designation of job 
 30.4   opportunity building zones. 
 30.5      (b) The commissioner shall publish the form for 
 30.6   applications and any procedural, form, or content requirements 
 30.7   for applications by no later than August 1, 2003.  The 
 30.8   commissioner may publish these requirements on the Internet, in 
 30.9   the State Register, or by any other means the commissioner 
 30.10  determines appropriate to disseminate the information to 
 30.11  potential applicants for designation. 
 30.12     (c) Applications must be submitted by October 15, 2003. 
 30.13     (d) The commissioner shall designate the zones by no later 
 30.14  than December 31, 2003. 
 30.15     (e) The designation of the zones takes effect January 1, 
 30.16  2004. 
 30.17     Subd. 5.  [GEOGRAPHIC DISTRIBUTION.] The commissioner shall 
 30.18  have as a goal the geographic distribution of zones around the 
 30.19  state. 
 30.20     Subd. 6.  [RULEMAKING EXEMPTION.] The commissioner's 
 30.21  actions in establishing procedures, requirements, and making 
 30.22  determinations to administer sections 469.310 to 469.320 are not 
 30.23  a rule for purposes of chapter 14 and are not subject to the 
 30.24  Administrative Procedure Act contained in chapter 14 and are not 
 30.25  subject to section 14.386. 
 30.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 30.27  following final enactment. 
 30.28     Sec. 20.  [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 
 30.29     Qualified businesses that operate in a job opportunity 
 30.30  building zone, individuals who invest in a qualified business 
 30.31  that operates in a job opportunity building zone, and property 
 30.32  located in a job opportunity building zone qualify for: 
 30.33     (1) exemption from individual income taxes as provided 
 30.34  under section 469.316; 
 30.35     (2) exemption from corporate franchise taxes as provided 
 30.36  under section 469.317; 
 31.1      (3) exemption from the state sales and use tax and any 
 31.2   local sales and use taxes on qualifying purchases as provided in 
 31.3   section 297A.68, subdivision 37; 
 31.4      (4) exemption from the state sales tax on motor vehicles 
 31.5   and any local sales tax on motor vehicles as provided under 
 31.6   section 297B.03; 
 31.7      (5) exemption from the property tax as provided in section 
 31.8   272.02, subdivision 56; 
 31.9      (6) exemption from the wind energy production tax under 
 31.10  section 272.029, subdivision 7; and 
 31.11     (7) the jobs credit allowed under section 469.318. 
 31.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 31.13  following final enactment. 
 31.14     Sec. 21.  [469.316] [INDIVIDUAL INCOME TAX EXEMPTION.] 
 31.15     Subdivision 1.  [APPLICATION.] An individual operating a 
 31.16  trade or business in a job opportunity building zone, and an 
 31.17  individual making a qualifying investment in a qualified 
 31.18  business operating in a job opportunity building zone qualifies 
 31.19  for the exemptions from taxes imposed under chapter 290, as 
 31.20  provided in this section.  The exemptions provided under this 
 31.21  section apply only to the extent that the income otherwise would 
 31.22  be taxable under chapter 290.  Subtractions under this section 
 31.23  from federal taxable income, alternative minimum taxable income, 
 31.24  or any other base subject to tax are limited to the amount that 
 31.25  otherwise would be included in the tax base absent the exemption 
 31.26  under this section.  This section applies only to taxable years 
 31.27  beginning during the duration of the job opportunity building 
 31.28  zone. 
 31.29     Subd. 2.  [RENTS.] An individual is exempt from the taxes 
 31.30  imposed under chapter 290 on net rents derived from real or 
 31.31  tangible personal property located in a zone for a taxable year 
 31.32  in which the zone was designated a job opportunity building 
 31.33  zone.  If tangible personal property was used both within and 
 31.34  outside of the zone, the exemption amount for the net rental 
 31.35  income must be multiplied by a fraction, the numerator of which 
 31.36  is the number of days the property was used in the zone and the 
 32.1   denominator of which is the total days. 
 32.2      Subd. 3.  [BUSINESS INCOME.] An individual is exempt from 
 32.3   the taxes imposed under chapter 290 on net income from the 
 32.4   operation of a qualified business in a job opportunity building 
 32.5   zone.  If the trade or business is carried on within and without 
 32.6   the zone and the individual is not a resident of Minnesota, the 
 32.7   exemption must be apportioned based on the zone percentage for 
 32.8   the taxable year.  If the trade or business is carried on within 
 32.9   and without the zone and the individual is a resident of 
 32.10  Minnesota, the exemption must be apportioned based on the zone 
 32.11  percentage for the taxable year, except the ratios under section 
 32.12  469.310, subdivision 7, clause (1), items (i) and (ii), must use 
 32.13  the denominators of the property and payroll factors determined 
 32.14  under section 290.191.  No subtraction is allowed under this 
 32.15  section in excess of 20 percent of the sum of the job 
 32.16  opportunity building zone payroll and the adjusted basis of the 
 32.17  property at the time that the property is first used in the job 
 32.18  opportunity building zone by the business. 
 32.19     Subd. 4.  [CAPITAL GAINS.] (a) An individual is exempt from 
 32.20  the taxes imposed under chapter 290 on: 
 32.21     (1) net gain derived on a sale or exchange of real property 
 32.22  located in the zone and used by a qualified business.  If the 
 32.23  property was held by the individual during a period when the 
 32.24  zone was not designated, the gain must be prorated based on the 
 32.25  percentage of time, measured in calendar days, that the real 
 32.26  property was held by the individual during the period the zone 
 32.27  designation was in effect to the total period of time the real 
 32.28  property was held by the individual; 
 32.29     (2) net gain derived on a sale or exchange of tangible 
 32.30  personal property used by a qualified business in the zone.  If 
 32.31  the property was held by the individual during a period when the 
 32.32  zone was not designated, the gain must be prorated based on the 
 32.33  percentage of time, measured in calendar days, that the property 
 32.34  was held by the individual during the period the zone 
 32.35  designation was in effect to the total period of time the 
 32.36  property was held by the individual.  If the tangible personal 
 33.1   property was used outside of the zone during the period of the 
 33.2   zone's designation, the exemption must be multiplied by a 
 33.3   fraction, the numerator of which is the number of days the 
 33.4   property was used in the zone during the time of the designation 
 33.5   and the denominator of which is the total days the property was 
 33.6   held during the time of the designation; and 
 33.7      (3) net gain derived on a sale of an ownership interest in 
 33.8   a qualified business operating in the job opportunity building 
 33.9   zone, meeting the requirements of paragraph (b).  The exemption 
 33.10  on the gain must be multiplied by the zone percentage of the 
 33.11  business for the taxable year prior to the sale. 
 33.12     (b) A qualified business meets the requirements of 
 33.13  paragraph (a), clause (3), if it is a corporation, an S 
 33.14  corporation, or a partnership, and for the taxable year its job 
 33.15  opportunity building zone percentage exceeds 25 percent.  For 
 33.16  purposes of paragraph (a), clause (3), the zone percentage must 
 33.17  be calculated by modifying the ratios under section 469.310, 
 33.18  subdivision 7, clause (1), items (i) and (ii), to use the 
 33.19  denominators of the property and payroll factors determined 
 33.20  under section 290.191.  Upon the request of an individual 
 33.21  holding an ownership interest in the entity, the entity must 
 33.22  certify to the owner, in writing, the job opportunity building 
 33.23  zone percentage needed to determine the exemption. 
 33.24     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 33.25  years beginning after December 31, 2003. 
 33.26     Sec. 22.  [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 
 33.27     (a) A qualified business is exempt from taxation under 
 33.28  section 290.02, the alternative minimum tax under section 
 33.29  290.0921, and the minimum fee under section 290.0922, on the 
 33.30  portion of its income attributable to operations within the 
 33.31  zone.  This exemption is determined as follows: 
 33.32     (1) for purposes of the tax imposed under section 290.02, 
 33.33  by multiplying its taxable net income by its zone percentage and 
 33.34  subtracting the result in determining taxable income; 
 33.35     (2) for purposes of the alternative minimum tax under 
 33.36  section 290.0921, by multiplying its alternative minimum taxable 
 34.1   income by its zone percentage and reducing alternative minimum 
 34.2   taxable income by this amount; and 
 34.3      (3) for purposes of the minimum fee under section 290.0922, 
 34.4   by excluding property and payroll in the zone from the 
 34.5   computations of the fee or by exempting the entity under section 
 34.6   290.0922, subdivision 2, clause (7). 
 34.7      (b) No subtraction is allowed under this section in excess 
 34.8   of 20 percent of the sum of the corporation's job opportunity 
 34.9   building zone payroll and the adjusted basis of the property at 
 34.10  the time that the property is first used in the job opportunity 
 34.11  building zone by the corporation. 
 34.12     (c) This section applies only to taxable years beginning 
 34.13  during the duration of the job opportunity building zone. 
 34.14     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 34.15  years beginning after December 31, 2003. 
 34.16     Sec. 23.  [469.318] [JOBS CREDIT.] 
 34.17     Subdivision 1.  [CREDIT ALLOWED.] A qualified business is 
 34.18  allowed a credit against the taxes imposed under chapter 290.  
 34.19  The credit equals seven percent of the: 
 34.20     (1) lesser of: 
 34.21     (i) zone payroll for the taxable year, less the zone 
 34.22  payroll for the base year; or 
 34.23     (ii) total Minnesota payroll for the taxable year, less 
 34.24  total Minnesota payroll for the base year; minus 
 34.25     (2) $30,000 multiplied by (the number of full-time 
 34.26  equivalent employees that the qualified business employs in the 
 34.27  job opportunity building zone for the taxable year, minus the 
 34.28  number of full-time equivalent employees the business employed 
 34.29  in the zone in the base year, but not less than zero). 
 34.30     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 34.31  the following terms have the meanings given. 
 34.32     (b) "Base year" means the taxable year beginning during the 
 34.33  calendar year prior to the calendar year in which the zone 
 34.34  designation took effect. 
 34.35     (c) "Full-time equivalent employees" means the equivalent 
 34.36  of annualized expected hours of work equal to 2,080 hours. 
 35.1      (d) "Minnesota payroll" means the wages or salaries 
 35.2   attributed to Minnesota under section 290.191, subdivision 12, 
 35.3   for the qualified business or the unitary business of which the 
 35.4   qualified business is a part, whichever is greater. 
 35.5      (e) "Zone payroll" means wages or salaries used to 
 35.6   determine the zone payroll factor for the qualified business, 
 35.7   less the amount of compensation attributable to any employee 
 35.8   that exceeds $100,000. 
 35.9      Subd. 3.  [INFLATION ADJUSTMENT.] For taxable years 
 35.10  beginning after December 31, 2004, the dollar amounts in 
 35.11  subdivision 1, clause (2), and subdivision 2, paragraph (e), are 
 35.12  annually adjusted for inflation.  The commissioner of revenue 
 35.13  shall adjust the amounts by the percentage determined under 
 35.14  section 290.06, subdivision 2d, for the taxable year. 
 35.15     Subd. 4.  [REFUNDABLE.] If the amount of the credit exceeds 
 35.16  the liability for tax under chapter 290, the commissioner of 
 35.17  revenue shall refund the excess to the qualified business. 
 35.18     Subd. 5.  [APPROPRIATION.] An amount sufficient to pay the 
 35.19  refunds authorized by this section is appropriated to the 
 35.20  commissioner of revenue from the general fund. 
 35.21     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 35.22  years beginning after December 31, 2003. 
 35.23     Sec. 24.  [469.319] [REPAYMENT OF TAX BENEFITS.] 
 35.24     Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
 35.25  repay the amount of the total tax reduction listed in section 
 35.26  469.315 and any refund under section 469.318 in excess of tax 
 35.27  liability, received during the two years immediately before it 
 35.28  ceased to operate in the zone, if the business: 
 35.29     (1) received tax reductions authorized by section 469.315; 
 35.30  and 
 35.31     (2)(i) did not meet the goals specified in an agreement 
 35.32  entered into with the applicant that states any obligation the 
 35.33  qualified business must fulfill in order to be eligible for tax 
 35.34  benefits.  The commissioner may extend for up to one year the 
 35.35  period for meeting any goals provided in an agreement.  The 
 35.36  applicant may extend the period for meeting other goals by 
 36.1   documenting in writing the reason for the extension and 
 36.2   attaching a copy of the document to its next annual report to 
 36.3   the commissioner; or 
 36.4      (ii) ceased to operate its facility located within the job 
 36.5   opportunity building zone or otherwise ceases to be or is not a 
 36.6   qualified business. 
 36.7      Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 36.8   the following terms have the meanings given. 
 36.9      (b) "Business" means any person who received tax benefits 
 36.10  enumerated in section 469.315. 
 36.11     (c) "Commissioner" means the commissioner of revenue. 
 36.12     Subd. 3.  [DISPOSITION OR REPAYMENT.] The repayment must be 
 36.13  paid to the state to the extent it represents a state tax 
 36.14  reduction and to the county to the extent it represents a 
 36.15  property tax reduction.  Any amount repaid to the state must be 
 36.16  deposited in the general fund.  Any amount repaid to the county 
 36.17  for the property tax exemption must be distributed to the local 
 36.18  governments with authority to levy taxes in the zone in the same 
 36.19  manner provided for distribution of payment of delinquent 
 36.20  property taxes.  Any repayment of local sales taxes must be 
 36.21  repaid to the city or county imposing the local sales tax. 
 36.22     Subd. 4.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
 36.23  taxes imposed under chapter 290 or 297A or local taxes collected 
 36.24  pursuant to section 297A.99, a business must file an amended 
 36.25  return with the commissioner of revenue and pay any taxes 
 36.26  required to be repaid within 30 days after ceasing to do 
 36.27  business in the zone.  The amount required to be repaid is 
 36.28  determined by calculating the tax for the period or periods for 
 36.29  which repayment is required without regard to the exemptions and 
 36.30  credits allowed under section 469.315. 
 36.31     (b) For the repayment of taxes imposed under chapter 297B, 
 36.32  a business must pay any taxes required to be repaid to the motor 
 36.33  vehicle registrar, as agent for the commissioner of revenue, 
 36.34  within 30 days after ceasing to do business in the zone. 
 36.35     (c) For the repayment of property taxes, the county auditor 
 36.36  shall prepare a tax statement for the business, applying the 
 37.1   applicable tax extension rates for each payable year and provide 
 37.2   a copy to the business.  The business must pay the taxes to the 
 37.3   county treasurer within 30 days after receipt of the tax 
 37.4   statement.  The taxpayer may appeal the valuation and 
 37.5   determination of the property tax to the tax court within 30 
 37.6   days after receipt of the tax statement. 
 37.7      (d) The provisions of chapters 270 and 289A relating to the 
 37.8   commissioner's authority to audit, assess, and collect the tax 
 37.9   and to hear appeals are applicable to the repayment required 
 37.10  under paragraphs (a) and (b).  The commissioner may impose civil 
 37.11  penalties as provided in chapter 289A, and the additional tax 
 37.12  and penalties are subject to interest at the rate provided in 
 37.13  section 270.75, from 30 days after ceasing to do business in the 
 37.14  job opportunity building zone until the date the tax is paid. 
 37.15     (e) If a property tax is not repaid under paragraph (c), 
 37.16  the county treasurer shall add the amount required to be repaid 
 37.17  to the property taxes assessed against the property for payment 
 37.18  in the year following the year in which the treasurer discovers 
 37.19  that the business ceased to operate in the job opportunity 
 37.20  building zone. 
 37.21     (f) For determining the tax required to be repaid, a tax 
 37.22  reduction is deemed to have been received on the date that the 
 37.23  tax would have been due if the taxpayer had not been entitled to 
 37.24  the exemption or on the date a refund was issued for a 
 37.25  refundable tax credit. 
 37.26     (g) The commissioner may assess the repayment of taxes 
 37.27  under paragraph (d) any time within two years after the business 
 37.28  ceases to operate in the job opportunity building zone, or 
 37.29  within any period of limitations for the assessment of tax under 
 37.30  section 289A.38, whichever period is later. 
 37.31     Subd. 5.  [WAIVER AUTHORITY.] The commissioner may waive 
 37.32  all or part of a repayment, if the commissioner, in consultation 
 37.33  with the commissioner of trade and economic development and 
 37.34  appropriate officials from the local government units in which 
 37.35  the qualified business is located, determines that requiring 
 37.36  repayment of the tax is not in the best interest of the state or 
 38.1   the local government units and the business ceased operating as 
 38.2   a result of circumstances beyond its control including, but not 
 38.3   limited to: 
 38.4      (1) a natural disaster; 
 38.5      (2) unforeseen industry trends; or 
 38.6      (3) loss of a major supplier or customer. 
 38.7      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 38.8   following final enactment. 
 38.9      Sec. 25.  [469.320] [ZONE PERFORMANCE; REMEDIES.] 
 38.10     Subdivision 1.  [REPORTING REQUIREMENT.] An applicant 
 38.11  receiving designation of a job opportunity building zone under 
 38.12  section 469.314 must annually report to the commissioner on its 
 38.13  progress in meeting the zone performance goals under the 
 38.14  development plan for the zone. 
 38.15     Subd. 2.  [PROCEDURES.] For reports required by subdivision 
 38.16  1, the commissioner may prescribe: 
 38.17     (1) the required time or times by which the reports must be 
 38.18  filed; 
 38.19     (2) the form of the report; and 
 38.20     (3) the information required to be included in the report. 
 38.21     Subd. 3.  [REMEDIES.] If the commissioner determines, based 
 38.22  on a report filed under subdivision 1 or other available 
 38.23  information, that a zone or subzone is failing to meet its 
 38.24  performance goals, the commissioner may take any actions the 
 38.25  commissioner determines appropriate, including modification of 
 38.26  the boundaries of the zone or a subzone or termination of the 
 38.27  zone or a subzone.  Before taking any action, the commissioner 
 38.28  shall consult with the applicant and the affected local 
 38.29  government units, including notifying them of the proposed 
 38.30  actions to be taken.  The commissioner shall publish any order 
 38.31  modifying a zone in the State Register and on the Internet.  The 
 38.32  applicant may appeal the commissioner's order under the 
 38.33  contested case procedures of chapter 14. 
 38.34     Subd. 4.  [EXISTING BUSINESSES.] (a) An action to remove 
 38.35  area from a zone or to terminate a zone under this section does 
 38.36  not apply to: 
 39.1      (1) the property tax on improvements constructed before the 
 39.2   first January 2 following publication of the commissioner's 
 39.3   order; 
 39.4      (2) sales tax on purchases made before the first day of the 
 39.5   next calendar month beginning at least 30 days after publication 
 39.6   of the commissioner's order; and 
 39.7      (3) individual income tax or corporate franchise tax 
 39.8   attributable to a facility that was in operation before the 
 39.9   publication of the commissioner's order. 
 39.10     (b) The tax exemptions specified in paragraph (a) terminate 
 39.11  on the date on which the zone expires under the original 
 39.12  designation. 
 39.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 39.14  following final enactment. 
 39.15     Sec. 26.  [477A.08] [JOB OPPORTUNITY BUILDING ZONE AID.] 
 39.16     Subdivision 1.  [ELIGIBILITY.] (a) For each assessment year 
 39.17  that the exemption for job opportunity building zone property is 
 39.18  in effect under section 272.02, subdivision 56, the assessor 
 39.19  shall determine the difference between the actual net tax 
 39.20  capacity and the net tax capacity that would be determined for 
 39.21  the job opportunity building zone, including any property 
 39.22  removed from the zone that continues to qualify under section 
 39.23  469.320, subdivision 4, if the exemption were not in effect. 
 39.24     (b) Each city and county is eligible for aid equal to 
 39.25  one-half of: 
 39.26     (1) the amount by which the sum of the differences 
 39.27  determined in paragraph (a) for the corresponding assessment 
 39.28  year exceeds three percent of the city's or county's total 
 39.29  taxable net tax capacity for taxes payable in 2003, multiplied 
 39.30  by 
 39.31     (2) the city's or the county's, as applicable, average 
 39.32  local tax rate for taxes payable in 2003. 
 39.33     Subd. 2.  [CERTIFICATION.] The county assessor shall notify 
 39.34  the commissioner of revenue of the amount determined under 
 39.35  subdivision 1, paragraph (b), clause (1), for any city or county 
 39.36  that qualifies for aid under this section by June 30 of the 
 40.1   assessment year, in a form prescribed by the commissioner.  The 
 40.2   commissioner shall notify each city and county of its qualifying 
 40.3   aid amount by August 15 of the assessment year. 
 40.4      Subd. 3.  [APPROPRIATION; PAYMENT.] The commissioner shall 
 40.5   pay each city and county its qualifying aid amount by July 20 of 
 40.6   the following year.  An amount sufficient to pay the aid under 
 40.7   this section is appropriated to the commissioner of revenue from 
 40.8   the general fund. 
 40.9      <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
 40.10  aid based on property taxes assessed in 2004, payable in 2005. 
 40.11     Sec. 27.  [APPROPRIATION; COST OF ADMINISTRATION.] 
 40.12     $100,000 in fiscal year 2004 and $30,000 in fiscal year 
 40.13  2005 are appropriated to the commissioner of trade and economic 
 40.14  development for the cost of designating job opportunity building 
 40.15  zones. 
 40.16     $53,000 in fiscal year 2004 and $29,000 in fiscal year 2005 
 40.17  are appropriated to the commissioner of revenue for the cost of 
 40.18  administering the tax provisions of this act. 
 40.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 40.20  following final enactment. 
 40.21                             ARTICLE 2 
 40.22               BIOTECHNOLOGY AND HEALTH SCIENCE ZONES 
 40.23     Section 1.  [LEGISLATIVE FINDINGS.] 
 40.24     The legislature finds, as a matter of public policy, that 
 40.25  biotechnology and the health sciences hold immense promise in 
 40.26  improving the quality of our lives, including curing diseases, 
 40.27  making our foods safer and more abundant, reducing our 
 40.28  dependence on fossil fuels and foreign oil, making better use of 
 40.29  Minnesota agriculture products, and growing tens of thousands of 
 40.30  new, high-paying jobs. 
 40.31     The legislature further finds that there are hundreds of 
 40.32  discoveries made each year at the University of Minnesota, the 
 40.33  Mayo Clinic, and other research institutions that, if properly 
 40.34  commercialized, could help provide these benefits.  
 40.35     The legislature further finds that biotechnology and health 
 40.36  sciences companies benefit from location in proximity to these 
 41.1   research institutions and the many faculty, students, and other 
 41.2   intellectual and physical infrastructure these institutions 
 41.3   provide.  
 41.4      The legislature further finds that Minnesota's high-quality 
 41.5   workforce is attractive to biotechnology and health sciences 
 41.6   companies that would want to relocate, start up, or expand in 
 41.7   Minnesota. 
 41.8      The legislature further finds and declares that it is 
 41.9   appropriate and necessary, to improve our quality of life and as 
 41.10  a matter of economic development, that Minnesota take rapid and 
 41.11  affirmative steps to encourage the development of biotechnology 
 41.12  and the health sciences and the commercialization of important 
 41.13  discoveries, especially through expansion of business 
 41.14  opportunities in proximity to the research institutions where 
 41.15  those discoveries occur.  This must include attention to the 
 41.16  ethical, legal, and societal impacts of the industry, including 
 41.17  risk assessment and environmental protection. 
 41.18     Sec. 2.  Minnesota Statutes 2002, section 272.02, is 
 41.19  amended by adding a subdivision to read: 
 41.20     Subd. 56.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 41.21  PROPERTY.] (a) Improvements to real property, and personal 
 41.22  property, classified under section 273.13, subdivision 24, and 
 41.23  located within a biotechnology and health sciences industry zone 
 41.24  are exempt from ad valorem taxes levied under chapter 275. 
 41.25     (b) For property to qualify for exemption under paragraph 
 41.26  (a), the occupant must be a qualified business, as defined in 
 41.27  section 469.310. 
 41.28     (c) The exemption applies beginning for the first 
 41.29  assessment year after designation of the biotechnology and 
 41.30  health sciences industry zone by the commissioner of trade and 
 41.31  economic development.  The exemption applies to each assessment 
 41.32  year that begins during the duration of the biotechnology and 
 41.33  health sciences industry zone.  This exemption does not apply to:
 41.34     (1) a levy under section 475.61 or similar levy provisions 
 41.35  under any other law to pay general obligation bonds; or 
 41.36     (2) a levy under section 126C.17, if the levy was approved 
 42.1   by the voters before the designation of the biotechnology and 
 42.2   health sciences industry zone. 
 42.3      (d) This subdivision does not apply to any taxes payable to 
 42.4   a city, town, or county that chose not to provide property tax 
 42.5   exemptions to qualified businesses in the biotechnology and 
 42.6   health sciences industry zone in the application submitted under 
 42.7   section 469.313. 
 42.8      <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
 42.9   property taxes assessed in 2004, payable in 2005. 
 42.10     Sec. 3.  Minnesota Statutes 2002, section 290.01, 
 42.11  subdivision 29, is amended to read: 
 42.12     Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
 42.13  means:  
 42.14     (1) for individuals, estates, and trusts, the same as 
 42.15  taxable net income; 
 42.16     (2) for corporations, the taxable net income less 
 42.17     (i) the net operating loss deduction under section 290.095; 
 42.18  and 
 42.19     (ii) the dividends received deduction under section 290.21, 
 42.20  subdivision 4; and 
 42.21     (iii) the exemption for operating in a biotechnology and 
 42.22  health sciences industry zone under section 469.317. 
 42.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 42.24  years beginning after December 31, 2003. 
 42.25     Sec. 4.  Minnesota Statutes 2002, section 290.06, is 
 42.26  amended by adding a subdivision to read: 
 42.27     Subd. 29.  [BIOTECHNOLOGY AND HEALTH SCIENCE INDUSTRY ZONE 
 42.28  JOB CREDIT.] A taxpayer that is a qualified business, as defined 
 42.29  in section 469.310, subdivision 11, is allowed a credit as 
 42.30  determined under section 469.318 against the franchise tax 
 42.31  imposed under section 290.06, subdivision 1, or the alternative 
 42.32  minimum tax imposed under section 290.0921. 
 42.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 42.34  following final enactment.  
 42.35     Sec. 5.  Minnesota Statutes 2002, section 290.06, is 
 42.36  amended by adding a subdivision to read: 
 43.1      Subd. 30.  [BIOTECHNOLOGY AND HEALTH SCIENCE INDUSTRY ZONE 
 43.2   RESEARCH AND DEVELOPMENT CREDIT.] A taxpayer that is a qualified 
 43.3   business, as defined in section 469.310, subdivision 11, is 
 43.4   allowed a credit as determined under section 469.3181 against 
 43.5   the franchise tax imposed under section 290.06, subdivision 1, 
 43.6   or the alternative minimum tax imposed under section 290.0921. 
 43.7      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 43.8   following final enactment.  
 43.9      Sec. 6.  Minnesota Statutes 2002, section 290.0921, 
 43.10  subdivision 3, is amended to read: 
 43.11     Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
 43.12  "Alternative minimum taxable income" is Minnesota net income as 
 43.13  defined in section 290.01, subdivision 19, and includes the 
 43.14  adjustments and tax preference items in sections 56, 57, 58, and 
 43.15  59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
 43.16  corporation files a separate company Minnesota tax return, the 
 43.17  minimum tax must be computed on a separate company basis.  If a 
 43.18  corporation is part of a tax group filing a unitary return, the 
 43.19  minimum tax must be computed on a unitary basis.  The following 
 43.20  adjustments must be made. 
 43.21     (1) For purposes of the depreciation adjustments under 
 43.22  section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
 43.23  the basis for depreciable property placed in service in a 
 43.24  taxable year beginning before January 1, 1990, is the adjusted 
 43.25  basis for federal income tax purposes, including any 
 43.26  modification made in a taxable year under section 290.01, 
 43.27  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 43.28  subdivision 7, paragraph (c). 
 43.29     For taxable years beginning after December 31, 2000, the 
 43.30  amount of any remaining modification made under section 290.01, 
 43.31  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 43.32  subdivision 7, paragraph (c), not previously deducted is a 
 43.33  depreciation allowance in the first taxable year after December 
 43.34  31, 2000. 
 43.35     (2) The portion of the depreciation deduction allowed for 
 43.36  federal income tax purposes under section 168(k) of the Internal 
 44.1   Revenue Code that is required as an addition under section 
 44.2   290.01, subdivision 19c, clause (16), is disallowed in 
 44.3   determining alternative minimum taxable income. 
 44.4      (3) The subtraction for depreciation allowed under section 
 44.5   290.01, subdivision 19d, clause (19), is allowed as a 
 44.6   depreciation deduction in determining alternative minimum 
 44.7   taxable income. 
 44.8      (4) The alternative tax net operating loss deduction under 
 44.9   sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
 44.10  not apply. 
 44.11     (5) The special rule for certain dividends under section 
 44.12  56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
 44.13     (6) The special rule for dividends from section 936 
 44.14  companies under section 56(g)(4)(C)(iii) does not apply. 
 44.15     (7) The tax preference for depletion under section 57(a)(1) 
 44.16  of the Internal Revenue Code does not apply. 
 44.17     (8) The tax preference for intangible drilling costs under 
 44.18  section 57(a)(2) of the Internal Revenue Code must be calculated 
 44.19  without regard to subparagraph (E) and the subtraction under 
 44.20  section 290.01, subdivision 19d, clause (4). 
 44.21     (9) The tax preference for tax exempt interest under 
 44.22  section 57(a)(5) of the Internal Revenue Code does not apply.  
 44.23     (10) The tax preference for charitable contributions of 
 44.24  appreciated property under section 57(a)(6) of the Internal 
 44.25  Revenue Code does not apply. 
 44.26     (11) For purposes of calculating the tax preference for 
 44.27  accelerated depreciation or amortization on certain property 
 44.28  placed in service before January 1, 1987, under section 57(a)(7) 
 44.29  of the Internal Revenue Code, the deduction allowable for the 
 44.30  taxable year is the deduction allowed under section 290.01, 
 44.31  subdivision 19e. 
 44.32     For taxable years beginning after December 31, 2000, the 
 44.33  amount of any remaining modification made under section 290.01, 
 44.34  subdivision 19e, not previously deducted is a depreciation or 
 44.35  amortization allowance in the first taxable year after December 
 44.36  31, 2004. 
 45.1      (12) For purposes of calculating the adjustment for 
 45.2   adjusted current earnings in section 56(g) of the Internal 
 45.3   Revenue Code, the term "alternative minimum taxable income" as 
 45.4   it is used in section 56(g) of the Internal Revenue Code, means 
 45.5   alternative minimum taxable income as defined in this 
 45.6   subdivision, determined without regard to the adjustment for 
 45.7   adjusted current earnings in section 56(g) of the Internal 
 45.8   Revenue Code. 
 45.9      (13) For purposes of determining the amount of adjusted 
 45.10  current earnings under section 56(g)(3) of the Internal Revenue 
 45.11  Code, no adjustment shall be made under section 56(g)(4) of the 
 45.12  Internal Revenue Code with respect to (i) the amount of foreign 
 45.13  dividend gross-up subtracted as provided in section 290.01, 
 45.14  subdivision 19d, clause (1), (ii) the amount of refunds of 
 45.15  income, excise, or franchise taxes subtracted as provided in 
 45.16  section 290.01, subdivision 19d, clause (10), or (iii) the 
 45.17  amount of royalties, fees or other like income subtracted as 
 45.18  provided in section 290.01, subdivision 19d, clause (11). 
 45.19     (14) Alternative minimum taxable income excludes the income 
 45.20  from operating in a biotechnology and health sciences industry 
 45.21  zone as provided under section 469.317. 
 45.22     Items of tax preference must not be reduced below zero as a 
 45.23  result of the modifications in this subdivision. 
 45.24     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 45.25  years beginning after December 31, 2003. 
 45.26     Sec. 7.  Minnesota Statutes 2002, section 290.0922, 
 45.27  subdivision 3, is amended to read: 
 45.28     Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
 45.29  means the total sales apportioned to Minnesota pursuant to 
 45.30  section 290.191, subdivision 5, the total receipts attributed to 
 45.31  Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
 45.32  and/or the total sales or receipts apportioned or attributed to 
 45.33  Minnesota pursuant to any other apportionment formula applicable 
 45.34  to the taxpayer. 
 45.35     (b) "Minnesota property" means total Minnesota tangible 
 45.36  property as provided in section 290.191, subdivisions 9 to 11, 
 46.1   and any other tangible property located in Minnesota, and 
 46.2   Minnesota property of a corporation, other than a corporation 
 46.3   treated as an "S" corporation under section 290.9725, but does 
 46.4   not include property of a qualified business located in a 
 46.5   biotechnology and health sciences zone designated under section 
 46.6   469.314.  Intangible property shall not be included in Minnesota 
 46.7   property for purposes of this section.  Taxpayers who do not 
 46.8   utilize tangible property to apportion income shall nevertheless 
 46.9   include Minnesota property for purposes of this section.  On a 
 46.10  return for a short taxable year, the amount of Minnesota 
 46.11  property owned, as determined under section 290.191, shall be 
 46.12  included in Minnesota property based on a fraction in which the 
 46.13  numerator is the number of days in the short taxable year and 
 46.14  the denominator is 365.  
 46.15     (c) "Minnesota payrolls"  means total Minnesota payrolls as 
 46.16  provided in section 290.191, subdivision 12, and Minnesota 
 46.17  payroll of a corporation, other than a corporation treated as an 
 46.18  "S" corporation under section 290.9725, but does not include 
 46.19  biotechnology and health sciences zone payroll under section 
 46.20  469.310, subdivision 8.  Taxpayers who do not utilize payrolls 
 46.21  to apportion income shall nevertheless include Minnesota 
 46.22  payrolls for purposes of this section. 
 46.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 46.24  years beginning after December 31, 2003. 
 46.25     Sec. 8.  Minnesota Statutes 2002, section 297A.68, is 
 46.26  amended by adding a subdivision to read: 
 46.27     Subd. 37.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
 46.28  ZONE.] (a) Purchases of tangible personal property or taxable 
 46.29  services by a qualified business, as defined in section 469.310, 
 46.30  are exempt if the property or services are primarily used or 
 46.31  consumed in a biotechnology and health sciences industry zone 
 46.32  designated under section 469.314. 
 46.33     (b) Purchase and use of construction materials and supplies 
 46.34  for construction of improvements to real property in a 
 46.35  biotechnology and health sciences industry zone are exempt if 
 46.36  the improvements after completion of construction are to be used 
 47.1   in the conduct of a qualified business, as defined in section 
 47.2   469.310.  This exemption applies regardless of whether the 
 47.3   purchases are made by the business or a contractor. 
 47.4      (c) The exemptions under this subdivision apply to a local 
 47.5   sales and use tax regardless of whether the local sales tax is 
 47.6   imposed on the sales taxable as defined under this chapter. 
 47.7      (d)(1) The tax on sales of goods or services exempted under 
 47.8   this subdivision shall be imposed and collected as if the 
 47.9   applicable rate under section 297A.62 applied.  Upon application 
 47.10  by the purchaser, on forms prescribed by the commissioner, a 
 47.11  refund equal to the tax paid shall be paid to the purchaser.  
 47.12  The application must include sufficient information to permit 
 47.13  the commissioner to verify the sales tax paid and the 
 47.14  eligibility of the claimant to receive the credit.  No more than 
 47.15  two applications for refunds may be filed under this subdivision 
 47.16  in a calendar year.  The provisions of section 289A.40 apply to 
 47.17  the refunds payable under this subdivision. 
 47.18     (2) There is annually appropriated to the commissioner of 
 47.19  revenue the amount required to make the refunds. 
 47.20     (3) The aggregate amount refunded to a qualified business 
 47.21  cannot exceed the amount allocated to the qualified business 
 47.22  under section 469.3141. 
 47.23     (e) This subdivision applies to sales made during the 
 47.24  duration of the designation of the zone. 
 47.25     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 47.26  on or after the day following final enactment. 
 47.27     Sec. 9.  [469.310] [DEFINITIONS.] 
 47.28     Subdivision 1.  [SCOPE.] For purposes of sections 469.310 
 47.29  to 469.320, the following terms have the meanings given. 
 47.30     Subd. 2.  [APPLICANT.] "Applicant" means a local government 
 47.31  unit or units applying for designation of an area as a 
 47.32  biotechnology and health sciences industry zone or a joint 
 47.33  powers board, established under section 471.59, acting on behalf 
 47.34  of two or more local government units. 
 47.35     Subd. 3.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
 47.36  FACILITY.] "Biotechnology and health sciences industry facility" 
 48.1   means one or more facilities or operations involved in:  (1) 
 48.2   researching, developing, and/or manufacturing a biotechnology 
 48.3   product or service or a biotechnology-related health sciences 
 48.4   product or service; (2) researching, developing, and/or 
 48.5   manufacturing a biotechnology medical device product or service 
 48.6   or a biotechnology-related medical device product or service; or 
 48.7   (3) promoting, supplying, or servicing a facility or operation 
 48.8   involved in clause (1) or (2), if the business derives more than 
 48.9   50 percent of its gross receipts from those activities. 
 48.10     Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 48.11  commissioner of trade and economic development. 
 48.12     Subd. 5.  [DEVELOPMENT PLAN.] "Development plan" means a 
 48.13  plan meeting the requirements of section 469.311. 
 48.14     Subd. 6.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 48.15  OR ZONE.] "Biotechnology and health sciences industry zone" or 
 48.16  "zone" means a zone designated by the commissioner under section 
 48.17  469.314. 
 48.18     Subd. 7.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 48.19  PERCENTAGE OR ZONE PERCENTAGE.] "Biotechnology and health 
 48.20  sciences industry zone percentage" or "zone percentage" means 
 48.21  the following fraction reduced to a percentage: 
 48.22     (1) the numerator of the fraction is: 
 48.23     (i) the ratio of the taxpayer's property factor under 
 48.24  section 290.191 located in the zone for the taxable year over 
 48.25  the property factor numerator determined under section 290.191, 
 48.26  plus 
 48.27     (ii) the ratio of the taxpayer's biotechnology and health 
 48.28  sciences industry zone payroll factor under subdivision 8 over 
 48.29  the payroll factor numerator determined under section 290.191; 
 48.30  and 
 48.31     (2) the denominator of the fraction is two. 
 48.32     When calculating the zone percentage for a business that is 
 48.33  part of a unitary business as defined under section 290.17, 
 48.34  subdivision 4, the denominator of the payroll and property 
 48.35  factors is the Minnesota payroll and property of the unitary 
 48.36  business as reported on the combined report under section 
 49.1   290.17, subdivision 4, paragraph (j). 
 49.2      Subd. 8.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 49.3   PAYROLL FACTOR.] "Biotechnology and health sciences industry 
 49.4   zone payroll factor" or "biotechnology and health sciences 
 49.5   industry zone payroll" is that portion of the payroll factor 
 49.6   under section 290.191 that represents: 
 49.7      (1) wages or salaries paid to an individual for services 
 49.8   performed for a qualified business in a biotechnology and health 
 49.9   sciences industry zone; or 
 49.10     (2) wages or salaries paid to individuals working from 
 49.11  offices of a qualified business within a biotechnology and 
 49.12  health sciences industry zone if their employment requires them 
 49.13  to work outside the zone and the work is incidental to the work 
 49.14  performed by the individual within the zone. 
 49.15     Subd. 9.  [LOCAL GOVERNMENT UNIT.] "Local government unit" 
 49.16  means a statutory or home rule charter city, county, town, or 
 49.17  school district. 
 49.18     Subd. 10.  [PERSON.] "Person" includes an individual, 
 49.19  corporation, partnership, limited liability company, 
 49.20  association, or any other entity. 
 49.21     Subd. 11.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
 49.22  means a person carrying on a trade or business at a 
 49.23  biotechnology and health sciences industry facility located 
 49.24  within a biotechnology and health sciences industry zone. 
 49.25     (b) A person that relocates a biotechnology and health 
 49.26  sciences industry facility from outside a biotechnology and 
 49.27  health sciences industry zone into a zone is not a qualified 
 49.28  business, unless the business: 
 49.29     (1)(i) increases full-time employment in the first full 
 49.30  year of operation within the biotechnology and health sciences 
 49.31  industry zone by at least 20 percent measured relative to the 
 49.32  operations that were relocated; or 
 49.33     (ii) makes a capital investment in the property located 
 49.34  within a zone equivalent to ten percent of the gross revenues of 
 49.35  operation that were relocated in the immediately preceding 
 49.36  taxable year; and 
 50.1      (2) enters a binding written agreement with the 
 50.2   commissioner that: 
 50.3      (i) pledges the business will meet the requirements of 
 50.4   clause (1); 
 50.5      (ii) provides for repayment of all tax benefits enumerated 
 50.6   under section 469.315 to the business under the procedures in 
 50.7   section 469.319, if the requirements of clause (1) are not met; 
 50.8   and 
 50.9      (iii) contains any other terms the commissioner determines 
 50.10  appropriate. 
 50.11     Subd. 12.  [RELOCATES.] (a) "Relocates" means that the 
 50.12  trade or business: 
 50.13     (1) ceases one or more operations or functions at another 
 50.14  location in Minnesota and begins performing substantially the 
 50.15  same operations or functions at a location in a biotechnology 
 50.16  and health sciences industry zone; or 
 50.17     (2) reduces employment at another location in Minnesota 
 50.18  during a period starting one year before and ending one year 
 50.19  after it begins operations in a biotechnology and health 
 50.20  sciences industry zone and its employees in the biotechnology 
 50.21  and health sciences industry zone are engaged in the same line 
 50.22  of business as the employees at the location where it reduced 
 50.23  employment. 
 50.24     (b) "Relocate" does not include an expansion by a business 
 50.25  that establishes a new facility that does not replace or 
 50.26  supplant an existing operation or employment, in whole or in 
 50.27  part. 
 50.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 50.29  following final enactment. 
 50.30     Sec. 10.  [469.311] [DEVELOPMENT PLAN.] 
 50.31     (a) An applicant for designation of a biotechnology and 
 50.32  health sciences industry zone must adopt a written development 
 50.33  plan for the zone before submitting the application to the 
 50.34  commissioner. 
 50.35     (b) The development plan must contain, at least, the 
 50.36  following: 
 51.1      (1) a map of the proposed zone that indicates the 
 51.2   geographic boundaries of the zone, the total area, and present 
 51.3   use and conditions generally of the land and structures within 
 51.4   those boundaries; 
 51.5      (2) evidence of community support and commitment from local 
 51.6   government, local workforce investment boards, school districts, 
 51.7   and other education institutions, business groups, and the 
 51.8   public; 
 51.9      (3) a description of the methods proposed to increase 
 51.10  economic opportunity and expansion, facilitate infrastructure 
 51.11  improvement, reduce the local regulatory burden, and identify 
 51.12  job-training opportunities; 
 51.13     (4) current social, economic, and demographic 
 51.14  characteristics of the proposed zone and anticipated 
 51.15  improvements in education, health, human services, and 
 51.16  employment if the zone is created; 
 51.17     (5) a description of anticipated activity in the zone and 
 51.18  each subzone, including, but not limited to, industrial use and 
 51.19  industrial site reuse; and 
 51.20     (6) any other information required by the commissioner. 
 51.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 51.22  following final enactment. 
 51.23     Sec. 11.  [469.312] [BIOTECHNOLOGY AND HEALTH SCIENCES 
 51.24  INDUSTRY ZONE; LIMITATIONS.] 
 51.25     Subdivision 1.  [MAXIMUM SIZE.] A biotechnology and health 
 51.26  sciences industry zone may not exceed 5,000 acres.  
 51.27     Subd. 2.  [SUBZONES.] The area of a biotechnology and 
 51.28  health sciences industry zone may consist of one or more 
 51.29  noncontiguous areas or subzones. 
 51.30     Subd. 3.  [DURATION LIMIT.] The maximum duration of a zone 
 51.31  is 12 years.  The applicant may request a shorter duration.  The 
 51.32  commissioner may specify a shorter duration, regardless of the 
 51.33  requested duration. 
 51.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 51.35  following final enactment. 
 51.36     Sec. 12.  [469.313] [APPLICATION FOR DESIGNATION.] 
 52.1      Subdivision 1.  [WHO MAY APPLY.] One or more local 
 52.2   government units, or a joint powers board under section 471.59, 
 52.3   acting on behalf of two or more units, may apply for designation 
 52.4   of an area as a biotechnology and health sciences industry 
 52.5   zone.  All or part of the area proposed for designation as a 
 52.6   zone must be located within the boundaries of each of the 
 52.7   governmental units.  A local government unit may not submit or 
 52.8   have submitted on its behalf more than one application for 
 52.9   designation of a biotechnology and health sciences industry zone.
 52.10     Subd. 2.  [APPLICATION CONTENT.] The application must 
 52.11  include: 
 52.12     (1) a development plan meeting the requirements of section 
 52.13  469.311; 
 52.14     (2) the proposed duration of the zone, not to exceed 12 
 52.15  years; 
 52.16     (3)(i) a resolution or ordinance adopted by each of the 
 52.17  cities or towns and the counties in which the zone is located, 
 52.18  agreeing to provide all of the local sales and use tax 
 52.19  exemptions provided under section 469.315; (ii) a resolution or 
 52.20  ordinance adopted by each of the cities or towns and the 
 52.21  counties in which the zone is located that declares whether it 
 52.22  will provide property tax exemptions under section 469.315; and 
 52.23     (4) supporting evidence to allow the commissioner to 
 52.24  evaluate the application under the criteria in section 469.314. 
 52.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 52.26  following final enactment. 
 52.27     Sec. 13.  [469.314] [DESIGNATION OF BIOTECHNOLOGY AND 
 52.28  HEALTH SCIENCES INDUSTRY ZONE.] 
 52.29     Subdivision 1.  [COMMISSIONER TO DESIGNATE.] (a) The 
 52.30  commissioner, in consultation with the commissioner of revenue 
 52.31  and the director of the office of strategic and long-range 
 52.32  planning, shall designate not more than one biotechnology and 
 52.33  health sciences industry zone.  Priority must be given to 
 52.34  applicants with a development plan that links a higher 
 52.35  education/research institution with a biotechnology and health 
 52.36  sciences industry facility. 
 53.1      (b) The commissioner may, upon designation of a zone, 
 53.2   modify the development plan, including the boundaries of the 
 53.3   zone or subzones, if in the commissioner's opinion a modified 
 53.4   plan would better meet the objectives of the biotechnology and 
 53.5   health sciences industry zone program.  The commissioner shall 
 53.6   notify the applicant of the modification and provide a statement 
 53.7   of the reasons for the modifications. 
 53.8      Subd. 2.  [NEED INDICATORS.] (a) In evaluating applications 
 53.9   to determine the need for designation of a biotechnology and 
 53.10  health sciences industry zone, the commissioner shall consider 
 53.11  the following factors as indicators of need: 
 53.12     (1) the extent to which land in proximity to a significant 
 53.13  scientific research institution could be developed as a higher 
 53.14  and better use for biotechnology and health sciences industry 
 53.15  facilities; 
 53.16     (2) the amount of property in or near the zone that is 
 53.17  deteriorated or underutilized; and 
 53.18     (3) the extent to which property in the area would remain 
 53.19  underdeveloped or nonperforming due to physical characteristics. 
 53.20     (b) The commissioner may require applicants to provide data 
 53.21  to demonstrate how the area meets one or more of the indicators 
 53.22  of need. 
 53.23     Subd. 3.  [SUCCESS INDICATORS.] In determining the 
 53.24  likelihood of success of a proposed zone, the commissioner shall 
 53.25  consider: 
 53.26     (1) applicants that show a viable link between a higher 
 53.27  education/research institution, the biotechnology and/or medical 
 53.28  devices business sectors, and one or more units of local 
 53.29  government with a development plan; 
 53.30     (2) the extent to which the area has substantial real 
 53.31  property with adequate infrastructure and energy to support new 
 53.32  or expanded development; 
 53.33     (3) the strength and viability of the proposed development 
 53.34  goals, objectives, and strategies in the development plan; 
 53.35     (4) whether the development plan is creative and innovative 
 53.36  in comparison to other applications; 
 54.1      (5) local public and private commitment to development of a 
 54.2   biotechnology and health sciences industry facility or 
 54.3   facilities in the proposed zone and the potential cooperation of 
 54.4   surrounding communities; 
 54.5      (6) existing resources available to the proposed zone; 
 54.6      (7) how the designation of the zone would relate to other 
 54.7   economic and community development projects and to regional 
 54.8   initiatives or programs; 
 54.9      (8) how the regulatory burden will be eased for 
 54.10  biotechnology and health sciences industry facilities located in 
 54.11  the proposed zone; 
 54.12     (9) proposals to establish and link job creation and job 
 54.13  training in the biotechnology and health sciences industry with 
 54.14  research/educational institutions; and 
 54.15     (10) the extent to which the development is directed at 
 54.16  encouraging, and that designation of the zone is likely to 
 54.17  result in, the creation of high-paying jobs. 
 54.18     Subd. 4.  [DESIGNATION SCHEDULE.] (a) The schedule in 
 54.19  paragraphs (b) to (e) applies to the designation of the 
 54.20  biotechnology and health sciences industry zone. 
 54.21     (b) The commissioner shall publish the form for 
 54.22  applications and any procedural, form, or content requirements 
 54.23  for applications by no later than August 1, 2003.  The 
 54.24  commissioner may publish these requirements on the Internet, in 
 54.25  the State Register, or by any other means the commissioner 
 54.26  determines appropriate to disseminate the information to 
 54.27  potential applicants for designation. 
 54.28     (c) Applications must be submitted by October 15, 2003. 
 54.29     (d) The commissioner shall designate the zones by no later 
 54.30  than December 31, 2003. 
 54.31     (e) The designation of the zones takes effect January 1, 
 54.32  2004. 
 54.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 54.34  following final enactment. 
 54.35     Sec. 14.  [469.3141] [APPLICATION FOR TAX BENEFITS.] 
 54.36     (a) To claim a tax credit or exemption under section 
 55.1   469.315, clauses (2) through (5), a business must apply to the 
 55.2   commissioner for a tax credit certificate.  As a condition of 
 55.3   its application, the business must agree to furnish information 
 55.4   to the commissioner that is sufficient to verify the eligibility 
 55.5   for any credits or exemptions claimed.  The total amount of the 
 55.6   state tax credits and exemptions allowed for the specified 
 55.7   period may not exceed the amount of the tax credit certificates 
 55.8   provided by the commissioner to the business.  The commissioner 
 55.9   must verify to the commissioner of revenue the amount of tax 
 55.10  exemptions or credits for which each business is eligible. 
 55.11     (b) A tax credit certificate issued under this section may 
 55.12  specify the particular tax exemptions or credits that the 
 55.13  qualified business is eligible to claim under section 469.315, 
 55.14  clauses (2) through (5), and the amount of each exemption or 
 55.15  credit allowed. 
 55.16     (c) The commissioner may issue $1,000,000 of tax credits or 
 55.17  exemptions in fiscal year 2004.  Any tax credits or exemptions 
 55.18  not awarded in fiscal year 2004 may be awarded in fiscal year 
 55.19  2005. 
 55.20     (d) A qualified business must use the tax credits or tax 
 55.21  exemptions granted under this section by the later of the end of 
 55.22  the state fiscal year or the taxpayer's tax year in which the 
 55.23  credits or exemptions are granted. 
 55.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 55.25  following final enactment. 
 55.26     Sec. 15.  [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 
 55.27     Qualified businesses that operate in a biotechnology and 
 55.28  health sciences industry zone, individuals who invest in a 
 55.29  qualified business that operates in a biotechnology and health 
 55.30  sciences industry zone, and property of a qualified business 
 55.31  located in a biotechnology and health sciences industry zone 
 55.32  qualify for: 
 55.33     (1) exemption from the property tax as provided in section 
 55.34  272.02, subdivision 56; 
 55.35     (2) exemption from corporate franchise taxes as provided 
 55.36  under section 469.317; 
 56.1      (3) exemption from the state sales and use tax and any 
 56.2   local sales and use taxes on qualifying purchases as provided in 
 56.3   section 297A.68, subdivision 37; 
 56.4      (4) research and development credits as provided under 
 56.5   section 469.3181; 
 56.6      (5) jobs credits as provided under section 469.318. 
 56.7      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 56.8   following final enactment. 
 56.9      Sec. 16.  [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 
 56.10     (a) A qualified business is exempt from taxation under 
 56.11  section 290.02, the alternative minimum tax under section 
 56.12  290.0921, and the minimum fee under section 290.0922, on the 
 56.13  portion of its income attributable to operations of a qualified 
 56.14  business within the biotechnology and health sciences industry 
 56.15  zone.  This exemption is determined as follows: 
 56.16     (1) for purposes of the tax imposed under section 290.02, 
 56.17  by multiplying its taxable net income by its zone percentage and 
 56.18  subtracting the result in determining taxable income; 
 56.19     (2) for purposes of the alternative minimum tax under 
 56.20  section 290.0921, by multiplying its alternative minimum taxable 
 56.21  income by its zone percentage and reducing alternative minimum 
 56.22  taxable income by this amount; and 
 56.23     (3) for purposes of the minimum fee under section 290.0922, 
 56.24  by excluding property and payroll in the zone from the 
 56.25  computations of the fee. 
 56.26     (b) No subtraction is allowed under this section in excess 
 56.27  of 20 percent of the sum of the corporation's biotechnology and 
 56.28  health sciences industry zone payroll and the adjusted basis of 
 56.29  the property at the time that the property is first used in the 
 56.30  biotechnology and health sciences industry zone by the 
 56.31  corporation. 
 56.32     (c) No reduction in tax is allowed in excess of the amount 
 56.33  allocated under section 469.3141. 
 56.34     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 56.35  years beginning after December 31, 2003. 
 56.36     Sec. 17.  [469.318] [JOBS CREDIT.] 
 57.1      Subdivision 1.  [CREDIT ALLOWED.] A qualified business is 
 57.2   allowed a credit against the taxes imposed under chapter 290. 
 57.3      The credit equals seven percent of the (1) lesser of (i) 
 57.4   zone payroll for the taxable year, less the zone payroll for the 
 57.5   base year; or (ii) total Minnesota payroll for the taxable year, 
 57.6   less total Minnesota payroll for the base year; minus (2) 
 57.7   $30,000 multiplied by the number of full-time equivalent 
 57.8   employee positions that the qualified business employs in the 
 57.9   biotechnology and health sciences industry zone for the taxable 
 57.10  year, minus the number of full-time equivalent employees the 
 57.11  business employed in the zone in the base year, but not less 
 57.12  than zero. 
 57.13     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 57.14  the following terms have the meaning given. 
 57.15     (b) "Base year" means the taxable year beginning during the 
 57.16  calendar year in which the commissioner designated the zone. 
 57.17     (c) "Full-time equivalent employee position" means the 
 57.18  equivalent of annualized expected hours of work equal to 2,080 
 57.19  hours. 
 57.20     (d) "Minnesota payroll" means the wages or salaries 
 57.21  attributed to Minnesota under section 290.191, subdivision 12, 
 57.22  for the qualified business or the unitary business of which the 
 57.23  qualified business is a part, whichever is greater. 
 57.24     (e) "Zone payroll" means wages or salaries used to 
 57.25  determine the zone payroll factor for the qualified business. 
 57.26     Subd. 3.  [INFLATION ADJUSTMENT.] For taxable years 
 57.27  beginning after December 31, 2004, the dollar amount in 
 57.28  subdivision 1, clause (2), is annually adjusted for inflation.  
 57.29  The commissioner of revenue shall adjust the amount by the 
 57.30  percentage determined under section 290.06, subdivision 2d, for 
 57.31  the taxable year. 
 57.32     Subd. 4.  [REFUNDABLE.] If the amount of the credit 
 57.33  calculated under this section and allocated to the qualified 
 57.34  business under section 14 exceeds the liability for tax under 
 57.35  chapter 290, the commissioner of revenue shall refund the excess 
 57.36  to the qualified business. 
 58.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 58.2   following final enactment. 
 58.3      Sec. 18.  [469.3181] [CREDIT FOR INCREASING RESEARCH 
 58.4   ACTIVITIES IN A BIOTECHNOLOGY AND HEALTH SCIENCES ZONE.] 
 58.5      Subdivision 1.  [CREDIT ALLOWED.] A corporation, other than 
 58.6   a corporation treated as an "S" corporation under section 
 58.7   290.9725, is allowed a credit against the portion of the 
 58.8   franchise tax computed under section 290.06, subdivision 1, for 
 58.9   the taxable year equal to:  (1) five percent of the first 
 58.10  $2,000,000 of the excess (if any) of (i) the qualified research 
 58.11  expenses for the taxable year, over (ii) the base amount; and 
 58.12  (2) 2.5 percent of all such excess expenses over $2,000,000. 
 58.13     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 58.14  the following terms have the meanings given. 
 58.15     (b) "Qualified research expenses" means qualified research 
 58.16  expenses and basic research payments as defined in section 41(b) 
 58.17  and (e) of the Internal Revenue Code. 
 58.18     (c) "Qualified research" means activities in the fields of 
 58.19  biotechnology or health sciences that are "qualified research" 
 58.20  as defined in section 41(d) of the Internal Revenue Code, except 
 58.21  that the term does not include qualified research conducted 
 58.22  outside the biotechnology and health sciences industry zone. 
 58.23     (d) "Base amount" means base amount as defined in section 
 58.24  4(c) of the Internal Revenue Code, except that the average 
 58.25  annual gross receipts must be calculated using Minnesota sales 
 58.26  or receipts under section 290.191 and the definitions contained 
 58.27  in paragraphs (b) and (c) shall apply. 
 58.28     (e) "Liability for tax" for purposes of this section means 
 58.29  the tax imposed under this chapter for the taxable year reduced 
 58.30  by the sum of the nonrefundable credits allowed under this 
 58.31  chapter. 
 58.32     Subd. 3.  [REFUNDABLE CREDIT.] If the credit determined 
 58.33  under this section and allocated to the taxpayer under section 
 58.34  469.3141 for the taxable year exceeds the taxpayer's liability 
 58.35  for tax for the year, the commissioner shall refund the 
 58.36  difference to the taxpayer. 
 59.1      Subd. 4.  [PARTNERSHIPS.] In the case of partnerships the 
 59.2   credit shall be allocated in the same manner provided by section 
 59.3   41(f)(2) of the Internal Revenue Code. 
 59.4      Subd. 5.  [ADJUSTMENTS; ACQUISITIONS AND DISPOSITIONS.] If 
 59.5   a taxpayer acquires or disposes of the major portion of a trade 
 59.6   or business or the major portion of a separate unit of a trade 
 59.7   or business in a transaction with another taxpayer, the 
 59.8   taxpayer's qualified research expenses and base amount are 
 59.9   adjusted in the same manner provided by section 41(f)(3) of the 
 59.10  Internal Revenue Code. 
 59.11     Subd. 6.  Any amount used to calculate a credit under this 
 59.12  section may not be used to generate a credit under section 
 59.13  290.068. 
 59.14     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 59.15  following final enactment.  
 59.16     Sec. 19.  [469.319] [REPAYMENT OF TAX BENEFITS.] 
 59.17     Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
 59.18  repay the amount of the tax reduction listed in section 469.315 
 59.19  and any refunds under sections 469.318 and 469.3181 in excess of 
 59.20  tax liability, received during the two years immediately before 
 59.21  it ceased to operate in the zone, if the business: 
 59.22     (1) received tax reductions authorized by section 469.315; 
 59.23  and 
 59.24     (2)(i) did not meet the goals specified in an agreement 
 59.25  entered into with the applicant that states any obligation the 
 59.26  qualified business must fulfill in order to be eligible for tax 
 59.27  benefits.  The commissioner may extend for up to one year the 
 59.28  period for meeting any goals provided in an agreement.  The 
 59.29  applicant may extend the period for meeting other goals by 
 59.30  documenting in writing the reason for the extension and 
 59.31  attaching a copy of the document to its next annual report to 
 59.32  the commissioner; or 
 59.33     (ii) ceased to operate its facility located within the 
 59.34  biotechnology and health sciences industry zone or otherwise 
 59.35  ceases to be or is not a qualified business. 
 59.36     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 60.1   the following terms have the meanings given. 
 60.2      (b) "Business" means any person who received tax benefits 
 60.3   enumerated in section 469.315. 
 60.4      (c) "Commissioner" means the commissioner of revenue. 
 60.5      Subd. 3.  [DISPOSITION OR REPAYMENT.] The repayment must be 
 60.6   paid to the state to the extent it represents a state tax 
 60.7   reduction and to the county to the extent it represents a 
 60.8   property tax reduction.  Any amount repaid to the state must be 
 60.9   deposited in the general fund.  Any amount repaid to the county 
 60.10  for the property tax exemption must be distributed to the local 
 60.11  governments with authority to levy taxes in the zone in the same 
 60.12  manner provided for distribution of payment of delinquent 
 60.13  property taxes.  Any repayment of local sales taxes must be 
 60.14  repaid to the city or county imposing the local sales tax. 
 60.15     Subd. 4.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
 60.16  taxes imposed under chapter 290 or 297A or local taxes collected 
 60.17  pursuant to section 297A.99, a business must file an amended 
 60.18  return with the commissioner of revenue and pay any taxes 
 60.19  required to be repaid within 30 days after ceasing to do 
 60.20  business in the zone.  The amount required to be repaid is 
 60.21  determined by calculating the tax for the period or periods for 
 60.22  which repayment is required without regard to the exemptions and 
 60.23  credits allowed under section 469.315. 
 60.24     (b) For the repayment of property taxes, the county auditor 
 60.25  shall prepare a tax statement for the business, applying the 
 60.26  applicable tax extension rates for each payable year and provide 
 60.27  a copy to the business.  The business must pay the taxes to the 
 60.28  county treasurer within 30 days after receipt of the tax 
 60.29  statement.  The taxpayer may appeal the valuation and 
 60.30  determination of the property tax to the tax court within 30 
 60.31  days after receipt of the tax statement. 
 60.32     (c) The provisions of chapters 270 and 289A relating to the 
 60.33  commissioner's authority to audit, assess, and collect the tax 
 60.34  and to hear appeals are applicable to the repayment required 
 60.35  under paragraph (a).  The commissioner may impose civil 
 60.36  penalties as provided in chapter 289A, and the additional tax 
 61.1   and penalties are subject to interest at the rate provided in 
 61.2   section 270.75, from 30 days after ceasing to do business in the 
 61.3   biotechnology and health sciences industry zone until the date 
 61.4   the tax is paid. 
 61.5      (d) If a property tax is not repaid under paragraph (b), 
 61.6   the county treasurer shall add the amount required to be repaid 
 61.7   to the property taxes assessed against the property for payment 
 61.8   in the year following the year in which the treasurer discovers 
 61.9   that the business ceased to operate in the biotechnology and 
 61.10  health sciences industry zone. 
 61.11     (e) For determining the tax required to be repaid, a tax 
 61.12  reduction is deemed to have been received on the date that the 
 61.13  tax would have been due if the taxpayer had not been entitled to 
 61.14  the exemption, or on the date a refund was issued for a 
 61.15  refundable credit. 
 61.16     (f) The commissioner may assess the repayment of taxes 
 61.17  under paragraph (c) any time within two years after the business 
 61.18  ceases to operate in the biotechnology and health sciences 
 61.19  industry zone, or within any period of limitations for the 
 61.20  assessment of tax under section 289A.38, whichever period is 
 61.21  later. 
 61.22     Subd. 5.  [WAIVER AUTHORITY.] The commissioner may waive 
 61.23  all or part of a repayment, if the commissioner, in consultation 
 61.24  with the commissioner of trade and economic development and 
 61.25  appropriate officials from the local government units in which 
 61.26  the business is located, determines that requiring repayment of 
 61.27  the tax is not in the best interest of the state or the local 
 61.28  government units and the business ceased operating as a result 
 61.29  of circumstances beyond its control including, but not limited 
 61.30  to: 
 61.31     (1) a natural disaster; 
 61.32     (2) unforeseen industry trends; or 
 61.33     (3) loss of a major supplier or customer. 
 61.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 61.35  following final enactment. 
 61.36     Sec. 20.  [469.320] [ZONE PERFORMANCE; REMEDIES.] 
 62.1      Subdivision 1.  [REPORTING REQUIREMENT.] An applicant 
 62.2   receiving designation of a biotechnology and health sciences 
 62.3   industry zone under section 469.314 must annually report to the 
 62.4   commissioner on its progress in meeting the zone performance 
 62.5   goals under the development plan for the zone. 
 62.6      Subd. 2.  [PROCEDURES.] For reports required by subdivision 
 62.7   1, the commissioner may prescribe: 
 62.8      (1) the required time or times by which the reports must be 
 62.9   filed; 
 62.10     (2) the form of the report; and 
 62.11     (3) the information required to be included in the report. 
 62.12     Subd. 3.  [REMEDIES.] If the commissioner determines, based 
 62.13  on a report filed under subdivision 1 or other available 
 62.14  information, that a zone or subzone is failing to meet its 
 62.15  performance goals, the commissioner may take any actions the 
 62.16  commissioner determines appropriate, including modification of 
 62.17  the boundaries of the zone or a subzone or termination of the 
 62.18  zone or a subzone.  Before taking any action, the commissioner 
 62.19  shall consult with the applicant and the affected local 
 62.20  government units, including notifying them of the proposed 
 62.21  actions to be taken.  The commissioner shall publish any order 
 62.22  modifying a zone in the State Register and on the Internet.  The 
 62.23  applicant may appeal the commissioner's order under the 
 62.24  contested case procedures of chapter 14. 
 62.25     Subd. 4.  [EXISTING BUSINESSES.] (a) An action to remove 
 62.26  area from a zone or to terminate a zone under this section does 
 62.27  not apply to: 
 62.28     (1) the property tax on improvements constructed before the 
 62.29  first January 2 following publication of the commissioner's 
 62.30  order; 
 62.31     (2) sales tax on purchases made before the first day of the 
 62.32  next calendar month beginning at least 30 days after publication 
 62.33  of the commissioner's order; and 
 62.34     (3) individual income tax or corporate franchise tax 
 62.35  attributable to a facility that was in operation before the 
 62.36  publication of the commissioner's order. 
 63.1      (b) The tax exemptions specified in paragraph (a) terminate 
 63.2   on the date on which the zone expires under the original 
 63.3   designation. 
 63.4                              ARTICLE 3 
 63.5                 INCOME, FRANCHISE, AND ESTATE TAXES 
 63.6      Section 1.  Minnesota Statutes 2002, section 10A.31, 
 63.7   subdivision 1, is amended to read: 
 63.8      Subdivision 1.  [DESIGNATION.] An individual resident of 
 63.9   this state who files an income tax return or a renter and 
 63.10  homeowner property tax refund return with the commissioner of 
 63.11  revenue may designate on their original return that $5 be paid 
 63.12  from the general fund of the state $1 to $25, or $1 to $50 if 
 63.13  the return is filed jointly, be added to the tax or deducted 
 63.14  from the refund that would otherwise be payable by or to the 
 63.15  individual and paid into the state elections campaign fund.  If 
 63.16  a husband and wife file a joint return, each spouse may 
 63.17  designate that $5 be paid.  No individual is allowed to 
 63.18  designate $5 more than once in any year.  The taxpayer may 
 63.19  designate that the amount be paid into the account of a 
 63.20  political party or into the general account.  Designations made 
 63.21  under this section are not eligible for refund under section 
 63.22  290.06, subdivision 23. 
 63.23     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 63.24  designations made on income tax returns filed for tax years 
 63.25  beginning after December 31, 2002, and on property tax refund 
 63.26  returns based on property taxes payable in 2004 or rent 
 63.27  constituting property taxes paid in 2003. 
 63.28     Sec. 2.  Minnesota Statutes 2002, section 10A.31, 
 63.29  subdivision 3, is amended to read: 
 63.30     Subd. 3.  [FORM.] The commissioner of revenue must provide 
 63.31  on the first page of the income tax form and the renter and 
 63.32  homeowner property tax refund return a space for the individual 
 63.33  to indicate a wish to pay $5 $1 to $25 ($10 $50 if filing a 
 63.34  joint return) from the general fund of the state to finance 
 63.35  election campaigns.  The form must also contain language 
 63.36  prepared by the commissioner that permits the individual to 
 64.1   direct the state to pay the $5 (or $10 if filing a joint return) 
 64.2   designation to:  (1) one of the major political parties; (2) any 
 64.3   minor political party that qualifies under subdivision 3a; or 
 64.4   (3) all qualifying candidates as provided by subdivision 7.  The 
 64.5   renter and homeowner property tax refund return must include 
 64.6   instructions that the individual filing the return may designate 
 64.7   $5 on the return only if the individual has not designated $5 on 
 64.8   the income tax return. 
 64.9      <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 64.10  designations made on income tax returns filed for tax years 
 64.11  beginning after December 31, 2002, and on property tax refund 
 64.12  returns based on property taxes payable in 2004 or rent 
 64.13  constituting property taxes paid in 2003. 
 64.14     Sec. 3.  Minnesota Statutes 2002, section 289A.10, 
 64.15  subdivision 1, is amended to read: 
 64.16     Subdivision 1.  [RETURN REQUIRED.] In the case of a 
 64.17  decedent who has an interest in property with a situs in 
 64.18  Minnesota, the personal representative must submit a Minnesota 
 64.19  estate tax return to the commissioner, on a form prescribed by 
 64.20  the commissioner, if (i) the federal gross estate exceeds 
 64.21  $700,000 for estates of decedents dying after December 31, 2001, 
 64.22  and before January 1, 2004 July 1, 2003; $850,000 for estates of 
 64.23  decedents dying after December 31, 2003, and before January 1, 
 64.24  2005; $950,000 for estates of decedents dying after December 31, 
 64.25  2004, and before January 1, 2006; and $1,000,000 for estates of 
 64.26  decedents dying after December 31, 2005 June 30, 2003, or (ii) a 
 64.27  federal estate tax return is required to be filed. 
 64.28     The return must contain a computation of the Minnesota 
 64.29  estate tax due.  The return must be signed by the personal 
 64.30  representative. 
 64.31     <b>[EFFECTIVE DATE.]</b> This section is effective for decedents 
 64.32  dying after December 31, 2002. 
 64.33     Sec. 4.  Minnesota Statutes 2002, section 290.06, 
 64.34  subdivision 23, is amended to read: 
 64.35     Subd. 23.  [REFUND OF CONTRIBUTIONS TO POLITICAL PARTIES 
 64.36  AND CANDIDATES.] (a) A taxpayer may claim a refund equal 
 65.1   to one-half of the amount of the taxpayer's contributions made 
 65.2   in the calendar year to candidates and to a political party.  
 65.3   The maximum refund for an individual must not exceed $50 $25 and 
 65.4   for a married couple, filing jointly, must not exceed $100 $50.  
 65.5   A refund of a contribution is allowed only if the taxpayer files 
 65.6   a form required by the commissioner and attaches to the form a 
 65.7   copy of an official refund receipt form issued by the candidate 
 65.8   or party and signed by the candidate, the treasurer of the 
 65.9   candidate's principal campaign committee, or the chair or 
 65.10  treasurer of the party unit, after the contribution was 
 65.11  received.  The receipt forms must be numbered, and the data on 
 65.12  the receipt that are not public must be made available to the 
 65.13  campaign finance and public disclosure board upon its request.  
 65.14  A claim must be filed with the commissioner no sooner than 
 65.15  January 1 of the calendar year in which the contribution was 
 65.16  made and no later than April 15 of the calendar year following 
 65.17  the calendar year in which the contribution was made.  A 
 65.18  taxpayer may file only one claim per calendar year.  Amounts 
 65.19  paid by the commissioner after June 15 of the calendar year 
 65.20  following the calendar year in which the contribution was made 
 65.21  must include interest at the rate specified in section 270.76. 
 65.22     (b) No refund is allowed under this subdivision for a 
 65.23  contribution to a candidate unless the candidate: 
 65.24     (1) has signed an agreement to limit campaign expenditures 
 65.25  as provided in section 10A.322; 
 65.26     (2) is seeking an office for which voluntary spending 
 65.27  limits are specified in section 10A.25; and 
 65.28     (3) has designated a principal campaign committee.  
 65.29     This subdivision does not limit the campaign expenditures 
 65.30  of a candidate who does not sign an agreement but accepts a 
 65.31  contribution for which the contributor improperly claims a 
 65.32  refund.  
 65.33     (c) For purposes of this subdivision, "political party" 
 65.34  means a major political party as defined in section 200.02, 
 65.35  subdivision 7, or a minor political party qualifying for 
 65.36  inclusion on the income tax or property tax refund form under 
 66.1   section 10A.31, subdivision 3a.  
 66.2      A "major party" or "minor party" includes the aggregate of 
 66.3   that party's organization within each house of the legislature, 
 66.4   the state party organization, and the party organization within 
 66.5   congressional districts, counties, legislative districts, 
 66.6   municipalities, and precincts.  
 66.7      "Candidate" means a candidate as defined in section 10A.01, 
 66.8   subdivision 10, except a candidate for judicial office.  
 66.9      "Contribution" means a gift of money. 
 66.10     (d) The commissioner shall make copies of the form 
 66.11  available to the public and candidates upon request. 
 66.12     (e) The following data collected or maintained by the 
 66.13  commissioner under this subdivision are private:  the identities 
 66.14  of individuals claiming a refund, the identities of candidates 
 66.15  to whom those individuals have made contributions, and the 
 66.16  amount of each contribution.  
 66.17     (f) The commissioner shall report to the campaign finance 
 66.18  and public disclosure board by each August 1 a summary showing 
 66.19  the total number and aggregate amount of political contribution 
 66.20  refunds made on behalf of each candidate and each political 
 66.21  party.  These data are public. 
 66.22     (g) The amount necessary to pay claims for the refund 
 66.23  provided in this section is appropriated from the general fund 
 66.24  to the commissioner of revenue. 
 66.25     (h) For a taxpayer who files a claim for refund via the 
 66.26  Internet or other electronic means, the commissioner may accept 
 66.27  the number on the official receipt as documentation that a 
 66.28  contribution was made rather than the actual receipt as required 
 66.29  by paragraph (a). 
 66.30     <b>[EFFECTIVE DATE.]</b> This section is effective for that 
 66.31  portion of any refund claim based on contributions that are made 
 66.32  on or after the day following final enactment. 
 66.33     Sec. 5.  Minnesota Statutes 2002, section 290.06, 
 66.34  subdivision 24, is amended to read: 
 66.35     Subd. 24.  [CREDIT FOR JOB CREATION.] (a) A corporation 
 66.36  that leases and operates a heavy maintenance base for aircraft 
 67.1   that is owned by the state of Minnesota or one of its political 
 67.2   subdivisions, or an engine repair facility described in section 
 67.3   116R.02, subdivision 6, or both, may take a credit against the 
 67.4   tax due under this chapter.  
 67.5      (b) For the first taxable year when the facility has been 
 67.6   in operation for at least three consecutive months, the credit 
 67.7   is equal to $5,000 multiplied by the number of persons employed 
 67.8   by the corporation on a full-time basis at the facility on the 
 67.9   last day of the taxable year, not to exceed the number of 
 67.10  persons employed by the corporation on a full-time basis at the 
 67.11  facility on the date 90 days before the last day of the taxable 
 67.12  year.  For each of the succeeding four taxable years, the credit 
 67.13  is equal to $5,000 multiplied by the number of persons employed 
 67.14  by the corporation on a full-time basis at the facility on the 
 67.15  last day of the taxable year, not to exceed the number of 
 67.16  persons employed by the corporation on a full-time basis at the 
 67.17  facility on the date 90 days before the last day of the taxable 
 67.18  year.  
 67.19     (c) For the first taxable year in which the credit is 
 67.20  allowed for the facility, the credit must not exceed 80 percent 
 67.21  of the wages paid to or incurred for persons employed by the 
 67.22  taxpayer at the facility during the taxable year.  For the 
 67.23  succeeding four taxable years, the credit must not exceed 20 
 67.24  percent of the wages paid to or incurred for persons employed by 
 67.25  the taxpayer at the facility during the taxable year.  For 
 67.26  purposes of this section, "wages" has the meaning given under 
 67.27  section 3121(b) of the Internal Revenue Code, except the 
 67.28  limitation to the contribution and benefit base does not apply. 
 67.29     (d) If the credit provided under this subdivision exceeds 
 67.30  the tax liability of the corporation for the taxable year, the 
 67.31  excess amount of the credit may be carried over to each of the 
 67.32  ten 20 taxable years succeeding the taxable year.  The entire 
 67.33  amount of the credit must be carried to the earliest taxable 
 67.34  year to which the amount may be carried.  The unused portion of 
 67.35  the credit must be carried to the following taxable year.  No 
 67.36  credit may be carried to a taxable year more than ten 20 years 
 68.1   after the taxable year in which the credit was earned. 
 68.2      (e) if an unused portion of the credit remains at the end 
 68.3   of the carryover period under paragraph (d), the commissioner 
 68.4   shall refund the unused portion to the taxpayer.  The provisions 
 68.5   of this paragraph do not apply if the corporation that earned 
 68.6   the credit under this subdivision or a successor in interest to 
 68.7   the corporation filed for bankruptcy protection. 
 68.8      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 68.9   years beginning after December 31, 2003. 
 68.10     Sec. 6.  Minnesota Statutes 2002, section 290.06, is 
 68.11  amended by adding a subdivision to read: 
 68.12     Subd. 29.  [REGIONAL INVESTMENT CREDIT.] (a) A credit is 
 68.13  allowed against the tax imposed by this chapter for investment 
 68.14  in a qualifying regional angel investment network fund.  The 
 68.15  credit equals 25 percent of the taxpayer's investment made in 
 68.16  the fund for the taxable year, but not to exceed the lesser of: 
 68.17     (1) the liability for tax under this chapter, including the 
 68.18  applicable alternative minimum tax; or 
 68.19     (2) the amount of the certificate under paragraph (c) 
 68.20  provided to the taxpayer by the fund. 
 68.21     (b) For purposes of this subdivision, a regional angel 
 68.22  investment network fund means a pool investment fund that: 
 68.23     (1) is organized as a limited liability company and 
 68.24  consists of members who are accredited investors within the 
 68.25  meaning of Regulation D of the Securities and Exchange 
 68.26  Commission, Code of Federal Regulations, title 17, section 
 68.27  230.501(a); and 
 68.28     (2) primarily makes equity investments in emerging and 
 68.29  expanding small businesses as defined by the Small Business 
 68.30  Administration that are located in local communities in 
 68.31  Minnesota outside of the metropolitan area as defined in section 
 68.32  473.121, subdivision 2, and does not make investments in 
 68.33  residential real estate. 
 68.34     (c) Regional angel investment network funds may apply to 
 68.35  the commissioner of trade and economic development for 
 68.36  certification as a qualifying regional angel investment network 
 69.1   fund.  The application must be in the form and made under 
 69.2   procedures specified by the commissioner of trade and economic 
 69.3   development.  The commissioner of trade and economic development 
 69.4   may certify up to ten qualifying funds and provide certificates 
 69.5   entitling investors in the funds to credits under this 
 69.6   subdivision of up to $250,000 for each fund.  The commissioner 
 69.7   of trade and economic development must not issue a total amount 
 69.8   of certificates for all funds of more than $2,500,000. In 
 69.9   awarding certificates under this paragraph, the commissioner of 
 69.10  trade and economic development shall generally award them to 
 69.11  qualified applicants in the order in which the applications are 
 69.12  received, but shall also seek to certify funds that are broadly 
 69.13  dispersed across the entire state outside of the metropolitan 
 69.14  area, as defined in section 473.121, subdivision 2. 
 69.15     (d) The commissioner may require a taxpayer to provide a 
 69.16  copy of the credit certificate under paragraph (c) to verify the 
 69.17  taxpayer's entitlement to a credit under this subdivision. 
 69.18     (e) If the amount of the credit under this subdivision for 
 69.19  any taxable year exceeds the limitation under paragraph (a), 
 69.20  clause (1), the excess is a credit carryover to each of the 15 
 69.21  succeeding taxable years.  The entire amount of the excess 
 69.22  unused credit for the taxable year must be carried first to the 
 69.23  earliest of the taxable years to which the credit may be carried 
 69.24  and then to each successive year to which the credit may be 
 69.25  carried.  The amount of the unused credit which may be added 
 69.26  under this paragraph may not exceed the taxpayer's liability for 
 69.27  tax less the credit for the taxable year. 
 69.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 69.29  following final enactment and for taxable years beginning after 
 69.30  December 31, 2002.  It applies to investments made after the 
 69.31  fund has been certified by the commissioner of trade and 
 69.32  economic development under this section. 
 69.33     Sec. 7.  Minnesota Statutes 2002, section 290.091, 
 69.34  subdivision 2, is amended to read: 
 69.35     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 69.36  this section, the following terms have the meanings given: 
 70.1      (a) "Alternative minimum taxable income" means the sum of 
 70.2   the following for the taxable year: 
 70.3      (1) the taxpayer's federal alternative minimum taxable 
 70.4   income as defined in section 55(b)(2) of the Internal Revenue 
 70.5   Code; 
 70.6      (2) the taxpayer's itemized deductions allowed in computing 
 70.7   federal alternative minimum taxable income, but excluding: 
 70.8      (i) the charitable contribution deduction under section 170 
 70.9   of the Internal Revenue Code to the extent that the deduction 
 70.10  exceeds 1.3 percent of adjusted gross income, as defined in 
 70.11  section 62 of the Internal Revenue Code; 
 70.12     (ii) the medical expense deduction; 
 70.13     (iii) the casualty, theft, and disaster loss deduction; and 
 70.14     (iv) the impairment-related work expenses of a disabled 
 70.15  person; 
 70.16     (3) for depletion allowances computed under section 613A(c) 
 70.17  of the Internal Revenue Code, with respect to each property (as 
 70.18  defined in section 614 of the Internal Revenue Code), to the 
 70.19  extent not included in federal alternative minimum taxable 
 70.20  income, the excess of the deduction for depletion allowable 
 70.21  under section 611 of the Internal Revenue Code for the taxable 
 70.22  year over the adjusted basis of the property at the end of the 
 70.23  taxable year (determined without regard to the depletion 
 70.24  deduction for the taxable year); 
 70.25     (4) to the extent not included in federal alternative 
 70.26  minimum taxable income, the amount of the tax preference for 
 70.27  intangible drilling cost under section 57(a)(2) of the Internal 
 70.28  Revenue Code determined without regard to subparagraph (E); 
 70.29     (5) to the extent not included in federal alternative 
 70.30  minimum taxable income, the amount of interest income as 
 70.31  provided by section 290.01, subdivision 19a, clause (1); and 
 70.32     (6) the amount of addition required by section 290.01, 
 70.33  subdivision 19a, clause (7); 
 70.34     less the sum of the amounts determined under the following: 
 70.35     (1) interest income as defined in section 290.01, 
 70.36  subdivision 19b, clause (1); 
 71.1      (2) an overpayment of state income tax as provided by 
 71.2   section 290.01, subdivision 19b, clause (2), to the extent 
 71.3   included in federal alternative minimum taxable income; 
 71.4      (3) the amount of investment interest paid or accrued 
 71.5   within the taxable year on indebtedness to the extent that the 
 71.6   amount does not exceed net investment income, as defined in 
 71.7   section 163(d)(4) of the Internal Revenue Code.  Interest does 
 71.8   not include amounts deducted in computing federal adjusted gross 
 71.9   income; and 
 71.10     (4) amounts subtracted from federal taxable income as 
 71.11  provided by section 290.01, subdivision 19b, clause (12). 
 71.12     In the case of an estate or trust, alternative minimum 
 71.13  taxable income must be computed as provided in section 59(c) of 
 71.14  the Internal Revenue Code. 
 71.15     (b) "Investment interest" means investment interest as 
 71.16  defined in section 163(d)(3) of the Internal Revenue Code. 
 71.17     (c) "Tentative minimum tax" equals 6.4 percent of 
 71.18  alternative minimum taxable income after subtracting the 
 71.19  exemption amount determined under subdivision 3. 
 71.20     (d) "Regular tax" means the tax that would be imposed under 
 71.21  this chapter (without regard to this section and section 
 71.22  290.032), reduced by the sum of the nonrefundable credits 
 71.23  allowed under this chapter.  
 71.24     (e) "Net minimum tax" means the minimum tax imposed by this 
 71.25  section. 
 71.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 71.27  years beginning after December 31, 2002. 
 71.28     Sec. 8.  Minnesota Statutes 2002, section 291.03, 
 71.29  subdivision 1, is amended to read: 
 71.30     Subdivision 1.  [TAX AMOUNT.] The tax imposed shall be an 
 71.31  amount equal to the proportion of the maximum credit computed 
 71.32  under section 2011 of the Internal Revenue Code for state death 
 71.33  taxes as the Minnesota gross estate bears to the value of the 
 71.34  federal gross estate.  For a resident decedent, the tax shall be 
 71.35  the maximum credit computed under section 2011 of the Internal 
 71.36  Revenue Code reduced by the amount of the death tax paid the 
 72.1   other state and credited against the federal estate tax if this 
 72.2   results in a larger amount of tax than the proportionate amount 
 72.3   of the credit.  The tax determined maximum credit under this 
 72.4   paragraph shall not be greater than the federal estate tax 
 72.5   computed under section 2001 of the Internal Revenue Code after 
 72.6   the allowance of the federal credits allowed under section 2010 
 72.7   of the Internal Revenue Code of 1986, as amended through 
 72.8   December 31, 2000 determined as if the decedent died during 
 72.9   calendar year 2003. 
 72.10     <b>[EFFECTIVE DATE.]</b> This section is effective for decedents 
 72.11  dying after June 30, 2003. 
 72.12     Sec. 9.  [APPROPRIATION.] 
 72.13     (a) $100,000 is appropriated from the general fund to the 
 72.14  commissioner of revenue to make grants to one or more nonprofit 
 72.15  organizations, qualifying under section 501(c)(3) of the 
 72.16  Internal Revenue Code of 1986, to coordinate, facilitate, 
 72.17  encourage, and aid in the provision of taxpayer assistance 
 72.18  services.  This appropriation is available for fiscal years 2004 
 72.19  and 2005 and does not become a part of the base. 
 72.20     (b) "Taxpayer assistance services" mean accounting and tax 
 72.21  preparation services provided by volunteers to low-income and 
 72.22  disadvantaged Minnesota residents to help them file federal and 
 72.23  state income tax returns and Minnesota property tax refund 
 72.24  claims and to provide personal representation before the 
 72.25  department of revenue and Internal Revenue Service. 
 72.26                             ARTICLE 4 
 72.27                        SALES AND USE TAXES 
 72.28     Section 1.  Minnesota Statutes 2002, section 168.27, 
 72.29  subdivision 4a, is amended to read: 
 72.30     Subd. 4a.  [LIMITED USED VEHICLE LICENSE.] A limited used 
 72.31  vehicle license shall be provided to a nonprofit charitable 
 72.32  organization that qualifies for tax exemption under section 
 72.33  501(c)(3) of the Internal Revenue Code whose primary business in 
 72.34  the transfer of vehicles is to raise funds for the corporation, 
 72.35  who acquires vehicles for sale through donation, and who uses a 
 72.36  licensed motor vehicle auctioneer to sell vehicles to retail 
 73.1   customers.  This license does not apply to educational 
 73.2   institutions whose primary purpose is to train students in the 
 73.3   repair, maintenance, and sale of motor vehicles.  A limited used 
 73.4   vehicle license allows the organization to accept assignment of 
 73.5   vehicles without the requirement to transfer title as provided 
 73.6   in section 168A.10 until sold to a retail customer or licensed 
 73.7   motor vehicle dealer.  Limited used vehicle license holders are 
 73.8   not entitled to dealer plates, and shall report all vehicles 
 73.9   held for resale to the department of public safety in a manner 
 73.10  and time prescribed by the department. 
 73.11     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 73.12  after June 30, 2003. 
 73.13     Sec. 2.  Minnesota Statutes 2002, section 168A.03, is 
 73.14  amended to read: 
 73.15     168A.03 [EXEMPT VEHICLES.] 
 73.16     Subdivision 1.  [EXEMPTIONS.] The registrar shall not issue 
 73.17  a certificate of title for: 
 73.18     (1) a vehicle owned by the United States; 
 73.19     (2) a vehicle owned by a manufacturer or dealer and held 
 73.20  for sale, even though incidentally moved on the highway or used 
 73.21  pursuant to section 168.27 or 168.28, or a vehicle used by a 
 73.22  manufacturer solely for testing; 
 73.23     (3) a vehicle owned by a nonresident and not required by 
 73.24  law to be registered in this state; 
 73.25     (4) (3) a vehicle owned by a nonresident and regularly 
 73.26  engaged in the interstate transportation of persons or property 
 73.27  for which a currently effective certificate of title has been 
 73.28  issued in another state; 
 73.29     (5) (4) a vehicle moved solely by animal power; 
 73.30     (6) (5) an implement of husbandry; 
 73.31     (7) (6) special mobile equipment; 
 73.32     (8) (7) a self-propelled wheelchair or invalid tricycle; 
 73.33     (9) (8) a trailer (i) having a gross weight of 4,000 pounds 
 73.34  or less unless a secured party holds an interest in the trailer 
 73.35  or a certificate of title was previously issued by this state or 
 73.36  any other state or (ii) designed primarily for agricultural 
 74.1   purposes except recreational equipment or a manufactured home, 
 74.2   both as defined in section 168.011, subdivisions 8 and 25; 
 74.3      (10) (9) a snowmobile.  
 74.4      Subd. 2.  [DEALERS.] No certificate of title need be 
 74.5   obtained for a vehicle owned by a manufacturer or dealer and 
 74.6   held for sale, even though incidentally moved on the highway or 
 74.7   used pursuant to section 168.27 or 168.28, or a vehicle used by 
 74.8   a manufacturer solely for testing. 
 74.9      <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 74.10  after June 30, 2003. 
 74.11     Sec. 3.  Minnesota Statutes 2002, section 289A.18, 
 74.12  subdivision 4, is amended to read: 
 74.13     Subd. 4.  [SALES AND USE TAX RETURNS.] (a) Sales and use 
 74.14  tax returns must be filed on or before the 20th day of the month 
 74.15  following the close of the preceding reporting period, except 
 74.16  that annual use tax returns provided for under section 289A.11, 
 74.17  subdivision 1, must be filed by April 15 following the close of 
 74.18  the calendar year, in the case of individuals.  Annual use tax 
 74.19  returns of businesses, including sole proprietorships, and 
 74.20  annual sales tax returns must be filed by February 5 following 
 74.21  the close of the calendar year.  
 74.22     (b) Returns for the June reporting period filed by 
 74.23  retailers required to remit their June liability under section 
 74.24  289A.20, subdivision 4, paragraph (b), are due on or before 
 74.25  August 20.  
 74.26     (c) If a retailer has an average sales and use tax 
 74.27  liability, including local sales and use taxes administered by 
 74.28  the commissioner, equal to or less than $500 per month in any 
 74.29  quarter of a calendar year, and has substantially complied with 
 74.30  the tax laws during the preceding four calendar quarters, the 
 74.31  retailer may request authorization to file and pay the taxes 
 74.32  quarterly in subsequent calendar quarters.  The authorization 
 74.33  remains in effect during the period in which the retailer's 
 74.34  quarterly returns reflect sales and use tax liabilities of less 
 74.35  than $1,500 and there is continued compliance with state tax 
 74.36  laws. 
 75.1      (d) If a retailer has an average sales and use tax 
 75.2   liability, including local sales and use taxes administered by 
 75.3   the commissioner, equal to or less than $100 per month during a 
 75.4   calendar year, and has substantially complied with the tax laws 
 75.5   during that period, the retailer may request authorization to 
 75.6   file and pay the taxes annually in subsequent years.  The 
 75.7   authorization remains in effect during the period in which the 
 75.8   retailer's annual returns reflect sales and use tax liabilities 
 75.9   of less than $1,200 and there is continued compliance with state 
 75.10  tax laws. 
 75.11     (e) The commissioner may also grant quarterly or annual 
 75.12  filing and payment authorizations to retailers if the 
 75.13  commissioner concludes that the retailers' future tax 
 75.14  liabilities will be less than the monthly totals identified in 
 75.15  paragraphs (c) and (d).  An authorization granted under this 
 75.16  paragraph is subject to the same conditions as an authorization 
 75.17  granted under paragraphs (c) and (d). 
 75.18     (f) A taxpayer who is a materials supplier may report gross 
 75.19  receipts either on: 
 75.20     (1) the cash basis as the consideration is received; or 
 75.21     (2) the accrual basis as sales are made.  
 75.22  As used in this paragraph, "materials supplier" means a person 
 75.23  who provides materials for the improvement of real property; who 
 75.24  is primarily engaged in the sale of lumber and building 
 75.25  materials-related products to owners, contractors, 
 75.26  subcontractors, repairers, or consumers; who is authorized to 
 75.27  file a mechanics lien upon real property and improvements under 
 75.28  chapter 514; and who files with the commissioner an election to 
 75.29  file sales and use tax returns on the basis of this paragraph.  
 75.30     (g) Notwithstanding paragraphs (a) to (f), a seller that is 
 75.31  not a Model 1, 2, or 3 seller, as those terms are used in the 
 75.32  Streamlined Sales and Use Tax Agreement, that does not have a 
 75.33  legal requirement to register in Minnesota, and that is 
 75.34  registered under the agreement, must file a return by February 5 
 75.35  following the close of the calendar year in which the seller 
 75.36  initially registers, and must file subsequent returns on 
 76.1   February 5 on an annual basis in succeeding years.  
 76.2   Additionally, a return must be submitted on or before the 20th 
 76.3   day of the month following any month by which sellers have 
 76.4   accumulated state and local tax funds for the state in the 
 76.5   amount of $1,000 or more.  
 76.6      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 76.7   purchases made on or after January 1, 2004. 
 76.8      Sec. 4.  Minnesota Statutes 2002, section 289A.20, 
 76.9   subdivision 4, is amended to read: 
 76.10     Subd. 4.  [SALES AND USE TAX.] (a) The taxes imposed by 
 76.11  chapter 297A are due and payable to the commissioner monthly on 
 76.12  or before the 20th day of the month following the month in which 
 76.13  the taxable event occurred, or following another reporting 
 76.14  period as the commissioner prescribes or as allowed under 
 76.15  section 289A.18, subdivision 4, paragraph (f) or (g), except 
 76.16  that use taxes due on an annual use tax return as provided under 
 76.17  section 289A.11, subdivision 1, are payable by April 15 
 76.18  following the close of the calendar year. 
 76.19     (b) For a fiscal year ending before July 1, 2002, A vendor 
 76.20  having a liability of $120,000 or more during a fiscal year 
 76.21  ending June 30 must remit the June liability for the next year 
 76.22  in the following manner: 
 76.23     (1) Two business days before June 30 of the year, the 
 76.24  vendor must remit 75 85 percent of the estimated June liability 
 76.25  to the commissioner.  
 76.26     (2) On or before August 20 of the year, the vendor must pay 
 76.27  any additional amount of tax not remitted in June. 
 76.28     (c) A vendor having a liability of $120,000 or more during 
 76.29  a fiscal year ending June 30 must remit all liabilities on 
 76.30  returns due for periods beginning in the subsequent calendar 
 76.31  year by electronic means on or before the 20th day of the month 
 76.32  following the month in which the taxable event occurred, or on 
 76.33  or before the 20th day of the month following the month in which 
 76.34  the sale is reported under section 289A.18, subdivision 4, 
 76.35  except for 75 85 percent of the estimated June liability, which 
 76.36  is due two business days before June 30.  The remaining amount 
 77.1   of the June liability is due on August 20.  
 77.2      <b>[EFFECTIVE DATE.]</b> This section, paragraph (a), is effective 
 77.3   for sales and purchases made on or after January 1, 2004.  The 
 77.4   rest of this section is effective for payments made after 
 77.5   December 31, 2003. 
 77.6      Sec. 5.  Minnesota Statutes 2002, section 289A.31, 
 77.7   subdivision 7, is amended to read: 
 77.8      Subd. 7.  [SALES AND USE TAX.] (a) The sales and use tax 
 77.9   required to be collected by the retailer under chapter 297A 
 77.10  constitutes a debt owed by the retailer to Minnesota, and the 
 77.11  sums collected must be held as a special fund in trust for the 
 77.12  state of Minnesota. 
 77.13     A retailer who does not maintain a place of business within 
 77.14  this state as defined by section 297A.66, subdivision 1, shall 
 77.15  not be indebted to Minnesota for amounts of tax that it was 
 77.16  required to collect but did not collect unless the retailer knew 
 77.17  or had been advised by the commissioner of its obligation to 
 77.18  collect the tax.  
 77.19     (b) The use tax required to be paid by a purchaser is a 
 77.20  debt owed by the purchaser to Minnesota. 
 77.21     (c) The tax imposed by chapter 297A, and interest and 
 77.22  penalties, is a personal debt of the individual required to file 
 77.23  a return from the time the liability arises, irrespective of 
 77.24  when the time for payment of that liability occurs.  The debt 
 77.25  is, in the case of the executor or administrator of the estate 
 77.26  of a decedent and in the case of a fiduciary, that of the 
 77.27  individual in an official or fiduciary capacity unless the 
 77.28  individual has voluntarily distributed the assets held in that 
 77.29  capacity without reserving sufficient assets to pay the tax, 
 77.30  interest, and penalties, in which case the individual is 
 77.31  personally liable for the deficiency. 
 77.32     (d) Liability for payment of sales and use taxes includes 
 77.33  any responsible person or entity described in the personal 
 77.34  liability provisions of section 270.101. 
 77.35     (e) Any amounts collected, even if erroneously or illegally 
 77.36  collected, from a purchaser under a representation that they are 
 78.1   taxes imposed under chapter 297A are state funds from the time 
 78.2   of collection and must be reported on a return filed with the 
 78.3   commissioner.  
 78.4      (f) Effective for sales made before July 1, 2003, and after 
 78.5   June 30, 2009, the tax imposed under chapter 297A on sales of 
 78.6   tickets to the premises of or events sponsored by the state 
 78.7   agricultural society and conducted on the state fairgrounds 
 78.8   during the period of the annual state fair may be retained by 
 78.9   the state agricultural society if the funds are used and matched 
 78.10  as required under section 37.13, subdivision 2. 
 78.11     <b>[EFFECTIVE DATE.]</b> This section is effective for sales taxes 
 78.12  collected on sales occurring after June 30, 2003. 
 78.13     Sec. 6.  Minnesota Statutes 2002, section 289A.40, 
 78.14  subdivision 2, is amended to read: 
 78.15     Subd. 2.  [BAD DEBT LOSS.] If a claim relates to an 
 78.16  overpayment because of a failure to deduct a loss due to a bad 
 78.17  debt or to a security becoming worthless, the claim is 
 78.18  considered timely if filed within seven years from the date 
 78.19  prescribed for the filing of the return.  A claim relating to an 
 78.20  overpayment of taxes under chapter 297A must be filed within 
 78.21  3-1/2 years from the date prescribed for filing the return, plus 
 78.22  any extensions granted for filing the return, but only if filed 
 78.23  within the extended time, or within one year from the date the 
 78.24  taxpayer's federal income tax return is timely filed claiming 
 78.25  the bad debt deduction, whichever period expires later.  The 
 78.26  refund or credit is limited to the amount of overpayment 
 78.27  attributable to the loss.  "Bad debt" for purposes of this 
 78.28  subdivision, has the same meaning as that term is used in United 
 78.29  States Code, title 26, section 166, except that the following 
 78.30  are excluded from the calculation of bad debt:  financing 
 78.31  charges or interest; sales or use taxes charged on the purchase 
 78.32  price; uncollectible amounts on property that remain in the 
 78.33  possession of the seller until the full purchase price is paid; 
 78.34  expenses incurred in attempting to collect any debt; and 
 78.35  repossessed property. 
 78.36     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 79.1   purchases made on or after January 1, 2004. 
 79.2      Sec. 7.  Minnesota Statutes 2002, section 289A.50, is 
 79.3   amended by adding a subdivision to read: 
 79.4      Subd. 2b.  [CERTIFIED SERVICE PROVIDER; BAD DEBT CLAIM.] A 
 79.5   certified service provider, as defined in section 297A.995, 
 79.6   subdivision 2, may claim on behalf of a taxpayer that is its 
 79.7   client any bad debt allowance provided by section 297A.81.  The 
 79.8   certified service provider must credit or refund to its client 
 79.9   the full amount of any bad debt allowance or refund received. 
 79.10     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 79.11  purchases made on or after January 1, 2004. 
 79.12     Sec. 8.  Minnesota Statutes 2002, section 289A.50, is 
 79.13  amended by adding a subdivision to read: 
 79.14     Subd. 2c.  [NOTICE FROM PURCHASER TO VENDOR REQUESTING 
 79.15  REFUND.] (a) If a vendor has collected from a purchaser a tax on 
 79.16  a transaction that is not subject to the tax imposed by chapter 
 79.17  297A, the purchaser may seek from the vendor a return of 
 79.18  over-collected sales or use taxes as follows: 
 79.19     (1) the purchaser must provide written notice to the 
 79.20  vendor; 
 79.21     (2) the notice to the vendor must contain the information 
 79.22  necessary to determine the validity of the request; and 
 79.23     (3) no cause of action against the vendor accrues until the 
 79.24  vendor has had 60 days to respond to the written notice. 
 79.25     (b) In connection with a purchaser's request from a vendor 
 79.26  of over-collected sales or use taxes, a vendor is presumed to 
 79.27  have a reasonable business practice, if in the collection of 
 79.28  such sales or use taxes, the vendor:  (1) uses a certified 
 79.29  service provider as defined in section 297A.995, a certified 
 79.30  automated system, as defined in section 297A.995, or a 
 79.31  proprietary system that is certified by the state; and (2) has 
 79.32  remitted to the state all taxes collected less any deductions, 
 79.33  credits, or collection allowances. 
 79.34     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 79.35  purchases made on or after January 1, 2004. 
 79.36     Sec. 9.  Minnesota Statutes 2002, section 289A.56, 
 80.1   subdivision 4, is amended to read: 
 80.2      Subd. 4.  [CAPITAL EQUIPMENT AND CERTAIN BUILDING MATERIALS 
 80.3   REFUNDS; REFUNDS TO PURCHASERS.] Notwithstanding subdivision 3, 
 80.4   for refunds payable under section sections 297A.75, subdivision 
 80.5   1, clauses (1), (2), (3), and (5), interest is computed from the 
 80.6   date the refund claim is filed with the commissioner.  For 
 80.7   refunds payable under section and 289A.50, subdivision 2a, 
 80.8   interest is computed from the 20th day of the month following 
 80.9   the month of the invoice date for the purchase which is the 
 80.10  subject of the refund, if the refund claim includes a detailed 
 80.11  schedule of purchases made during each of the periods in the 
 80.12  claim.  If the refund claim submitted does not contain a 
 80.13  schedule reflecting purchases made in each period, interest is 
 80.14  computed from the date the claim was filed 90 days after the 
 80.15  refund claim is filed with the commissioner. 
 80.16     <b>[EFFECTIVE DATE.]</b> This section is effective for refund 
 80.17  claims filed on or after April 1, 2003. 
 80.18     Sec. 10.  Minnesota Statutes 2002, section 289A.60, 
 80.19  subdivision 15, is amended to read: 
 80.20     Subd. 15.  [ACCELERATED PAYMENT OF JUNE SALES TAX 
 80.21  LIABILITY; PENALTY FOR UNDERPAYMENT.] (a) For payments made 
 80.22  after December 31, 2003, if a vendor is required by law to 
 80.23  submit an estimation of June sales tax liabilities and 62 85 
 80.24  percent payment by a certain date, the vendor shall pay a 
 80.25  penalty equal to ten percent of the amount of actual June 
 80.26  liability required to be paid in June less the amount remitted 
 80.27  in June.  The penalty must not be imposed, however, if the 
 80.28  amount remitted in June equals the lesser of 62 85 percent of 
 80.29  the preceding May's liability or 62 85 percent of the average 
 80.30  monthly liability for the previous calendar year. 
 80.31     (b) For payments made after December 31, 2002, and before 
 80.32  January 1, 2004, if a vendor is required by law to submit an 
 80.33  estimation of June sales tax liabilities and 75 percent payment 
 80.34  by a certain date, the vendor shall pay a penalty equal to ten 
 80.35  percent of the amount of actual June liability required to be 
 80.36  paid in June less the amount remitted in June.  The penalty must 
 81.1   not be imposed, however, if the amount remitted in June equals 
 81.2   the lesser of 75 percent of the preceding May's liability or 75 
 81.3   percent of the average monthly liability for the previous 
 81.4   calendar year. 
 81.5      <b>[EFFECTIVE DATE.]</b> Paragraph (a) of this section is 
 81.6   effective for payments made after December 31, 2003.  Paragraph 
 81.7   (b) of this section is effective for payments made after 
 81.8   December 31, 2002, and before January 1, 2004. 
 81.9      Sec. 11.  Minnesota Statutes 2002, section 297A.61, 
 81.10  subdivision 3, is amended to read: 
 81.11     Subd. 3.  [SALE AND PURCHASE.] (a) "Sale" and "purchase" 
 81.12  include, but are not limited to, each of the transactions listed 
 81.13  in this subdivision. 
 81.14     (b) Sale and purchase include: 
 81.15     (1) any transfer of title or possession, or both, of 
 81.16  tangible personal property, whether absolutely or conditionally, 
 81.17  for a consideration in money or by exchange or barter; and 
 81.18     (2) the leasing of or the granting of a license to use or 
 81.19  consume, for a consideration in money or by exchange or barter, 
 81.20  tangible personal property, other than a manufactured home used 
 81.21  for residential purposes for a continuous period of 30 days or 
 81.22  more. 
 81.23     (c) Sale and purchase include the production, fabrication, 
 81.24  printing, or processing of tangible personal property for a 
 81.25  consideration for consumers who furnish either directly or 
 81.26  indirectly the materials used in the production, fabrication, 
 81.27  printing, or processing. 
 81.28     (d) Sale and purchase include the preparing for a 
 81.29  consideration of food.  Notwithstanding section 297A.67, 
 81.30  subdivision 2, taxable food includes, but is not limited to, the 
 81.31  following: 
 81.32     (1) prepared food sold by the retailer; 
 81.33     (2) soft drinks; 
 81.34     (3) candy; and 
 81.35     (4) all food sold through vending machines. 
 81.36     (e) A sale and a purchase includes the furnishing for a 
 82.1   consideration of electricity, gas, water, or steam for use or 
 82.2   consumption within this state. 
 82.3      (f) A sale and a purchase includes the transfer for a 
 82.4   consideration of prewritten computer software whether delivered 
 82.5   electronically, by load and leave, or otherwise.  
 82.6      (g) A sale and a purchase includes the furnishing for a 
 82.7   consideration of the following services: 
 82.8      (1) the privilege of admission to places of amusement, 
 82.9   recreational areas, or athletic events, and the making available 
 82.10  of amusement devices, tanning facilities, reducing salons, steam 
 82.11  baths, turkish baths, health clubs, and spas or athletic 
 82.12  facilities; but not including separately stated fees or charges 
 82.13  for pen-raised game or poultry at a game farm or hunting 
 82.14  preserve; 
 82.15     (2) lodging and related services by a hotel, rooming house, 
 82.16  resort, campground, motel, or trailer camp and the granting of 
 82.17  any similar license to use real property other than the renting 
 82.18  or leasing of it for a continuous period of 30 days or more; 
 82.19     (3) parking services, whether on a contractual, hourly, or 
 82.20  other periodic basis, except for parking at a meter; 
 82.21     (4) the granting of membership in a club, association, or 
 82.22  other organization if: 
 82.23     (i) the club, association, or other organization makes 
 82.24  available for the use of its members sports and athletic 
 82.25  facilities, without regard to whether a separate charge is 
 82.26  assessed for use of the facilities; and 
 82.27     (ii) use of the sports and athletic facility is not made 
 82.28  available to the general public on the same basis as it is made 
 82.29  available to members.  
 82.30  Granting of membership means both onetime initiation fees and 
 82.31  periodic membership dues but does not include separately stated 
 82.32  fees or charges for pen-raised game or poultry by a game farm or 
 82.33  hunting preserve.  Sports and athletic facilities include golf 
 82.34  courses; tennis, racquetball, handball, and squash courts; 
 82.35  basketball and volleyball facilities; running tracks; exercise 
 82.36  equipment; swimming pools; and other similar athletic or sports 
 83.1   facilities; 
 83.2      (5) delivery of aggregate materials and concrete block by a 
 83.3   third party if the delivery would be subject to the sales tax if 
 83.4   provided by the seller of the aggregate material or concrete 
 83.5   block; and 
 83.6      (6) services as provided in this clause: 
 83.7      (i) laundry and dry cleaning services including cleaning, 
 83.8   pressing, repairing, altering, and storing clothes, linen 
 83.9   services and supply, cleaning and blocking hats, and carpet, 
 83.10  drapery, upholstery, and industrial cleaning.  Laundry and dry 
 83.11  cleaning services do not include services provided by coin 
 83.12  operated facilities operated by the customer; 
 83.13     (ii) motor vehicle washing, waxing, and cleaning services, 
 83.14  including services provided by coin operated facilities operated 
 83.15  by the customer, and rustproofing, undercoating, and towing of 
 83.16  motor vehicles; 
 83.17     (iii) building and residential cleaning, maintenance, and 
 83.18  disinfecting and exterminating services; 
 83.19     (iv) detective, security, burglar, fire alarm, and armored 
 83.20  car services; but not including services performed within the 
 83.21  jurisdiction they serve by off-duty licensed peace officers as 
 83.22  defined in section 626.84, subdivision 1, or services provided 
 83.23  by a nonprofit organization for monitoring and electronic 
 83.24  surveillance of persons placed on in-home detention pursuant to 
 83.25  court order or under the direction of the Minnesota department 
 83.26  of corrections; 
 83.27     (v) pet grooming services; 
 83.28     (vi) lawn care, fertilizing, mowing, spraying and sprigging 
 83.29  services; garden planting and maintenance; tree, bush, and shrub 
 83.30  pruning, bracing, spraying, and surgery; indoor plant care; 
 83.31  tree, bush, shrub, and stump removal; and tree trimming for 
 83.32  public utility lines.  Services performed under a construction 
 83.33  contract for the installation of shrubbery, plants, sod, trees, 
 83.34  bushes, and similar items are not taxable; 
 83.35     (vii) massages, except when provided by a licensed health 
 83.36  care facility or professional or upon written referral from a 
 84.1   licensed health care facility or professional for treatment of 
 84.2   illness, injury, or disease; and 
 84.3      (viii) the furnishing of lodging, board, and care services 
 84.4   for animals in kennels and other similar arrangements, but 
 84.5   excluding veterinary and horse boarding services. 
 84.6      In applying the provisions of this chapter, the terms 
 84.7   "tangible personal property" and "sales at retail" include 
 84.8   taxable services and the provision of taxable services, unless 
 84.9   specifically provided otherwise.  Services performed by an 
 84.10  employee for an employer are not taxable.  Services performed by 
 84.11  a partnership or association for another partnership or 
 84.12  association are not taxable if one of the entities owns or 
 84.13  controls more than 80 percent of the voting power of the equity 
 84.14  interest in the other entity.  Services performed between 
 84.15  members of an affiliated group of corporations are not taxable.  
 84.16  For purposes of this section, "affiliated group of corporations" 
 84.17  includes those entities that would be classified as members of 
 84.18  an affiliated group under United States Code, title 26, section 
 84.19  1504, and that are eligible to file a consolidated tax return 
 84.20  for federal income tax purposes. 
 84.21     (h) A sale and a purchase includes the furnishing for a 
 84.22  consideration of tangible personal property or taxable services 
 84.23  by the United States or any of its agencies or 
 84.24  instrumentalities, or the state of Minnesota, its agencies, 
 84.25  instrumentalities, or political subdivisions. 
 84.26     (i) A sale and a purchase includes the furnishing for a 
 84.27  consideration of telecommunications services, including cable 
 84.28  television services and direct satellite services.  
 84.29  Telecommunications services are taxed to the extent allowed 
 84.30  under federal law if those services:. 
 84.31     (1) either (i) originate and terminate in this state; or 
 84.32  (ii) originate in this state and terminate outside the state and 
 84.33  the service is charged to a telephone number customer located in 
 84.34  this state or to the account of any transmission instrument in 
 84.35  this state; or (iii) originate outside this state and terminate 
 84.36  in this state and the service is charged to a telephone number 
 85.1   customer located in this state or to the account of any 
 85.2   transmission instrument in this state; or 
 85.3      (2) are rendered by providing a private communications 
 85.4   service for which the customer has one or more locations within 
 85.5   Minnesota connected to the service and the service is charged to 
 85.6   a telephone number customer located in this state or to the 
 85.7   account of any transmission instrument in this state. 
 85.8      All charges for mobile telecommunications services, as 
 85.9   defined in United States Code, title 4, section 124, are deemed 
 85.10  to be provided by the customer's home service provider and 
 85.11  sourced to the customer's place of primary use and are subject 
 85.12  to tax based upon the customer's place of primary use in 
 85.13  accordance with the Mobile Telecommunications Sourcing Act, 
 85.14  United States Code, title 4, sections 116 to 126.  All other 
 85.15  definitions and provisions of the Mobile Telecommunications 
 85.16  Sourcing Act as provided in United States Code, title 4, are 
 85.17  hereby adopted. 
 85.18     (j) A sale and a purchase includes the furnishing for a 
 85.19  consideration of installation if the installation charges would 
 85.20  be subject to the sales tax if the installation were provided by 
 85.21  the seller of the item being installed. 
 85.22     (k) A sale and a purchase includes the rental of a vehicle 
 85.23  by a motor vehicle dealer to a customer when (1) the vehicle is 
 85.24  rented by the customer for a consideration, or (2) the motor 
 85.25  vehicle dealer is reimbursed pursuant to a service contract as 
 85.26  defined in Minnesota Statutes, section 65B.29, subdivision 1, 
 85.27  clause (1). 
 85.28     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 85.29  purchases made on or after January 1, 2004, except that the 
 85.30  amendments in paragraph (g) and the addition of paragraph (k) 
 85.31  are effective for sales and purchases made after June 30, 2003. 
 85.32     Sec. 12.  Minnesota Statutes 2002, section 297A.61, 
 85.33  subdivision 7, is amended to read: 
 85.34     Subd. 7.  [SALES PRICE.] (a) "Sales price" means the 
 85.35  measure subject to sales tax, and means the total amount of 
 85.36  consideration, including cash, credit, personal property, and 
 86.1   services, for which personal property or services are sold, 
 86.2   leased, or rented, valued in money, whether received in money or 
 86.3   otherwise, without any deduction for the following: 
 86.4      (1) the seller's cost of the property sold; 
 86.5      (2) the cost of materials used, labor or service cost, 
 86.6   interest, losses, all costs of transportation to the seller, all 
 86.7   taxes imposed on the seller, and any other expenses of the 
 86.8   seller; 
 86.9      (3) charges by the seller for any services necessary to 
 86.10  complete the sale, other than delivery and installation charges; 
 86.11     (4) delivery charges; 
 86.12     (5) installation charges; and 
 86.13     (6) the value of exempt property given to the purchaser 
 86.14  when taxable and exempt personal property have been bundled 
 86.15  together and sold by the seller as a single product or piece of 
 86.16  merchandise. 
 86.17     (b) Sales price does not include: 
 86.18     (1) discounts, including cash, terms, or coupons, that are 
 86.19  not reimbursed by a third party and that are allowed by the 
 86.20  seller and taken by a purchaser on a sale; 
 86.21     (2) interest, financing, and carrying charges from credit 
 86.22  extended on the sale of personal property or services, if the 
 86.23  amount is separately stated on the invoice, bill of sale, or 
 86.24  similar document given to the purchaser; and 
 86.25     (3) any taxes legally imposed directly on the consumer that 
 86.26  are separately stated on the invoice, bill of sale, or similar 
 86.27  document given to the purchaser. 
 86.28     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 86.29  purchases made on or after January 1, 2004. 
 86.30     Sec. 13.  Minnesota Statutes 2002, section 297A.61, 
 86.31  subdivision 10, is amended to read: 
 86.32     Subd. 10.  [TANGIBLE PERSONAL PROPERTY.] (a) "Tangible 
 86.33  personal property" means corporeal personal property of any 
 86.34  kind, including property that is to become real property as a 
 86.35  result of incorporation, attachment, or installation following 
 86.36  its acquisition. 
 87.1      (b) Tangible personal property includes, but is not limited 
 87.2   to: 
 87.3      (1) computer software, whether contained on tape, discs, 
 87.4   cards, or other devices; and 
 87.5      (2) prepaid telephone calling cards.  
 87.6      (c) personal property that can be seen, weighed, measured, 
 87.7   felt, or touched, or that is in any other manner perceptible to 
 87.8   the senses.  "Tangible personal property" includes, but is not 
 87.9   limited to, electricity, water, gas, steam, prewritten computer 
 87.10  software, and prepaid calling cards. 
 87.11     (b) Tangible personal property does not include: 
 87.12     (1) large ponderous machinery and equipment used in a 
 87.13  business or production activity which at common law would be 
 87.14  considered to be real property; 
 87.15     (2) property which is subject to an ad valorem property 
 87.16  tax; 
 87.17     (3) property described in section 272.02, subdivision 9, 
 87.18  clauses (a) to (d); and 
 87.19     (4) property described in section 272.03, subdivision 2, 
 87.20  clauses (3) and (5). 
 87.21     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 87.22  purchases made on or after January 1, 2004. 
 87.23     Sec. 14.  Minnesota Statutes 2002, section 297A.61, is 
 87.24  amended by adding a subdivision to read: 
 87.25     Subd. 14a.  [LEASE OR RENTAL.] (a) "Lease or rental" means 
 87.26  any transfer of possession or control of tangible personal 
 87.27  property for a fixed or indeterminate term for consideration.  A 
 87.28  lease or rental may include future options to purchase or extend.
 87.29     (b) Lease or rental does not include: 
 87.30     (1) a transfer of possession or control of property under a 
 87.31  security agreement or deferred payment plan that requires the 
 87.32  transfer of title upon completion of the required payments; 
 87.33     (2) a transfer of possession or control of property under 
 87.34  an agreement that requires the transfer of title upon completion 
 87.35  of required payments and payment of an option price does not 
 87.36  exceed the greater of $100 or one percent of the total required 
 88.1   payments; or 
 88.2      (3) providing tangible personal property along with an 
 88.3   operator for a fixed or indeterminate period of time.  A 
 88.4   condition of this exclusion is that the operator is necessary 
 88.5   for the equipment to perform as designed.  For the purpose of 
 88.6   this subdivision, an operator must do more than maintain, 
 88.7   inspect, or set up the tangible personal property. 
 88.8      (c) Lease or rental does include agreements covering motor 
 88.9   vehicles and trailers where the amount of consideration may be 
 88.10  increased or decreased by reference to the amount realized upon 
 88.11  sale or disposition of the property as defined in United States 
 88.12  Code, title 26, section 7701(h)(l). 
 88.13     (d) This definition must be used for sales and use tax 
 88.14  purposes regardless if a transaction is characterized as a lease 
 88.15  or rental under generally accepted accounting principles, the 
 88.16  Internal Revenue Code, chapter 336, or other provisions of 
 88.17  federal, state, or local law. 
 88.18     <b>[EFFECTIVE DATE.]</b> This section is effective for leases and 
 88.19  rentals entered into on or after January 1, 2004. 
 88.20     Sec. 15.  Minnesota Statutes 2002, section 297A.61, 
 88.21  subdivision 17, is amended to read: 
 88.22     Subd. 17.  [PREWRITTEN COMPUTER SOFTWARE.] "Prewritten 
 88.23  computer software" means a computer program, either in the form 
 88.24  of written procedures or contained on tapes, discs, cards, or 
 88.25  another device, or any required documentation or manuals 
 88.26  designed to facilitate the use of the computer program. computer 
 88.27  software, including prewritten upgrades, that is not designed 
 88.28  and developed by the author or other creator to the 
 88.29  specifications of a specific purchaser.  The combining of two or 
 88.30  more "prewritten computer software" programs or prewritten 
 88.31  portions of the programs does not cause the combination to be 
 88.32  other than "prewritten computer software."  "Prewritten computer 
 88.33  software" includes software designed and developed by the author 
 88.34  or other creator to the specifications of a specific purchaser 
 88.35  when it is sold to a person other than the purchaser.  If a 
 88.36  person modifies or enhances computer software of which the 
 89.1   person is not the author or creator, the person is deemed to be 
 89.2   the author or creator only of such person's modifications or 
 89.3   enhancements.  "Prewritten computer software" or a prewritten 
 89.4   portion of it that is modified or enhanced to any degree, if the 
 89.5   modification or enhancement is designed and developed to the 
 89.6   specifications of a specific purchaser, remains "prewritten 
 89.7   computer software"; provided, however, that if there is a 
 89.8   reasonable, separately stated charge or an invoice or other 
 89.9   statement of the price given to the purchaser for such 
 89.10  modification or enhancement, the modification or enhancement 
 89.11  does not constitute "prewritten computer software."  For 
 89.12  purposes of this subdivision: 
 89.13     (1) "computer" does not include tape-controlled automatic 
 89.14  drilling, milling, or other manufacturing machinery or equipment 
 89.15  means an electronic device that accepts information in digital 
 89.16  or similar form and manipulates it for a result based on a 
 89.17  sequence of instructions; and 
 89.18     (2) "computer program" means information and directions 
 89.19  that dictate the function performed by data processing 
 89.20  equipment.  It includes the complete plan for the solution of a 
 89.21  problem, such as the complete sequence of automatic data 
 89.22  processing equipment instructions necessary to solve a problem 
 89.23  and includes both systems and application programs and 
 89.24  subdivisions, such as assemblers, compilers, routines, 
 89.25  generators, and utility programs.  Computer program includes a 
 89.26  "canned" or prewritten computer program that is held or existing 
 89.27  for general or repeated sale or lease, even if the prewritten or 
 89.28  "canned" program was initially developed on a custom basis or 
 89.29  for in-house use. "electronic" means relating to technology 
 89.30  having electrical, digital, magnetic, wireless, optical, 
 89.31  electromagnetic, or similar capabilities; and 
 89.32     (3) "computer software" means a set of coded instructions 
 89.33  designed to cause a "computer" or automatic data processing 
 89.34  equipment to perform a task. 
 89.35     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 89.36  purchases made on or after January 1, 2004. 
 90.1      Sec. 16.  Minnesota Statutes 2002, section 297A.61, is 
 90.2   amended by adding a subdivision to read: 
 90.3      Subd. 17a.  [DELIVERED ELECTRONICALLY.] "Delivered 
 90.4   electronically" means delivered to the purchaser by means other 
 90.5   than tangible storage media. 
 90.6      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 90.7   purchases made on or after January 1, 2004. 
 90.8      Sec. 17.  Minnesota Statutes 2002, section 297A.61, is 
 90.9   amended by adding a subdivision to read: 
 90.10     Subd. 17b.  [LOAD AND LEAVE.] "Load and leave" means 
 90.11  delivered to the purchaser by use of a tangible storage media 
 90.12  where the tangible storage media is not physically transferred 
 90.13  to the purchaser. 
 90.14     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 90.15  purchases made on or after January 1, 2004. 
 90.16     Sec. 18.  Minnesota Statutes 2002, section 297A.61, 
 90.17  subdivision 30, is amended to read: 
 90.18     Subd. 30.  [DELIVERY CHARGES.] "Delivery charges" means 
 90.19  charges by the seller of personal property or services for 
 90.20  preparation and delivery to a location designated by the 
 90.21  purchaser of personal property or services including, but not 
 90.22  limited to, transportation, shipping, postage, handling, 
 90.23  crating, and packing. 
 90.24     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 90.25  purchases made on or after January 1, 2004. 
 90.26     Sec. 19.  Minnesota Statutes 2002, section 297A.61, 
 90.27  subdivision 31, is amended to read: 
 90.28     Subd. 31.  [PREPARED FOOD.] (a) "Prepared food" means food 
 90.29  that meets either any of the following conditions: 
 90.30     (1) the food is sold with eating utensils provided by the 
 90.31  seller, including plates, knives, forks, spoons, glasses, cups, 
 90.32  napkins, or straws.  A "plate" does not include a container or 
 90.33  packaging used to transport the food; or 
 90.34     (2) the food is sold in a heated state or heated by the 
 90.35  seller; or 
 90.36     (3) two or more food ingredients are mixed or combined by 
 91.1   the seller for sale as a single item, except for:. 
 91.2      (b) "Prepared food" does not include the following if sold 
 91.3   without eating utensils provided by the seller: 
 91.4      (i) (1) bakery items, including, but not limited to, bread, 
 91.5   rolls, buns, biscuits, bagels, croissants, pastries, donuts, 
 91.6   danish, cakes, tortes, pies, tarts, muffins, bars, cookies, 
 91.7   tortillas; or 
 91.8      (ii) (2) ready-to-eat meat and seafood food sold in an 
 91.9   unheated state sold by weight; or volume as a single item. 
 91.10     (c) "Prepared food" under paragraph (a), clause (3), does 
 91.11  not include: 
 91.12     (iii) (1) eggs, fish, meat, poultry, and foods containing 
 91.13  these raw animal foods requiring cooking by the consumer as 
 91.14  recommended by the Food and Drug Administration in chapter 3, 
 91.15  part 401.11 of its food code so as to prevent food borne 
 91.16  illnesses; or 
 91.17     (iv) (2) food that is only sliced cut, repackaged, or 
 91.18  pasteurized by the seller. 
 91.19     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 91.20  purchases made on or after January 1, 2004. 
 91.21     Sec. 20.  Minnesota Statutes 2002, section 297A.61, is 
 91.22  amended by adding a subdivision to read: 
 91.23     Subd. 35.  [DIRECT MAIL.] "Direct mail" means printed 
 91.24  material delivered or distributed by United States mail or other 
 91.25  delivery service to a mass audience or to addressees on a 
 91.26  mailing list provided by the purchaser or at the direction of 
 91.27  the purchaser when the cost of the items are not billed directly 
 91.28  to the recipients.  "Direct mail" includes tangible personal 
 91.29  property supplied directly or indirectly by the purchaser to the 
 91.30  direct mail seller for inclusion in the package containing 
 91.31  printed material.  "Direct mail" does not include multiple items 
 91.32  of printed material delivered to a single address. 
 91.33     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 91.34  purchases made on or after January 1, 2004. 
 91.35     Sec. 21.  Minnesota Statutes 2002, section 297A.66, is 
 91.36  amended by adding a subdivision to read: 
 92.1      Subd. 5.  [WITHDRAWAL FROM STREAMLINED SALES AND USE TAX 
 92.2   AGREEMENT.] If the state has withdrawn its membership or been 
 92.3   expelled from the streamlined sales and use tax agreement, it 
 92.4   shall not use a seller's registration with the central 
 92.5   registration system and the collection of sales and use taxes in 
 92.6   the state as a factor in determining whether the seller has 
 92.7   nexus with that state for any tax at any time. 
 92.8      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 92.9   purchases made on or after January 1, 2004. 
 92.10     Sec. 22.  [297A.666] [AMNESTY FOR REGISTRATION.] 
 92.11     Subdivision 1.  [AMNESTY PROVISIONS.] Subject to the 
 92.12  limitations of subdivision 2: 
 92.13     (1) this state shall provide amnesty for uncollected or 
 92.14  unpaid sales or use tax to a seller who registers to pay or to 
 92.15  collect and remit applicable sales or use tax on sales made to 
 92.16  purchasers in this state in accordance with the terms of the 
 92.17  streamlined sales and use tax agreement, provided that the 
 92.18  seller was not so registered in this state in the 12-month 
 92.19  period preceding the effective date of the state's participation 
 92.20  in the agreement; and 
 92.21     (2) the amnesty shall preclude assessment for uncollected 
 92.22  or unpaid sales or use tax together with penalty or interest for 
 92.23  sales made during the period the seller was not registered in 
 92.24  this state, provided registration occurs within 12 months of the 
 92.25  effective date of the state's participation in the agreement. 
 92.26     Subd. 2.  [LIMITATIONS.] (a) The amnesty is not available 
 92.27  to a seller with respect to any matter or matters for which the 
 92.28  seller received notice of the commencement of an audit and the 
 92.29  audit is not yet finally resolved, including any related 
 92.30  administrative and judicial processes. 
 92.31     (b) The amnesty is not available for sales or use taxes 
 92.32  already paid or remitted to this state or to taxes collected by 
 92.33  the seller. 
 92.34     (c) The amnesty is fully effective, absent the seller's 
 92.35  fraud or intentional misrepresentation of a material fact, as 
 92.36  long as the seller continues registration and continues payment 
 93.1   or collection and remittance of applicable sales or use taxes 
 93.2   for a period of at least 36 months.  The statute of limitations 
 93.3   provisions of chapter 289A applicable to asserting a sales or 
 93.4   use tax liability must be tolled during this 36-month period. 
 93.5      (d) The amnesty is applicable only to sales or use taxes 
 93.6   due from a seller in its capacity as a seller and not to sales 
 93.7   or use taxes due from a seller in its capacity as a buyer. 
 93.8      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 93.9   purchases made on or after January 1, 2004. 
 93.10     Sec. 23.  Minnesota Statutes 2002, section 297A.668, is 
 93.11  amended to read: 
 93.12     297A.668 [SOURCING OF SALE; SITUS IN THIS STATE.] 
 93.13     Subdivision 1.  [SOURCING RULES APPLICABILITY.] (a) The 
 93.14  following provisions of this section apply regardless of the 
 93.15  characterization of a product as tangible personal property, a 
 93.16  digital good, or a service; but do not apply to 
 93.17  telecommunications services, or the sales of motor vehicles, 
 93.18  watercraft, aircraft, modular homes, manufactured homes, or 
 93.19  mobile homes.  These provisions only apply to determine a 
 93.20  seller's obligation to pay or collect and remit a sales or use 
 93.21  tax with respect to the seller's sale of a product.  These 
 93.22  provisions do not affect the obligation of a seller as purchaser 
 93.23  to remit tax on the use of the product. 
 93.24     Subd. 2.  [SOURCING RULES.] (a) The retail sale, excluding 
 93.25  lease or rental, of a product shall be sourced as required in 
 93.26  paragraphs (b) through (f). 
 93.27     (b) When the product is received by the purchaser at a 
 93.28  business location of the seller, the sale is sourced to that 
 93.29  business location. 
 93.30     (c) When the product is not received by the purchaser at a 
 93.31  business location of the seller, the sale is sourced to the 
 93.32  location where receipt by the purchaser or the donee designated 
 93.33  by the purchaser occurs, including the location indicated by 
 93.34  instructions for delivery to the purchasers or the purchaser's 
 93.35  donee, known to the seller. 
 93.36     (d) When paragraphs (b) and (c) do not apply, the sale is 
 94.1   sourced to the location indicated by an address for the 
 94.2   purchaser that is available from the business records of the 
 94.3   seller that are maintained in the ordinary course of the 
 94.4   seller's business, when use of this address does not constitute 
 94.5   bad faith. 
 94.6      (e) When paragraphs (b), (c), and (d) do not apply, the 
 94.7   sale is sourced to the location indicated by an address for the 
 94.8   purchaser obtained during the consummation of the sale, 
 94.9   including the address of a purchaser's payment instrument if no 
 94.10  other address is available, when use of this address does not 
 94.11  constitute bad faith. 
 94.12     (f) When paragraphs (b), (c), (d), and (e) do not apply, 
 94.13  including the circumstance where the seller is without 
 94.14  sufficient information to apply the previous paragraphs, then 
 94.15  the location is determined by the address from which tangible 
 94.16  personal property was shipped, from which the digital good or 
 94.17  the computer software delivered electronically was first 
 94.18  available for transmission by the seller, or from which the 
 94.19  service was provided.  For purposes of this paragraph, the 
 94.20  seller must disregard any location that merely provided the 
 94.21  digital transfer of the product sold. 
 94.22     (g) For purposes of this subdivision, the terms "receive" 
 94.23  and "receipt" mean taking possession of tangible personal 
 94.24  property, making first use of services, or taking possession or 
 94.25  making first use of digital goods or the computer software 
 94.26  delivered electronically, whichever occurs first.  The terms 
 94.27  receive and receipt do not include possession by a carrier for 
 94.28  hire on behalf of the purchaser. 
 94.29     Subd. 3.  [LEASE OR RENTAL OF TANGIBLE PERSONAL 
 94.30  PROPERTY.] The lease or rental of tangible personal property, 
 94.31  other than property identified in subdivision 4 or 5, shall be 
 94.32  sourced as required in paragraphs (a) to (c). 
 94.33     (a) For a lease or rental that requires recurring periodic 
 94.34  payments, the first periodic payment is sourced the same as a 
 94.35  retail sale in accordance with the provisions of subdivision 6.  
 94.36  Periodic payments made subsequent to the first payment are 
 95.1   sourced to the primary property location for each period covered 
 95.2   by the payment.  The primary property location must be as 
 95.3   indicated by an address for the property provided by the lessee 
 95.4   that is available to the lessor from its records maintained in 
 95.5   the ordinary course of business, when use of this address does 
 95.6   not constitute bad faith.  The property location must not be 
 95.7   altered by intermittent use at different locations, such as use 
 95.8   of business property that accompanies employees on business 
 95.9   trips and service calls. 
 95.10     (b) For a lease or rental that does not require recurring 
 95.11  periodic payments, the payment is sourced the same as a retail 
 95.12  sale in accordance with the provisions of subdivision 2. 
 95.13     (c) This subdivision does not affect the imposition or 
 95.14  computation of sales or use tax on leases or rentals based on a 
 95.15  lump sum or accelerated basis, or on the acquisition of property 
 95.16  for lease. 
 95.17     Subd. 4.  [LEASE OR RENTAL OF MOTOR VEHICLES, TRAILERS, 
 95.18  SEMITRAILERS, OR AIRCRAFT THAT DO NOT QUALIFY AS TRANSPORTATION 
 95.19  EQUIPMENT.] The lease or rental of motor vehicles, trailers, 
 95.20  semitrailers, or aircraft that do not qualify as transportation 
 95.21  equipment, as defined in subdivision 5, shall be sourced as 
 95.22  required in paragraphs (a) to (c). 
 95.23     (a) For a lease or rental that requires recurring periodic 
 95.24  payments, each periodic payment is sourced to the primary 
 95.25  property location.  The primary property location must be as 
 95.26  indicated by an address for the property provided by the lessee 
 95.27  that is available to the lessor from its records maintained in 
 95.28  the ordinary course of business, when use of this address does 
 95.29  not constitute bad faith.  This location must not be altered by 
 95.30  intermittent use at different locations. 
 95.31     (b) For a lease or rental that does not require recurring 
 95.32  periodic payments, the payment is sourced the same as a retail 
 95.33  sale in accordance with the provisions of subdivision 2. 
 95.34     (c) This subdivision does not affect the imposition or 
 95.35  computation of sales or use tax on leases or rentals based on a 
 95.36  lump sum or accelerated basis, or on the acquisition of property 
 96.1   for lease. 
 96.2      Subd. 5.  [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 
 96.3   including lease or rental, of transportation equipment shall be 
 96.4   sourced the same as a retail sale in accordance with the 
 96.5   provisions of subdivision 2, notwithstanding the exclusion of 
 96.6   lease or rental in subdivision 2. 
 96.7      (b) "Transportation equipment" means any of the following: 
 96.8      (1) locomotives and railcars that are utilized for the 
 96.9   carriage of persons or property in interstate commerce; and/or 
 96.10     (2) trucks and truck-tractors with a gross vehicle weight 
 96.11  rating (GVWR) of 10,001 pounds or greater, trailers, 
 96.12  semitrailers, or passenger buses that are: 
 96.13     (i) registered through the international registration plan; 
 96.14  and 
 96.15     (ii) operated under authority of a carrier authorized and 
 96.16  certified by the United States Department of Transportation or 
 96.17  another federal authority to engage in the carriage of persons 
 96.18  or property in interstate commerce.  
 96.19     Subd. 2. 6.  [MULTIPLE POINTS OF USE.] (a) Notwithstanding 
 96.20  the provisions of subdivision 1 subdivisions 2 to 5, a business 
 96.21  purchaser that is not a holder of a direct pay permit that knows 
 96.22  at the time of its purchase of a digital good, computer software 
 96.23  delivered electronically, or a service that the digital good, 
 96.24  computer software delivered electronically, or service will be 
 96.25  concurrently available for use in more than one taxing 
 96.26  jurisdiction shall deliver to the seller in conjunction with its 
 96.27  purchase a multiple points of use exemption certificate 
 96.28  disclosing this fact.  
 96.29     (b) Upon receipt of the multiple points of use exemption 
 96.30  certificate, the seller is relieved of the obligation to 
 96.31  collect, pay, or remit the applicable tax and the purchaser is 
 96.32  obligated to collect, pay, or remit the applicable tax on a 
 96.33  direct pay basis. 
 96.34     (c) A purchaser delivering the multiple points of use 
 96.35  exemption certificate may use any reasonable, but consistent and 
 96.36  uniform, method of apportionment that is supported by the 
 97.1   purchaser's business records as they exist at the time of the 
 97.2   consummation of the sale. 
 97.3      (d) The multiple points of use exemption certificate 
 97.4   remains in effect for all future sales by the seller to the 
 97.5   purchaser until it is revoked in writing, except as to the 
 97.6   subsequent sale's specific apportionment that is governed by the 
 97.7   principle of paragraph (c) and the facts existing at the time of 
 97.8   the sale. 
 97.9      (e) A holder of a direct pay permit is not required to 
 97.10  deliver a multiple points or use exemption certificate to the 
 97.11  seller.  A direct pay permit holder shall follow the provisions 
 97.12  of paragraph (c) in apportioning the tax due on a digital good, 
 97.13  computer software delivered electronically, or a service that 
 97.14  will be concurrently available for use in more than one taxing 
 97.15  jurisdiction. 
 97.16     Subd. 3.  [DEFINITION OF TERMS.] For purposes of this 
 97.17  section, the terms "receive" and "receipt" mean taking 
 97.18  possession of tangible personal property, making first use of 
 97.19  services, or taking possession or making first use of digital 
 97.20  goods, whichever occurs first.  The terms receive and receipt do 
 97.21  not include possession by a carrier for hire on behalf of the 
 97.22  purchaser. 
 97.23     Subd. 7.  [DIRECT MAIL.] (a) Notwithstanding other 
 97.24  subdivisions of this section, a purchaser of direct mail that is 
 97.25  not a holder of a direct pay permit shall provide to the seller, 
 97.26  in conjunction with the purchase, either a direct mail form or 
 97.27  information to show the jurisdictions to which the direct mail 
 97.28  is delivered to recipients. 
 97.29     (1) Upon receipt of the direct mail form, the seller is 
 97.30  relieved of all obligations to collect, pay, or remit the 
 97.31  applicable tax and the purchaser is obligated to pay or remit 
 97.32  the applicable tax on a direct pay basis.  A direct mail form 
 97.33  remains in effect for all future sales of direct mail by the 
 97.34  seller to the purchaser until it is revoked in writing.  
 97.35     (2) Upon receipt of information from the purchaser showing 
 97.36  the jurisdictions to which the direct mail is delivered to 
 98.1   recipients, the seller shall collect the tax according to the 
 98.2   delivery information provided by the purchaser.  In the absence 
 98.3   of bad faith, the seller is relieved of any further obligation 
 98.4   to collect tax on any transaction for which the seller has 
 98.5   collected tax pursuant to the delivery information provided by 
 98.6   the purchaser. 
 98.7      (b) If the purchaser of direct mail does not have a direct 
 98.8   pay permit and does not provide the seller with either a direct 
 98.9   mail form or delivery information, as required by paragraph (a), 
 98.10  the seller shall collect the tax according to subdivision 2, 
 98.11  paragraph (f).  Nothing in this paragraph limits a purchaser's 
 98.12  obligation for sales or use tax to any state to which the direct 
 98.13  mail is delivered. 
 98.14     (c) If a purchaser of direct mail provides the seller with 
 98.15  documentation of direct pay authority, the purchaser is not 
 98.16  required to provide a direct mail form or delivery information 
 98.17  to the seller. 
 98.18     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 98.19  purchases made on or after January 1, 2004. 
 98.20     Sec. 24.  [297A.669] [TELECOMMUNICATION SOURCING.] 
 98.21     Subdivision 1.  [CALL-BY-CALL BASIS SOURCING.] Except for 
 98.22  the defined telecommunication services in subdivision 3, the 
 98.23  sale of telecommunication service sold on a call-by-call basis 
 98.24  shall be sourced to (1) each level of taxing jurisdiction where 
 98.25  the call originates and terminates in that jurisdiction; or (2) 
 98.26  each level of taxing jurisdiction where the call either 
 98.27  originates or terminates and in which the service address is 
 98.28  also located. 
 98.29     Subd. 2.  [OTHER THAN CALL-BY-CALL BASIS SOURCING.] Except 
 98.30  for the defined telecommunication services in subdivision 3, a 
 98.31  sale of telecommunications services sold on a basis other than a 
 98.32  call-by-call basis is sourced to the customer's place of primary 
 98.33  use. 
 98.34     Subd. 3.  [DEFINED TELECOMMUNICATIONS SERVICES 
 98.35  SOURCING.] The sale of the following telecommunication services 
 98.36  shall be sourced to each level of taxing jurisdiction in 
 99.1   paragraphs (a) to (d). 
 99.2      (a) A sale of mobile telecommunications services, other 
 99.3   than air-to-ground radiotelephone service and prepaid calling 
 99.4   service, is sourced to the customer's place of primary use as 
 99.5   required by the Mobile Telecommunications Sourcing Act. 
 99.6      (b) A sale of postpaid calling service is sourced to the 
 99.7   origination point of the telecommunications signal as first 
 99.8   identified by either: 
 99.9      (1) the seller's telecommunications system; or 
 99.10     (2) information received by the seller from its service 
 99.11  provider, where the system used to transport such signals is not 
 99.12  that of the seller. 
 99.13     (c) A sale of prepaid calling service is sourced in 
 99.14  accordance with section 297A.668, subdivision 2.  However, in 
 99.15  the case of a sale of mobile telecommunications service that is 
 99.16  a prepaid telecommunications service, the rule provided in 
 99.17  section 297A.668, subdivision 2, paragraph (f), shall include as 
 99.18  an option the location associated with the mobile telephone 
 99.19  number. 
 99.20     (d) A sale of a private communication service is sourced as 
 99.21  follows: 
 99.22     (1) service for a separate charge related to a customer 
 99.23  channel termination point is sourced to each level of 
 99.24  jurisdiction in which the customer channel termination point is 
 99.25  located; 
 99.26     (2) service where all customer termination points are 
 99.27  located entirely within one jurisdiction or levels of 
 99.28  jurisdiction is sourced in such jurisdiction in which the 
 99.29  customer channel termination points are located; 
 99.30     (3) service for segments of a channel between two customer 
 99.31  channel termination points located in different jurisdictions 
 99.32  and which segment of channel are separately charged is sourced 
 99.33  50 percent in each level of jurisdiction in which the customer 
 99.34  channel termination points are located; and 
 99.35     (4) service for segments of a channel located in more than 
 99.36  one jurisdiction or levels of jurisdiction and which segments 
100.1   are not separately billed is sourced in each jurisdiction based 
100.2   on the percentage determined by dividing the number of customer 
100.3   channel termination points in the jurisdiction by the total 
100.4   number of customer channel termination points. 
100.5      Subd. 4.  [AIR-TO-GROUND RADIOTELEPHONE 
100.6   SERVICE.] "Air-to-ground radiotelephone service," for purposes 
100.7   of this section, means a radio service, as that term is defined 
100.8   in Code of Federal Regulations, title 47, section 22.99, in 
100.9   which common carriers are authorized to offer and provide radio 
100.10  telecommunications service for hire to subscribers in aircraft. 
100.11     Subd. 5.  [CALL-BY-CALL BASIS.] "Call-by-call basis," for 
100.12  purposes of this section, means any method of charging for 
100.13  telecommunications services where the price is measured by 
100.14  individual calls. 
100.15     Subd. 6.  [COMMUNICATIONS CHANNEL.] "Communications 
100.16  channel," for purposes of this section, means a physical or 
100.17  virtual path of communications over which signals are 
100.18  transmitted between or among customer channel termination points.
100.19     Subd. 7.  [CUSTOMER.] "Customer," for purposes of this 
100.20  section, means the person or entity that contracts with the 
100.21  seller of telecommunications services.  If the end user of 
100.22  telecommunications services is not the contracting party, the 
100.23  end user of the telecommunications service is the customer of 
100.24  the telecommunication service, but this sentence applies only 
100.25  for the purpose of sourcing sales of telecommunications services 
100.26  under this section.  Customer does not include a reseller of 
100.27  telecommunications service or for mobile telecommunications 
100.28  service of a serving carrier under an agreement to serve the 
100.29  customer outside the home service provider's licensed service 
100.30  area. 
100.31     Subd. 8.  [CUSTOMER CHANNEL TERMINATION POINT.] "Customer 
100.32  channel termination point," for purposes of this section, means 
100.33  the location where the customer either inputs or receives the 
100.34  communications. 
100.35     Subd. 9.  [END USER.] "End user," for purposes of this 
100.36  section, means the person who utilizes the telecommunication 
101.1   service.  In the case of an entity, end user means the 
101.2   individual who utilizes the service on behalf of the entity. 
101.3      Subd. 10.  [HOME SERVICE PROVIDER.] "Home service provider,"
101.4   for purposes of this section, means the same as that term is 
101.5   defined in Section 124(5) of Public Law 106-252 (Mobile 
101.6   Telecommunications Sourcing Act). 
101.7      Subd. 11.  [MOBILE TELECOMMUNICATIONS SERVICE.] "Mobile 
101.8   telecommunications service," for purposes of this section, means 
101.9   the same as that term is defined in Section 124(1) of Public Law 
101.10  106-252 (Mobile Telecommunications Sourcing Act). 
101.11     Subd. 12.  [PLACE OF PRIMARY USE.] "Place of primary use," 
101.12  for purposes of this section, means the street address 
101.13  representative of where the customer's use of the 
101.14  telecommunications service primarily occurs, which must be the 
101.15  residential street address or the primary business street 
101.16  address of the customer.  In the case of mobile 
101.17  telecommunications services, place of primary use must be within 
101.18  the licensed service area of the home service provider. 
101.19     Subd. 13.  [POSTPAID CALLING SERVICE.] "Postpaid calling 
101.20  service," for purposes of this section, means the 
101.21  telecommunications service obtained by making a payment on a 
101.22  call-by-call basis either through the use of a credit card or 
101.23  payment mechanism such as a bank card, travel card, credit card, 
101.24  or debit card, or by a charge made to a telephone number that is 
101.25  not associated with the origination or termination of the 
101.26  telecommunications service.  A postpaid calling service includes 
101.27  a telecommunications service that would be a prepaid calling 
101.28  service except it is not exclusively a telecommunication service.
101.29     Subd. 14.  [PREPAID CALLING SERVICE.] "Prepaid calling 
101.30  service," for purposes of this section, means the right to 
101.31  access exclusively telecommunications services, which must be 
101.32  paid for in advance and which enables the origination of calls 
101.33  using an access number or authorization code, whether manually 
101.34  or electronically dialed, and that is sold in predetermined 
101.35  units or dollars of which the number declines with use in a 
101.36  known amount. 
102.1      Subd. 15.  [PRIVATE COMMUNICATION SERVICES.] "Private 
102.2   communication services," for purposes of this section, means the 
102.3   same as that term is defined in section 297A.61, subdivision 26. 
102.4      Subd. 16.  [SERVICE ADDRESS.] "Service address," for 
102.5   purposes of this section, means: 
102.6      (1) the location of the telecommunications equipment to 
102.7   which a customer's call is charged and from which the call 
102.8   originates or terminates, regardless of where the call is billed 
102.9   or paid; 
102.10     (2) if the location in paragraph (a) is not known, service 
102.11  address means the origination point of the signal of the 
102.12  telecommunications services first identified by either the 
102.13  seller's telecommunications system or in information received by 
102.14  the seller from its service provider, where the system used to 
102.15  transport the signals is not that of the seller; or 
102.16     (3) if the location in paragraphs (a) and (b) is not known, 
102.17  the service address means the location of the customer's place 
102.18  of primary use. 
102.19     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
102.20  purchases made on or after January 1, 2004. 
102.21     Sec. 25.  Minnesota Statutes 2002, section 297A.67, 
102.22  subdivision 7, is amended to read: 
102.23     Subd. 7.  [MEDICINES; MEDICAL DEVICES.] (a) Sales of the 
102.24  following medicines and medical devices are exempt: 
102.25     (1) Prescribed drugs and medicine, and insulin, intended 
102.26  for internal or external use, in the cure, mitigation, 
102.27  treatment, or prevention of illness or disease in human beings 
102.28  are exempt.  "Prescribed drugs and medicine" includes use, 
102.29  including over-the-counter drugs or medicine prescribed by a 
102.30  licensed health care professional.; 
102.31     (b) Nonprescription medicines consisting principally 
102.32  (determined by the weight of all ingredients) of analgesics that 
102.33  are approved by the United States Food and Drug Administration 
102.34  for internal use by human beings are exempt.  For purposes of 
102.35  this subdivision, "principally" means greater than 50 percent 
102.36  analgesics by weight.  
103.1      (c) Prescription glasses, hospital beds, fever 
103.2   thermometers, reusable (2) single use finger-pricking devices 
103.3   for the extraction of blood, blood glucose monitoring machines, 
103.4   and other single use devices and diagnostic agents used in 
103.5   diagnosing, monitoring, or treating diabetes, and therapeutic 
103.6   and; 
103.7      (3) insulin and medical oxygen for human use are also 
103.8   exempt, regardless of whether it is prescribed or sold 
103.9   over-the-counter; 
103.10     (4) prosthetic devices are exempt.  "Therapeutic devices" 
103.11  means devices that are attached or applied to the human body to 
103.12  cure, heal, or alleviate injury, illness, or disease, either 
103.13  directly or by administering a curative agent.  "Prosthetic 
103.14  devices" means devices that replace injured, diseased, or 
103.15  missing parts of the human body, either temporarily or 
103.16  permanently., if prescribed by a licensed health care 
103.17  professional, or paid for by Medicare or Medicaid; 
103.18     (5) durable medical equipment for home use only; and 
103.19     (6) mobility enhancing equipment.  
103.20     (b) For purposes of this subdivision: 
103.21     (1) "Drug" means a compound, substance, or preparation, and 
103.22  any component of a compound, substance, or preparation, other 
103.23  than food and food ingredients, dietary supplements, or 
103.24  alcoholic beverages that is: 
103.25     (i) recognized in the official United States Pharmacopoeia, 
103.26  official Homeopathic Pharmacopoeia of the United States, or 
103.27  official National Formulary, and supplement to any of them; 
103.28     (ii) intended for use in the diagnosis, cure, mitigation, 
103.29  treatment, or prevention of disease; or 
103.30     (iii) intended to affect the structure or any function of 
103.31  the body. 
103.32     (2) "Durable medical equipment" means equipment, including 
103.33  repair and replacement parts, but not including mobility 
103.34  enhancing equipment, that: 
103.35     (i) can withstand repeated use; 
103.36     (ii) is primarily and customarily used to serve a medical 
104.1   purpose; 
104.2      (iii) generally is not useful to a person in the absence of 
104.3   illness or injury; and 
104.4      (iv) is not worn in or on the body. 
104.5      (3) "Mobility enhancing equipment" means equipment, 
104.6   including repair and replacement parts, but not including 
104.7   durable medical equipment, that: 
104.8      (i) is primarily and customarily used to provide or 
104.9   increase the ability to move from one place to another and that 
104.10  is appropriate for use either in a home or a motor vehicle; 
104.11     (ii) is not generally used by persons with normal mobility; 
104.12  and 
104.13     (iii) does not include any motor vehicle or equipment on a 
104.14  motor vehicle normally provided by a motor vehicle manufacturer. 
104.15     (4) "Over-the-counter drug" means a drug that contains a 
104.16  label that identifies the product as a drug as required by Code 
104.17  of Federal Regulations, title 21, section 201.66.  The label 
104.18  must include a "drug facts" panel or a statement of the active 
104.19  ingredients with a list of those ingredients contained in the 
104.20  compound, substance, or preparation.  Grooming and hygiene 
104.21  products such as soaps, cleaning solutions, shampoo, toothpaste, 
104.22  mouthwash, antiperspirants, and suntan lotions and sunscreens 
104.23  are not "over-the-counter drugs," regardless of whether they 
104.24  otherwise meet the definition. 
104.25     (5) "Prescribed" means a direction in the form of an order, 
104.26  formula, or recipe issued in any form of oral, written, 
104.27  electronic, or other means of transmission by a duly licensed 
104.28  health care professional. 
104.29     (6) "Prosthetic device" means a replacement, corrective, or 
104.30  supportive device, including repair and replacement parts, worn 
104.31  on or in the body to: 
104.32     (i) artificially replace a missing portion of the body; 
104.33     (ii) prevent or correct physical deformity or malfunction; 
104.34  or 
104.35     (iii) support a weak or deformed portion of the body. 
104.36     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
105.1   purchases made on or after January 1, 2004. 
105.2      Sec. 26.  Minnesota Statutes 2002, section 297A.67, 
105.3   subdivision 8, is amended to read: 
105.4      Subd. 8.  [CLOTHING.] (a) Clothing is exempt.  For purposes 
105.5   of this subdivision, "clothing" means all human wearing apparel 
105.6   suitable for general use. 
105.7      (b) Clothing includes, but is not limited to, aprons, 
105.8   household and shop; athletic supporters; baby receiving 
105.9   blankets; bathing suits and caps; beach capes and coats; belts 
105.10  and suspenders; boots; coats and jackets; costumes; children and 
105.11  adult diapers, including disposable; ear muffs; footlets; formal 
105.12  wear; garters and garter belts; girdles; gloves and mittens for 
105.13  general use; hats and caps; hosiery; insoles for shoes; lab 
105.14  coats; neckties; overshoes; pantyhose; rainwear; rubber pants; 
105.15  sandals; scarves; shoes and shoe laces; slippers; sneakers; 
105.16  socks and stockings; steel-toed boots; underwear; uniforms, 
105.17  athletic and nonathletic; and wedding apparel. 
105.18     (c) Clothing does not include the following: 
105.19     (1) belt buckles sold separately; 
105.20     (2) costume masks sold separately; 
105.21     (3) patches and emblems sold separately; 
105.22     (4) sewing equipment and supplies, including but not 
105.23  limited to, knitting needles, patterns, pins, scissors, sewing 
105.24  machines, sewing needles, tape measures, and thimbles; 
105.25     (5) sewing materials that become part of clothing, 
105.26  including but not limited to, buttons, fabric, lace, thread, 
105.27  yarn, and zippers; 
105.28     (6) clothing accessories or equipment; 
105.29     (7) sports or recreational equipment; and 
105.30     (8) protective equipment. 
105.31  Clothing also does not include apparel made from fur if a 
105.32  uniform definition of "apparel made from fur" is developed by 
105.33  the member states of the Streamlined Sales and Use Tax Agreement.
105.34     For purposes of this subdivision, "clothing accessories or 
105.35  equipment" means incidental items worn on the person or in 
105.36  conjunction with clothing.  Clothing accessories and equipment 
106.1   include, but are not limited to, briefcases; cosmetics; hair 
106.2   notions, including barrettes, hair bows, and hairnets; handbags; 
106.3   handkerchiefs; jewelry; nonprescription sunglasses; umbrellas; 
106.4   wallets; watches; and wigs and hairpieces.  "Sports or 
106.5   recreational equipment" means items designed for human use and 
106.6   worn in conjunction with an athletic or recreational activity 
106.7   that are not suitable for general use.  Sports and recreational 
106.8   equipment includes, but is not limited to, ballet and tap shoes; 
106.9   cleated or spiked athletic shoes; gloves, including, but not 
106.10  limited to, baseball, bowling, boxing, hockey, and golf gloves; 
106.11  goggles; hand and elbow guards; life preservers and vests; mouth 
106.12  guards; roller and ice skates; shin guards; shoulder pads; ski 
106.13  boots; waders; and wetsuits and fins.  "Protective equipment" 
106.14  means items for human wear and designed as protection of the 
106.15  wearer against injury or disease or as protection against damage 
106.16  or injury of other persons or property but not suitable for 
106.17  general use.  Protective equipment includes, but is not limited 
106.18  to, breathing masks; clean room apparel and equipment; ear and 
106.19  hearing protectors; face shields; finger guards; hard hats; 
106.20  helmets; paint or dust respirators; protective gloves; safety 
106.21  glasses and goggles; safety belts; tool belts; and welders 
106.22  gloves and masks. 
106.23     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
106.24  purchases made on or after January 1, 2004. 
106.25     Sec. 27.  Minnesota Statutes 2002, section 297A.67, is 
106.26  amended by adding a subdivision to read: 
106.27     Subd. 31.  [SERVICE LOANER VEHICLE COVERED BY 
106.28  WARRANTY.] The loan of a vehicle by a motor vehicle dealer to a 
106.29  customer as a replacement for a vehicle being serviced or 
106.30  repaired is exempt if the vehicle is loaned pursuant to a 
106.31  warranty included in the original purchase price of the vehicle 
106.32  being serviced or repaired. 
106.33     <b>[EFFECTIVE DATE.]</b> This section is effective for vehicle 
106.34  loans made after June 30, 2003. 
106.35     Sec. 28.  Minnesota Statutes 2002, section 297A.68, 
106.36  subdivision 2, is amended to read: 
107.1      Subd. 2.  [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 
107.2   (a) Materials stored, used, or consumed in industrial production 
107.3   of personal property intended to be sold ultimately at retail 
107.4   are exempt, whether or not the item so used becomes an 
107.5   ingredient or constituent part of the property produced.  
107.6   Materials that qualify for this exemption include, but are not 
107.7   limited to, the following: 
107.8      (1) chemicals, including chemicals used for cleaning food 
107.9   processing machinery and equipment; 
107.10     (2) materials, including chemicals, fuels, and electricity 
107.11  purchased by persons engaged in industrial production to treat 
107.12  waste generated as a result of the production process; 
107.13     (3) fuels, electricity, gas, and steam used or consumed in 
107.14  the production process, except that electricity, gas, or steam 
107.15  used for space heating, cooling, or lighting is exempt if (i) it 
107.16  is in excess of the average climate control or lighting for the 
107.17  production area, and (ii) it is necessary to produce that 
107.18  particular product; 
107.19     (4) petroleum products and lubricants; 
107.20     (5) packaging materials, including returnable containers 
107.21  used in packaging food and beverage products; 
107.22     (6) accessory tools, equipment, and other items that are 
107.23  separate detachable units with an ordinary useful life of less 
107.24  than 12 months used in producing a direct effect upon the 
107.25  product; and 
107.26     (7) the following materials, tools, and equipment used in 
107.27  metalcasting:  crucibles, thermocouple protection sheaths and 
107.28  tubes, stalk tubes, refractory materials, molten metal filters 
107.29  and filter boxes, degassing lances, and base blocks. 
107.30     (b) This exemption does not include: 
107.31     (1) machinery, equipment, implements, tools, accessories, 
107.32  appliances, contrivances and furniture and fixtures, except 
107.33  those listed in paragraph (a), clause (6); and 
107.34     (2) petroleum and special fuels used in producing or 
107.35  generating power for propelling ready-mixed concrete trucks on 
107.36  the public highways of this state. 
108.1      (c) Industrial production includes, but is not limited to, 
108.2   research, development, design or production of any tangible 
108.3   personal property, manufacturing, processing (other than by 
108.4   restaurants and consumers) of agricultural products (whether 
108.5   vegetable or animal), commercial fishing, refining, smelting, 
108.6   reducing, brewing, distilling, printing, mining, quarrying, 
108.7   lumbering, generating electricity and, the production of road 
108.8   building materials, and the research, development, design, or 
108.9   production of computer software.  Industrial production does not 
108.10  include painting, cleaning, repairing or similar processing of 
108.11  property except as part of the original manufacturing process.  
108.12     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
108.13  purchases made on or after January 1, 2004. 
108.14     Sec. 29.  Minnesota Statutes 2002, section 297A.68, 
108.15  subdivision 5, is amended to read: 
108.16     Subd. 5.  [CAPITAL EQUIPMENT.] (a) Capital equipment is 
108.17  exempt.  The tax must be imposed and collected as if the rate 
108.18  under section 297A.62, subdivision 1, applied, and then refunded 
108.19  in the manner provided in section 297A.75. 
108.20     "Capital equipment" means machinery and equipment purchased 
108.21  or leased, and used in this state by the purchaser or lessee 
108.22  primarily for manufacturing, fabricating, mining, or refining 
108.23  tangible personal property to be sold ultimately at retail if 
108.24  the machinery and equipment are essential to the integrated 
108.25  production process of manufacturing, fabricating, mining, or 
108.26  refining.  Capital equipment also includes machinery and 
108.27  equipment used to electronically transmit results retrieved by a 
108.28  customer of an online computerized data retrieval system. 
108.29     (b) Capital equipment includes, but is not limited to: 
108.30     (1) machinery and equipment used to operate, control, or 
108.31  regulate the production equipment; 
108.32     (2) machinery and equipment used for research and 
108.33  development, design, quality control, and testing activities; 
108.34     (3) environmental control devices that are used to maintain 
108.35  conditions such as temperature, humidity, light, or air pressure 
108.36  when those conditions are essential to and are part of the 
109.1   production process; 
109.2      (4) materials and supplies used to construct and install 
109.3   machinery or equipment; 
109.4      (5) repair and replacement parts, including accessories, 
109.5   whether purchased as spare parts, repair parts, or as upgrades 
109.6   or modifications to machinery or equipment; 
109.7      (6) materials used for foundations that support machinery 
109.8   or equipment; 
109.9      (7) materials used to construct and install special purpose 
109.10  buildings used in the production process; and 
109.11     (8) ready-mixed concrete trucks in which the ready-mixed 
109.12  concrete is mixed as part of the delivery process; and 
109.13     (9) machinery or equipment used for research, development, 
109.14  design, or production of computer software.  
109.15     (c) Capital equipment does not include the following: 
109.16     (1) motor vehicles taxed under chapter 297B; 
109.17     (2) machinery or equipment used to receive or store raw 
109.18  materials; 
109.19     (3) building materials, except for materials included in 
109.20  paragraph (b), clauses (6) and (7); 
109.21     (4) machinery or equipment used for nonproduction purposes, 
109.22  including, but not limited to, the following:  plant security, 
109.23  fire prevention, first aid, and hospital stations; support 
109.24  operations or administration; pollution control; and plant 
109.25  cleaning, disposal of scrap and waste, plant communications, 
109.26  space heating, cooling, lighting, or safety; 
109.27     (5) farm machinery and aquaculture production equipment as 
109.28  defined by section 297A.61, subdivisions 12 and 13; 
109.29     (6) machinery or equipment purchased and installed by a 
109.30  contractor as part of an improvement to real property; or 
109.31     (7) any other item that is not essential to the integrated 
109.32  process of manufacturing, fabricating, mining, or refining. 
109.33     (d) For purposes of this subdivision: 
109.34     (1) "Equipment" means independent devices or tools separate 
109.35  from machinery but essential to an integrated production 
109.36  process, including computers and computer software, used in 
110.1   operating, controlling, or regulating machinery and equipment; 
110.2   and any subunit or assembly comprising a component of any 
110.3   machinery or accessory or attachment parts of machinery, such as 
110.4   tools, dies, jigs, patterns, and molds.  
110.5      (2) "Fabricating" means to make, build, create, produce, or 
110.6   assemble components or property to work in a new or different 
110.7   manner. 
110.8      (3) "Machinery" means mechanical, electronic, or electrical 
110.9   devices, including computers and computer software, that are 
110.10  purchased or constructed to be used for the activities set forth 
110.11  in paragraph (a), beginning with the removal of raw materials 
110.12  from inventory through completion of the product, including 
110.13  packaging of the product. 
110.14     (4) "Machinery and equipment used for pollution control" 
110.15  means machinery and equipment used solely to eliminate, prevent, 
110.16  or reduce pollution resulting from an activity described in 
110.17  paragraph (a).  
110.18     (5) "Manufacturing" means an operation or series of 
110.19  operations where raw materials are changed in form, composition, 
110.20  or condition by machinery and equipment and which results in the 
110.21  production of a new article of tangible personal property.  For 
110.22  purposes of this subdivision, "manufacturing" includes the 
110.23  generation of electricity or steam to be sold at retail. 
110.24     (6) "Mining" means the extraction of minerals, ores, stone, 
110.25  or peat. 
110.26     (7) "Online data retrieval system" means a system whose 
110.27  cumulation of information is equally available and accessible to 
110.28  all its customers. 
110.29     (8) "Primarily" means machinery and equipment used 50 
110.30  percent or more of the time in an activity described in 
110.31  paragraph (a). 
110.32     (9) "Refining" means the process of converting a natural 
110.33  resource to a product, including the treatment of water to be 
110.34  sold at retail. 
110.35     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
110.36  purchases made on or after January 1, 2004. 
111.1      Sec. 30.  Minnesota Statutes 2002, section 297A.68, 
111.2   subdivision 36, is amended to read: 
111.3      Subd. 36.  [DELIVERY OR DISTRIBUTION CHARGES; PRINTED 
111.4   MATERIALS DIRECT MAIL.] Charges for the delivery or distribution 
111.5   of printed materials, including individual account 
111.6   information, direct mail are exempt if (1) the charges are 
111.7   separately stated, (2) the delivery or distribution is to a mass 
111.8   audience or to a mailing list provided at the direction of the 
111.9   customer, and (3) the cost of the materials is not billed 
111.10  directly to the recipients. 
111.11     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
111.12  purchases made on or after January 1, 2004. 
111.13     Sec. 31.  Minnesota Statutes 2002, section 297A.68, is 
111.14  amended by adding a subdivision to read: 
111.15     Subd. 37.  [DURABLE MEDICAL EQUIPMENT FOR NURSING 
111.16  HOMES.] The purchase of durable medical equipment by nursing 
111.17  homes is exempt.  For purposes of this subdivision, "durable 
111.18  medical equipment" has the meaning given in section 297A.67, 
111.19  subdivision 7. 
111.20     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
111.21  purchases made on or after January 1, 2004. 
111.22     Sec. 32.  Minnesota Statutes 2002, section 297A.70, 
111.23  subdivision 8, is amended to read: 
111.24     Subd. 8.  [REGIONWIDE PUBLIC SAFETY RADIO COMMUNICATION 
111.25  SYSTEM; PRODUCTS AND SERVICES.] Products and services including, 
111.26  but not limited to, end user equipment used for construction, 
111.27  ownership, operation, maintenance, and enhancement of the 
111.28  backbone system of the regionwide public safety radio 
111.29  communication system established under sections 473.891 to 
111.30  473.905, are exempt.  For purposes of this subdivision, backbone 
111.31  system is defined in section 473.891, subdivision 9.  This 
111.32  subdivision is effective for purchases, sales, storage, use, or 
111.33  consumption occurring before August 1, 2003 2005, in the 
111.34  counties of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and 
111.35  Washington. 
111.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
112.1   following final enactment. 
112.2      Sec. 33.  Minnesota Statutes 2002, section 297A.70, 
112.3   subdivision 16, is amended to read: 
112.4      Subd. 16.  [CAMP FEES.] Camp fees to camps or other 
112.5   recreation facilities owned and operated by an exempt 
112.6   organization under section 501(c)(3) of the Internal Revenue 
112.7   Code are exempt if when the camps or facilities provide either: 
112.8      (1) educational and, religious, or rehabilitative 
112.9   activities; or 
112.10     (2) sports or social activities for young people primarily 
112.11  age 18 and under. 
112.12     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
112.13  purchases made after June 30, 2003. 
112.14     Sec. 34.  Minnesota Statutes 2002, section 297A.75, 
112.15  subdivision 4, is amended to read: 
112.16     Subd. 4.  [INTEREST.] Interest must be paid on the refund 
112.17  at the rate in section 270.76 from the date the refund claim is 
112.18  filed for taxes paid under subdivision 1, clauses (1) to (3), 
112.19  and (5), and from 60 days after the date the refund claim is 
112.20  filed with the commissioner for claims filed under subdivision 
112.21  1, clauses (4), (6), (7), (8), and (9) 90 days after the refund 
112.22  claim is filed with the commissioner for taxes paid under 
112.23  subdivision 1. 
112.24     <b>[EFFECTIVE DATE.]</b> This section is effective for refund 
112.25  claims filed on or after April 1, 2003. 
112.26     Sec. 35.  Minnesota Statutes 2002, section 297A.81, is 
112.27  amended to read: 
112.28     297A.81 [UNCOLLECTIBLE DEBTS; OFFSET AGAINST OTHER TAXES.] 
112.29     Subdivision 1.  [GENERAL.] The taxpayer may offset against 
112.30  the taxes payable for any reporting period the amount of taxes 
112.31  imposed by this chapter previously paid as a result of any 
112.32  transaction the consideration for which became a debt owed to 
112.33  the taxpayer that became uncollectible during the reporting 
112.34  period, but only in proportion to the portion of the debt that 
112.35  became uncollectible.  Section 289A.40, subdivision 2, applies 
112.36  to an offset under this section. 
113.1      Subd. 2.  [MANNER OF ALLOWING DEDUCTION FOR UNCOLLECTIBLE 
113.2   DEBT.] (a) Uncollectible debt is allowed as a deduction in the 
113.3   manner provided in this subdivision. 
113.4      (b) If the uncollectible debt arose with respect to a sale 
113.5   required to be included in gross receipts, subject to a tax 
113.6   imposed under chapter 297A, the entire amount of the debt 
113.7   remaining uncollected is allowed as a deduction. 
113.8      (c) If the uncollectible debt arose with respect to a sale 
113.9   partly subject to the tax imposed under chapter 297A and partly 
113.10  exempt, the amount of the uncollectible debt allowed as a 
113.11  deduction is the amount derived by multiplying the uncollectible 
113.12  debt by the percentage that the taxable sale bears to the total 
113.13  sales. 
113.14     (d) If the uncollectible debt arose with respect to two or 
113.15  more sales made at successive intervals, payments made before 
113.16  the date the debt became uncollectible must be applied first to 
113.17  the earliest sale upon which there is an unpaid balance, and to 
113.18  following sales in successive order. 
113.19     (e) If the books and records of the taxpayer claiming the 
113.20  bad debt allowance support an allocation of the bad debts among 
113.21  the member states of the streamlined sales and use tax 
113.22  agreement, such an allocation shall be allowed. 
113.23     Subd. 3.  [CERTIFIED SERVICE PROVIDER.] A certified service 
113.24  provider, as defined in section 297A.995, subdivision 2, on 
113.25  behalf of a taxpayer who is its client, may offset against taxes 
113.26  as provided by this section. 
113.27     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
113.28  purchases made on or after January 1, 2004. 
113.29     Sec. 36.  Minnesota Statutes 2002, section 297A.82, 
113.30  subdivision 4, is amended to read: 
113.31     Subd. 4.  [EXEMPTIONS.] (a) The following transactions are 
113.32  exempt from the tax imposed in this chapter to the extent 
113.33  provided. 
113.34     (b) The purchase or use of aircraft previously registered 
113.35  in Minnesota by a corporation or partnership is exempt if the 
113.36  transfer constitutes a transfer within the meaning of section 
114.1   351 or 721 of the Internal Revenue Code. 
114.2      (c) The sale to or purchase, storage, use, or consumption 
114.3   by a licensed aircraft dealer of an aircraft for which a 
114.4   commercial use permit has been issued pursuant to section 
114.5   360.654 is exempt, if the aircraft is resold while the permit is 
114.6   in effect. 
114.7      (d) Airflight equipment when sold to, or purchased, stored, 
114.8   used, or consumed by airline companies, as defined in section 
114.9   270.071, subdivision 4, is exempt.  For purposes of this 
114.10  subdivision, "airflight equipment" includes airplanes and parts 
114.11  necessary for the repair and maintenance of such airflight 
114.12  equipment, and flight simulators, but does not include airplanes 
114.13  with a gross weight of less than 30,000 pounds that are used on 
114.14  intermittent or irregularly timed flights. 
114.15     (e) Sales of, and the storage, distribution, use, or 
114.16  consumption of aircraft, as defined in section 360.511 and 
114.17  approved by the Federal Aviation Administration, and which the 
114.18  seller delivers to a purchaser outside Minnesota or which, 
114.19  without intermediate use, is shipped or transported outside 
114.20  Minnesota by the purchaser are exempt, but only if the purchaser 
114.21  is not a resident of Minnesota and provided that the aircraft is 
114.22  not thereafter returned to a point within Minnesota, except in 
114.23  the course of interstate commerce or isolated and occasional 
114.24  use, and will be registered in another state or country upon its 
114.25  removal from Minnesota.  This exemption applies even if the 
114.26  purchaser takes possession of the aircraft in Minnesota and uses 
114.27  the aircraft in the state exclusively for training purposes for 
114.28  a period not to exceed ten days prior to removing the aircraft 
114.29  from this state. 
114.30     (f) The purchase, storage, use, or consumption by or the 
114.31  sale to an airline company, as defined in section 270.071, 
114.32  subdivision 4, of prepared food and beverages are exempt if the 
114.33  prepared food and beverages are: 
114.34     (1) prepared in Minnesota or shipped or brought into 
114.35  Minnesota by a for-hire carrier; and 
114.36     (2) kept, without use, for the purpose of being transported 
115.1   outside of Minnesota. 
115.2      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
115.3   purchases made after June 30, 2003. 
115.4      Sec. 37.  Minnesota Statutes 2002, section 297A.99, 
115.5   subdivision 5, is amended to read: 
115.6      Subd. 5.  [TAX RATE.] (a) The tax rate is as specified in 
115.7   the special law authorization and as imposed by the political 
115.8   subdivision. 
115.9      (b) The full political subdivision rate applies to any 
115.10  sales that are taxed at a state rate less than or more than the 
115.11  state general sales and use tax rate., and the political 
115.12  subdivision must not have more than one local sales tax rate or 
115.13  more than one local use tax rate.  This paragraph does not apply 
115.14  to sales or use taxes imposed on electricity, piped natural or 
115.15  artificial gas, or other heating fuels delivered by the seller, 
115.16  or the retail sale or transfer of motor vehicles, aircraft, 
115.17  watercraft, modular homes, manufactured homes, or mobile homes. 
115.18     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
115.19  purchases made on or after January 1, 2004. 
115.20     Sec. 38.  Minnesota Statutes 2002, section 297A.99, 
115.21  subdivision 10, is amended to read: 
115.22     Subd. 10.  [USE OF ZIP CODE IN DETERMINING LOCATION OF 
115.23  SALE.] To determine whether to impose the local tax, the 
115.24  retailer may use zip codes if the zip code area is entirely 
115.25  within the political subdivision.  When a zip code area is not 
115.26  entirely within a political subdivision, the retailer shall not 
115.27  collect the local tax if the purchaser notifies the retailer 
115.28  that the purchaser's delivery address is outside of the 
115.29  political subdivision, unless the retailer verifies that the 
115.30  delivery address is in the political subdivision using a means 
115.31  other than the zip code.  The lowest combined tax rate imposed 
115.32  in the zip code area applies if the area includes more than one 
115.33  tax rate in any level of taxing jurisdictions.  If a nine-digit 
115.34  zip code designation is not available for a street address or if 
115.35  a seller is unable to determine the nine-digit zip code 
115.36  designation of a purchaser after exercising due diligence to 
116.1   determine the designation, the seller may apply the rate for the 
116.2   five-digit zip code area.  For the purposes of this subdivision, 
116.3   there is a rebuttable presumption that a seller has exercised 
116.4   due diligence if the seller has attempted to determine the 
116.5   nine-digit zip code designation by utilizing software approved 
116.6   by the governing board that makes this designation from the 
116.7   street address and the five-digit zip code of the purchaser. 
116.8   Notwithstanding subdivision 13, this subdivision applies to all 
116.9   local sales taxes without regard to the date of 
116.10  authorization.  This subdivision does not apply when the 
116.11  purchased product is received by the purchaser at the business 
116.12  location of the seller. 
116.13     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
116.14  purchases made on or after January 1, 2004. 
116.15     Sec. 39.  Minnesota Statutes 2002, section 297A.99, 
116.16  subdivision 12, is amended to read: 
116.17     Subd. 12.  [EFFECTIVE DATES; NOTIFICATION.] (a) A political 
116.18  subdivision may impose a tax under this section starting only on 
116.19  the first day of a calendar quarter.  A political subdivision 
116.20  may repeal a tax under this section stopping only on the last 
116.21  day of a calendar quarter. 
116.22     (b) The political subdivision shall notify the commissioner 
116.23  of revenue at least 90 days before imposing, changing the rate 
116.24  of, or repealing a tax under this section. 
116.25     (c) The political subdivision shall change the rate of tax 
116.26  imposed under this section starting only on the first day of a 
116.27  calendar quarter, and only after the commissioner has notified 
116.28  sellers at least 60 days prior to the change. 
116.29     (d) The political subdivision shall apply the rate change 
116.30  for sales tax imposed under this section to purchases from 
116.31  printed catalogs, wherein the purchaser computed the tax based 
116.32  upon local tax rates published in the catalog, starting only on 
116.33  the first day of a calendar quarter, and only after the 
116.34  commissioner has notified sellers at least 120 days prior to the 
116.35  change. 
116.36     (e) The political subdivision shall apply local 
117.1   jurisdiction boundary changes to taxes imposed under this 
117.2   section starting only on the first day of a calendar quarter, 
117.3   and only after the commissioner has notified sellers at least 60 
117.4   days prior to the change. 
117.5      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
117.6   purchases made on or after January 1, 2004. 
117.7      Sec. 40.  Minnesota Statutes 2002, section 297A.995, is 
117.8   amended by adding a subdivision to read: 
117.9      Subd. 10.  [RELIEF FROM CERTAIN LIABILITY.] Notwithstanding 
117.10  subdivision 9, sellers and certified service providers are 
117.11  relieved from liability to the state for having charged and 
117.12  collected the incorrect amount of sales or use tax resulting 
117.13  from the seller or certified service provider (1) relying on 
117.14  erroneous data provided by this state on tax rates, boundaries, 
117.15  or taxing jurisdiction assignments, or (2) relying on erroneous 
117.16  data provided by the state in its taxability matrix concerning 
117.17  the taxability of products and services. 
117.18     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
117.19  purchases made on or after January 1, 2004. 
117.20     Sec. 41.  Minnesota Statutes 2002, section 297B.01, 
117.21  subdivision 7, is amended to read: 
117.22     Subd. 7.  [SALE, SELLS, SELLING, PURCHASE, PURCHASED, OR 
117.23  ACQUIRED.] (a) "Sale," "sells," "selling," "purchase," 
117.24  "purchased," or "acquired" means any transfer of title of any 
117.25  motor vehicle, whether absolutely or conditionally, for a 
117.26  consideration in money or by exchange or barter for any purpose 
117.27  other than resale in the regular course of business.  
117.28     (b) Any motor vehicle utilized by the owner only by leasing 
117.29  such vehicle to others or by holding it in an effort to so lease 
117.30  it, and which is put to no other use by the owner other than 
117.31  resale after such lease or effort to lease, shall be considered 
117.32  property purchased for resale.  
117.33     (c) The terms also shall include any transfer of title or 
117.34  ownership of a motor vehicle by other means, for or without 
117.35  consideration, except that these terms shall not include: 
117.36     (1) the acquisition of a motor vehicle by inheritance from 
118.1   or by bequest of, a decedent who owned it; 
118.2      (2) the transfer of a motor vehicle which was previously 
118.3   licensed in the names of two or more joint tenants and 
118.4   subsequently transferred without monetary consideration to one 
118.5   or more of the joint tenants; 
118.6      (3) the transfer of a motor vehicle by way of gift between 
118.7   individuals, or gift from a limited used vehicle dealer licensed 
118.8   under section 168.27, subdivision 4a, to an individual, when the 
118.9   transfer is with no monetary or other consideration or 
118.10  expectation of consideration and the parties to the transfer 
118.11  submit an affidavit to that effect at the time the title 
118.12  transfer is recorded; 
118.13     (4) the voluntary or involuntary transfer of a motor 
118.14  vehicle between a husband and wife in a divorce proceeding; or 
118.15     (5) the transfer of a motor vehicle by way of a gift to an 
118.16  organization that is exempt from federal income taxation under 
118.17  section 501(c)(3) of the Internal Revenue Code, as amended 
118.18  through December 31, 1996, when the motor vehicle will be used 
118.19  exclusively for religious, charitable, or educational purposes. 
118.20     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
118.21  after June 30, 2003. 
118.22     Sec. 42.  Minnesota Statutes 2002, section 297B.035, is 
118.23  amended by adding a subdivision to read: 
118.24     Subd. 5.  [USE BY DEALER.] If a motor vehicle dealer uses a 
118.25  vehicle, purchased for resale in the ordinary course of 
118.26  business, other than for demonstration purposes, the dealer may 
118.27  elect to pay the motor vehicle sales tax under this chapter or 
118.28  the use tax under chapter 297A based on the reasonable rental 
118.29  value of the vehicle.  If the motor vehicle dealer fails to 
118.30  report the use tax under chapter 297A, it is presumed that the 
118.31  dealer elected to pay the motor vehicle sales tax under this 
118.32  chapter. 
118.33     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
118.34  after June 30, 2003. 
118.35     Sec. 43.  Laws 2001, First Special Session chapter 5, 
118.36  article 12, section 95, as amended by Laws 2002, chapter 377, 
119.1   article 3, section 24, is amended to read: 
119.2      Sec. 95.  [REPEALER.] 
119.3      (a) Minnesota Statutes 2000, sections 297A.61, subdivision 
119.4   16; 297A.68, subdivision 21; and 297A.71, subdivision 2, are 
119.5   repealed effective for sales and purchases occurring after June 
119.6   30, 2001, except that the repeal of section 297A.61, subdivision 
119.7   16, paragraph (d), is effective for sales and purchases 
119.8   occurring after July 31, 2001. 
119.9      (b) Minnesota Statutes 2000, sections 297A.62, subdivision 
119.10  2, and 297A.64, subdivision 1, are repealed effective for sales 
119.11  and purchases made after December 31, 2005. 
119.12     (c) Minnesota Statutes 2000, section 297A.71, subdivision 
119.13  15, is repealed effective for sales and purchases made after 
119.14  June 30, 2002. 
119.15     (d) Minnesota Statutes 2000, section 289A.60, subdivision 
119.16  15, is repealed effective for liabilities after January 1, 2004. 
119.17     (e) Minnesota Statutes 2000, section 297A.71, subdivision 
119.18  16, is repealed effective for sales and purchases occurring 
119.19  after December 31, 2002. 
119.20     Sec. 44.  [STATE CONVENTION CENTER.] 
119.21     Subdivision 1.  [EXEMPTION.] Building materials, supplies, 
119.22  or equipment used or consumed in constructing or equipping 
119.23  improvements to a state convention center located in a city 
119.24  outside the metropolitan area as defined in section 473.121, 
119.25  subdivision 2, and governed by an 11-person board of which four 
119.26  are appointed by the governor are exempt if the improvements are 
119.27  financed in whole or in part by nonstate resources including, 
119.28  but not limited to, revenue or general obligations issued by the 
119.29  state convention center board of the city in which the center is 
119.30  located.  This exemption applies regardless of whether the items 
119.31  are purchased by the owner or by a contractor, subcontractor, or 
119.32  builder. 
119.33     Subd. 2.  [LEGISLATIVE INTENT.] This section is intended to 
119.34  clarify the original intent of Minnesota Statutes, section 
119.35  297A.71, subdivision 2. 
119.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
120.1   following final enactment and applies retroactively to sales and 
120.2   purchases made after June 30, 1995, and before July 1, 2001. 
120.3      Sec. 45.  [CITY OF NEWPORT; LODGING TAX.] 
120.4      Subdivision 1.  [LODGING TAX.] Notwithstanding Minnesota 
120.5   Statutes, section 477A.016, or any ordinance, city charter, or 
120.6   other provision of law, the city of Newport may, by ordinance, 
120.7   impose a tax of up to four percent upon the gross receipts from 
120.8   the sale of lodging for periods of less than 30 days in hotels 
120.9   and motels located in the city.  The tax does not apply to the 
120.10  furnishing of lodging by a business having less than 25 lodging 
120.11  rooms.  The total amount of taxes imposed under this section and 
120.12  under Minnesota Statutes, section 469.190, shall not exceed four 
120.13  percent. 
120.14     Subd. 2.  [USE OF PROCEEDS.] The proceeds of any tax 
120.15  imposed in subdivision 1 shall be used by the city to fund 
120.16  economic development and redevelopment of the city.  Authorized 
120.17  expenses include, but are not limited to, acquisition and 
120.18  development costs of open space, parks, and trails. 
120.19     Subd. 3.  [ENFORCEMENT, COLLECTION, AND 
120.20  ADMINISTRATION.] The tax shall be collected and administered in 
120.21  the same manner as local lodging taxes under Minnesota Statutes, 
120.22  section 469.190. 
120.23     <b>[EFFECTIVE DATE.]</b> This section is effective upon approval 
120.24  by the Newport city council and compliance with Minnesota 
120.25  Statutes, section 645.021, subdivision 3. 
120.26     Sec. 46.  [STUDY OF LOCAL SALES TAX.] 
120.27     (a) The commissioner of revenue shall study the local sales 
120.28  taxes in Minnesota and provide a written report and 
120.29  recommendations to the legislature, in compliance with Minnesota 
120.30  Statutes, sections 3.195 and 3.197, by February 1, 2004.  The 
120.31  study must report on: 
120.32     (1) the authorized uses of revenue from local sales taxes 
120.33  in effect, and the proposed uses of revenue from local sales 
120.34  taxes recently proposed but not enacted; 
120.35     (2) the local approval requirements for local sales taxes; 
120.36     (3) the duration of local sales taxes and whether the full 
121.1   duration authorized in law was necessary to provide sufficient 
121.2   revenue for the authorized uses of the local sales tax; 
121.3      (4) if the authorized uses of the local sales tax revenues 
121.4   are regional in nature or limited in benefit to the jurisdiction 
121.5   in which the tax is imposed; 
121.6      (5) the estimated portion of revenue raised through the 
121.7   local sales taxes that comes from (i) residents of the 
121.8   jurisdiction in which the tax is imposed; (ii) Minnesota 
121.9   residents who live outside the jurisdiction; and (iii) 
121.10  non-Minnesota residents; 
121.11     (6) the ability of jurisdictions to raise revenue by other 
121.12  means, including the local property tax, and the extent to which 
121.13  the jurisdictions assess property taxes in comparison to other 
121.14  similar jurisdictions, and the state average, expressed in terms 
121.15  of levy as a percent of adjusted net tax capacity; 
121.16     (7) how jurisdictions that do not impose local sales taxes 
121.17  raise revenue to fund projects similar to those funded through 
121.18  local sales taxes; and 
121.19     (8) the compatibility of local sales taxes with the 
121.20  policies underlying the streamlined sales tax project. 
121.21     (b) The study must make recommendations on: 
121.22     (1) the appropriate role of local sales taxes as a part of 
121.23  Minnesota's state and local revenue system, including: 
121.24     (i) the appropriate uses of local sales taxes; and 
121.25     (ii) whether local sales taxes should be limited to 
121.26  jurisdictions that do not meet minimum thresholds of raising 
121.27  revenue through other means, including local property tax; 
121.28     (2) criteria to be used in evaluating local sales tax 
121.29  proposals, designed to direct the use of local sales taxes 
121.30  toward: 
121.31     (i) projects that are regional in nature; 
121.32     (ii) projects that require capital expenditures; and 
121.33     (iii) projects in jurisdictions with inadequate fiscal 
121.34  capacity to fund the projects through other means; and 
121.35     (3) the feasibility of authorizing the commissioner of 
121.36  revenue to approve or deny local sales taxes proposals based on 
122.1   a uniform set of criteria, including the advisability of 
122.2   requiring local approval by referendum or revocation by reverse 
122.3   referendum, and if the referendum should be a criterion 
122.4   necessary for a proposal to be considered for authorization or 
122.5   should occur after authorization but as a condition of the tax 
122.6   being implemented. 
122.7      Sec. 47.  [APPROPRIATION.] 
122.8      $259,000 in fiscal year 2004 is appropriated to the 
122.9   commissioner of revenue from the general fund for the cost of 
122.10  administering the streamlined sales tax project provisions of 
122.11  this article. 
122.12     Sec. 48.  [REPEALER.] 
122.13     (a) Minnesota Statutes 2002, section 297A.61, subdivisions 
122.14  14 and 15, are repealed and are effective for sales and 
122.15  purchases made on or after January 1, 2004. 
122.16     (b) Minnesota Statutes 2002, section 297A.69, subdivision 
122.17  5, is repealed effective January 1, 2006. 
122.18     (c) Minnesota Statutes 2002, section 325E.112, subdivision 
122.19  2a, is repealed effective July 1, 2003. 
122.20                             ARTICLE 5 
122.21                           PROPERTY TAXES 
122.22     Section 1.  [123A.455] [REALIGNING SPLIT RESIDENTIAL 
122.23  PARCELS.] 
122.24     Subdivision 1.  [DEFINITIONS.] "Split residential property 
122.25  parcel" means a parcel of real estate that is located within the 
122.26  boundaries of more than one school district and that is 
122.27  classified as residential property under: 
122.28     (1) section 273.13, subdivision 22, paragraph (a) or (b); 
122.29     (2) section 273.13, subdivision 25, paragraph (b), clause 
122.30  (1); or 
122.31     (3) section 273.13, subdivision 25, paragraph (c), clause 
122.32  (1). 
122.33     Subd. 2.  [PETITION.] The owner of a split residential 
122.34  property parcel may petition the auditor of the county where the 
122.35  split parcel is located to transfer that part into the adjoining 
122.36  school district so the entire property will be located in the 
123.1   same school district.  The petition must contain: 
123.2      (1) a correct description of the split parcel to be 
123.3   affected by the transfer including supporting data on location 
123.4   and title to the land; 
123.5      (2) a list of the school districts in which the split 
123.6   parcels currently lie; 
123.7      (3) the school district into which the petitioner desires 
123.8   to have the whole split parcel transferred; and 
123.9      (4) the district of attendance of any students currently 
123.10  residing on the property. 
123.11     Subd. 3.  [AUDITOR'S ORDER.] Within 60 days of receipt of 
123.12  the petition, the auditor of the county in which the petition 
123.13  was filed under subdivision 2 shall issue an order to transfer 
123.14  the affected parcel to the district determined by the county 
123.15  board.  Orders issued on or before July 1 will be effective for 
123.16  taxes payable in the following year.  The auditor must notify 
123.17  the affected school districts and the commissioner of the change 
123.18  in school district boundaries. 
123.19     Subd. 4.  [COMMISSIONER.] The commissioner shall modify the 
123.20  records of school district boundaries to conform to the order. 
123.21     Subd. 5.  [TAXABLE PROPERTY.] Upon the effective date of 
123.22  the order, the whole split property parcel is transferred into a 
123.23  single school district.  Beginning in the next subsequent taxes 
123.24  payable year, all taxable property in the whole split parcel is: 
123.25     (1) relieved of all school district taxes from the district 
123.26  in which the parcel is no longer located; and 
123.27     (2) subject to all school district taxes in the district in 
123.28  which the whole split parcel is now located. 
123.29     <b>[EFFECTIVE DATE.]</b> This section is effective for petitions 
123.30  filed on or after the day following final enactment.  Orders 
123.31  issued under subdivision 3 on or before September 15, 2003, are 
123.32  effective for taxes payable in 2004.  
123.33     Sec. 2.  [126C.446] [TREE GROWTH REPLACEMENT REVENUE.] 
123.34     Beginning with taxes payable in 2004, a school district may 
123.35  levy an amount not to exceed its miscellaneous revenue for tree 
123.36  growth revenue for taxes payable in 2002.  
124.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
124.2   following final enactment and supersedes any change made to this 
124.3   specific revenue contained in Laws 2003, H.F. 1404, regardless 
124.4   of order of enactment. 
124.5      Sec. 3.  Minnesota Statutes 2002, section 161.465, is 
124.6   amended to read: 
124.7      161.465 [REIMBURSEMENT FOR FIRE SERVICES.] 
124.8      (a) Subdivision 1.  [GRASS FIRES.] Ordinary expenses 
124.9   incurred by a municipal or volunteer fire department in 
124.10  extinguishing a grass fire within the right-of-way of a trunk 
124.11  highway must be reimbursed upon certification to the 
124.12  commissioner of transportation from the trunk highway fund.  In 
124.13  addition, ordinary expenses incurred by a municipal or volunteer 
124.14  fire department in extinguishing a fire outside the right-of-way 
124.15  of any trunk highway if the fire originated within the 
124.16  right-of-way, upon approval of a police officer or an officer or 
124.17  employee of the department of public safety must, upon 
124.18  certification to the commissioner of transportation by the 
124.19  proper official of the municipality or fire department within 60 
124.20  days after the completion of the service, be reimbursed to the 
124.21  municipality or fire department from funds in the trunk highway 
124.22  fund.  
124.23     Subd. 2.  [MOTOR VEHICLE FIRES.] Ordinary expenses incurred 
124.24  by a municipal or volunteer fire department in extinguishing a 
124.25  motor vehicle fire within the right-of-way of a trunk highway or 
124.26  interstate, to the extent these expenses are not reimbursed by 
124.27  insurance, some other reasonable method of reimbursement, or 
124.28  collected in accordance with section 366.012, may be reimbursed 
124.29  by the commissioner from the motor vehicle fire revolving 
124.30  account in the general fund up to $300 per fire call upon 
124.31  certification to the commissioner. 
124.32     Subd. 3.  [FUND REIMBURSEMENT.] The commissioner of 
124.33  transportation shall take action practicable to secure 
124.34  reimbursement to the trunk highway fund or to the general fund 
124.35  of money expended under this section from the person, firm, or 
124.36  corporation responsible for the fire or danger of fire.  A motor 
125.1   vehicle fire revolving account is created in the general fund.  
125.2   The commissioner shall deposit into the account all money 
125.3   received by the commissioner in reimbursements from persons, 
125.4   firms, or corporations for costs of extinguishing motor vehicle 
125.5   fires within trunk highway rights-of-way.  Money in the account 
125.6   is appropriated to the commissioner for the purpose of making 
125.7   reimbursements to municipal or volunteer fire departments under 
125.8   subdivision 2. 
125.9      (b) Subd. 4.  [NO ADMISSION OF LIABILITY.] The provisions 
125.10  of this section shall not be construed to admit state liability 
125.11  for damage or destruction to private property or for injury to 
125.12  persons resulting from a fire originating within a trunk highway 
125.13  or interstate right-of-way. 
125.14     <b>[EFFECTIVE DATE.]</b> This section is effective for motor 
125.15  vehicle fires after June 30, 2003. 
125.16     Sec. 4.  Minnesota Statutes 2002, section 168A.05, 
125.17  subdivision 1a, is amended to read: 
125.18     Subd. 1a.  [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 
125.19  PAYMENT.] In the case of a manufactured home as defined in 
125.20  section 327.31, subdivision 6, the department shall not issue a 
125.21  certificate of title unless the application under section 
125.22  168A.04 is accompanied with a statement from the county auditor 
125.23  or county treasurer where the manufactured home is presently 
125.24  located, stating that all manufactured home personal property 
125.25  taxes levied on the unit that are due from in the name of the 
125.26  current owner at the time of transfer for which the application 
125.27  applies, have been paid. 
125.28     <b>[EFFECTIVE DATE.]</b> This section is effective for 
125.29  certificates of title issued by the department on or after July 
125.30  1, 2003. 
125.31     Sec. 5.  Minnesota Statutes 2002, section 216B.2424, 
125.32  subdivision 5, is amended to read: 
125.33     Subd. 5.  [MANDATE.] (a) A public utility, as defined in 
125.34  section 216B.02, subdivision 4, that operates a nuclear-powered 
125.35  electric generating plant within this state must construct and 
125.36  operate, purchase, or contract to construct and operate (1) by 
126.1   December 31, 1998, 50 megawatts of electric energy installed 
126.2   capacity generated by farm-grown closed-loop biomass scheduled 
126.3   to be operational by December 31, 2001; and (2) by December 31, 
126.4   1998, an additional 75 megawatts of installed capacity so 
126.5   generated scheduled to be operational by December 31, 2002.  
126.6      (b) Of the 125 megawatts of biomass electricity installed 
126.7   capacity required under this subdivision, no more than 50 
126.8   megawatts of this capacity may be provided by a facility that 
126.9   uses poultry litter as its primary fuel source and any such 
126.10  facility:  
126.11     (1) need not use biomass that complies with the definition 
126.12  in subdivision 1; 
126.13     (2) must enter into a contract with the public utility for 
126.14  such capacity, that has an average purchase price per megawatt 
126.15  hour over the life of the contract that is equal to or less than 
126.16  the average purchase price per megawatt hour over the life of 
126.17  the contract in contracts approved by the public utilities 
126.18  commission before April 1, 2000, to satisfy the mandate of this 
126.19  section, and file that contract with the public utilities 
126.20  commission prior to September 1, 2000; and 
126.21     (3) must schedule such capacity to be operational by 
126.22  December 31, 2002.  
126.23     (c) Of the total 125 megawatts of biomass electric energy 
126.24  installed capacity required under this section, no more than 75 
126.25  megawatts may be provided by a single project.  
126.26     (d) Of the 75 megawatts of biomass electric energy 
126.27  installed capacity required under paragraph (a), clause (2), no 
126.28  more than 25 megawatts of this capacity may be provided by a St. 
126.29  Paul district heating and cooling system cogeneration facility 
126.30  utilizing waste wood as a primary fuel source.  The St. Paul 
126.31  district heating and cooling system cogeneration facility need 
126.32  not use biomass that complies with the definition in subdivision 
126.33  1.  
126.34     (e) The public utility must accept and consider on an equal 
126.35  basis with other biomass proposals: 
126.36     (1) a proposal to satisfy the requirements of this section 
127.1   that includes a project that exceeds the megawatt capacity 
127.2   requirements of either paragraph (a), clause (1) or (2), and 
127.3   that proposes to sell the excess capacity to the public utility 
127.4   or to other purchasers; and 
127.5      (2) a proposal for a new facility to satisfy more than ten 
127.6   but not more than 20 megawatts of the electrical generation 
127.7   requirements by a small business-sponsored independent power 
127.8   producer facility to be located within the northern quarter of 
127.9   the state, which means the area located north of Constitutional 
127.10  Route No. 8 as described in section 161.114, subdivision 2, and 
127.11  that utilizes biomass residue wood, sawdust, bark, chipped wood, 
127.12  or brush to generate electricity.  A facility described in this 
127.13  clause is not required to utilize biomass complying with the 
127.14  definition in subdivision 1, but must have the capacity required 
127.15  by this clause operational by December 31, 2002 be under 
127.16  construction by July 1, 2005. 
127.17     (f) If a public utility files a contract with the 
127.18  commission for electric energy installed capacity that uses 
127.19  poultry litter as its primary fuel source, the commission must 
127.20  do a preliminary review of the contract to determine if it meets 
127.21  the purchase price criteria provided in paragraph (b), clause 
127.22  (2), of this subdivision.  The commission shall perform its 
127.23  review and advise the parties of its determination within 30 
127.24  days of filing of such a contract by a public utility.  A public 
127.25  utility may submit by September 1, 2000, a revised contract to 
127.26  address the commission's preliminary determination.  
127.27     (g) The commission shall finally approve, modify, or 
127.28  disapprove no later than July 1, 2001, all contracts submitted 
127.29  by a public utility as of September 1, 2000, to meet the mandate 
127.30  set forth in this subdivision.  
127.31     (h) If a public utility subject to this section exercises 
127.32  an option to increase the generating capacity of a project in a 
127.33  contract approved by the commission prior to April 25, 2000, to 
127.34  satisfy the mandate in this subdivision, the public utility must 
127.35  notify the commission by September 1, 2000, that it has 
127.36  exercised the option and include in the notice the amount of 
128.1   additional megawatts to be generated under the option 
128.2   exercised.  Any review by the commission of the project after 
128.3   exercise of such an option shall be based on the same criteria 
128.4   used to review the existing contract. 
128.5      (i) A facility specified in this subdivision qualifies for 
128.6   exemption from property taxation under section 272.02, 
128.7   subdivision 43. 
128.8      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
128.9   following final enactment. 
128.10     Sec. 6.  Minnesota Statutes 2002, section 270B.12, is 
128.11  amended by adding a subdivision to read: 
128.12     Subd. 13.  [COUNTY ASSESSORS; CLASS 1B HOMESTEADS.] The 
128.13  commissioner may disclose to a county assessor, and to the 
128.14  assessor's designated agents or employees, a listing of persons 
128.15  and parcels of property qualifying for the class 1b property tax 
128.16  classification under section 273.13, subdivision 22.  
128.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
128.18  following final enactment. 
128.19     Sec. 7.  Minnesota Statutes 2002, section 272.02, 
128.20  subdivision 31, is amended to read: 
128.21     Subd. 31.  [BUSINESS INCUBATOR PROPERTY.] Property owned by 
128.22  a nonprofit charitable organization that qualifies for tax 
128.23  exemption under section 501(c)(3) of the Internal Revenue Code 
128.24  of 1986, as amended through December 31, 1997, that is intended 
128.25  to be used as a business incubator in a high-unemployment 
128.26  county, is exempt.  As used in this subdivision, a "business 
128.27  incubator" is a facility used for the development of nonretail 
128.28  businesses, offering access to equipment, space, services, and 
128.29  advice to the tenant businesses, for the purpose of encouraging 
128.30  economic development, diversification, and job creation in the 
128.31  area served by the organization, and "high-unemployment county" 
128.32  is a county that had an average annual unemployment rate of 7.9 
128.33  percent or greater in 1997.  Property that qualifies for the 
128.34  exemption under this subdivision is limited to no more than two 
128.35  contiguous parcels and structures that do not exceed in the 
128.36  aggregate 40,000 square feet.  This exemption expires after 
129.1   taxes payable in 2005 2011. 
129.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
129.3   following final enactment. 
129.4      Sec. 8.  Minnesota Statutes 2002, section 272.02, 
129.5   subdivision 47, is amended to read: 
129.6      Subd. 47.  [POULTRY LITTER BIOMASS GENERATION FACILITY; 
129.7   PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 
129.8   attached machinery and other personal property which is part of 
129.9   an electrical generating facility that meets the requirements of 
129.10  this subdivision is exempt.  At the time of construction, the 
129.11  facility must: 
129.12     (1) be designed to utilize poultry litter as a primary fuel 
129.13  source; and 
129.14     (2) be constructed for the purpose of generating power at 
129.15  the facility that will be sold pursuant to a contract approved 
129.16  by the public utilities commission in accordance with the 
129.17  biomass mandate imposed under section 216B.2424. 
129.18     Construction of the facility must be commenced after 
129.19  January 1, 2000 2003, and before December 31, 2002 2003.  
129.20  Property eligible for this exemption does not include electric 
129.21  transmission lines and interconnections or gas pipelines and 
129.22  interconnections appurtenant to the property or the facility. 
129.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
129.24  levied in 2004, payable in 2005, and thereafter. 
129.25     Sec. 9.  Minnesota Statutes 2002, section 272.02, 
129.26  subdivision 48, is amended to read: 
129.27     Subd. 48.  [WASTE TIRE COGENERATION FACILITY; PERSONAL 
129.28  PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
129.29  machinery and other personal property which is part of an 
129.30  electric generating facility that meets the requirements of this 
129.31  subdivision is exempt.  At the time of construction, the 
129.32  facility must: 
129.33     (1) be designed to utilize waste tires as a primary fuel 
129.34  source; and 
129.35     (2) be a cogeneration electric generating facility of 15 to 
129.36  25 megawatts of installed capacity. 
130.1      Construction of the facility must be commenced after 
130.2   January 1, 2000, and before January 1, 2004 2008.  Property 
130.3   eligible for this exemption does not include electric 
130.4   transmission lines and interconnections or gas pipelines and 
130.5   interconnections appurtenant to the property or the facility.  
130.6      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
130.7   following final enactment. 
130.8      Sec. 10.  Minnesota Statutes 2002, section 272.02, 
130.9   subdivision 53, is amended to read: 
130.10     Subd. 53.  [ELECTRIC GENERATION FACILITY; PERSONAL 
130.11  PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
130.12  machinery and other personal property which is part of a 3.2 
130.13  megawatt run-of-the-river hydroelectric generation facility and 
130.14  that meets the requirements of this subdivision is exempt.  At 
130.15  the time of construction, the facility must: 
130.16     (1) utilize two turbine generators at a dam site existing 
130.17  on March 31, 1994; 
130.18     (2) be located on publicly owned land and within 1,500 feet 
130.19  of a 13.8 kilovolt distribution substation; and 
130.20     (3) be eligible to receive a renewable energy production 
130.21  incentive payment under section 216C.41. 
130.22     Construction of the facility must be commenced after 
130.23  January 1, 2002, and before January 1, 2004 2005.  Property 
130.24  eligible for this exemption does not include electric 
130.25  transmission lines and interconnections or gas pipelines and 
130.26  interconnections appurtenant to the property or the facility. 
130.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
130.28  following final enactment. 
130.29     Sec. 11.  Minnesota Statutes 2002, section 272.02, is 
130.30  amended by adding a subdivision to read: 
130.31     Subd. 56.  [ELECTRIC GENERATION FACILITY; PERSONAL 
130.32  PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
130.33  attached machinery and other personal property which is part of 
130.34  a combined-cycle combustion-turbine electric generation facility 
130.35  that exceeds 550 megawatts of installed capacity and that meets 
130.36  the requirements of this subdivision is exempt.  At the time of 
131.1   construction, the facility must: 
131.2      (1) be designed to utilize natural gas as a primary fuel; 
131.3      (2) not be owned by a public utility as defined in section 
131.4   216B.02, subdivision 4; 
131.5      (3) be located within five miles of an existing natural gas 
131.6   pipeline and within four miles of an existing electrical 
131.7   transmission substation; 
131.8      (4) be located outside the metropolitan area as defined 
131.9   under section 473.121, subdivision 2; and 
131.10     (5) be designed to provide energy and ancillary services 
131.11  and have received a certificate of need under section 216B.243. 
131.12     (b) Construction of the facility must be commenced after 
131.13  January 1, 2004, and before January 1, 2007.  Property eligible 
131.14  for this exemption does not include electric transmission lines 
131.15  and interconnections or gas pipelines and interconnections 
131.16  appurtenant to the property or the facility. 
131.17     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
131.18  year 2005, taxes payable in 2006, and thereafter. 
131.19     Sec. 12.  Minnesota Statutes 2002, section 272.02, is 
131.20  amended by adding a subdivision to read: 
131.21     Subd. 57.  [ELECTRIC GENERATION FACILITY; PERSONAL 
131.22  PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
131.23  attached machinery and other personal property which is part of 
131.24  a combined-cycle combustion-turbine electric generation facility 
131.25  that exceeds 150 megawatts of installed capacity and that meets 
131.26  the requirements of this subdivision is exempt.  At the time of 
131.27  construction, the facility must: 
131.28     (1) utilize natural gas as a primary fuel; 
131.29     (2) be owned by an electric generation and transmission 
131.30  cooperative; 
131.31     (3) be located within ten miles of parallel existing 
131.32  24-inch and 30-inch natural gas pipelines and a 345-kilovolt 
131.33  high-voltage electric transmission line; 
131.34     (4) be designed to provide intermediate energy and 
131.35  ancillary services, and have received a certificate of need 
131.36  under section 216B.243, demonstrating demand for its capacity; 
132.1   and 
132.2      (5) have received by resolution, the approval from the 
132.3   governing body of the county and city in which the proposed 
132.4   facility is to be located for the exemption of personal property 
132.5   under this subdivision. 
132.6      (b) Construction of the facility must be commenced after 
132.7   January 1, 2004, and before January 1, 2009.  Property eligible 
132.8   for this exemption does not include electric transmission lines 
132.9   and interconnections or gas pipelines and interconnections 
132.10  appurtenant to the property or the facility. 
132.11     (c) The exemption under this section will take effect only 
132.12  if the owner of the facility enters into agreements with the 
132.13  governing bodies of the county and the city in which the 
132.14  facility is located.  The agreements may include a requirement 
132.15  that the facility must pay a host fee to compensate the county 
132.16  and city for hosting the facility. 
132.17     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
132.18  year 2005, taxes payable in 2006, and thereafter. 
132.19     Sec. 13.  Minnesota Statutes 2002, section 273.01, is 
132.20  amended to read: 
132.21     273.01 [LISTING AND ASSESSMENT, TIME.] 
132.22     All real property subject to taxation shall be listed and 
132.23  at least one-fourth one-fifth of the parcels listed shall be 
132.24  appraised each year with reference to their value on January 2 
132.25  preceding the assessment so that each parcel shall be 
132.26  reappraised at maximum intervals of four five years.  All real 
132.27  property becoming taxable in any year shall be listed with 
132.28  reference to its value on January 2 of that year.  Except as 
132.29  provided in this section and section 274.01, subdivision 1, all 
132.30  real property assessments shall be completed two weeks prior to 
132.31  the date scheduled for the local board of review or 
132.32  equalization.  No changes in valuation or classification which 
132.33  are intended to correct errors in judgment by the county 
132.34  assessor may be made by the county assessor after the board of 
132.35  review or the county board of equalization has adjourned; 
132.36  however, corrections of errors that are merely clerical in 
133.1   nature or changes that extend homestead treatment to property 
133.2   are permitted after adjournment until the tax extension date for 
133.3   that assessment year.  Any changes made by the assessor after 
133.4   adjournment must be fully documented and maintained in a file in 
133.5   the assessor's office and shall be available for review by any 
133.6   person.  A copy of any changes made during this period shall be 
133.7   sent to the county board no later than December 31 of the 
133.8   assessment year.  In the event a valuation and classification is 
133.9   not placed on any real property by the dates scheduled for the 
133.10  local board of review or equalization the valuation and 
133.11  classification determined in the preceding assessment shall be 
133.12  continued in effect and the provisions of section 273.13 shall, 
133.13  in such case, not be applicable, except with respect to real 
133.14  estate which has been constructed since the previous 
133.15  assessment.  Real property containing iron ore, the fee to which 
133.16  is owned by the state of Minnesota, shall, if leased by the 
133.17  state after January 2 in any year, be subject to assessment for 
133.18  that year on the value of any iron ore removed under said lease 
133.19  prior to January 2 of the following year.  Personal property 
133.20  subject to taxation shall be listed and assessed annually with 
133.21  reference to its value on January 2; and, if acquired on that 
133.22  day, shall be listed by or for the person acquiring it.  
133.23     <b>[EFFECTIVE DATE.]</b> This section is effective for assessments 
133.24  on or after January 2, 2004. 
133.25     Sec. 14.  Minnesota Statutes 2002, section 273.08, is 
133.26  amended to read: 
133.27     273.08 [ASSESSOR'S DUTIES.] 
133.28     The assessor shall actually view, and determine the market 
133.29  value of each tract or lot of real property listed for taxation, 
133.30  including the value of all improvements and structures thereon, 
133.31  at maximum intervals of four five years and shall enter the 
133.32  value opposite each description. 
133.33     <b>[EFFECTIVE DATE.]</b> This section is effective for assessments 
133.34  on or after January 2, 2004. 
133.35     Sec. 15.  Minnesota Statutes 2002, section 273.112, 
133.36  subdivision 3, is amended to read: 
134.1      Subd. 3.  [REQUIREMENTS.] Real estate shall be entitled to 
134.2   valuation and tax deferment under this section only if it is: 
134.3      (a) actively and exclusively devoted to golf, skiing, lawn 
134.4   bowling, croquet, auto racing, or archery or firearms range 
134.5   recreational use or other recreational uses carried on at the 
134.6   establishment; 
134.7      (b) five acres in size or more, except in the case of a 
134.8   lawn bowling or croquet green or an archery or firearms range; 
134.9      (c)(1) operated by private individuals or, in the case of a 
134.10  lawn bowling green, or croquet green, or an auto racing track, 
134.11  by private individuals or corporations, and open to the public; 
134.12  or 
134.13     (2) operated by firms or corporations for the benefit of 
134.14  employees or guests; or 
134.15     (3) operated by private clubs having a membership of 50 or 
134.16  more or open to the public, provided that the club does not 
134.17  discriminate in membership requirements or selection on the 
134.18  basis of sex or marital status; and 
134.19     (d) made available for use in the case of real estate 
134.20  devoted to golf without discrimination on the basis of sex 
134.21  during the time when the facility is open to use by the public 
134.22  or by members, except that use for golf may be restricted on the 
134.23  basis of sex no more frequently than one, or part of one, 
134.24  weekend each calendar month for each sex and no more than two, 
134.25  or part of two, weekdays each week for each sex.  
134.26     If a golf club membership allows use of golf course 
134.27  facilities by more than one adult per membership, the use must 
134.28  be equally available to all adults entitled to use of the golf 
134.29  course under the membership, except that use may be restricted 
134.30  on the basis of sex as permitted in this section.  Memberships 
134.31  that permit play during restricted times may be allowed only if 
134.32  the restricted times apply to all adults using the membership.  
134.33  A golf club may not offer a membership or golfing privileges to 
134.34  a spouse of a member that provides greater or less access to the 
134.35  golf course than is provided to that person's spouse under the 
134.36  same or a separate membership in that club, except that the 
135.1   terms of a membership may provide that one spouse may have no 
135.2   right to use the golf course at any time while the other spouse 
135.3   may have either limited or unlimited access to the golf course.  
135.4      A golf club may have or create an individual membership 
135.5   category which entitles a member for a reduced rate to play 
135.6   during restricted hours as established by the club.  The club 
135.7   must have on record a written request by the member for such 
135.8   membership.  
135.9      A golf club that has food or beverage facilities or 
135.10  services must allow equal access to those facilities and 
135.11  services for both men and women members in all membership 
135.12  categories at all times.  Nothing in this paragraph shall be 
135.13  construed to require service or access to facilities to persons 
135.14  under the age of 21 years or require any act that would violate 
135.15  law or ordinance regarding sale, consumption, or regulation of 
135.16  alcoholic beverages. 
135.17     For purposes of this subdivision and subdivision 7a, 
135.18  discrimination means a pattern or course of conduct and not 
135.19  linked to an isolated incident. 
135.20     <b>[EFFECTIVE DATE.]</b> This section is effective beginning in 
135.21  assessment year 2003, except that for the 2003 assessment year, 
135.22  the application for deferment under this section must be filed 
135.23  with the county assessor in which the property is located within 
135.24  60 days after final enactment of this act. 
135.25     Sec. 16.  Minnesota Statutes 2002, section 273.124, 
135.26  subdivision 14, is amended to read: 
135.27     Subd. 14.  [AGRICULTURAL HOMESTEADS; SPECIAL PROVISIONS.] 
135.28  (a) Real estate of less than ten acres that is the homestead of 
135.29  its owner must be classified as class 2a under section 273.13, 
135.30  subdivision 23, paragraph (a), if:  
135.31     (1) the parcel on which the house is located is contiguous 
135.32  on at least two sides to (i) agricultural land, (ii) land owned 
135.33  or administered by the United States Fish and Wildlife Service, 
135.34  or (iii) land administered by the department of natural 
135.35  resources on which in lieu taxes are paid under sections 477A.11 
135.36  to 477A.14; 
136.1      (2) its owner also owns a noncontiguous parcel of 
136.2   agricultural land that is at least 20 acres; 
136.3      (3) the noncontiguous land is located not farther than four 
136.4   townships or cities, or a combination of townships or cities 
136.5   from the homestead; and 
136.6      (4) the agricultural use value of the noncontiguous land 
136.7   and farm buildings is equal to at least 50 percent of the market 
136.8   value of the house, garage, and one acre of land. 
136.9      Homesteads initially classified as class 2a under the 
136.10  provisions of this paragraph shall remain classified as class 
136.11  2a, irrespective of subsequent changes in the use of adjoining 
136.12  properties, as long as the homestead remains under the same 
136.13  ownership, the owner owns a noncontiguous parcel of agricultural 
136.14  land that is at least 20 acres, and the agricultural use value 
136.15  qualifies under clause (4).  Homestead classification under this 
136.16  paragraph is limited to property that qualified under this 
136.17  paragraph for the 1998 assessment. 
136.18     (b)(i) Agricultural property consisting of at least 40 
136.19  acres shall be classified as the owner's homestead, to the same 
136.20  extent as other agricultural homestead property, if all of the 
136.21  following criteria are met: 
136.22     (1) the owner, the owner's spouse, or the son or daughter 
136.23  of the owner or owner's spouse, is actively farming the 
136.24  agricultural property, either on the person's own behalf as an 
136.25  individual or on behalf of a partnership operating a family 
136.26  farm, family farm corporation, joint family farm venture, or 
136.27  limited liability company of which the person is a partner, 
136.28  shareholder, or member; 
136.29     (2) both the owner of the agricultural property and the 
136.30  person who is actively farming the agricultural property under 
136.31  clause (1), are Minnesota residents; 
136.32     (3) neither the owner nor the spouse of the owner claims 
136.33  another agricultural homestead in Minnesota; and 
136.34     (4) neither the owner nor the person actively farming the 
136.35  property lives farther than four townships or cities, or a 
136.36  combination of four townships or cities, from the agricultural 
137.1   property, except that if the owner or the owner's spouse is 
137.2   required to live in employer-provided housing, the owner or 
137.3   owner's spouse, whichever is actively farming the agricultural 
137.4   property, may live more than four townships or cities, or 
137.5   combination of four townships or cities from the agricultural 
137.6   property. 
137.7      The relationship under this paragraph may be either by 
137.8   blood or marriage. 
137.9      (ii) Real property held by a trustee under a trust is 
137.10  eligible for agricultural homestead classification under this 
137.11  paragraph if the qualifications in clause (i) are met, except 
137.12  that "owner" means the grantor of the trust. 
137.13     (iii) Property containing the residence of an owner who 
137.14  owns qualified property under clause (i) shall be classified as 
137.15  part of the owner's agricultural homestead, if that property is 
137.16  also used for noncommercial storage or drying of agricultural 
137.17  crops. 
137.18     (c) Noncontiguous land shall be included as part of a 
137.19  homestead under section 273.13, subdivision 23, paragraph (a), 
137.20  only if the homestead is classified as class 2a and the detached 
137.21  land is located in the same township or city, or not farther 
137.22  than four townships or cities or combination thereof from the 
137.23  homestead.  Any taxpayer of these noncontiguous lands must 
137.24  notify the county assessor that the noncontiguous land is part 
137.25  of the taxpayer's homestead, and, if the homestead is located in 
137.26  another county, the taxpayer must also notify the assessor of 
137.27  the other county. 
137.28     (d) Agricultural land used for purposes of a homestead and 
137.29  actively farmed by a person holding a vested remainder interest 
137.30  in it must be classified as a homestead under section 273.13, 
137.31  subdivision 23, paragraph (a).  If agricultural land is 
137.32  classified class 2a, any other dwellings on the land used for 
137.33  purposes of a homestead by persons holding vested remainder 
137.34  interests who are actively engaged in farming the property, and 
137.35  up to one acre of the land surrounding each homestead and 
137.36  reasonably necessary for the use of the dwelling as a home, must 
138.1   also be assessed class 2a. 
138.2      (e) Agricultural land and buildings that were class 2a 
138.3   homestead property under section 273.13, subdivision 23, 
138.4   paragraph (a), for the 1997 assessment shall remain classified 
138.5   as agricultural homesteads for subsequent assessments if:  
138.6      (1) the property owner abandoned the homestead dwelling 
138.7   located on the agricultural homestead as a result of the April 
138.8   1997 floods; 
138.9      (2) the property is located in the county of Polk, Clay, 
138.10  Kittson, Marshall, Norman, or Wilkin; 
138.11     (3) the agricultural land and buildings remain under the 
138.12  same ownership for the current assessment year as existed for 
138.13  the 1997 assessment year and continue to be used for 
138.14  agricultural purposes; 
138.15     (4) the dwelling occupied by the owner is located in 
138.16  Minnesota and is within 30 miles of one of the parcels of 
138.17  agricultural land that is owned by the taxpayer; and 
138.18     (5) the owner notifies the county assessor that the 
138.19  relocation was due to the 1997 floods, and the owner furnishes 
138.20  the assessor any information deemed necessary by the assessor in 
138.21  verifying the change in dwelling.  Further notifications to the 
138.22  assessor are not required if the property continues to meet all 
138.23  the requirements in this paragraph and any dwellings on the 
138.24  agricultural land remain uninhabited. 
138.25     (f) Agricultural land and buildings that were class 2a 
138.26  homestead property under section 273.13, subdivision 23, 
138.27  paragraph (a), for the 1998 assessment shall remain classified 
138.28  agricultural homesteads for subsequent assessments if: 
138.29     (1) the property owner abandoned the homestead dwelling 
138.30  located on the agricultural homestead as a result of damage 
138.31  caused by a March 29, 1998, tornado; 
138.32     (2) the property is located in the county of Blue Earth, 
138.33  Brown, Cottonwood, LeSueur, Nicollet, Nobles, or Rice; 
138.34     (3) the agricultural land and buildings remain under the 
138.35  same ownership for the current assessment year as existed for 
138.36  the 1998 assessment year; 
139.1      (4) the dwelling occupied by the owner is located in this 
139.2   state and is within 50 miles of one of the parcels of 
139.3   agricultural land that is owned by the taxpayer; and 
139.4      (5) the owner notifies the county assessor that the 
139.5   relocation was due to a March 29, 1998, tornado, and the owner 
139.6   furnishes the assessor any information deemed necessary by the 
139.7   assessor in verifying the change in homestead dwelling.  For 
139.8   taxes payable in 1999, the owner must notify the assessor by 
139.9   December 1, 1998.  Further notifications to the assessor are not 
139.10  required if the property continues to meet all the requirements 
139.11  in this paragraph and any dwellings on the agricultural land 
139.12  remain uninhabited. 
139.13     (g) Agricultural property consisting of at least 40 acres 
139.14  of a family farm corporation, joint family farm venture, family 
139.15  farm limited liability company, or partnership operating a 
139.16  family farm as described under subdivision 8 shall be classified 
139.17  homestead, to the same extent as other agricultural homestead 
139.18  property, if all of the following criteria are met: 
139.19     (1) a shareholder, member, or partner of that entity is 
139.20  actively farming the agricultural property; 
139.21     (2) that shareholder, member, or partner who is actively 
139.22  farming the agricultural property is a Minnesota resident; 
139.23     (3) neither that shareholder, member, or partner, nor the 
139.24  spouse of that shareholder, member, or partner claims another 
139.25  agricultural homestead in Minnesota; and 
139.26     (4) that shareholder, member, or partner does not live 
139.27  farther than four townships or cities, or a combination of four 
139.28  townships or cities, from the agricultural property. 
139.29     Homestead treatment applies under this paragraph for 
139.30  property leased to a family farm corporation, joint farm 
139.31  venture, limited liability company, or partnership operating a 
139.32  family farm if legal title to the property is in the name of an 
139.33  individual who is a member, shareholder, or partner in the 
139.34  entity. 
139.35     (h) To be eligible for the special agricultural homestead 
139.36  under this subdivision, an initial full application must be 
140.1   submitted to the county assessor where the property is located.  
140.2   Owners and the persons who are actively farming the property 
140.3   shall be required to complete only a one-page abbreviated 
140.4   version of the application in each subsequent year provided that 
140.5   none of the following items have changed since the initial 
140.6   application: 
140.7      (1) the day-to-day operation, administration, and financial 
140.8   risks remain the same; 
140.9      (2) the owners and the persons actively farming the 
140.10  property continue to live within the four townships or city 
140.11  criteria and are Minnesota residents; 
140.12     (3) the same operator of the agricultural property is 
140.13  listed with the farm service agency; 
140.14     (4) a Schedule F or equivalent income tax form was filed 
140.15  for the most recent year; 
140.16     (5) the property's acreage is unchanged; and 
140.17     (6) none of the property's acres have been enrolled in a 
140.18  federal or state farm program since the initial application. 
140.19     The owners and any persons who are actively farming the 
140.20  property must include the appropriate social security numbers, 
140.21  and sign and date the application.  If any of the specified 
140.22  information has changed since the full application was filed, 
140.23  the owner must notify the assessor, and must complete a new 
140.24  application to determine if the property continues to qualify 
140.25  for the special agricultural homestead.  The commissioner of 
140.26  revenue shall prepare a standard reapplication form for use by 
140.27  the assessors. 
140.28     <b>[EFFECTIVE DATE.]</b> This section is effective for 
140.29  applications filed for the 2004 assessment and thereafter. 
140.30     Sec. 17.  Minnesota Statutes 2002, section 273.13, 
140.31  subdivision 22, is amended to read: 
140.32     Subd. 22.  [CLASS 1.] (a) Except as provided in subdivision 
140.33  23 and in paragraphs (b) and (c), real estate which is 
140.34  residential and used for homestead purposes is class 1a.  In the 
140.35  case of a duplex or triplex in which one of the units is used 
140.36  for homestead purposes, the entire property is deemed to be used 
141.1   for homestead purposes.  The market value of class 1a property 
141.2   must be determined based upon the value of the house, garage, 
141.3   and land.  
141.4      The first $500,000 of market value of class 1a property has 
141.5   a net class rate of one percent of its market value; and the 
141.6   market value of class 1a property that exceeds $500,000 has a 
141.7   class rate of 1.25 percent of its market value. 
141.8      (b) Class 1b property includes homestead real estate or 
141.9   homestead manufactured homes used for the purposes of a 
141.10  homestead by 
141.11     (1) any blind person, or the blind person and the blind 
141.12  person's spouse; or 
141.13     (2) any person, hereinafter referred to as "veteran," who: 
141.14     (i) served in the active military or naval service of the 
141.15  United States; and 
141.16     (ii) is entitled to compensation under the laws and 
141.17  regulations of the United States for permanent and total 
141.18  service-connected disability due to the loss, or loss of use, by 
141.19  reason of amputation, ankylosis, progressive muscular 
141.20  dystrophies, or paralysis, of both lower extremities, such as to 
141.21  preclude motion without the aid of braces, crutches, canes, or a 
141.22  wheelchair; and 
141.23     (iii) has acquired a special housing unit with special 
141.24  fixtures or movable facilities made necessary by the nature of 
141.25  the veteran's disability, or the surviving spouse of the 
141.26  deceased veteran for as long as the surviving spouse retains the 
141.27  special housing unit as a homestead; or 
141.28     (3) any person who: 
141.29     (i) is permanently and totally disabled and 
141.30     (ii) receives 90 percent or more of total household income, 
141.31  as defined in section 290A.03, subdivision 5, from 
141.32     (A) aid from any state as a result of that disability; or 
141.33     (B) supplemental security income for the disabled; or 
141.34     (C) workers' compensation based on a finding of total and 
141.35  permanent disability; or 
141.36     (D) social security disability, including the amount of a 
142.1   disability insurance benefit which is converted to an old age 
142.2   insurance benefit and any subsequent cost of living increases; 
142.3   or 
142.4      (E) aid under the federal Railroad Retirement Act of 1937, 
142.5   United States Code Annotated, title 45, section 228b(a)5; or 
142.6      (F) a pension from any local government retirement fund 
142.7   located in the state of Minnesota as a result of that 
142.8   disability; or 
142.9      (G) pension, annuity, or other income paid as a result of 
142.10  that disability from a private pension or disability plan, 
142.11  including employer, employee, union, and insurance plans and 
142.12     (iii) has household income as defined in section 290A.03, 
142.13  subdivision 5, of $50,000 or less; or 
142.14     (4) any person who is permanently and totally disabled and 
142.15  whose household income as defined in section 290A.03, 
142.16  subdivision 5, is 275 percent or less of the federal poverty 
142.17  level. 
142.18     Property is classified and assessed under clause (4) only 
142.19  if the government agency or income-providing source certifies, 
142.20  upon the request of the homestead occupant, that the homestead 
142.21  occupant satisfies the disability requirements of this paragraph.
142.22     Property is classified and assessed pursuant to clause (1) 
142.23  only if the commissioner of economic security revenue certifies 
142.24  to the assessor that the homestead occupant satisfies the 
142.25  requirements of this paragraph.  Once the initial application is 
142.26  made and approved by the commissioner, no further applications 
142.27  are required, unless the property is sold, there is a change in 
142.28  occupancy, or the occupant's vision changes.  Failure to notify 
142.29  the commissioner within 60 days that the property no longer 
142.30  qualifies shall result in a penalty provided under section 
142.31  273.124, subdivision 13, computed on the basis of the class 1b 
142.32  benefits for the property, and the property shall lose its 
142.33  current class 1b classification.  If the commissioner determines 
142.34  that the homestead occupant no longer satisfies the requirements 
142.35  of this paragraph, the commissioner shall notify the county 
142.36  assessor. 
143.1      Permanently and totally disabled for the purpose of this 
143.2   subdivision means a condition which is permanent in nature and 
143.3   totally incapacitates the person from working at an occupation 
143.4   which brings the person an income.  The first $32,000 market 
143.5   value of class 1b property has a net class rate of .45 percent 
143.6   of its market value.  The remaining market value of class 1b 
143.7   property has a class rate using the rates for class 1a or class 
143.8   2a property, whichever is appropriate, of similar market value.  
143.9      (c) Class 1c property is commercial use real property that 
143.10  abuts a lakeshore line and is devoted to temporary and seasonal 
143.11  residential occupancy for recreational purposes but not devoted 
143.12  to commercial purposes for more than 250 days in the year 
143.13  preceding the year of assessment, and that includes a portion 
143.14  used as a homestead by the owner, which includes a dwelling 
143.15  occupied as a homestead by a shareholder of a corporation that 
143.16  owns the resort or, a partner in a partnership that owns the 
143.17  resort, or a member of a limited liability company that owns the 
143.18  resort even if the title to the homestead is held by the 
143.19  corporation or, partnership, or limited liability company.  For 
143.20  purposes of this clause, property is devoted to a commercial 
143.21  purpose on a specific day if any portion of the property, 
143.22  excluding the portion used exclusively as a homestead, is used 
143.23  for residential occupancy and a fee is charged for residential 
143.24  occupancy.  The first $500,000 of market value of class 1c 
143.25  property has a class rate of one percent, and the remaining 
143.26  market value of class 1c property has a class rate of one 
143.27  percent, with the following limitation:  the area of the 
143.28  property must not exceed 100 feet of lakeshore footage for each 
143.29  cabin or campsite located on the property up to a total of 800 
143.30  feet and 500 feet in depth, measured away from the lakeshore.  
143.31  If any portion of the class 1c resort property is classified as 
143.32  class 4c under subdivision 25, the entire property must meet the 
143.33  requirements of subdivision 25, paragraph (d), clause (1), to 
143.34  qualify for class 1c treatment under this paragraph. 
143.35     (d) Class 1d property includes structures that meet all of 
143.36  the following criteria: 
144.1      (1) the structure is located on property that is classified 
144.2   as agricultural property under section 273.13, subdivision 23; 
144.3      (2) the structure is occupied exclusively by seasonal farm 
144.4   workers during the time when they work on that farm, and the 
144.5   occupants are not charged rent for the privilege of occupying 
144.6   the property, provided that use of the structure for storage of 
144.7   farm equipment and produce does not disqualify the property from 
144.8   classification under this paragraph; 
144.9      (3) the structure meets all applicable health and safety 
144.10  requirements for the appropriate season; and 
144.11     (4) the structure is not salable as residential property 
144.12  because it does not comply with local ordinances relating to 
144.13  location in relation to streets or roads. 
144.14     The market value of class 1d property has the same class 
144.15  rates as class 1a property under paragraph (a). 
144.16     <b>[EFFECTIVE DATE.]</b> Paragraph (b) is effective for taxes 
144.17  payable in 2005 and thereafter. 
144.18     Paragraph (c) is effective for taxes payable in 2004 and 
144.19  thereafter. 
144.20     Sec. 18.  [273.1387] [TRANSITION PAYMENTS FOR PROPERTY TAX 
144.21  BASE LOSS.] 
144.22     Subdivision 1.  [DEFINITIONS.] (a) For the purposes of this 
144.23  section, the following terms have the meanings given them. 
144.24     (b) "State" means a state agency, board, commission, or 
144.25  authority. 
144.26     (c) "Political subdivision" means the metropolitan council 
144.27  or a metropolitan agency, county, statutory or home rule charter 
144.28  city, township, school district, or any other political 
144.29  subdivision with the authority to acquire real property. 
144.30     (d) "Acquire" includes acquisition by purchase, gift, or 
144.31  eminent domain. 
144.32     Subd. 2.  [PAYMENT REQUIRED.] (a) When the state or a 
144.33  political subdivision acquires taxable real property and that 
144.34  property becomes tax exempt upon acquisition, the state or 
144.35  political subdivision must pay to all other taxing jurisdictions 
144.36  levying property taxes on the property in the year in which it 
145.1   is acquired an amount as follows: 
145.2      (1) in the year in which the property is acquired, 100 
145.3   percent of the taxes payable for that year on the acquired 
145.4   property, less any amount of property taxes already collected 
145.5   for that year on the property before the acquisition; 
145.6      (2) in the first full year after acquisition, 80 percent of 
145.7   the total amount that was due and payable in the year of 
145.8   acquisition; 
145.9      (3) in the second year after acquisition, 60 percent of the 
145.10  total amount that was due and payable in the year of 
145.11  acquisition; 
145.12     (4) in the third year after acquisition, 40 percent of the 
145.13  total amount that was due and payable in the year of 
145.14  acquisition; and 
145.15     (5) in the fourth year after acquisition, 20 percent of the 
145.16  total amount that was due and payable in the year of acquisition.
145.17     (b) As an alternative to the payments required as provided 
145.18  in paragraph (a), clauses (2) to (5), the state or political 
145.19  subdivision may pay to any taxing jurisdiction a single payment 
145.20  equal to 150 percent of the total taxes payable on the acquired 
145.21  property in the year of acquisition. 
145.22     (c) Any payment under paragraph (a), clause (1), must be 
145.23  made at the time of acquisition and must be paid to the county 
145.24  treasurer of the county where the property is located.  The 
145.25  payment under paragraph (b) must be made at the time of 
145.26  acquisition and must be paid directly to each affected taxing 
145.27  jurisdiction.  Payments under paragraph (a), clauses (2) to (5), 
145.28  must be made annually on or before May 15 of each year 
145.29  immediately following the year of acquisition and must be paid 
145.30  directly to the affected taxing jurisdictions.  
145.31     Subd. 3.  [WAIVER.] A statutory or home rule charter city, 
145.32  county, town, or school district may waive payments required 
145.33  under this section by resolution of the governing body.  A 
145.34  resolution to waive part or all of a payment must not be adopted 
145.35  unless the waiver is identified as an item of business in a 
145.36  meeting notice for the meeting at which the waiver will be 
146.1   discussed and voted on.  The notice must be provided at least 
146.2   ten days before the meeting. 
146.3      Subd. 4.  [PAYMENTS RECEIVED ARE OUTSIDE LEVY LIMITS.] Any 
146.4   payments received by a political subdivision under this section 
146.5   are not included in the calculation of its overall levy limit 
146.6   imposed under chapter 275. 
146.7      Subd. 5.  [COST OF ACQUISITION.] Payments made under this 
146.8   section are a cost of acquisition of the property. 
146.9      <b>[EFFECTIVE DATE.]</b> This section is effective for property 
146.10  acquired on or after July 1, 2005. 
146.11     Sec. 19.  [274.014] [LOCAL BOARDS; APPEALS AND EQUALIZATION 
146.12  COURSE AND MEETING REQUIREMENTS.] 
146.13     Subdivision 1.  [HANDBOOK FOR LOCAL BOARDS.] By no later 
146.14  than January 1, 2005, the commissioner of revenue must develop a 
146.15  handbook detailing procedures, responsibilities, and 
146.16  requirements for local boards of appeal and equalization.  The 
146.17  handbook must include, but need not be limited to, the role of 
146.18  the local board in the assessment process, the legal and policy 
146.19  reasons for fair and impartial appeal and equalization hearings, 
146.20  local board meeting procedures that foster fair and impartial 
146.21  assessment reviews and other best practices recommendations, 
146.22  quorum requirements for local boards, and explanations of 
146.23  alternate methods of appeal. 
146.24     Subd. 2.  [APPEALS AND EQUALIZATION COURSE.] By no later 
146.25  than January 1, 2006, and each year thereafter, there must be at 
146.26  least one member at each meeting of a local board of appeal and 
146.27  equalization who has attended an appeals and equalization course 
146.28  developed or approved by the commissioner within the last four 
146.29  years, as certified by the commissioner.  The course may be 
146.30  offered in conjunction with a meeting of the Minnesota League of 
146.31  Cities or the Minnesota Association of Townships.  The course 
146.32  content must include, but need not be limited to, a review of 
146.33  the handbook developed by the commissioner under subdivision 1. 
146.34     Subd. 3.  [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] Any 
146.35  city or town that does not provide proof to the county assessor 
146.36  by December 1, 2006, and each year thereafter, that it is in 
147.1   compliance with the requirements of subdivision 2, and that it 
147.2   had a quorum at each meeting of the board of appeal and 
147.3   equalization in the prior year, is deemed to have transferred 
147.4   its board of appeal and equalization powers to the county under 
147.5   section 274.01, subdivision 3, for the following year's 
147.6   assessment. 
147.7      The county shall notify the taxpayers when the board of 
147.8   appeal and equalization for a city or town has been transferred 
147.9   to the county under this subdivision and, prior to the meeting 
147.10  time of the county board of equalization, the county shall make 
147.11  available to those taxpayers a procedure for a review of the 
147.12  assessments, including, but not limited to, open book meetings.  
147.13  This alternate review process shall take place in April and May. 
147.14     A local board whose powers are transferred to the county 
147.15  under this subdivision may be reinstated by resolution of the 
147.16  governing body of the city or town and upon proof of compliance 
147.17  with the requirements of subdivision 2.  The resolution and 
147.18  proofs must be provided to the county assessor by December 1 in 
147.19  order to be effective for the following year's assessment. 
147.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
147.21  following final enactment. 
147.22     Sec. 20.  Minnesota Statutes 2002, section 275.025, 
147.23  subdivision 1, is amended to read: 
147.24     Subdivision 1.  [LEVY AMOUNT.] The state general levy is 
147.25  levied against commercial-industrial property and seasonal 
147.26  recreational property, as defined in this section.  The state 
147.27  general levy is $592,000,000 for taxes payable in 2002.  For 
147.28  taxes payable in subsequent years, the levy is increased each 
147.29  year by multiplying the amount for the prior year by the sum of 
147.30  one plus the rate of increase, if any, in the implicit price 
147.31  deflator for government consumption expenditures and gross 
147.32  investment for state and local governments prepared by the 
147.33  Bureau of Economic Analysts of the United States Department of 
147.34  Commerce for the 12-month period ending March 31 of the year 
147.35  prior to the year the taxes are payable.  The tax under this 
147.36  section is not treated as a local tax rate under section 469.177 
148.1   and is not the levy of a governmental unit under chapters 276A 
148.2   and 473F.  Beginning in fiscal year 2004, and in each year 
148.3   thereafter, the commissioner of finance shall deposit in an 
148.4   education reserve account, which account is hereby established, 
148.5   the increased amount of the state general levy received for 
148.6   deposit in the general fund for that year over the amount of the 
148.7   state general levy received for deposit in the general fund in 
148.8   fiscal year 2003.  The amounts in the education reserve account 
148.9   do not lapse or cancel each year, but remain until appropriated 
148.10  by law for education aid or higher education funding. 
148.11     The commissioner shall increase or decrease the preliminary 
148.12  or final rate for a year as necessary to account for errors and 
148.13  tax base changes that affected a preliminary or final rate for 
148.14  either of the two preceding years.  Adjustments are allowed to 
148.15  the extent that the necessary information is available to the 
148.16  commissioner at the time the rates for a year must be certified, 
148.17  and for the following reasons: 
148.18     (1) an erroneous report of taxable value by a local 
148.19  official; 
148.20     (2) an erroneous calculation by the commissioner; and 
148.21     (3) an increase or decrease in taxable value for 
148.22  commercial-industrial or seasonal residential recreational 
148.23  property reported on the abstracts of tax lists submitted under 
148.24  section 275.29 that was not reported on the abstracts of 
148.25  assessment submitted under section 270.11, subdivision 2, for 
148.26  the same year. 
148.27  The commissioner may, but need not, make adjustments if the 
148.28  total difference in the tax levied for the year would be less 
148.29  than $100,000. 
148.30     <b>[EFFECTIVE DATE.]</b> This section is effective June 30, 2003.  
148.31     Sec. 21.  Minnesota Statutes 2002, section 278.01, 
148.32  subdivision 4, is amended to read: 
148.33     Subd. 4.  [FILING OF APPEAL DEADLINE; EXCEPTION.] 
148.34  Notwithstanding the March 31 April 30 date in subdivision 1, 
148.35  whenever the exempt status, valuation, or classification of real 
148.36  or personal property is changed other than by an abatement or a 
149.1   court decision, and the owner responsible for payment of the tax 
149.2   is not given notice of the change until after January 31 
149.3   February 28 of the year the tax is payable or after July 1 in 
149.4   the case of property subject to section 273.125, subdivision 4, 
149.5   an eligible petitioner, as defined and limited in subdivision 1, 
149.6   has 60 days from the date of mailing of the notice to initiate 
149.7   an appeal of the property's exempt status, classification, or 
149.8   valuation change under this chapter. 
149.9      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
149.10  payable in 2003 and thereafter. 
149.11     Sec. 22.  Minnesota Statutes 2002, section 278.05, 
149.12  subdivision 6, is amended to read: 
149.13     Subd. 6.  [DISMISSAL OF PETITION; EXCLUSION OF CERTAIN 
149.14  EVIDENCE.] (a) Information, including income and expense 
149.15  figures, verified net rentable areas, and anticipated income and 
149.16  expenses, for income-producing property must be provided to the 
149.17  county assessor within 60 days after the petition has been filed 
149.18  under this chapter no later than 60 days after the applicable 
149.19  filing deadline contained in section 278.01, subdivision 1 or 
149.20  4.  Failure to provide the information required in this 
149.21  paragraph shall result in the dismissal of the petition, 
149.22  unless (1) the failure to provide it was due to the 
149.23  unavailability of the evidence at that the time that the 
149.24  information was due, or (2) the petitioner was not aware of or 
149.25  informed of the requirement to provide the information. 
149.26  If the petitioner proves that the requirements under clause (2) 
149.27  are met, the petitioner has an additional 30 days to provide the 
149.28  information from the time the petitioner became aware of or was 
149.29  informed of the requirement to provide the information, 
149.30  otherwise the petition shall be dismissed.  
149.31     (b) Provided that the information as contained in paragraph 
149.32  (a) is timely submitted to the county assessor, the county 
149.33  assessor shall furnish the petitioner at least five days before 
149.34  the hearing under this chapter with the property's appraisal, if 
149.35  any, which will be presented to the court at the hearing.  The 
149.36  petitioner shall furnish to the county assessor at least five 
150.1   days before the hearing under this chapter with the property's 
150.2   appraisal, if any, which will be presented to the court at the 
150.3   hearing.  An appraisal of the petitioner's property done by or 
150.4   for the county shall not be admissible as evidence if the county 
150.5   assessor does not comply with the provisions in this paragraph.  
150.6   The petition shall be dismissed if the petitioner does not 
150.7   comply with the provisions in this paragraph. 
150.8      <b>[EFFECTIVE DATE.]</b> This section is effective for petitions 
150.9   filed on or after July 1, 2003. 
150.10     Sec. 23.  Minnesota Statutes 2002, section 290A.03, 
150.11  subdivision 8, is amended to read: 
150.12     Subd. 8.  [CLAIMANT.] (a) "Claimant" means a person, other 
150.13  than a dependent, as defined under sections 151 and 152 of the 
150.14  Internal Revenue Code disregarding section 152(b)(3) of the 
150.15  Internal Revenue Code, who filed a claim authorized by this 
150.16  chapter and who was a resident of this state as provided in 
150.17  chapter 290 during the calendar year for which the claim for 
150.18  relief was filed. 
150.19     (b) In the case of a claim relating to rent constituting 
150.20  property taxes, the claimant shall have resided in a rented or 
150.21  leased unit on which ad valorem taxes or payments made in lieu 
150.22  of ad valorem taxes, including payments of special assessments 
150.23  imposed in lieu of ad valorem taxes, are payable at some time 
150.24  during the calendar year covered by the claim.  
150.25     (c) "Claimant" shall not include a resident of a nursing 
150.26  home, intermediate care facility, or long-term residential 
150.27  facility whose rent constituting property taxes is paid pursuant 
150.28  to the supplemental security income program under title XVI of 
150.29  the Social Security Act, the Minnesota supplemental aid program 
150.30  under sections 256D.35 to 256D.54, the medical assistance 
150.31  program pursuant to title XIX of the Social Security Act, or the 
150.32  general assistance medical care program pursuant to section 
150.33  256D.03, subdivision 3; or the group residential housing program 
150.34  under chapter 256I. 
150.35  If only a portion of the rent constituting property taxes is 
150.36  paid by these programs, the resident shall be a claimant for 
151.1   purposes of this chapter, but the refund calculated pursuant to 
151.2   section 290A.04 shall be multiplied by a fraction, the numerator 
151.3   of which is income as defined in subdivision 3, paragraphs (1) 
151.4   and (2), reduced by the total amount of income from the above 
151.5   sources other than vendor payments under the medical assistance 
151.6   program or the general assistance medical care program and the 
151.7   denominator of which is income as defined in subdivision 3, 
151.8   paragraphs (1) and (2), plus vendor payments under the medical 
151.9   assistance program or the general assistance medical care 
151.10  program, to determine the allowable refund pursuant to this 
151.11  chapter. 
151.12     (d) Notwithstanding paragraph (c), if the claimant was a 
151.13  resident of the nursing home, intermediate care facility or, 
151.14  long-term residential facility, or facility for which the rent 
151.15  was paid for the claimant by the group residential housing 
151.16  program for only a portion of the calendar year covered by the 
151.17  claim, the claimant may compute rent constituting property taxes 
151.18  by disregarding the rent constituting property taxes from the 
151.19  nursing home, intermediate care facility, or long-term 
151.20  residential facility and use only that amount of rent 
151.21  constituting property taxes or property taxes payable relating 
151.22  to that portion of the year when the claimant was not in the 
151.23  facility.  The claimant's household income is the income for the 
151.24  entire calendar year covered by the claim.  
151.25     (e) In the case of a claim for rent constituting property 
151.26  taxes of a part-year Minnesota resident, the income and rental 
151.27  reflected in this computation shall be for the period of 
151.28  Minnesota residency only.  Any rental expenses paid which may be 
151.29  reflected in arriving at federal adjusted gross income cannot be 
151.30  utilized for this computation.  When two individuals of a 
151.31  household are able to meet the qualifications for a claimant, 
151.32  they may determine among them as to who the claimant shall be. 
151.33  If they are unable to agree, the matter shall be referred to the 
151.34  commissioner of revenue whose decision shall be final.  If a 
151.35  homestead property owner was a part-year Minnesota resident, the 
151.36  income reflected in the computation made pursuant to section 
152.1   290A.04 shall be for the entire calendar year, including income 
152.2   not assignable to Minnesota. 
152.3      (f) If a homestead is occupied by two or more renters, who 
152.4   are not husband and wife, the rent shall be deemed to be paid 
152.5   equally by each, and separate claims shall be filed by each.  
152.6   The income of each shall be each renter's household income for 
152.7   purposes of computing the amount of credit to be allowed. 
152.8      <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
152.9   based on rent paid in 2003 and thereafter. 
152.10     Sec. 24.  Minnesota Statutes 2002, section 366.011, is 
152.11  amended to read: 
152.12     366.011 [CHARGES FOR EMERGENCY SERVICES; COLLECTION.] 
152.13     A town may impose a reasonable service charge for emergency 
152.14  services, including fire, rescue, medical, and related services 
152.15  provided by the town or contracted for by the town.  If the 
152.16  service charge remains unpaid 30 days after a notice of 
152.17  delinquency is sent to the recipient of the service or the 
152.18  recipient's representative or estate, the town or its contractor 
152.19  on behalf of the town may use any lawful means allowed to a 
152.20  private party for the collection of an unsecured delinquent 
152.21  debt.  The town may also use the authority of section 366.012 to 
152.22  collect unpaid service charges of this kind from delinquent 
152.23  recipients of services who are owners of taxable real property 
152.24  in the town. 
152.25     The powers conferred by this section are in addition and 
152.26  supplemental to the powers conferred by any other law for a town 
152.27  to impose a service charge or assessment for a service provided 
152.28  by the town or contracted for by the town. 
152.29     <b>[EFFECTIVE DATE.]</b> This section is effective for emergency 
152.30  services rendered after June 30, 2003. 
152.31     Sec. 25.  Minnesota Statutes 2002, section 366.012, is 
152.32  amended to read: 
152.33     366.012 [COLLECTION OF UNPAID SERVICE CHARGES.] 
152.34     If a town is authorized to impose a service charge on the 
152.35  owner, lessee, or occupant of property, or any of them, for a 
152.36  governmental service provided by the town, the town board may 
153.1   certify to the county auditor of the county in which the 
153.2   recipient of the services owns real property, on or before 
153.3   October 15 for each year, any unpaid service charges which shall 
153.4   then be collected together with property taxes levied against 
153.5   the property.  The county auditor shall remit to the town all 
153.6   service charges collected by the auditor on behalf of the town.  
153.7   Charges collected under this section for motor vehicle fires, as 
153.8   provided by section 161.465, subdivision 2, shall not exceed the 
153.9   amount authorized in that subdivision, but a town may recover 
153.10  expenses incurred for extinguishing a motor vehicle fire in 
153.11  excess of that amount by any other authorized method.  A charge 
153.12  may be certified to the auditor only if, on or before September 
153.13  15, the town has given written notice to the property owner of 
153.14  its intention to certify the charge to the auditor.  The service 
153.15  charges shall be subject to the same penalties, interest, and 
153.16  other conditions provided for the collection of property taxes.  
153.17  This section is in addition to other law authorizing the 
153.18  collection of unpaid costs and service charges. 
153.19     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
153.20  payable in 2004 and thereafter. 
153.21     Sec. 26.  Minnesota Statutes 2002, section 473.167, 
153.22  subdivision 3, is amended to read: 
153.23     Subd. 3.  [TAX.] The council may levy a tax on all taxable 
153.24  property in the metropolitan area, as defined in section 
153.25  473.121, to provide funds for loans made pursuant to 
153.26  subdivisions 2 and 2a.  This tax for the right-of-way 
153.27  acquisition loan fund shall be certified by the council, levied, 
153.28  and collected in the manner provided by section 473.13.  The tax 
153.29  shall be in addition to that authorized by section 473.249 and 
153.30  any other law and shall not affect the amount or rate of taxes 
153.31  which may be levied by the council or any metropolitan agency or 
153.32  local governmental unit.  The amount of the levy shall be as 
153.33  determined and certified by the council, provided that the tax 
153.34  levied by the metropolitan council for the right-of-way 
153.35  acquisition loan fund shall not exceed the product of (1) the 
153.36  metropolitan council's property tax levy under this subdivision 
154.1   for taxes payable in 1997 multiplied by (2) an index for market 
154.2   valuation changes equal to the total market valuation of all 
154.3   taxable property located within the metropolitan area for the 
154.4   current taxes payable year divided by the total market valuation 
154.5   of all taxable property located within the metropolitan area for 
154.6   taxes payable in 1997. 
154.7      For the purpose of determining the metropolitan council's 
154.8   property tax levy limitation for the right-of-way acquisition 
154.9   loan fund, "total market valuation" means the total market 
154.10  valuation of all taxable property within the metropolitan area 
154.11  without valuation adjustments for fiscal disparities (chapter 
154.12  473F), tax increment financing (sections 469.174 to 469.179), 
154.13  and high voltage transmission lines (section 273.425) $2,828,379 
154.14  for taxes payable in 2004 and $2,828,379 for taxes payable in 
154.15  2005.  The amount of the levy for taxes payable in 2006 and 
154.16  subsequent years shall not exceed the product of (1) the 
154.17  metropolitan council's property tax levy limitation under this 
154.18  subdivision for the previous year, multiplied by (2) one plus a 
154.19  percentage equal to the growth in the implicit price deflator as 
154.20  defined in section 275.70, subdivision 2. 
154.21     <b>[EFFECTIVE DATE; APPLICATION.]</b> This section is effective 
154.22  the day following final enactment and applies in the counties of 
154.23  Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 
154.24     Sec. 27.  Minnesota Statutes 2002, section 473.246, is 
154.25  amended to read: 
154.26     473.246 [COUNCIL'S SUBMISSIONS TO LEGISLATIVE COMMISSION.] 
154.27     The metropolitan council shall submit to the legislative 
154.28  commission on metropolitan government information on the 
154.29  council's tax rates and dollar amounts levied for the current 
154.30  year, proposed property tax rates and levies, operating and 
154.31  capital budgets, work program, capital improvement program, and 
154.32  any other information requested by the commission, for review by 
154.33  the legislative commission, as provided in section 3.8841.  The 
154.34  council shall submit to the legislative commission a report on 
154.35  property tax levies as approved by the council, detailing any 
154.36  differences between the amounts originally proposed and the 
155.1   amounts finally approved by the council, and providing 
155.2   explanation where the approved levy amounts differ from 
155.3   recommendations of the legislative commission. 
155.4      <b>[EFFECTIVE DATE; APPLICATION.]</b> This section is effective 
155.5   the day following final enactment and applies in the counties of 
155.6   Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 
155.7      Sec. 28.  Minnesota Statutes 2002, section 473.249, 
155.8   subdivision 1, is amended to read: 
155.9      Subdivision 1.  [INDEXED LIMIT.] (a) The metropolitan 
155.10  council may levy a tax on all taxable property in the 
155.11  metropolitan area defined in section 473.121 to provide funds 
155.12  for the purposes of sections 473.121 to 473.249 and for the 
155.13  purpose of carrying out other responsibilities of the council as 
155.14  provided by law.  This tax for general purposes shall be levied 
155.15  and collected in the manner provided by section 473.13. 
155.16     (b) The property tax levied by the metropolitan council for 
155.17  general purposes shall not exceed $10,117,123 for taxes payable 
155.18  in 2004 and $9,331,123 for taxes payable in 2005. 
155.19     (c) The property tax levy limitation for general purposes 
155.20  for taxes payable in 2006 and subsequent years shall not exceed 
155.21  the product of:  (1) the metropolitan council's property tax 
155.22  levy limitation for general purposes for the previous year 
155.23  determined under this subdivision multiplied by (2) the lesser 
155.24  of 
155.25     (i) an index for market valuation changes equal to the 
155.26  total market valuation of all taxable property located within 
155.27  the metropolitan area for the current taxes payable year divided 
155.28  by the total market valuation of all taxable property located 
155.29  within the metropolitan area for the previous taxes payable 
155.30  year; 
155.31     (ii) an index equal to the implicit price deflator for 
155.32  government consumption expenditures and gross investment for 
155.33  state and local governments for the most recent month for which 
155.34  data are available divided by the same implicit price deflator 
155.35  for the same month of the previous year; or 
155.36     (iii) 103 percent. 
156.1      (c) For the purpose of determining the metropolitan 
156.2   council's property tax levy limitation for general purposes, 
156.3   "total market valuation" means the total market valuation of all 
156.4   taxable property within the metropolitan area without valuation 
156.5   adjustments for fiscal disparities (chapter 473F), tax increment 
156.6   financing (sections 469.174 to 469.179), and high voltage 
156.7   transmission lines (section 273.425) one plus a percentage equal 
156.8   to the growth in the implicit price deflator as defined in 
156.9   section 275.70, subdivision 2. 
156.10     <b>[EFFECTIVE DATE; APPLICATION.]</b> This section is effective 
156.11  the day following final enactment and applies in the counties of 
156.12  Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 
156.13     Sec. 29.  Minnesota Statutes 2002, section 473.253, 
156.14  subdivision 1, is amended to read: 
156.15     Subdivision 1.  [SOURCES OF FUNDS.] The council shall 
156.16  credit to the livable communities demonstration account the 
156.17  revenues provided in this subdivision.  This tax shall be levied 
156.18  and collected in the manner provided by section 473.13.  The 
156.19  levy shall not exceed the following amount for the years 
156.20  specified:  
156.21     (a)(1) for taxes payable in 1996, 50 percent of (i) the 
156.22  metropolitan mosquito control commission's property tax levy for 
156.23  taxes payable in 1995 multiplied by (ii) an index for market 
156.24  valuation changes equal to the total market valuation of all 
156.25  taxable property located within the metropolitan area for the 
156.26  current taxes payable year divided by the total market valuation 
156.27  of all taxable property located in the metropolitan area for the 
156.28  previous taxes payable year; and 
156.29     (2) for taxes payable in 1997 and subsequent years through 
156.30  2003, the product of (i) the property tax levy limit under this 
156.31  subdivision for the previous year multiplied by (ii) an index 
156.32  for market valuation changes equal to the total market valuation 
156.33  of all taxable property located within the metropolitan area for 
156.34  the current taxes payable year divided by the total market 
156.35  valuation of all taxable property located in the metropolitan 
156.36  area for the previous taxes payable year; 
157.1      (3) for taxes payable in 2004 and 2005, $6,933,163; and 
157.2      (4) for taxes payable in 2006 and subsequent years, the 
157.3   product of (i) the property tax levy limit under this 
157.4   subdivision for the previous year multiplied by (ii) one plus a 
157.5   percentage equal to the growth in the implicit price deflator as 
157.6   defined in section 275.70, subdivision 2. 
157.7      For the purposes of this subdivision, "total market 
157.8   valuation" means the total market valuation of all taxable 
157.9   property within the metropolitan area without valuation 
157.10  adjustments for fiscal disparities under chapter 473F, tax 
157.11  increment financing under sections 469.174 to 469.179, and high 
157.12  voltage transmission lines under section 273.425. 
157.13     (b) The metropolitan council, for the purposes of the fund, 
157.14  is considered a unique taxing jurisdiction for purposes of 
157.15  receiving aid pursuant to section 273.1398.  For aid to be 
157.16  received in 1996, the fund's homestead and agricultural credit 
157.17  base shall equal 50 percent of the metropolitan mosquito control 
157.18  commission's certified homestead and agricultural credit aid for 
157.19  1995, determined under section 273.1398, subdivision 2, less any 
157.20  permanent aid reduction under section 477A.0132.  For aid to be 
157.21  received under section 273.1398 in 1997 and subsequent years, 
157.22  the fund's homestead and agricultural credit base shall be 
157.23  determined in accordance with section 273.1398, subdivision 1. 
157.24     <b>[EFFECTIVE DATE; APPLICATION.]</b> This section is effective 
157.25  the day following final enactment and applies in the counties of 
157.26  Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 
157.27     Sec. 30.  Minnesota Statutes 2002, section 473.702, is 
157.28  amended to read: 
157.29     473.702 [ESTABLISHMENT OF DISTRICT; PURPOSE; AREA; 
157.30  GOVERNING BODY.] 
157.31     A metropolitan mosquito control district is created to 
157.32  control mosquitoes, disease vectoring ticks, and black gnats 
157.33  (Simuliidae) in the metropolitan area.  The area of the district 
157.34  is the metropolitan area defined in section 473.121.  The area 
157.35  of the district is the metropolitan area excluding the part of 
157.36  Carver county west of the west line of township 116N, range 24W, 
158.1   township 115N, range 24W, and township 114N, range 24W.  The 
158.2   metropolitan mosquito control commission is created as the 
158.3   governing body of the district, composed and exercising the 
158.4   powers as prescribed in sections 473.701 to 473.716. 
158.5      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
158.6   payable in 2004 and thereafter. 
158.7      Sec. 31.  Minnesota Statutes 2002, section 473.711, 
158.8   subdivision 2a, is amended to read: 
158.9      Subd. 2a.  [TAX LEVY.] (a) The commission may levy a tax on 
158.10  all taxable property in the district as defined in section 
158.11  473.702 to provide funds for the purposes of sections 473.701 to 
158.12  473.716.  The tax shall not exceed the property tax levy 
158.13  limitation determined in this subdivision.  A participating 
158.14  county may agree to levy an additional tax to be used by the 
158.15  commission for the purposes of sections 473.701 to 473.716 but 
158.16  the sum of the county's and commission's taxes may not exceed 
158.17  the county's proportionate share of the property tax levy 
158.18  limitation determined under this subdivision based on the ratio 
158.19  of its total net tax capacity to the total net tax capacity of 
158.20  the entire district as adjusted by section 270.12, subdivision 3.
158.21  The auditor of each county in the district shall add the amount 
158.22  of the levy made by the district to other taxes of the county 
158.23  for collection by the county treasurer with other taxes.  When 
158.24  collected, the county treasurer shall make settlement of the tax 
158.25  with the district in the same manner as other taxes are 
158.26  distributed to political subdivisions.  No county shall levy any 
158.27  tax for mosquito, disease vectoring tick, and black gnat 
158.28  (Simuliidae) control except under this section.  The levy shall 
158.29  be in addition to other taxes authorized by law. 
158.30     (b) The property tax levied by the metropolitan mosquito 
158.31  control commission shall not exceed the following amount for the 
158.32  years specified: 
158.33     (1) for taxes payable in 1996, the product of (i) the 
158.34  commission's property tax levy limitation for taxes payable in 
158.35  1995 determined under this subdivision minus 50 percent of the 
158.36  amount actually levied for taxes payable in 1995, multiplied by 
159.1   (ii) an index for market valuation changes equal to the total 
159.2   market valuation of all taxable property located within the 
159.3   district for the current taxes payable year divided by the total 
159.4   market valuation of all taxable property located within the 
159.5   district for the previous taxes payable year; 
159.6      (2) for taxes payable in 1997 and subsequent years, the 
159.7   product of (i) the commission's property tax levy limitation for 
159.8   the previous year determined under this subdivision multiplied 
159.9   by (ii) an index for market valuation changes equal to the total 
159.10  market valuation of all taxable property for the current tax 
159.11  payable year located within the district for the current taxes 
159.12  payable year plus any area that has been added to the district 
159.13  since the previous year, divided by the total market valuation 
159.14  of all taxable property located within the district for the 
159.15  previous taxes payable year; and. 
159.16     (3) (c) For the purpose of determining the commission's 
159.17  property tax levy limitation under this subdivision, "total 
159.18  market valuation" means the total market valuation of all 
159.19  taxable property within the district without valuation 
159.20  adjustments for fiscal disparities (chapter 473F), tax increment 
159.21  financing (sections 469.174 to 469.179), and high voltage 
159.22  transmission lines (section 273.425). 
159.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
159.24  payable in 2004 and thereafter. 
159.25     Sec. 32.  [CITY OF MEDFORD.] 
159.26     Subdivision 1.  [SPECIAL TAXING AUTHORITY.] After published 
159.27  notice and public hearing, the governing body of the city of 
159.28  Medford may, by resolution, establish a special taxing area 
159.29  within the boundaries of the city to finance a portion of the 
159.30  cost of an expansion and improvement of the city's wastewater 
159.31  treatment facility.  The city may annually impose a levy on the 
159.32  tax capacity of properties within the special taxing area. 
159.33     Subd. 2.  [TAXING AREA.] The city may include within the 
159.34  special taxing area, as it determines appropriate, one or more 
159.35  parcels of property classified under Minnesota Statutes, section 
159.36  273.13, subdivision 24. 
160.1      Subd. 3.  [LEVY LIMIT.] The amount of the levy for a year 
160.2   may not exceed 45 percent of the cost of principal and interest 
160.3   payments on the financing for the expansion and improvement of 
160.4   the wastewater treatment facility.  Any levy imposed under this 
160.5   section is not subject to any other levy limit that applies to 
160.6   the city, notwithstanding any law to the contrary. 
160.7      Subd. 4.  [EXPIRATION.] This section expires upon repayment 
160.8   of the financing, including any refinancing, for the wastewater 
160.9   treatment facility. 
160.10     Subd. 5.  [EFFECTIVE DATE.] This section is effective upon 
160.11  local approval under Minnesota Statutes, section 645.021 by the 
160.12  governing body of the city of Medford. 
160.13     Sec. 33.  [APPROPRIATION.] 
160.14     There is appropriated to the commissioner of revenue from 
160.15  the general fund $16,000 in fiscal year 2003 and $8,000 in 
160.16  fiscal year 2004 for printing and distributing the local boards 
160.17  of appeals and equalization handbook under section 19. 
160.18     Sec. 34.  [REPEALER.] 
160.19     Minnesota Statutes 2002, section 473.711, subdivision 2b, 
160.20  is repealed. 
160.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
160.22  following final enactment. 
160.23                             ARTICLE 6
160.24                       INTERGOVERNMENTAL AIDS
160.25     Section 1.  Minnesota Statutes 2002, section 4A.02, is 
160.26  amended to read: 
160.27     4A.02 [STATE DEMOGRAPHER.] 
160.28     (a) The director shall appoint a state demographer.  The 
160.29  demographer must be professionally competent in demography and 
160.30  must possess demonstrated ability based upon past performance.  
160.31     (b) The demographer shall: 
160.32     (1) continuously gather and develop demographic data 
160.33  relevant to the state; 
160.34     (2) design and test methods of research and data 
160.35  collection; 
160.36     (3) periodically prepare population projections for the 
161.1   state and designated regions and periodically prepare 
161.2   projections for each county or other political subdivision of 
161.3   the state as necessary to carry out the purposes of this 
161.4   section; 
161.5      (4) review, comment on, and prepare analysis of population 
161.6   estimates and projections made by state agencies, political 
161.7   subdivisions, other states, federal agencies, or nongovernmental 
161.8   persons, institutions, or commissions; 
161.9      (5) serve as the state liaison with the United States 
161.10  Bureau of the Census, coordinate state and federal demographic 
161.11  activities to the fullest extent possible, and aid the 
161.12  legislature in preparing a census data plan and form for each 
161.13  decennial census; 
161.14     (6) compile an annual study of population estimates on the 
161.15  basis of county, regional, or other political or geographical 
161.16  subdivisions as necessary to carry out the purposes of this 
161.17  section and section 4A.03; 
161.18     (7) by January 1 of each year, issue a report to the 
161.19  legislature containing an analysis of the demographic 
161.20  implications of the annual population study and population 
161.21  projections; 
161.22     (8) prepare maps for all counties in the state, all 
161.23  municipalities with a population of 10,000 or more, and other 
161.24  municipalities as needed for census purposes, according to scale 
161.25  and detail recommended by the United States Bureau of the 
161.26  Census, with the maps of cities showing precinct boundaries; 
161.27     (9) prepare an estimate of population and of the number of 
161.28  households for each governmental subdivision for which the 
161.29  metropolitan council does not prepare an annual estimate, and 
161.30  convey the estimates to the governing body of each political 
161.31  subdivision by May 1 of each year; 
161.32     (10) direct, under section 414.01, subdivision 14, and 
161.33  certify population and household estimates of annexed or 
161.34  detached areas of municipalities or towns after being notified 
161.35  of the order or letter of approval by the Minnesota municipal 
161.36  board; and 
162.1      (11) prepare, for any purpose for which a population 
162.2   estimate is required by law or needed to implement a law, a 
162.3   population estimate of a municipality or town whose population 
162.4   is affected by action under section 379.02 or 414.01, 
162.5   subdivision 14; and 
162.6      (12) prepare an estimate of average household size for each 
162.7   statutory or home rule charter city with a population of 2,500 
162.8   or more by May 1 of each year. 
162.9      (c) A governing body may challenge an estimate made under 
162.10  paragraph (b) by filing their specific objections in writing 
162.11  with the state demographer by June 10.  If the challenge does 
162.12  not result in an acceptable estimate by June 24, the governing 
162.13  body may have a special census conducted by the United States 
162.14  Bureau of the Census.  The political subdivision must notify the 
162.15  state demographer by July 1 of its intent to have the special 
162.16  census conducted.  The political subdivision must bear all costs 
162.17  of the special census.  Results of the special census must be 
162.18  received by the state demographer by the next April 15 to be 
162.19  used in that year's May 1 estimate to the political subdivision 
162.20  under paragraph (b). 
162.21     <b>[EFFECTIVE DATE.]</b> This section is effective beginning July 
162.22  1, 2003. 
162.23     Sec. 2.  Minnesota Statutes 2002, section 273.1398, 
162.24  subdivision 4a, is amended to read: 
162.25     Subd. 4a.  [AID OFFSET FOR COURT COSTS.] (a) In calendar 
162.26  years 2004 and 2005, the commissioner of revenue shall pay the 
162.27  amounts determined in this subdivision to the eligible counties 
162.28  on the dates specified in subdivision 6.  By July 15 of the year 
162.29  preceding the year in which the state assumes the cost of court 
162.30  administration in the judicial district as specified under 
162.31  section 480.183, 2003, the supreme court shall determine and 
162.32  certify to the commissioner of revenue for each county the 
162.33  county's share of the costs to be assumed in the judicial 
162.34  districts specified under section 480.183, subdivision 1, during 
162.35  each of the succeeding fiscal year years. 
162.36     (b) The amount certified in paragraph (a) shall be equal to 
163.1   the following: 
163.2      (1) 103 percent of the required court administration 
163.3   expenditures as defined under section 480.183, subdivision 3, 
163.4   for calendar year 2003, as determined under subdivision 4b, 
163.5   paragraph (a); plus 
163.6      (2) an adjustment for any cumulative percentage increase in 
163.7   salary expenditures as defined under section 480.183, 
163.8   subdivision 2, in excess of a maintenance of effort increase of 
163.9   six percent; less 
163.10     (3) an amount equal to the county's share of transferred 
163.11  fines collected by the district courts in the county during the 
163.12  calendar year preceding certification 2002, increased by two 
163.13  percent for counties in districts one and three, and by 4.04 
163.14  percent for counties in districts six and ten.  
163.15     The court and the county may, if both parties agree, 
163.16  negotiate and certify an amount higher than the amount 
163.17  calculated under this paragraph. 
163.18     (c) For purposes of this subdivision, the adjustment in 
163.19  paragraph (b), clause (2), shall be equal to: 
163.20     (1) the sum of the court administration expenditures as 
163.21  defined under section 480.183, subdivision 3, required under 
163.22  subdivision 4b, paragraph (a), plus the temporary aid payment 
163.23  under subdivision 4c; multiplied by 
163.24     (2) the difference between (i) the cumulative percentage 
163.25  increase in actual and anticipated salary settlements for court 
163.26  employees from July 1, 2001, until the date of the court 
163.27  transfer and (ii) the percentage specified in subdivision 4b, 
163.28  paragraph (a).  
163.29     (d) Payments to a county under subdivision 2 or section 
163.30  273.166 for the calendar year in which the state assumes the 
163.31  cost of court administration as defined under section 480.183, 
163.32  subdivision 3, in the judicial district must be permanently 
163.33  reduced by an amount equal to 75 percent of the net cost to the 
163.34  state for assumption of district court costs as certified in 
163.35  paragraph (a). For calendar year 2004, each county in judicial 
163.36  districts one and three shall receive an amount equal to 25 
164.1   percent of the amount certified under paragraph (b), and each 
164.2   county in judicial districts six and ten shall receive an amount 
164.3   equal to the amount certified under paragraph (b).  For calendar 
164.4   year 2005, each county in judicial districts six and ten shall 
164.5   receive an amount equal to 25 percent of the amount certified 
164.6   under paragraph (b), and each county in judicial districts one 
164.7   and three receives zero. 
164.8      (e) Payments to a county under subdivision 2 or section 
164.9   273.166 for the calendar year after the calendar year in which 
164.10  the state assumes the cost of court administration as defined 
164.11  under section 480.183, subdivision 3, in the judicial district 
164.12  must be permanently reduced by an amount equal to 25 percent of 
164.13  the net cost to the state for assumption of district court costs 
164.14  as certified in paragraph (a), provided that this amount must be 
164.15  increased or decreased by an amount equal to the positive or 
164.16  negative difference between the amount of fee and fine revenue 
164.17  certified under paragraph (b), clause (3), and the actual amount 
164.18  of fee and fine revenue of the county for the calendar year when 
164.19  certification takes place. 
164.20     (f) Payments to a county under subdivision 2 for calendar 
164.21  year 2001 are permanently increased by an amount equal to 7.5 
164.22  percent of the county's share of transferred fines collected by 
164.23  the district courts in the county during calendar year 1998, as 
164.24  determined under paragraph (a).  If the amount determined in 
164.25  paragraph (a) exceeds the amount of aid a county is scheduled to 
164.26  be paid under subdivision 2 in 2000, then the county shall not 
164.27  receive an aid increase under this paragraph. 
164.28     (g) Payments to a county under subdivision 2 or section 
164.29  273.166, for the cost of mandated services, as defined in 
164.30  section 480.183, subdivision 4, in the judicial district, must 
164.31  be permanently reduced in 2002 by an amount equal to the cost to 
164.32  the state for assumption of mandated court services as defined 
164.33  in section 480.183, subdivision 4.  The supreme court shall 
164.34  determine the amount for each county and certify it to the 
164.35  commissioner of revenue by July 15, 2001. 
164.36     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
165.1   in 2004 and 2005. 
165.2      Sec. 3.  Minnesota Statutes 2002, section 273.1398, 
165.3   subdivision 4c, is amended to read: 
165.4      Subd. 4c.  [TEMPORARY AID; COURT ADMINISTRATION COSTS.] For 
165.5   calendar years 2004 and 2005, each county in a judicial district 
165.6   that has not been transferred to the state by January 1 of that 
165.7   year shall receive additional homestead and agricultural 
165.8   credit temporary court maintenance of effort cost aid.  This 
165.9   amount is in addition to the amount calculated under subdivision 
165.10  2 and must not be included in the definition of homestead and 
165.11  agricultural credit base under subdivision 1, paragraph (j).  
165.12  The amount of additional aid is equal to the difference between 
165.13  (1) the amount budgeted for court administration costs in 2001 
165.14  as determined under subdivision 4b, paragraph (b), multiplied by 
165.15  the maintenance of effort percent for the calendar year as 
165.16  determined under subdivision 4b, paragraph (a), and (2) the 
165.17  amount calculated under subdivision 4b, paragraph (a), for 
165.18  calendar year 2003, except that the payment under this section 
165.19  is reduced by 50 percent in the calendar year in which the 
165.20  district is transferred to the state.  This additional aid must 
165.21  be used only to fund court administration expenditures as 
165.22  defined in section 480.183, subdivision 3.  This amount must be 
165.23  added to the state court's base budget in the year when the 
165.24  court in that judicial district in which the county is located 
165.25  is transferred to the state. 
165.26     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
165.27  in 2004 and 2005 for counties in judicial districts one, three, 
165.28  six, and ten. 
165.29     Sec. 4.  Minnesota Statutes 2002, section 273.1398, 
165.30  subdivision 6, is amended to read: 
165.31     Subd. 6.  [PAYMENT.] The commissioner shall certify the 
165.32  aids provided in subdivisions 2, 2b, 3, 3 and 5 before September 
165.33  1 of the year preceding the distribution year to the county 
165.34  auditor of the affected local government.  The aids provided in 
165.35  subdivisions 2, 2b, 3, 4a, 4c, and 5 must be paid to local 
165.36  governments other than school districts at the times provided in 
166.1   section 477A.015 for payment of local government aid to taxing 
166.2   jurisdictions, except that the first one-half payment of 
166.3   disparity reduction aid provided in subdivision 3 must be paid 
166.4   on or before August 31.  The disparity reduction credit provided 
166.5   in subdivision 4 must be paid to taxing jurisdictions other than 
166.6   school districts at the time provided in section 473H.10, 
166.7   subdivision 3.  Aids and credit reimbursements to school 
166.8   districts must be certified to the commissioner of children, 
166.9   families, and learning and paid under section 273.1392.  Payment 
166.10  shall not be made to any taxing jurisdiction that has ceased to 
166.11  levy a property tax.  
166.12     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
166.13  in 2004 and thereafter. 
166.14     Sec. 5.  Minnesota Statutes 2002, section 273.1398, 
166.15  subdivision 8, is amended to read: 
166.16     Subd. 8.  [APPROPRIATION.] (a) An amount sufficient to pay 
166.17  the aids and credits provided under this section for school 
166.18  districts, intermediate school districts, or any group of school 
166.19  districts levying as a single taxing entity, is annually 
166.20  appropriated from the general fund to the commissioner of 
166.21  children, families, and learning.  An amount sufficient to pay 
166.22  the aids and credits provided under this section for counties, 
166.23  cities, towns, and special taxing districts is annually 
166.24  appropriated from the general fund to the commissioner of 
166.25  revenue.  A jurisdiction's aid amount may be increased or 
166.26  decreased based on any prior year adjustments for homestead 
166.27  credit or other property tax credit or aid programs. 
166.28     (b) The commissioner of finance shall bill the commissioner 
166.29  of revenue for the cost of preparation of local impact notes as 
166.30  required by section 3.987 only to the extent to which those 
166.31  costs exceed those costs incurred in fiscal year 1997 and for 
166.32  any other new costs attributable to the local impact note 
166.33  function required by section 3.987, not to exceed $100,000 in 
166.34  fiscal years 1998 and 1999 and $200,000 in fiscal year 2000 and 
166.35  thereafter. 
166.36     The commissioner of revenue shall deduct the amount billed 
167.1   under this paragraph from aid payments to be made to cities and 
167.2   counties under subdivision 2 on a pro rata basis.  The amount 
167.3   deducted under this paragraph is appropriated to the 
167.4   commissioner of finance for the preparation of local impact 
167.5   notes.  
167.6      <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
167.7   in 2004 and thereafter. 
167.8      Sec. 6.  Minnesota Statutes 2002, section 477A.011, 
167.9   subdivision 34, is amended to read: 
167.10     Subd. 34.  [CITY REVENUE NEED.] (a) For a city with a 
167.11  population equal to or greater than 2,500, "city revenue need" 
167.12  is the sum of (1) 3.462312 5.0734098 times the pre-1940 housing 
167.13  percentage; plus (2) 2.093826 times the commercial industrial 
167.14  percentage plus (3) 6.862552 19.141678 times the population 
167.15  decline percentage; plus (4) .00026 times the city 
167.16  population (3) 2504.06334 times the road accidents factor; 
167.17  plus (5) 152.0141 (4) 355.0547; minus (5) the metropolitan area 
167.18  factor; minus (6) 49.10638 times the household size. 
167.19     (b) For a city with a population less than 2,500, "city 
167.20  revenue need" is the sum of (1) 1.795919 2.387 times the 
167.21  pre-1940 housing percentage; plus (2) 1.562138 2.67591 times the 
167.22  commercial industrial percentage; plus (3) 4.177568 3.16042 
167.23  times the population decline percentage; plus (4) 1.04013 1.206 
167.24  times the transformed population; minus (5) 107.475 62.772. 
167.25     (c) The city revenue need cannot be less than zero. 
167.26     (d) For calendar year 1998 and subsequent years, the city 
167.27  revenue need for a city, as determined in paragraphs (a) to (c), 
167.28  is multiplied by the ratio of the annual implicit price deflator 
167.29  for government consumption expenditures and gross investment for 
167.30  state and local governments as prepared by the United States 
167.31  Department of Commerce, for the most recently available year to 
167.32  the 1993 implicit price deflator for state and local government 
167.33  purchases. 
167.34     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
167.35  in 2004 and thereafter. 
167.36     Sec. 7.  Minnesota Statutes 2002, section 477A.011, 
168.1   subdivision 36, is amended to read: 
168.2      Subd. 36.  [CITY AID BASE.] (a) Except as otherwise 
168.3   provided in this subdivision, "city aid base" means, for each 
168.4   city, the sum of the local government aid and equalization aid 
168.5   it was originally certified to receive in calendar year 1993 
168.6   under Minnesota Statutes 1992, section 477A.013, subdivisions 3 
168.7   and 5, and the amount of disparity reduction aid it received in 
168.8   calendar year 1993 under Minnesota Statutes 1992, section 
168.9   273.1398, subdivision 3 is zero. 
168.10     (b) For aids payable in 1996 and thereafter, a city that in 
168.11  1992 or 1993 transferred an amount from governmental funds to 
168.12  its sewer and water fund, which amount exceeded its net levy for 
168.13  taxes payable in the year in which the transfer occurred, has a 
168.14  "city aid base" equal to the sum of (i) its city aid base, as 
168.15  calculated under paragraph (a), and (ii) one-half of the 
168.16  difference between its city aid distribution under section 
168.17  477A.013, subdivision 9, for aids payable in 1995 and its city 
168.18  aid base for aids payable in 1995. 
168.19     (c) The city aid base for any city with a population less 
168.20  than 500 is increased by $40,000 for aids payable in calendar 
168.21  year 1995 and thereafter, and the maximum amount of total aid it 
168.22  may receive under section 477A.013, subdivision 9, paragraph 
168.23  (c), is also increased by $40,000 for aids payable in calendar 
168.24  year 1995 only, provided that: 
168.25     (i) the average total tax capacity rate for taxes payable 
168.26  in 1995 exceeds 200 percent; 
168.27     (ii) the city portion of the tax capacity rate exceeds 100 
168.28  percent; and 
168.29     (iii) its city aid base is less than $60 per capita. 
168.30     (d) (c) The city aid base for a city is increased by 
168.31  $20,000 in 1998 and thereafter and the maximum amount of total 
168.32  aid it may receive under section 477A.013, subdivision 9, 
168.33  paragraph (c), is also increased by $20,000 in calendar year 
168.34  1998 only, provided that: 
168.35     (i) the city has a population in 1994 of 2,500 or more; 
168.36     (ii) the city is located in a county, outside of the 
169.1   metropolitan area, which contains a city of the first class; 
169.2      (iii) the city's net tax capacity used in calculating its 
169.3   1996 aid under section 477A.013 is less than $400 per capita; 
169.4   and 
169.5      (iv) at least four percent of the total net tax capacity, 
169.6   for taxes payable in 1996, of property located in the city is 
169.7   classified as railroad property. 
169.8      (e) (d) The city aid base for a city is increased by 
169.9   $200,000 in 1999 and thereafter and the maximum amount of total 
169.10  aid it may receive under section 477A.013, subdivision 9, 
169.11  paragraph (c), is also increased by $200,000 in calendar year 
169.12  1999 only, provided that: 
169.13     (i) the city was incorporated as a statutory city after 
169.14  December 1, 1993; 
169.15     (ii) its city aid base does not exceed $5,600; and 
169.16     (iii) the city had a population in 1996 of 5,000 or more. 
169.17     (f) (e) The city aid base for a city is increased by 
169.18  $450,000 in 1999 to 2008 and the maximum amount of total aid it 
169.19  may receive under section 477A.013, subdivision 9, paragraph 
169.20  (c), is also increased by $450,000 in calendar year 1999 only, 
169.21  provided that: 
169.22     (i) the city had a population in 1996 of at least 50,000; 
169.23     (ii) its population had increased by at least 40 percent in 
169.24  the ten-year period ending in 1996; and 
169.25     (iii) its city's net tax capacity for aids payable in 1998 
169.26  is less than $700 per capita. 
169.27     (g) (f) Beginning in 2004, the city aid base for a city is 
169.28  equal to the sum of its city aid base in 2003 and the amount of 
169.29  additional aid it was certified to receive under section 477A.06 
169.30  in 2003.  For 2004 only, the maximum amount of total aid a city 
169.31  may receive under section 477A.013, subdivision 9, paragraph 
169.32  (c), is also increased by the amount it was certified to receive 
169.33  under section 477A.06 in 2003. 
169.34     (h) (g) The city aid base for a city is increased by 
169.35  $150,000 for aids payable in 2000 and thereafter, and the 
169.36  maximum amount of total aid it may receive under section 
170.1   477A.013, subdivision 9, paragraph (c), is also increased by 
170.2   $150,000 in calendar year 2000 only, provided that: 
170.3      (1) the city has a population that is greater than 1,000 
170.4   and less than 2,500; 
170.5      (2) its commercial and industrial percentage for aids 
170.6   payable in 1999 is greater than 45 percent; and 
170.7      (3) the total market value of all commercial and industrial 
170.8   property in the city for assessment year 1999 is at least 15 
170.9   percent less than the total market value of all commercial and 
170.10  industrial property in the city for assessment year 1998. 
170.11     (i) (h) The city aid base for a city is increased by 
170.12  $200,000 in 2000 and thereafter, and the maximum amount of total 
170.13  aid it may receive under section 477A.013, subdivision 9, 
170.14  paragraph (c), is also increased by $200,000 in calendar year 
170.15  2000 only, provided that: 
170.16     (1) the city had a population in 1997 of 2,500 or more; 
170.17     (2) the net tax capacity of the city used in calculating 
170.18  its 1999 aid under section 477A.013 is less than $650 per 
170.19  capita; 
170.20     (3) the pre-1940 housing percentage of the city used in 
170.21  calculating 1999 aid under section 477A.013 is greater than 12 
170.22  percent; 
170.23     (4) the 1999 local government aid of the city under section 
170.24  477A.013 is less than 20 percent of the amount that the formula 
170.25  aid of the city would have been if the need increase percentage 
170.26  was 100 percent; and 
170.27     (5) the city aid base of the city used in calculating aid 
170.28  under section 477A.013 is less than $7 per capita. 
170.29     (j) The city aid base for a city is increased by $225,000 
170.30  in calendar years 2000 to 2002 and the maximum amount of total 
170.31  aid it may receive under section 477A.013, subdivision 9, 
170.32  paragraph (c), is also increased by $225,000 in calendar year 
170.33  2000 only, provided that: 
170.34     (1) the city had a population of at least 5,000; 
170.35     (2) its population had increased by at least 50 percent in 
170.36  the ten-year period ending in 1997; 
171.1      (3) the city is located outside of the Minneapolis-St. Paul 
171.2   metropolitan statistical area as defined by the United States 
171.3   Bureau of the Census; and 
171.4      (4) the city received less than $30 per capita in aid under 
171.5   section 477A.013, subdivision 9, for aids payable in 1999. 
171.6      (k) (i) The city aid base for a city is increased by 
171.7   $102,000 in 2000 and thereafter, and the maximum amount of total 
171.8   aid it may receive under section 477A.013, subdivision 9, 
171.9   paragraph (c), is also increased by $102,000 in calendar year 
171.10  2000 only, provided that: 
171.11     (1) the city has a population in 1997 of 2,000 or more; 
171.12     (2) the net tax capacity of the city used in calculating 
171.13  its 1999 aid under section 477A.013 is less than $455 per 
171.14  capita; 
171.15     (3) the net levy of the city used in calculating 1999 aid 
171.16  under section 477A.013 is greater than $195 per capita; and 
171.17     (4) the 1999 local government aid of the city under section 
171.18  477A.013 is less than 38 percent of the amount that the formula 
171.19  aid of the city would have been if the need increase percentage 
171.20  was 100 percent. 
171.21     (l) (j) The city aid base for a city is increased by 
171.22  $32,000 in 2001 and thereafter, and the maximum amount of total 
171.23  aid it may receive under section 477A.013, subdivision 9, 
171.24  paragraph (c), is also increased by $32,000 in calendar year 
171.25  2001 only, provided that: 
171.26     (1) the city has a population in 1998 that is greater than 
171.27  200 but less than 500; 
171.28     (2) the city's revenue need used in calculating aids 
171.29  payable in 2000 was greater than $200 per capita; 
171.30     (3) the city net tax capacity for the city used in 
171.31  calculating aids available in 2000 was equal to or less than 
171.32  $200 per capita; 
171.33     (4) the city aid base of the city used in calculating aid 
171.34  under section 477A.013 is less than $65 per capita; and 
171.35     (5) the city's formula aid for aids payable in 2000 was 
171.36  greater than zero. 
172.1      (m) (k) The city aid base for a city is increased by $7,200 
172.2   in 2001 and thereafter, and the maximum amount of total aid it 
172.3   may receive under section 477A.013, subdivision 9, paragraph 
172.4   (c), is also increased by $7,200 in calendar year 2001 only, 
172.5   provided that: 
172.6      (1) the city had a population in 1998 that is greater than 
172.7   200 but less than 500; 
172.8      (2) the city's commercial industrial percentage used in 
172.9   calculating aids payable in 2000 was less than ten percent; 
172.10     (3) more than 25 percent of the city's population was 60 
172.11  years old or older according to the 1990 census; 
172.12     (4) the city aid base of the city used in calculating aid 
172.13  under section 477A.013 is less than $15 per capita; and 
172.14     (5) the city's formula aid for aids payable in 2000 was 
172.15  greater than zero. 
172.16     (n) (l) The city aid base for a city is increased by 
172.17  $45,000 in 2001 and thereafter and by an additional $50,000 in 
172.18  calendar years 2002 to 2011, and the maximum amount of total aid 
172.19  it may receive under section 477A.013, subdivision 9, paragraph 
172.20  (c), is also increased by $45,000 in calendar year 2001 only, 
172.21  and by $50,000 in calendar year 2002 only, provided that: 
172.22     (1) the net tax capacity of the city used in calculating 
172.23  its 2000 aid under section 477A.013 is less than $810 per 
172.24  capita; 
172.25     (2) the population of the city declined more than two 
172.26  percent between 1988 and 1998; 
172.27     (3) the net levy of the city used in calculating 2000 aid 
172.28  under section 477A.013 is greater than $240 per capita; and 
172.29     (4) the city received less than $36 per capita in aid under 
172.30  section 477A.013, subdivision 9, for aids payable in 2000. 
172.31     (o) (m) The city aid base for a city with a population of 
172.32  10,000 or more which is located outside of the seven-county 
172.33  metropolitan area is increased in 2002 and thereafter, and the 
172.34  maximum amount of total aid it may receive under section 
172.35  477A.013, subdivision 9, paragraph (b) or (c), is also increased 
172.36  in calendar year 2002 only, by an amount equal to the lesser of: 
173.1      (1)(i) the total population of the city, as determined by 
173.2   the United States Bureau of the Census, in the 2000 census, (ii) 
173.3   minus 5,000, (iii) times 60; or 
173.4      (2) $2,500,000. 
173.5      (p) (n) The city aid base is increased by $50,000 in 2002 
173.6   and thereafter, and the maximum amount of total aid it may 
173.7   receive under section 477A.013, subdivision 9, paragraph (c), is 
173.8   also increased by $50,000 in calendar year 2002 only, provided 
173.9   that: 
173.10     (1) the city is located in the seven-county metropolitan 
173.11  area; 
173.12     (2) its population in 2000 is between 10,000 and 20,000; 
173.13  and 
173.14     (3) its commercial industrial percentage, as calculated for 
173.15  city aid payable in 2001, was greater than 25 percent. 
173.16     (q) (o) The city aid base for a city is increased by 
173.17  $150,000 in calendar years 2002 to 2011 and the maximum amount 
173.18  of total aid it may receive under section 477A.013, subdivision 
173.19  9, paragraph (c), is also increased by $150,000 in calendar year 
173.20  2002 only, provided that: 
173.21     (1) the city had a population of at least 3,000 but no more 
173.22  than 4,000 in 1999; 
173.23     (2) its home county is located within the seven-county 
173.24  metropolitan area; 
173.25     (3) its pre-1940 housing percentage is less than 15 
173.26  percent; and 
173.27     (4) its city net tax capacity per capita for taxes payable 
173.28  in 2000 is less than $900 per capita. 
173.29     (r) (p) The city aid base for a city is increased by 
173.30  $200,000 beginning in calendar year 2003 and the maximum amount 
173.31  of total aid it may receive under section 477A.013, subdivision 
173.32  9, paragraph (c), is also increased by $200,000 in calendar year 
173.33  2003 only, provided that the city qualified for an increase in 
173.34  homestead and agricultural credit aid under Laws 1995, chapter 
173.35  264, article 8, section 18. 
173.36     (q) The city aid base for a city is increased by $200,000 
174.1   in 2004 and thereafter and the maximum amount of total aid it 
174.2   may receive under section 477A.013, subdivision 9, is also 
174.3   increased by $200,000 in calendar year 2004 only, if the city is 
174.4   the site of a nuclear dry cask storage facility. 
174.5      (r) The city aid base for a city is increased by $10,000 in 
174.6   2004 and thereafter and the maximum total aid it may receive 
174.7   under section 477A.013, subdivision 9, is also increased by 
174.8   $10,000 in calendar year 2004 only, if the city was included in 
174.9   a federal major disaster designation issued on April 1, 1998 and 
174.10  its pre-1940 housing stock was decreased by more than 40 percent 
174.11  between 1990 and 2000. 
174.12     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
174.13  aids payable in 2004. 
174.14     Sec. 8.  Minnesota Statutes 2002, section 477A.011, is 
174.15  amended by adding a subdivision to read: 
174.16     Subd. 38.  [HOUSEHOLD SIZE.] "Household size" means the 
174.17  average number of persons per household in the jurisdiction as 
174.18  most recently estimated and reported by the state demographer as 
174.19  of July 1 of the aid calculation year. 
174.20     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
174.21  in 2004 and thereafter. 
174.22     Sec. 9.  Minnesota Statutes 2002, section 477A.011, is 
174.23  amended by adding a subdivision to read: 
174.24     Subd. 39.  [ROAD ACCIDENTS FACTOR.] "Road accidents factor" 
174.25  means the average annual number of vehicular accidents occurring 
174.26  on public roads, streets, and alleys in the jurisdiction as 
174.27  reported to the commissioner of revenue by the commissioner of 
174.28  public safety by July 1 of the aid calculation year using the 
174.29  most recent three-year period for which the commissioner of 
174.30  public safety has complete information, divided by the 
174.31  jurisdiction's population. 
174.32     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
174.33  in 2004 and thereafter. 
174.34     Sec. 10.  Minnesota Statutes 2002, section 477A.011, is 
174.35  amended by adding a subdivision to read: 
174.36     Subd. 40.  [METROPOLITAN AREA FACTOR.] "Metropolitan area 
175.1   factor" means 35.20915 for cities located in the metropolitan 
175.2   area. 
175.3      <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
175.4   in 2004 and thereafter. 
175.5      Sec. 11.  [477A.0124] [COUNTY PROGRAM AID.] 
175.6      Subdivision 1.  [CALENDAR YEAR 2004.] In 2004, each county 
175.7   shall receive program aid in an amount equal to the sum of: 
175.8      (1) the amount of county attached machinery aid computed 
175.9   for the county for payment in 2003 under section 273.138 prior 
175.10  to any reduction under laws enacted in 2003; 
175.11     (2) the amount of county homestead and agricultural credit 
175.12  aid computed for the county for payment in 2003 under section 
175.13  273.1398, subdivision 2, prior to any reduction under laws 
175.14  enacted in 2003, minus the amount certified under section 
175.15  273.1398, subdivision 4a; and for counties located in judicial 
175.16  districts two and four, minus 25 percent of the amount 
175.17  calculated under section 273.1398, subdivision 4a; 
175.18     (3) the amount of county manufactured home homestead and 
175.19  agricultural credit aid computed for the county for payment in 
175.20  2003 under section 273.166 prior to any reduction under laws 
175.21  enacted in 2003; 
175.22     (4) the amount of county criminal justice aid computed for 
175.23  the county for payment in 2003 under section 477A.0121 prior to 
175.24  any reduction under laws enacted in 2003; and 
175.25     (5) the amount of county family preservation aid computed 
175.26  for the county for payment in 2003 under section 477A.0122 prior 
175.27  to any reduction under laws enacted in 2003. 
175.28     Subd. 2.  [DEFINITIONS.] (a) For the purposes of this 
175.29  section, the following terms have the meaning given. 
175.30     (b) "County program aid" means the sum of "county need aid" 
175.31  plus "county tax base equalization aid." 
175.32     (c) "Age adjusted population" means a county's population 
175.33  multiplied by the county age index. 
175.34     (d) "County age index" means the percentage of the 
175.35  population over age 65 within the county divided by the 
175.36  percentage of the population over age 65 within the state, 
176.1   except that the age index for any county may not be greater than 
176.2   1.8 nor less than 0.8. 
176.3      (e) "Population over age 65" means the population over age 
176.4   65 established as of July 1 in an aid calculation year by the 
176.5   most recent federal census, by a special census conducted under 
176.6   contract with the United States Bureau of the Census, by a 
176.7   population estimate made by the metropolitan council, or by a 
176.8   population estimate of the state demographer made pursuant to 
176.9   section 4A.02, whichever is the most recent as to the stated 
176.10  date of the count or estimate for the preceding calendar year. 
176.11     (f) "Part I crimes" means the three-year average annual 
176.12  number of Part I crimes reported for each county by the 
176.13  department of public safety for the most recent years available. 
176.14  By July 1 of each year the commissioner of public safety shall 
176.15  certify to the commissioner of revenue the number of Part I 
176.16  crimes reported for each county. 
176.17     (g) "Households receiving food stamps" means the average 
176.18  monthly number of households receiving food stamps for the three 
176.19  most recent years for which data is available.  By July 1 of 
176.20  each year, the commissioner of human services must certify to 
176.21  the commissioner of revenue the average monthly number of 
176.22  households in the state and in each county that receive food 
176.23  stamps, for the most recent calendar year. 
176.24     (h) "County net tax capacity" means the net tax capacity of 
176.25  the county, computed analogously to city net tax capacity under 
176.26  section 477A.011, subdivision 20. 
176.27     Subd. 3.  [COUNTY NEED AID.] For 2005 and subsequent years, 
176.28  the money appropriated to county need aid each calendar year 
176.29  shall be allocated as follows:  40 percent based on each 
176.30  county's share of age-adjusted population, 40 percent based on 
176.31  each county's share of the state total of households receiving 
176.32  food stamps, and 20 percent based on each county's share of the 
176.33  state total of Part I crimes. 
176.34     Subd. 4.  [COUNTY TAX-BASE EQUALIZATION AID.] (a) For 2005 
176.35  and subsequent years, the money appropriated to county tax-base 
176.36  equalization aid each calendar year shall be apportioned among 
177.1   the counties according to each county's tax-base equalization 
177.2   aid factor. 
177.3      (b) A county's tax-base equalization aid factor is equal to 
177.4   the amount by which (i) $185 times the county's population, 
177.5   exceeds (ii) 9.45 percent of the county's net tax capacity. 
177.6      (c) In the case of a county with a population less than 
177.7   10,000, the factor determined in paragraph (b) shall be 
177.8   multiplied by a factor of three. 
177.9      (d) In the case of a county with a population greater than 
177.10  500,000, the factor determined in paragraph (b) shall be 
177.11  multiplied by a factor of 0.3. 
177.12     <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
177.13  payable in 2004 and subsequent years. 
177.14     Sec. 12.  Minnesota Statutes 2002, section 477A.013, 
177.15  subdivision 8, is amended to read: 
177.16     Subd. 8.  [CITY FORMULA AID.] In calendar year 1994 2004 
177.17  and subsequent years, the formula aid for a city is equal to the 
177.18  need increase percentage multiplied by the difference between 
177.19  (1) the city's revenue need multiplied by its population, and 
177.20  (2) the sum of the city's net tax capacity multiplied by the tax 
177.21  effort rate, the taconite aids under sections 298.28 and 
177.22  298.282, and 50 percent of the revenue raised in the city by a 
177.23  local general sales tax subject to section 297A.99 for the 
177.24  calendar year two years prior to the year in which the aid is 
177.25  being calculated, if the local sales tax is still in effect for 
177.26  the year in which the calculated aid will be paid.  No city may 
177.27  have a formula aid amount less than zero.  The need increase 
177.28  percentage must be the same for all cities.  
177.29     Notwithstanding the prior sentence, in 1995 only, the need 
177.30  increase percentage for a city shall be twice the need increase 
177.31  percentage applicable to other cities if:  
177.32     (1) the city, in 1992 or 1993, transferred an amount from 
177.33  governmental funds to their sewer and water fund, and 
177.34     (2) the amount transferred exceeded their net levy for 
177.35  taxes payable in the year in which the transfer occurred. 
177.36     The applicable need increase percentage or percentages must 
178.1   be calculated by the department of revenue so that the total of 
178.2   the aid under subdivision 9 equals the total amount available 
178.3   for aid under section 477A.03 after the subtraction under 
178.4   section 477A.014, subdivisions 4 and 5.  
178.5      <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
178.6   in 2004 and thereafter. 
178.7      Sec. 13.  Minnesota Statutes 2002, section 477A.013, 
178.8   subdivision 9, is amended to read: 
178.9      Subd. 9.  [CITY AID DISTRIBUTION.] (a) In calendar year 
178.10  2002 and thereafter, each city shall receive an aid distribution 
178.11  equal to the sum of (1) the city formula aid under subdivision 
178.12  8, and (2) its city aid base. 
178.13     (b) The percentage increase aid for a first class city in 
178.14  calendar year 1995 and thereafter, except for 2002, 2004 shall 
178.15  not exceed the percentage increase in the sum of the aid to all 
178.16  cities under this section in the current calendar year compared 
178.17  to the sum of the aid to all cities in the previous year amount 
178.18  of its aid in calendar year 2003 after the reductions under this 
178.19  article.  For aids payable in 2002 only, the amount of the aid 
178.20  paid to a first class city shall not exceed the sum of its aid 
178.21  amount for calendar year 2001 under this section and its aid 
178.22  payment in calendar year 2001 under section 273.1398, 
178.23  subdivision 2, by more than 2.5 percent. 
178.24     (c) For aids payable in all years except 2002 2005 and 
178.25  thereafter, the total aid for any city, except a first class 
178.26  city, shall not exceed the sum of (1) ten percent of the city's 
178.27  net levy for the year prior to the aid distribution plus (2) its 
178.28  total aid in the previous year.  For aids payable in 2002 only, 
178.29  the total aid for any city, except a first class city, shall not 
178.30  exceed the sum of (1) 40 percent of the city's net levy for 
178.31  taxes payable in the year prior to the aid distribution plus (2) 
178.32  40 percent of its total aid in the previous year under section 
178.33  273.1398, subdivision 2, plus (3) its total aid in the previous 
178.34  year under this section.  For aids payable in 2005 and 
178.35  thereafter, the total aid for any city with a population of 
178.36  2,500 or more may not decrease from its total aid under this 
179.1   section in the previous year by an amount greater than ten 
179.2   percent of its net levy in the year prior to the aid 
179.3   distribution. 
179.4      (d) For aids payable in 2004 only, the total aid for a city 
179.5   with a population less than 2,500 may not be less than the 
179.6   amount it was certified to receive in 2003 minus the greater of 
179.7   (1) the reduction to this aid payment in 2003 under this 
179.8   article, or (2) five percent of its 2003 aid amount.  For aids 
179.9   payable in 2005 and thereafter, the total aid for a city with a 
179.10  population less than 2,500 must not be less than the amount it 
179.11  was certified to receive in the previous year minus five percent 
179.12  of its 2003 certified aid amount. 
179.13     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
179.14  aids payable in 2004. 
179.15     Sec. 14.  Minnesota Statutes 2002, section 477A.03, 
179.16  subdivision 2, is amended to read: 
179.17     Subd. 2.  [ANNUAL APPROPRIATION.] (a) A sum sufficient to 
179.18  discharge the duties imposed by sections 477A.011 to 477A.014 is 
179.19  annually appropriated from the general fund to the commissioner 
179.20  of revenue.  
179.21     (b) Aid payments to counties under section 477A.0121 are 
179.22  limited to $20,265,000 in 1996.  Aid payments to counties under 
179.23  section 477A.0121 are limited to $27,571,625 in 1997.  For aid 
179.24  payable in 1998 and thereafter, the total aids paid under 
179.25  section 477A.0121 are the amounts certified to be paid in the 
179.26  previous year, adjusted for inflation as provided under 
179.27  subdivision 3. 
179.28     (c)(i) For aids payable in 1998 and thereafter, the total 
179.29  aids paid to counties under section 477A.0122 are the amounts 
179.30  certified to be paid in the previous year, adjusted for 
179.31  inflation as provided under subdivision 3. 
179.32     (ii) Aid payments to counties under section 477A.0122 in 
179.33  2000 are further increased by an additional $20,000,000 in 2000. 
179.34     (d) Aid payments to cities in 2002 under section 477A.013, 
179.35  subdivision 9, are limited to the amounts certified to be paid 
179.36  in the previous year, adjusted for inflation as provided in 
180.1   subdivision 3, and increased by $140,000,000.  For aids payable 
180.2   in 2003, the total aids paid under section 477A.013, subdivision 
180.3   9, are the amounts certified to be paid in the previous year, 
180.4   adjusted for inflation as provided under subdivision 3.  For 
180.5   aids payable in 2004, the total aids paid under section 
180.6   477A.013, subdivision 9, are the amounts certified to be paid in 
180.7   the previous year, adjusted for inflation as provided under 
180.8   subdivision 3, and increased by the amount certified to be paid 
180.9   in 2003 under section 477A.06.  For aids payable in 2005 and 
180.10  thereafter, the total aids paid under section 477A.013, 
180.11  subdivision 9, are the amounts certified to be paid in the 
180.12  previous year, adjusted for inflation as provided under 
180.13  subdivision 3.  The additional amount authorized under 
180.14  subdivision 4 is not included when calculating the appropriation 
180.15  limits under this paragraph limited to $390,000,000.  For aids 
180.16  payable in 2005 and thereafter, the total aids paid under 
180.17  section 477A.013, subdivision 9, are increased to $406,602,000. 
180.18     (e) Reimbursements made to counties under section 477A.0123 
180.19  in calendar year 2005 and thereafter are limited to an amount 
180.20  equal to the maximum allowed appropriation under this section in 
180.21  the previous year, multiplied by a percent to be established by 
180.22  law.  If no percent is established by law, the appropriation is 
180.23  limited to the total amount appropriated for this purpose in the 
180.24  previous year.  (c) For aids payable in calendar year 2005 and 
180.25  thereafter, the total aids paid to counties under section 
180.26  477A.0124, subdivision 3, are limited to $100,500,000.  Each 
180.27  calendar year, $500,000 shall be retained by the commissioner of 
180.28  revenue to make reimbursements to the commissioner of finance 
180.29  for payments made under section 611.27.  For calendar year 2004, 
180.30  the amount shall be in addition to the payments authorized under 
180.31  section 477A.0124, subdivision 1.  For calendar year 2005 and 
180.32  subsequent years, the amount shall be deducted from the 
180.33  appropriation under this paragraph.  The reimbursements shall be 
180.34  to defray the additional costs associated with court-ordered 
180.35  counsel under section 611.27.  Any retained amounts not used for 
180.36  reimbursement in a year shall be included in the next 
181.1   distribution of county need aid that is certified to the county 
181.2   auditors for the purpose of property tax reduction for the next 
181.3   taxes payable year. 
181.4      (d) For aids payable in 2005 and thereafter, the total aids 
181.5   under section 477A.0124, subdivision 4, are limited to 
181.6   $105,000,000.  The commissioner of finance shall bill the 
181.7   commissioner of revenue for the cost of preparation of local 
181.8   impact notes as required by section 3.987, not to exceed 
181.9   $207,000 in fiscal year 2004 and thereafter.  The commissioner 
181.10  of children, families, and learning shall bill the commissioner 
181.11  of revenue for the cost of preparation of local impact notes for 
181.12  school districts as required by section 3.987, not to exceed 
181.13  $7,000 in fiscal year 2004 and thereafter.  The commissioner of 
181.14  revenue shall deduct the amounts billed under this paragraph 
181.15  from the appropriation under this paragraph.  The amounts 
181.16  deducted are appropriated to the commissioner of finance and the 
181.17  commissioner of children, families, and learning for the 
181.18  preparation of local impact notes. 
181.19     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
181.20  in 2004 and thereafter. 
181.21     Sec. 15.  Minnesota Statutes 2002, section 611.27, 
181.22  subdivision 13, is amended to read: 
181.23     Subd. 13.  [PUBLIC DEFENSE SERVICES; CORRECTIONAL FACILITY 
181.24  INMATES.] All billings for services rendered and ordered under 
181.25  subdivision 7 shall require the approval of the chief district 
181.26  public defender before being forwarded on a monthly basis to the 
181.27  state public defender.  In cases where adequate representation 
181.28  cannot be provided by the district public defender and where 
181.29  counsel has been appointed under a court order, the state public 
181.30  defender shall forward to the commissioner of finance all 
181.31  billings for services rendered under the court order.  The 
181.32  commissioner shall pay for services from county criminal justice 
181.33  aid retained by the commissioner of revenue for that purpose 
181.34  under section 477A.0121, subdivision 4, or from county program 
181.35  aid retained by the commissioner of revenue for that purpose 
181.36  under section 477A.0124, subdivision 1, clause (4), or 477A.03, 
182.1   subdivision 2, paragraph (c). 
182.2      The costs of appointed counsel and associated services in 
182.3   cases arising from new criminal charges brought against indigent 
182.4   inmates who are incarcerated in a Minnesota state correctional 
182.5   facility are the responsibility of the state board of public 
182.6   defense.  In such cases the state public defender may follow the 
182.7   procedures outlined in this section for obtaining court-ordered 
182.8   counsel. 
182.9      <b>[EFFECTIVE DATE.]</b> This section is effective for payments in 
182.10  2004 and subsequent years. 
182.11     Sec. 16.  Minnesota Statutes 2002, section 611.27, 
182.12  subdivision 15, is amended to read: 
182.13     Subd. 15.  [COSTS OF TRANSCRIPTS.] In appeal cases and 
182.14  postconviction cases where the state public defender's office 
182.15  does not have sufficient funds to pay for transcripts and other 
182.16  necessary expenses because it has spent or committed all of the 
182.17  transcript funds in its annual budget, the state public defender 
182.18  may forward to the commissioner of finance all billings for 
182.19  transcripts and other necessary expenses.  The commissioner 
182.20  shall pay for these transcripts and other necessary expenses 
182.21  from county criminal justice aid retained by the commissioner of 
182.22  revenue under section 477A.0121, subdivision 4, or from county 
182.23  program aid retained by the commissioner of revenue for that 
182.24  purpose under section 477A.0124, subdivision 1, clause (4), or 
182.25  477A.03, subdivision 2, paragraph (c). 
182.26     <b>[EFFECTIVE DATE.]</b> This section is effective for payments in 
182.27  2004 and subsequent years. 
182.28     Sec. 17.  [DEFINITIONS.] 
182.29     (a) For purposes of sections 17 to 25, the following terms 
182.30  have the meanings given them in this section. 
182.31     (b) The 2003 and 2004 "levy plus aid revenue base" for a 
182.32  city is the sum of that city's certified property tax levy for 
182.33  taxes payable in 2003, plus the sum of the amounts the city was 
182.34  certified to receive in 2003 as: 
182.35     (1) local government aid under Minnesota Statutes, section 
182.36  477A.013; 
183.1      (2) existing low-income housing aid under Minnesota 
183.2   Statutes, section 477A.06; 
183.3      (3) new construction low-income housing aid under Minnesota 
183.4   Statutes, section 477A.065; and 
183.5      (4) taconite aids under Minnesota Statutes, sections 298.28 
183.6   and 298.282, including any aid which was required to be placed 
183.7   in a special fund for expenditure in the next succeeding year. 
183.8      (c) The 2003 and 2004 "levy plus aid revenue base" for a 
183.9   county is the sum of that county's certified property tax levy 
183.10  for taxes payable in 2003, plus the sum of the amounts the 
183.11  county was certified to receive in the designated calendar year 
183.12  as: 
183.13     (1) homestead and agricultural credit aid under Minnesota 
183.14  Statutes, section 273.1398, subdivision 2, minus the amount 
183.15  calculated under section 273.1398, subdivision 4a, paragraph 
183.16  (b), for counties in judicial districts one, three, six, and 
183.17  ten, and 25 percent of the amount calculated under section 
183.18  273.1398, subdivision 4a, paragraph (b), for counties in 
183.19  judicial districts two and four; 
183.20     (2) the amount of county manufactured home homestead and 
183.21  agricultural credit aid computed for the county for payment in 
183.22  2003 under section 273.166 prior to any reduction under laws 
183.23  enacted in 2003; 
183.24     (3) criminal justice aid under Minnesota Statutes, section 
183.25  477A.0121; 
183.26     (4) family preservation aid under Minnesota Statutes, 
183.27  section 477A.0122; 
183.28     (5) taconite aids under Minnesota Statutes, sections 298.28 
183.29  and 298.282, including any aid which was required to be placed 
183.30  in a special fund for expenditure in the next succeeding year; 
183.31  and 
183.32     (6) county program aid under section 477A.0124. 
183.33     (d) "Total revenue" for a city or county for a particular 
183.34  year are the total revenue amount for that city or county, as 
183.35  reported by the state auditor for the same year, or for the most 
183.36  recent preceding year for which the state auditor has reported, 
184.1   excluding grants between political subdivisions and amounts 
184.2   borrowed by the city or county but including net transfers from 
184.3   an enterprise fund. 
184.4      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
184.5   following final enactment. 
184.6      Sec. 18.  [2003 CITY AID REDUCTIONS.] 
184.7      The commissioner of revenue shall compute an aid reduction 
184.8   amount for each city for 2003 equal to 9.3 percent of the city's 
184.9   levy plus aid revenue base for 2003. 
184.10     The reduction amount is limited to 3.7 percent of the 
184.11  city's total revenues for 2003 if a city has a population under 
184.12  1,000 or if the city has a three-year levy plus aid revenue base 
184.13  increase average of less than two percent.  For all other 
184.14  cities, the reduction amount is limited to 5.25 percent of the 
184.15  city's total revenues for 2003. 
184.16     The reduction is further limited to the sum of the city's 
184.17  payable 2003 distribution pursuant to Minnesota Statutes, 
184.18  section 477A.013, and related sections, and the city's payable 
184.19  2003 reimbursement under Minnesota Statutes, section 273.1384. 
184.20     The reduction is applied first to the city's distribution 
184.21  pursuant to Minnesota Statutes, section 477A.013, and then if 
184.22  necessary to the city's reimbursements pursuant to Minnesota 
184.23  Statutes, section 273.1384. 
184.24     To the extent that sufficient information is available on 
184.25  each successive payment date within the year, the commissioner 
184.26  of revenue shall pay any remaining 2003 distribution or 
184.27  reimbursement amount reduced under this section in equal 
184.28  installments on the payment dates provided in law. 
184.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
184.30  following final enactment. 
184.31     Sec. 19.  [2003 COUNTY AID REDUCTIONS.] 
184.32     The commissioner of revenue shall compute an aid reduction 
184.33  amount for each county for 2003 equal to 3.16 percent of the 
184.34  county's levy plus aid revenue base for 2003. 
184.35     The reduction is limited to the sum of the county's payable 
184.36  2003 distributions pursuant to Minnesota Statutes, sections 
185.1   273.138; 273.1384; 273.1398, subdivision 2; 273.166; 477A.0121; 
185.2   and 477A.0122. 
185.3      The aid reduction is applied first to reduce the county's 
185.4   2003 distribution pursuant to Minnesota Statutes, section 
185.5   273.138, then to reduce, in this sequence, the aid payable in 
185.6   2003 under Minnesota Statutes, sections 273.1398, subdivision 2; 
185.7   273.166; 477A.0121; and 477A.0122.  Then, if necessary, the 
185.8   county's reimbursements pursuant to Minnesota Statutes, section 
185.9   273.1384, are to be reduced. 
185.10     To the extent that sufficient information is available on 
185.11  each successive payment date within the year, the commissioner 
185.12  of revenue shall pay any remaining 2003 distribution or 
185.13  reimbursement amount reduced under this section in equal 
185.14  installments on the payment dates provided in law. 
185.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
185.16  following final enactment. 
185.17     Sec. 20.  [2003 TOWNSHIP AID REDUCTIONS.] 
185.18     The commissioner of revenue shall compute an aid reduction 
185.19  amount for each township for 2003 equal to one percent of the 
185.20  town's certified levy for taxes payable in 2003. 
185.21     The reduction is limited to the amount of the town's 
185.22  payable 2003 reimbursement pursuant to Minnesota Statutes, 
185.23  section 273.1384.  
185.24     To the extent that sufficient information is available on 
185.25  each successive payment date within the year, the commissioner 
185.26  of revenue shall pay any remaining 2003 reimbursement amount for 
185.27  the town in equal installments on the payment dates provided in 
185.28  law. 
185.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
185.30  following final enactment. 
185.31     Sec. 21.  [2003 SPECIAL TAXING DISTRICT AID REDUCTIONS.] 
185.32     The commissioner of revenue shall compute an aid reduction 
185.33  amount for each special taxing district for 2003 equal to 0.75 
185.34  percent of the district's certified levy for taxes payable in 
185.35  2003. 
185.36     The reduction is limited to the amount of the district's 
186.1   payable 2003 reimbursement pursuant to Minnesota Statutes, 
186.2   section 237.1384. 
186.3      To the extent that sufficient information is available on 
186.4   each successive payment date within the year, the commissioner 
186.5   of revenue shall pay any remaining 2003 reimbursement amount for 
186.6   the district in equal installments on the payment dates provided 
186.7   in law. 
186.8      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
186.9   following final enactment. 
186.10     Sec. 22.  [2004 CITY AID REDUCTIONS.] 
186.11     The commissioner of revenue shall compute an aid reduction 
186.12  amount for 2004 for each city as provided in this section. 
186.13     The initial aid reduction amount for each city is the 
186.14  amount by which the city's aid distribution under Minnesota 
186.15  Statutes, section 477A.013, and related provisions payable in 
186.16  2003 exceeds the city's 2004 distribution under those provisions.
186.17     The minimum aid reduction amount for a city is the amount 
186.18  of its reduction in 2003 under section 18.  If a city receives 
186.19  an increase to its city aid base under section 477A.011, 
186.20  subdivision 36, its minimum aid reduction is reduced by an equal 
186.21  amount. 
186.22     The maximum aid reduction amount for a city is an amount 
186.23  equal to 18 percent of the city's total 2004 levy plus aid 
186.24  revenue base, except that if the city has a city net tax 
186.25  capacity for aids payable in 2004, as defined in section 
186.26  477A.011, subdivision 20, of $700 per capita or less, the 
186.27  maximum aid reduction shall not exceed an amount equal to 13 
186.28  percent of the city's total 2004 levy plus aid revenue base. 
186.29     If the initial aid reduction amount for a city is less than 
186.30  the minimum aid reduction amount for that city, the final aid 
186.31  reduction amount for the city is the sum of the initial aid 
186.32  reduction amount and the lesser of the amount of the city's 
186.33  payable 2004 reimbursement under Minnesota Statutes, section 
186.34  273.1384, or the difference between the minimum and initial aid 
186.35  reduction amounts for the city. 
186.36     If the initial aid reduction amount for a city is greater 
187.1   than the maximum aid reduction amount for the city, the city 
187.2   receives an additional distribution under this section equal to 
187.3   the result of subtracting the maximum aid reduction amount from 
187.4   the initial aid reduction amount.  This distribution shall be 
187.5   paid in equal installments in 2004 on the dates specified in 
187.6   Minnesota Statutes, section 477A.015.  The amount necessary for 
187.7   these additional distributions is appropriated to the 
187.8   commissioner of revenue from the general fund in fiscal year 
187.9   2005. 
187.10     The initial aid reduction is applied to the city's 
187.11  distribution pursuant to Minnesota Statutes, section 477A.013, 
187.12  and any aid reduction in excess of the initial aid reduction is 
187.13  applied to the city's reimbursements pursuant to Minnesota 
187.14  Statutes, section 273.1384. 
187.15     To the extent that sufficient information is available on 
187.16  each payment date in 2004, the commissioner of revenue shall pay 
187.17  the reimbursements reduced under this section in equal 
187.18  installments on the payment dates provided in law. 
187.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
187.20  following final enactment. 
187.21     Sec. 23.  [2004 COUNTY AID REDUCTIONS.] 
187.22     The commissioner of revenue shall compute an aid reduction 
187.23  amount for 2004 for each county as provided in this section. 
187.24     The commissioner of revenue shall compute an aid reduction 
187.25  amount for each county for 2004 equal to 5.27 percent of the 
187.26  county's levy plus aid revenue base for 2004. 
187.27     The reduction is further limited to the sum of the county's 
187.28  payable 2004 distributions under Minnesota Statutes, sections 
187.29  477A.0124 and 273.1384. 
187.30     The aid reduction is applied first to the county's 
187.31  distributions pursuant to Minnesota Statutes, section 477A.0124, 
187.32  and then, if necessary, to reduce the county's reimbursements 
187.33  pursuant to Minnesota Statutes, section 273.1384. 
187.34     To the extent that sufficient information is available on 
187.35  each payment date in 2004, the commissioner of revenue shall pay 
187.36  any remaining 2004 distribution or reimbursement amount reduced 
188.1   under this section in equal installments on the payment dates 
188.2   provided in law. 
188.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
188.4   following final enactment. 
188.5      Sec. 24.  [2004 TOWNSHIP AID REDUCTIONS.] 
188.6      The commissioner of revenue shall compute an aid reduction 
188.7   amount for each township for 2004 equal to 1.5 percent of the 
188.8   town's certified levy for taxes payable in 2003.  
188.9      The reduction is limited to the amount of the town's 
188.10  payable 2004 reimbursement pursuant to Minnesota Statutes, 
188.11  section 273.1384. 
188.12     To the extent that sufficient information is available on 
188.13  each successive payment date within the year, the commissioner 
188.14  of revenue shall pay any remaining 2004 reimbursement amount for 
188.15  the town in equal installments on the payment dates provided in 
188.16  law. 
188.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
188.18  following final enactment. 
188.19     Sec. 25.  [2004 SPECIAL TAXING DISTRICT AID REDUCTIONS.] 
188.20     The commissioner of revenue shall compute an aid reduction 
188.21  amount for each special taxing district for 2004 equal to one 
188.22  percent of the district's certified levy for taxes payable in 
188.23  2003.  
188.24     The reduction is limited to the amount of the district's 
188.25  payable 2004 reimbursement pursuant to Minnesota Statutes, 
188.26  section 273.1384. 
188.27     To the extent that sufficient information is available on 
188.28  each successive payment date within the year, the commissioner 
188.29  of revenue shall pay any remaining 2004 reimbursement amount for 
188.30  the district in equal installments on the payment dates provided 
188.31  in law. 
188.32     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
188.33  following final enactment. 
188.34     Sec. 26.  [HACA ADJUSTMENT; COURT TAKEOVER ERROR.] 
188.35     In calendar years 2003 and 2004, any county whose 2002 aid 
188.36  reduction, related to the state assumption of funding for 
189.1   mandated court services, was based on costs not assumed by the 
189.2   state shall receive the following aid adjustments; 
189.3      (1) in calendar year 2003, a permanent increase of $50,000 
189.4   in its aid payment under Minnesota Statutes, section 273.1398, 
189.5   subdivision 2, above its certified 2003 aid amount; and 
189.6      (2) in calendar year 2004, a permanent increase of an 
189.7   additional $50,000 in its county program aid payment under 
189.8   Minnesota Statutes, section 477A.0124, subdivision 1, clause (2).
189.9      <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
189.10  payable in 2003 and 2004. 
189.11     Sec. 27.  [REPEALER.] 
189.12     (a) Minnesota Statutes 2002, sections 273.138, subdivision 
189.13  2, and the parts of subdivisions 5 and 7 relating to counties; 
189.14  273.1398, subdivisions 2, 2c, 4, and 4d; 273.166; 477A.011, 
189.15  subdivision 37; 477A.0121; 477A.0122; 477A.0123; 477A.0132; 
189.16  477A.03, subdivisions 3 and 4; 477A.06; 477A.065; and 477A.07, 
189.17  are repealed effective for aid payable in 2004 and thereafter. 
189.18     (b) Minnesota Statutes 2002, section 273.138, subdivisions 
189.19  3 and 6, and the parts of subdivisions 5 and 7 relating to 
189.20  school districts are repealed effective for calendar year 2003. 
189.21                             ARTICLE 7 
189.22                            LEVY LIMITS 
189.23     Section 1.  Minnesota Statutes 2002, section 275.70, 
189.24  subdivision 5, is amended to read: 
189.25     Subd. 5.  [SPECIAL LEVIES.] "Special levies" means those 
189.26  portions of ad valorem taxes levied by a local governmental unit 
189.27  for the following purposes or in the following manner: 
189.28     (1) to pay the costs of the principal and interest on 
189.29  bonded indebtedness or to reimburse for the amount of liquor 
189.30  store revenues used to pay the principal and interest due on 
189.31  municipal liquor store bonds in the year preceding the year for 
189.32  which the levy limit is calculated; 
189.33     (2) to pay the costs of principal and interest on 
189.34  certificates of indebtedness issued for any corporate purpose 
189.35  except for the following: 
189.36     (i) tax anticipation or aid anticipation certificates of 
190.1   indebtedness; 
190.2      (ii) certificates of indebtedness issued under sections 
190.3   298.28 and 298.282; 
190.4      (iii) certificates of indebtedness used to fund current 
190.5   expenses or to pay the costs of extraordinary expenditures that 
190.6   result from a public emergency; or 
190.7      (iv) certificates of indebtedness used to fund an 
190.8   insufficiency in tax receipts or an insufficiency in other 
190.9   revenue sources; 
190.10     (3) to provide for the bonded indebtedness portion of 
190.11  payments made to another political subdivision of the state of 
190.12  Minnesota; 
190.13     (4) to fund payments made to the Minnesota state armory 
190.14  building commission under section 193.145, subdivision 2, to 
190.15  retire the principal and interest on armory construction bonds; 
190.16     (5) property taxes approved by voters which are levied 
190.17  against the referendum market value as provided under section 
190.18  275.61; 
190.19     (6) to fund matching requirements needed to qualify for 
190.20  federal or state grants or programs to the extent that either 
190.21  (i) the matching requirement exceeds the matching requirement in 
190.22  calendar year 2001, or (ii) it is a new matching requirement 
190.23  that did not exist prior to 2002; 
190.24     (7) to pay the expenses reasonably and necessarily incurred 
190.25  in preparing for or repairing the effects of natural disaster 
190.26  including the occurrence or threat of widespread or severe 
190.27  damage, injury, or loss of life or property resulting from 
190.28  natural causes, in accordance with standards formulated by the 
190.29  emergency services division of the state department of public 
190.30  safety, as allowed by the commissioner of revenue under section 
190.31  275.74, subdivision 2; 
190.32     (8) pay amounts required to correct an error in the levy 
190.33  certified to the county auditor by a city or county in a levy 
190.34  year, but only to the extent that when added to the preceding 
190.35  year's levy it is not in excess of an applicable statutory, 
190.36  special law or charter limitation, or the limitation imposed on 
191.1   the governmental subdivision by sections 275.70 to 275.74 in the 
191.2   preceding levy year; 
191.3      (9) to pay an abatement under section 469.1815; 
191.4      (10) to pay any costs attributable to increases in the 
191.5   employer contribution rates under chapter 353 that are effective 
191.6   after June 30, 2001; 
191.7      (11) to pay the operating or maintenance costs of a county 
191.8   jail as authorized in section 641.01 or 641.262, or of a 
191.9   correctional facility as defined in section 241.021, subdivision 
191.10  1, paragraph (5), to the extent that the county can demonstrate 
191.11  to the commissioner of revenue that the amount has been included 
191.12  in the county budget as a direct result of a rule, minimum 
191.13  requirement, minimum standard, or directive of the department of 
191.14  corrections, or to pay the operating or maintenance costs of a 
191.15  regional jail as authorized in section 641.262.  For purposes of 
191.16  this clause, a district court order is not a rule, minimum 
191.17  requirement, minimum standard, or directive of the department of 
191.18  corrections.  If the county utilizes this special levy, except 
191.19  to pay operating or maintenance costs of a new regional jail 
191.20  facility under sections 641.262 to 641.264 which will not 
191.21  replace an existing jail facility, any amount levied by the 
191.22  county in the previous levy year for the purposes specified 
191.23  under this clause and included in the county's previous year's 
191.24  levy limitation computed under section 275.71, shall be deducted 
191.25  from the levy limit base under section 275.71, subdivision 2, 
191.26  when determining the county's current year levy limitation.  The 
191.27  county shall provide the necessary information to the 
191.28  commissioner of revenue for making this determination; 
191.29     (12) to pay for operation of a lake improvement district, 
191.30  as authorized under section 103B.555.  If the county utilizes 
191.31  this special levy, any amount levied by the county in the 
191.32  previous levy year for the purposes specified under this clause 
191.33  and included in the county's previous year's levy limitation 
191.34  computed under section 275.71 shall be deducted from the levy 
191.35  limit base under section 275.71, subdivision 2, when determining 
191.36  the county's current year levy limitation.  The county shall 
192.1   provide the necessary information to the commissioner of revenue 
192.2   for making this determination; 
192.3      (13) to repay a state or federal loan used to fund the 
192.4   direct or indirect required spending by the local government due 
192.5   to a state or federal transportation project or other state or 
192.6   federal capital project.  This authority may only be used if the 
192.7   project is not a local government initiative; 
192.8      (14) for counties only, to pay the costs reasonably 
192.9   expected to be incurred in 2002 related to the redistricting of 
192.10  election districts and establishment of election precincts under 
192.11  sections 204B.135 and 204B.14, the notice required by section 
192.12  204B.14, subdivision 4, and the reassignment of voters in the 
192.13  statewide registration system, not to exceed $1 per capita, 
192.14  provided that the county shall distribute a portion of the 
192.15  amount levied under this clause equal to 25 cents times the 
192.16  population of the city to all cities in the county with a 
192.17  population of 30,000 or more; 
192.18     (15) to pay for court administration costs as required 
192.19  under section 273.1398, subdivision 4b, less the (i) county's 
192.20  share of transferred fines and fees collected by the district 
192.21  courts in the county for calendar year 2001 and (ii) the aid 
192.22  amount certified to be paid to the county in 2004 under section 
192.23  273.1398, subdivision 4c; however, for taxes levied to pay for 
192.24  these costs in the year in which the court financing is 
192.25  transferred to the state, the amount under this section clause 
192.26  is limited to one-third of the aid reduction the amount of aid 
192.27  the county is certified to receive under section 273.1398, 
192.28  subdivision 4a; and 
192.29     (16) (15) to fund a police or firefighters relief 
192.30  association as required under section 69.77 to the extent that 
192.31  the required amount exceeds the amount levied for this purpose 
192.32  in 2001. 
192.33     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
192.34  payable in 2004 and thereafter. 
192.35     Sec. 2.  Minnesota Statutes 2002, section 275.71, 
192.36  subdivision 2, is amended to read: 
193.1      Subd. 2.  [LEVY LIMIT BASE.] (a) If a local government unit 
193.2   was not subject to levy limits under this section for taxes 
193.3   levied in 2002, the levy limit base for a the local governmental 
193.4   unit for taxes levied in 2001 is equal to the greater of: 
193.5      (1) the sum of its adjusted levy limit base for taxes 
193.6   levied in 1999 plus the amount it levied in 1999 under Minnesota 
193.7   Statutes 1999 Supplement, section 275.70, subdivision 5, clauses 
193.8   (8) and (13), multiplied by: 
193.9      (i) one plus the percentage growth in the implicit price 
193.10  deflator for the 12-month period ending March 30, 2000; 
193.11     (ii) one plus a percentage equal to the annual percentage 
193.12  increase in the estimated number of households, if any, for the 
193.13  most recent 12-month period that was available on July 1, 2000; 
193.14  and 
193.15     (iii) one plus a percentage equal to 50 percent of the 
193.16  percentage increase in the taxable market value of the 
193.17  jurisdiction due to new construction of class 3 property, as 
193.18  defined in section 273.13, subdivision 24, except for 
193.19  state-assessed utility and railroad operating property, for the 
193.20  most recent year for which data was available as of July 1, 
193.21  2000; or 
193.22     (2) 2003 is an amount equal to: 
193.23     (i) the sum of the amount it levied in 2000 2002 plus the 
193.24  amount of aids it was certified to receive in calendar year 2001 
193.25  2003 under sections 273.1398, 298.282, 477A.011 to 477A.03, 
193.26  prior to any aid reductions under section 273.1399, subdivision 
193.27  5, 477A.06, and 477A.065, after any reductions to these aids 
193.28  under article 6; less 
193.29     (ii) the amount it levied in 2000 2002 that would qualify 
193.30  as special levies under section 275.70, subdivision 6, for taxes 
193.31  levied in 2001.  The local governmental unit shall provide the 
193.32  commissioner of revenue with sufficient information to make this 
193.33  calculation. 
193.34     (b) If the governmental unit was not subject to levy limits 
193.35  for taxes levied in 1999, its levy limit base for taxes levied 
193.36  in 2001 is equal to the amount calculated under paragraph (a), 
194.1   clause (2). 
194.2      (c) The levy limit base for a local governmental unit not 
194.3   included in paragraph (a) for taxes levied in 2002 2003 is equal 
194.4   to its adjusted levy limit base in the previous year, plus the 
194.5   amount of tree growth tax it received in calendar year 2001 
194.6   under sections 270.31 to 270.39, and plus, in the case of a 
194.7   city, the amount it was certified to receive in calendar year 
194.8   2001 under section 273.166, subject to any adjustments under 
194.9   section 275.72, and less (1) any cuts in 2003 payments to aids 
194.10  under sections 273.1398 and 477A.011 to 477A.03, (2) 65 percent 
194.11  of the difference between its levy limit under subdivision 5 for 
194.12  taxes levied in 2002 and the amount it actually levied under 
194.13  that subdivision in that year, and (3) certified property tax 
194.14  replacement aid payable in 2003 under section 174.242. 
194.15     (c) The levy limit base for a local governmental unit for 
194.16  taxes levied in 2004 is equal to its adjusted levy limit base in 
194.17  the previous year, subject to any adjustments under section 
194.18  275.72. 
194.19     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
194.20  levied in 2003 and 2004. 
194.21     Sec. 3.  Minnesota Statutes 2002, section 275.71, 
194.22  subdivision 4, is amended to read: 
194.23     Subd. 4.  [ADJUSTED LEVY LIMIT BASE.] (a) For taxes levied 
194.24  in 2001 and 2002 2003 and 2004, the adjusted levy limit base is 
194.25  equal to the levy limit base computed under subdivisions 2 and 3 
194.26  or section 275.72, multiplied by: 
194.27     (1) one plus a percentage equal to the percentage growth in 
194.28  the implicit price deflator; 
194.29     (2) one plus a percentage equal to the percentage increase 
194.30  in number of households, if any, for the most recent 12-month 
194.31  period for which data is available; and 
194.32     (3) (2) one plus a percentage equal to 50 percent of the 
194.33  percentage increase in the taxable market value of the 
194.34  jurisdiction due to new construction of class 3 property, as 
194.35  defined in section 273.13, subdivision 24, except for 
194.36  state-assessed utility and railroad operating property, for the 
195.1   most recent year for which data is available. 
195.2      (b) For counties only, for taxes levied in 2001 and 2002, 
195.3   the adjusted levy limit base is also reduced by any amount of 
195.4   levy reduction required under section 275.07, subdivision 1, 
195.5   paragraph (b), clause (ii). 
195.6      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
195.7   payable in 2004 and thereafter. 
195.8      Sec. 4.  Minnesota Statutes 2002, section 275.71, 
195.9   subdivision 5, is amended to read: 
195.10     Subd. 5.  [PROPERTY TAX LEVY LIMIT.] Notwithstanding any 
195.11  other provision of a municipal charter which limits ad valorem 
195.12  taxes to a lesser amount, or which would require a separate 
195.13  voter approval for any increase, For taxes levied in 2001 and 
195.14  2002 2003 and 2004, the property tax levy limit for a local 
195.15  governmental unit is equal to its adjusted levy limit base 
195.16  determined under subdivision 4 plus any additional levy 
195.17  authorized under section 275.73, which is levied against net tax 
195.18  capacity, reduced by the sum of (i) the total amount of aids and 
195.19  reimbursements that the local governmental unit is certified to 
195.20  receive under sections 477A.011 to 477A.014, except for the 
195.21  increases in city aid bases in calendar year 2002 under section 
195.22  477A.011, subdivision 36, paragraphs (n), (p), and (q), (ii) 
195.23  homestead and agricultural aids it is certified to receive under 
195.24  section 273.1398, (iii) taconite aids under sections 298.28 and 
195.25  298.282 including any aid which was required to be placed in a 
195.26  special fund for expenditure in the next succeeding year, (iv) 
195.27  low-income housing aid under sections 477A.06 and 477A.065, and 
195.28  (v) property tax replacement aids under section 174.242 and (iv) 
195.29  estimated payments to the local governmental unit under section 
195.30  272.029, adjusted for any error in estimation in the preceding 
195.31  year. 
195.32     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
195.33  payable in 2004 and thereafter. 
195.34     Sec. 5.  Minnesota Statutes 2002, section 275.71, 
195.35  subdivision 6, is amended to read: 
195.36     Subd. 6.  [LEVIES IN EXCESS OF LEVY LIMITS.] (a) If the 
196.1   levy made by a city or county exceeds the levy limit provided in 
196.2   sections 275.70 to 275.74, except when the excess levy is due to 
196.3   the rounding of the rate in accordance with section 275.28, the 
196.4   county auditor shall only extend the amount of taxes permitted 
196.5   under sections 275.70 to 275.74, as provided for in section 
196.6   275.16. 
196.7      (b) For taxes levied in 2002, payable in 2003 only, if an 
196.8   error was made in calculating the levy limit adjustment related 
196.9   to a special levy for jails authorized under section 275.70, 
196.10  subdivision 5, clause (11), in the previous year, the following 
196.11  adjustments must be made: 
196.12     (1) the county's levy limit base for taxes levied in 2002 
196.13  must be based on the corrected adjusted levy limit base for 
196.14  taxes levied in 2001; and 
196.15     (2) the county's final levy limit for taxes levied in 2002, 
196.16  payable in 2003, must also be temporarily reduced by an amount 
196.17  equal to the amount of county levy spread in the previous year 
196.18  in excess of the total recalculated levy limit plus authorized 
196.19  special levies for taxes levied in 2001, payable in 2002. 
196.20     (c) The commissioner of revenue shall inform counties 
196.21  affected by paragraph (b) of the levy error and levy adjustments 
196.22  required under this provision by June 15, 2002.  The county may 
196.23  provide additional information to the commissioner indicating 
196.24  why these adjustments may be in error by July 15, 2002.  The 
196.25  commissioner shall certify the final levy adjustment to the 
196.26  affected counties by August 1, 2002.  The levy reduction imposed 
196.27  under paragraph (b), clause (2), may be spread over a period not 
196.28  to exceed three years, upon agreement between the county and the 
196.29  commissioner. 
196.30     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
196.31  payable in 2004 and thereafter. 
196.32     Sec. 6.  Minnesota Statutes 2002, section 275.72, 
196.33  subdivision 3, is amended to read: 
196.34     Subd. 3.  [ADJUSTMENTS FOR CHANGES IN SERVICE LEVELS.] If a 
196.35  local governmental unit, as a result of an annexation 
196.36  agreement prior to January 1, 1999, has different tax rates in 
197.1   various parts of the jurisdiction due to different service 
197.2   levels, it may petition the commissioner of revenue to adjust 
197.3   its levy limits established under section 275.71.  The 
197.4   commissioner shall adjust the levy limits to reflect scheduled 
197.5   changes in tax rates related to increasing service levels in 
197.6   areas currently receiving less city services.  The local 
197.7   governmental unit shall provide the commissioner with any 
197.8   information the commissioner deems necessary in making the levy 
197.9   limit adjustment. 
197.10     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
197.11  levied in 2003, payable in 2004 and thereafter. 
197.12     Sec. 7.  Minnesota Statutes 2002, section 275.73, 
197.13  subdivision 2, is amended to read:  
197.14     Subd. 2.  [LEVY EFFECTIVE DATE.] An additional levy 
197.15  approved under subdivision 1 at a general or special election 
197.16  held prior to September 1 on or before the first Tuesday in 
197.17  November in any levy year may be levied in that same levy year 
197.18  and subsequent levy years.  An additional levy approved under 
197.19  subdivision 1 at a general or special election held after August 
197.20  31 the first Tuesday in November in any levy year shall not be 
197.21  levied in that same levy but may be levied in subsequent levy 
197.22  years. 
197.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
197.24  payable in 2004 and thereafter. 
197.25     Sec. 8.  Minnesota Statutes 2002, section 275.74, 
197.26  subdivision 3, is amended to read: 
197.27     Subd. 3.  [INFORMATION NECESSARY TO CALCULATE THE 2001 LEVY 
197.28  LIMIT BASE.] A local governmental unit must provide the 
197.29  commissioner with the information required to calculate the 
197.30  alternative 2001 levy limit base amount under section 275.71, 
197.31  subdivision 2, paragraph (a), clause (2), by July 20, 2001 of 
197.32  the levy year.  If the information is not received by the 
197.33  commissioner by that date, or is not deemed sufficient to make 
197.34  the calculation under that clause, the commissioner has the 
197.35  discretion to set the local governmental unit's 2001 levy limit 
197.36  for all purposes including those purposes for which special 
198.1   levies may be made, base equal to the amount calculated under 
198.2   section 275.71, subdivision 2, paragraph (a), clause (1) of the 
198.3   local governmental unit's certified levy for the prior year. 
198.4      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
198.5   payable in 2004 and thereafter. 
198.6      Sec. 9.  [275.75] [CHARTER EXEMPTION FOR AID LOSS.] 
198.7      Notwithstanding any other provision of a municipal charter 
198.8   which limits ad valorem taxes to a lesser amount, or which would 
198.9   require voter approval for any increase, a municipality may 
198.10  increase its levy in any payable year by an amount equal to the 
198.11  reduction in the amount of aid it is certified to receive under 
198.12  sections 477A.011 to 477A.03 for that same payable year compared 
198.13  to the amount certified in the previous year.  The levy increase 
198.14  is a permanent increase in the municipality's levy authority. 
198.15     <b>[EFFECTIVE DATE.]</b> This section is effective for aids levied 
198.16  in calendar year 2003, payable in 2004, and thereafter. 
198.17                             ARTICLE 8 
198.18              TRUTH IN TAXATION AND REVERSE REFERENDUM 
198.19     Section 1.  Minnesota Statutes 2002, section 275.065, 
198.20  subdivision 1, is amended to read: 
198.21     Subdivision 1.  [PROPOSED LEVY.] (a) Notwithstanding any 
198.22  law or charter to the contrary, on or before September 15 1, 
198.23  each taxing authority, other than a school district, shall adopt 
198.24  a proposed budget and shall certify to the county auditor the 
198.25  proposed or, in the case of a town, the final property tax levy 
198.26  for taxes payable in the following year. 
198.27     (b) On or before September 30 1, each school district shall 
198.28  certify to the county auditor the proposed property tax levy for 
198.29  taxes payable in the following year.  The school district shall 
198.30  certify the proposed levy as: 
198.31     (1) the state determined school levy amount as prescribed 
198.32  under section 126C.13, subdivision 2; 
198.33     (2) voter approved referendum and debt levies; and 
198.34     (3) the sum of the remaining school levies, or the maximum 
198.35  levy limitation certified by the commissioner of children, 
198.36  families, and learning according to section 126C.48, subdivision 
199.1   1, less the amounts levied under clauses (1) and (2). 
199.2      (c) If the board of estimate and taxation or any similar 
199.3   board that establishes maximum tax levies for taxing 
199.4   jurisdictions within a first class city certifies the maximum 
199.5   property tax levies for funds under its jurisdiction by charter 
199.6   to the county auditor by September 15 1, the city shall be 
199.7   deemed to have certified its levies for those taxing 
199.8   jurisdictions. 
199.9      (d) For purposes of this section, "taxing authority" 
199.10  includes all home rule and statutory cities, towns, counties, 
199.11  school districts, and special taxing districts as defined in 
199.12  section 275.066.  Intermediate school districts that levy a tax 
199.13  under chapter 124 or 136D, joint powers boards established under 
199.14  sections 123A.44 to 123A.446, and common school districts No. 
199.15  323, Franconia, and No. 815, Prinsburg, are also special taxing 
199.16  districts for purposes of this section.  
199.17     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
199.18  payable in 2006 and thereafter. 
199.19     Sec. 2.  Minnesota Statutes 2002, section 275.065, 
199.20  subdivision 1a, is amended to read: 
199.21     Subd. 1a.  [OVERLAPPING JURISDICTIONS.] In the case of a 
199.22  taxing authority lying in two or more counties, the home county 
199.23  auditor shall certify the proposed levy and the proposed local 
199.24  tax rate to the other county auditor by September 20 5.  The 
199.25  home county auditor must estimate the levy or rate in preparing 
199.26  the notices required in subdivision 3, if the other county has 
199.27  not certified the appropriate information.  If requested by the 
199.28  home county auditor, the other county auditor must furnish an 
199.29  estimate to the home county auditor. 
199.30     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
199.31  payable in 2006 and thereafter. 
199.32     Sec. 3.  Minnesota Statutes 2002, section 275.065, 
199.33  subdivision 1c, is amended to read: 
199.34     Subd. 1c.  [LEVY; SHARED, MERGED, CONSOLIDATED SERVICES.] 
199.35  If two or more taxing authorities are in the process of 
199.36  negotiating an agreement for sharing, merging, or consolidating 
200.1   services between those taxing authorities at the time the 
200.2   proposed levy is to be certified under subdivision 1, each 
200.3   taxing authority involved in the negotiation shall certify its 
200.4   total proposed levy as provided in that subdivision, including a 
200.5   notification to the county auditor of the specific service 
200.6   involved in the agreement which is not yet finalized.  The 
200.7   affected taxing authorities may amend their proposed levies 
200.8   under subdivision 1 until October September 10 for levy amounts 
200.9   relating only to the specific service involved. 
200.10     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
200.11  payable in 2006 and thereafter. 
200.12     Sec. 4.  Minnesota Statutes 2002, section 275.065, 
200.13  subdivision 3, is amended to read: 
200.14     Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
200.15  county auditor shall prepare and the county treasurer shall 
200.16  deliver after November October 10 and on or before November 
200.17  October 24 each year, by first class mail to each taxpayer at 
200.18  the address listed on the county's current year's assessment 
200.19  roll, a notice of proposed property taxes.  
200.20     (b) The commissioner of revenue shall prescribe the form of 
200.21  the notice. 
200.22     (c) The notice must inform taxpayers that it contains the 
200.23  amount of property taxes each taxing authority proposes to 
200.24  collect for taxes payable the following year.  In the case of a 
200.25  town, or in the case of the state general tax, the final tax 
200.26  amount will be its proposed tax.  In the case of taxing 
200.27  authorities required to hold a public meeting under subdivision 
200.28  6, the notice must clearly state that each taxing authority, 
200.29  including regional library districts established under section 
200.30  134.201, and including the metropolitan taxing districts as 
200.31  defined in paragraph (i), but excluding all other special taxing 
200.32  districts and towns, will hold a public meeting to receive 
200.33  public testimony on the proposed budget and proposed or final 
200.34  property tax levy, or, in case of a school district, on the 
200.35  current budget and proposed property tax levy.  It must clearly 
200.36  state the time and place of each taxing authority's meeting, a 
201.1   telephone number for the taxing authority that taxpayers may 
201.2   call if they have questions related to the notice, and an 
201.3   address where comments will be received by mail.  
201.4      (d) The notice must state for each parcel: 
201.5      (1) the market value of the property as determined under 
201.6   section 273.11, and used for computing property taxes payable in 
201.7   the following year and for taxes payable in the current year as 
201.8   each appears in the records of the county assessor on November 
201.9   October 1 of the current year; and, in the case of residential 
201.10  property, whether the property is classified as homestead or 
201.11  nonhomestead.  The notice must clearly inform taxpayers of the 
201.12  years to which the market values apply and that the values are 
201.13  final values; 
201.14     (2) the items listed below, shown separately by county, 
201.15  city or town, and state general tax, net of the residential and 
201.16  agricultural homestead credit under section 273.1384, voter 
201.17  approved school levy, other local school levy, and the sum of 
201.18  the special taxing districts, and as a total of all taxing 
201.19  authorities:  
201.20     (i) the actual tax for taxes payable in the current year; 
201.21     (ii) the tax change due to spending factors, defined as the 
201.22  proposed tax minus the constant spending tax amount; 
201.23     (iii) the tax change due to other factors, defined as the 
201.24  constant spending tax amount minus the actual current year tax; 
201.25  and 
201.26     (iv) (ii) the proposed tax amount. 
201.27     If the county levy under clause (2) includes an amount for 
201.28  a lake improvement district as defined under sections 103B.501 
201.29  to 103B.581, the amount attributable for that purpose must be 
201.30  separately stated from the remaining county levy amount.  
201.31     In the case of a town or the state general tax, the final 
201.32  tax shall also be its proposed tax unless the town changes its 
201.33  levy at a special town meeting under section 365.52.  If a 
201.34  school district has certified under section 126C.17, subdivision 
201.35  9, that a referendum will be held in the school district at the 
201.36  November general election, the county auditor must note next to 
202.1   the school district's proposed amount that a referendum is 
202.2   pending and that, if approved by the voters, the tax amount may 
202.3   be higher than shown on the notice.  In the case of the city of 
202.4   Minneapolis, the levy for the Minneapolis library board and the 
202.5   levy for Minneapolis park and recreation shall be listed 
202.6   separately from the remaining amount of the city's levy.  In the 
202.7   case of the city of St. Paul, the levy for the St. Paul library 
202.8   agency must be listed separately from the remaining amount of 
202.9   the city's levy.  In the case of a parcel where tax increment or 
202.10  the fiscal disparities areawide tax under chapter 276A or 473F 
202.11  applies, the proposed tax levy on the captured value or the 
202.12  proposed tax levy on the tax capacity subject to the areawide 
202.13  tax must each be stated separately and not included in the sum 
202.14  of the special taxing districts; and 
202.15     (3) the increase or decrease between the total taxes 
202.16  payable in the current year and the total proposed taxes, 
202.17  expressed as a percentage. 
202.18     For purposes of this section, the amount of the tax on 
202.19  homesteads qualifying under the senior citizens' property tax 
202.20  deferral program under chapter 290B is the total amount of 
202.21  property tax before subtraction of the deferred property tax 
202.22  amount. 
202.23     (e) The notice must clearly state that the proposed or 
202.24  final taxes do not include the following: 
202.25     (1) special assessments; 
202.26     (2) levies approved by the voters after the date the 
202.27  proposed taxes are certified, including bond referenda, and 
202.28  school district levy referenda, and; 
202.29     (3) a levy limit increase referenda approved by the voters 
202.30  by the first Tuesday in November of the levy year as provided 
202.31  under section 275.73; 
202.32     (3) (4) amounts necessary to pay cleanup or other costs due 
202.33  to a natural disaster occurring after the date the proposed 
202.34  taxes are certified; 
202.35     (4) (5) amounts necessary to pay tort judgments against the 
202.36  taxing authority that become final after the date the proposed 
203.1   taxes are certified; and 
203.2      (5) (6) the contamination tax imposed on properties which 
203.3   received market value reductions for contamination. 
203.4      (f) Except as provided in subdivision 7, failure of the 
203.5   county auditor to prepare or the county treasurer to deliver the 
203.6   notice as required in this section does not invalidate the 
203.7   proposed or final tax levy or the taxes payable pursuant to the 
203.8   tax levy. 
203.9      (g) If the notice the taxpayer receives under this section 
203.10  lists the property as nonhomestead, and satisfactory 
203.11  documentation is provided to the county assessor by the 
203.12  applicable deadline, and the property qualifies for the 
203.13  homestead classification in that assessment year, the assessor 
203.14  shall reclassify the property to homestead for taxes payable in 
203.15  the following year. 
203.16     (h) In the case of class 4 residential property used as a 
203.17  residence for lease or rental periods of 30 days or more, the 
203.18  taxpayer must either: 
203.19     (1) mail or deliver a copy of the notice of proposed 
203.20  property taxes to each tenant, renter, or lessee; or 
203.21     (2) post a copy of the notice in a conspicuous place on the 
203.22  premises of the property.  
203.23     The notice must be mailed or posted by the taxpayer by 
203.24  November October 27 or within three days of receipt of the 
203.25  notice, whichever is later.  A taxpayer may notify the county 
203.26  treasurer of the address of the taxpayer, agent, caretaker, or 
203.27  manager of the premises to which the notice must be mailed in 
203.28  order to fulfill the requirements of this paragraph. 
203.29     (i) For purposes of this subdivision, subdivisions 5a and 
203.30  6, "metropolitan special taxing districts" means the following 
203.31  taxing districts in the seven-county metropolitan area that levy 
203.32  a property tax for any of the specified purposes listed below: 
203.33     (1) metropolitan council under section 473.132, 473.167, 
203.34  473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
203.35     (2) metropolitan airports commission under section 473.667, 
203.36  473.671, or 473.672; and 
204.1      (3) metropolitan mosquito control commission under section 
204.2   473.711. 
204.3      For purposes of this section, any levies made by the 
204.4   regional rail authorities in the county of Anoka, Carver, 
204.5   Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
204.6   398A shall be included with the appropriate county's levy and 
204.7   shall be discussed at that county's public hearing. 
204.8      (j) If a statutory or home rule charter city or a town has 
204.9   exercised the local levy option provided by section 473.388, 
204.10  subdivision 7, it may include in the notice of its proposed 
204.11  taxes the amount of its proposed taxes attributable to its 
204.12  exercise of the option.  In the first year of the city or town's 
204.13  exercise of this option, the statement shall include an estimate 
204.14  of the reduction of the metropolitan council's tax on the parcel 
204.15  due to exercise of that option.  The metropolitan council's levy 
204.16  shall be adjusted accordingly. 
204.17     <b>[EFFECTIVE DATE.]</b> This section is effective for notices 
204.18  prepared in 2005 for taxes payable in 2006, and thereafter, 
204.19  except that the changes made to paragraph (d), clause (2), and 
204.20  paragraphs (e) and (j) are effective for notices prepared in 
204.21  2003 for taxes payable in 2004, and thereafter. 
204.22     Sec. 5.  Minnesota Statutes 2002, section 275.065, 
204.23  subdivision 6, is amended to read: 
204.24     Subd. 6.  [PUBLIC HEARING; ADOPTION OF BUDGET AND LEVY.] 
204.25  (a) For purposes of this section, the following terms shall have 
204.26  the meanings given: 
204.27     (1) "Initial hearing" means the first and primary hearing 
204.28  held to discuss the taxing authority's proposed budget and 
204.29  proposed property tax levy for taxes payable in the following 
204.30  year, or, for school districts, the current budget and the 
204.31  proposed property tax levy for taxes payable in the following 
204.32  year. 
204.33     (2) "Continuation hearing" means a hearing held to complete 
204.34  the initial hearing, if the initial hearing is not completed on 
204.35  its scheduled date. 
204.36     (3) "Subsequent hearing" means the hearing held to adopt 
205.1   the taxing authority's final property tax levy, and, in the case 
205.2   of taxing authorities other than school districts, the final 
205.3   budget, for taxes payable in the following year. 
205.4      (b) Between November 29 9 and December 20 1, the governing 
205.5   bodies of a city that has a population over 500, county, 
205.6   metropolitan special taxing districts as defined in subdivision 
205.7   3, paragraph (i), and regional library districts shall each hold 
205.8   an initial public hearing to discuss and seek public comment on 
205.9   its final budget and property tax levy for taxes payable in the 
205.10  following year, and the governing body of the school district 
205.11  shall hold an initial public hearing to review its current 
205.12  budget and proposed property tax levy for taxes payable in the 
205.13  following year.  The metropolitan special taxing districts shall 
205.14  be required to hold only a single joint initial public hearing, 
205.15  the location of which will be determined by the affected 
205.16  metropolitan agencies.  A city, county, metropolitan special 
205.17  taxing district as defined in subdivision 3, paragraph (i), 
205.18  regional library district established under section 134.201, or 
205.19  school district is not required to hold a public hearing under 
205.20  this subdivision unless its proposed property tax levy for taxes 
205.21  payable in the following year, as certified under subdivision 1, 
205.22  has increased over its final property tax levy for taxes payable 
205.23  in the current year by a percentage that is greater than the 
205.24  percentage increase in the implicit price deflator for 
205.25  government consumption expenditures and gross investment for 
205.26  state and local governments prepared by the Bureau of Economic 
205.27  Analysts of the United States Department of Commerce for the 
205.28  12-month period ending March 31 of the current year. 
205.29     (c) The initial hearing must be held after 5:00 p.m. if 
205.30  scheduled on a day other than Saturday.  No initial hearing may 
205.31  be held on a Sunday.  
205.32     (d) At the initial hearing under this subdivision, the 
205.33  percentage increase in property taxes proposed by the taxing 
205.34  authority, if any, and the specific purposes for which property 
205.35  tax revenues are being increased must be discussed.  During the 
205.36  discussion, the governing body shall hear comments regarding a 
206.1   proposed increase and explain the reasons for the proposed 
206.2   increase.  The public shall be allowed to speak and to ask 
206.3   questions.  At the public hearing, the school district must also 
206.4   provide and discuss information on the distribution of its 
206.5   revenues by revenue source, and the distribution of its spending 
206.6   by program area.  
206.7      (e) If the initial hearing is not completed on its 
206.8   scheduled date, the taxing authority must announce, prior to 
206.9   adjournment of the hearing, the date, time, and place for the 
206.10  continuation of the hearing.  The continuation hearing must be 
206.11  held at least five business days but no more than 14 business 
206.12  days after the initial hearing.  A continuation hearing may not 
206.13  be held later than December 20 except as provided in paragraphs 
206.14  (f) and (g).  A continuation hearing must be held after 5:00 
206.15  p.m. if scheduled on a day other than Saturday.  No continuation 
206.16  hearing may be held on a Sunday. 
206.17     (f) The governing body of a county shall hold its initial 
206.18  hearing on the first second Thursday in December November each 
206.19  year, and may hold additional initial hearings on other dates on 
206.20  or before December 20 1 if necessary for the convenience of 
206.21  county residents.  If the county needs a continuation of its 
206.22  hearing, the continuation hearing shall be held on the third 
206.23  Tuesday in December.  If the third Tuesday in December falls on 
206.24  December 21, the county's continuation hearing shall be held on 
206.25  Monday, December 20 November.  
206.26     (g) The metropolitan special taxing districts shall hold a 
206.27  joint initial public hearing on the first second Wednesday of 
206.28  December November.  A continuation hearing, if necessary, shall 
206.29  be held on the second third Wednesday of December even if that 
206.30  second Wednesday is after December 10 November. 
206.31     (h) The county auditor shall provide for the coordination 
206.32  of initial and continuation hearing dates for all school 
206.33  districts and cities within the county to prevent conflicts 
206.34  under clauses (i) and (j). 
206.35     (i) By August 10, each school board and the board of the 
206.36  regional library district shall certify to the county auditors 
207.1   of the counties in which the school district or regional library 
207.2   district is located the dates on which it elects to hold its 
207.3   initial hearing and any continuation hearing.  If a school board 
207.4   or regional library district does not certify these dates by 
207.5   August 10, the auditor will assign the initial and continuation 
207.6   hearing dates.  The dates elected or assigned must not conflict 
207.7   with the initial and continuation hearing dates of the county or 
207.8   the metropolitan special taxing districts.  
207.9      (j) By August 20, the county auditor shall notify the 
207.10  clerks of the cities within the county of the dates on which 
207.11  school districts and regional library districts have elected to 
207.12  hold their initial and continuation hearings.  At the time a 
207.13  city certifies its proposed levy under subdivision 1 it shall 
207.14  certify the dates on which it elects to hold its initial hearing 
207.15  and any continuation hearing.  Until September 15, the first and 
207.16  second Mondays Monday of December are November is reserved for 
207.17  the use of the cities.  If a city does not certify its hearing 
207.18  dates by September 15, the auditor shall assign the initial and 
207.19  continuation hearing dates.  The dates elected or assigned for 
207.20  the initial hearing must not conflict with the initial hearing 
207.21  dates of the county, metropolitan special taxing districts, 
207.22  regional library districts, or school districts within which the 
207.23  city is located.  To the extent possible, the dates of the 
207.24  city's continuation hearing should not conflict with the 
207.25  continuation hearing dates of the county, metropolitan special 
207.26  taxing districts, regional library districts, or school 
207.27  districts within which the city is located.  This paragraph does 
207.28  not apply to cities of 500 population or less. 
207.29     (k) The county initial hearing date and the city, 
207.30  metropolitan special taxing district, regional library district, 
207.31  and school district initial hearing dates must be designated on 
207.32  the notices required under subdivision 3.  The continuation 
207.33  hearing dates need not be stated on the notices.  
207.34     (l) At a subsequent hearing, each county, school district, 
207.35  city over 500 population, and metropolitan special taxing 
207.36  district may amend its proposed property tax levy and must adopt 
208.1   a final property tax levy.  Each county, city over 500 
208.2   population, and metropolitan special taxing district may also 
208.3   amend its proposed budget and must adopt a final budget at the 
208.4   subsequent hearing.  The final property tax levy must be adopted 
208.5   prior to adopting the final budget.  A school district is not 
208.6   required to adopt its final budget at the subsequent hearing.  
208.7   The subsequent hearing of a taxing authority must be held on a 
208.8   date subsequent to the date of the taxing authority's initial 
208.9   public hearing.  If a continuation hearing is held, the 
208.10  subsequent hearing must be held either immediately following the 
208.11  continuation hearing or on a date subsequent to the continuation 
208.12  hearing.  The subsequent hearing may be held at a regularly 
208.13  scheduled board or council meeting or at a special meeting 
208.14  scheduled for the purposes of the subsequent hearing.  The 
208.15  subsequent hearing of a taxing authority does not have to be 
208.16  coordinated by the county auditor to prevent a conflict with an 
208.17  initial hearing, a continuation hearing, or a subsequent hearing 
208.18  of any other taxing authority.  All subsequent hearings must be 
208.19  held prior to five working days after December 20 1 of the levy 
208.20  year.  The date, time, and place of the subsequent hearing must 
208.21  be announced at the initial public hearing or at the 
208.22  continuation hearing. 
208.23     (m) The property tax levy certified under section 275.07 by 
208.24  a city of any population, county, metropolitan special taxing 
208.25  district, regional library district, or school district must not 
208.26  exceed the proposed levy determined under subdivision 1, except 
208.27  by an amount up to the sum of the following amounts: 
208.28     (1) the amount of a school district levy whose voters 
208.29  approved a referendum to increase taxes under section 123B.63, 
208.30  subdivision 3, or 126C.17, subdivision 9, after the proposed 
208.31  levy was certified; 
208.32     (2) the amount of a city or county levy approved by the 
208.33  voters after the proposed levy was certified; 
208.34     (3) the amount of a levy to pay principal and interest on 
208.35  bonds approved by the voters under section 475.58 after the 
208.36  proposed levy was certified; 
209.1      (4) the amount of a levy to pay costs due to a natural 
209.2   disaster occurring after the proposed levy was certified, if 
209.3   that amount is approved by the commissioner of revenue under 
209.4   subdivision 6a; 
209.5      (5) the amount of a levy to pay tort judgments against a 
209.6   taxing authority that become final after the proposed levy was 
209.7   certified, if the amount is approved by the commissioner of 
209.8   revenue under subdivision 6a; 
209.9      (6) the amount of an increase in levy limits certified to 
209.10  the taxing authority by the commissioner of children, families, 
209.11  and learning or the commissioner of revenue after the proposed 
209.12  levy was certified; and 
209.13     (7) the amount required under section 126C.55. 
209.14     (n) This subdivision does not apply to towns and special 
209.15  taxing districts other than regional library districts and 
209.16  metropolitan special taxing districts. 
209.17     (o) Notwithstanding the requirements of this section, the 
209.18  employer is required to meet and negotiate over employee 
209.19  compensation as provided for in chapter 179A.  
209.20     <b>[EFFECTIVE DATE.]</b> This section is effective for hearings 
209.21  held in 2005 for taxes payable in 2006, and thereafter. 
209.22     Sec. 6.  Minnesota Statutes 2002, section 275.065, 
209.23  subdivision 8, is amended to read: 
209.24     Subd. 8.  [HEARING.] Notwithstanding any other provision of 
209.25  law, Ramsey county, the city of St. Paul, and independent school 
209.26  district No. 625 are authorized to and shall hold their initial 
209.27  public hearing jointly.  The hearing must be held on the second 
209.28  Tuesday of December November each year.  The advertisement 
209.29  required in subdivision 5a may be a joint advertisement.  The 
209.30  hearing is otherwise subject to the requirements of this section.
209.31     Ramsey county is authorized to hold an additional initial 
209.32  hearing or hearings as provided under this section, provided 
209.33  that any additional hearings must not conflict with the initial 
209.34  or continuation hearing dates of the other taxing districts.  
209.35  However, if Ramsey county elects not to hold such additional 
209.36  initial hearing or hearings, the joint initial hearing required 
210.1   by this subdivision must be held in a St. Paul location 
210.2   convenient to residents of Ramsey county. 
210.3      <b>[EFFECTIVE DATE.]</b> This section is effective for hearings 
210.4   held in 2005 for property taxes payable in 2006, and thereafter. 
210.5      Sec. 7.  Minnesota Statutes 2002, section 275.065, is 
210.6   amended by adding a subdivision to read: 
210.7      Subd. 9.  [REVERSE REFERENDUM.] (a) The reverse referendum 
210.8   procedure in this subdivision applies only in the case of a 
210.9   county, or a city that has a population of more than 2,500, that 
210.10  has adopted a property tax levy increase over the property tax 
210.11  levy amount certified under section 275.07, subdivision 1, for 
210.12  the previous year. 
210.13     (b) If, within 21 days after the public hearing and 
210.14  adoption of a levy under subdivision 6, a petition signed by 
210.15  voters equal in number to five percent of the votes cast in the 
210.16  county or city in the last general state election requesting a 
210.17  referendum on the levy increase is filed with the county auditor 
210.18  or the city clerk, the levy increase shall not be effective 
210.19  until it has been submitted to the voters at a special election 
210.20  to be held on the second Tuesday in January, and a majority of 
210.21  votes cast on the question of approving the levy increase are in 
210.22  the affirmative.  The commissioner of revenue shall prepare the 
210.23  form of the question to be presented at the referendum, which 
210.24  shall reference only the amount of the property tax levy 
210.25  increase over the previous year. 
210.26     (c) The county or city shall notify the county auditor of 
210.27  the results of the referendum.  If the majority of the votes 
210.28  cast on the question are in the affirmative, the property tax 
210.29  levy adopted under subdivision 6 shall be certified to the 
210.30  county auditor under section 275.07, subdivision 1.  If the 
210.31  majority of the votes cast on the question are in the negative, 
210.32  an amount equal to the preceding year's property tax levy shall 
210.33  be certified to the county auditor for purposes of section 
210.34  275.07, subdivision 1; provided that if the current year adopted 
210.35  levy includes any levy for the payment of bonded indebtedness or 
210.36  judgments, such levies for bonded indebtedness and judgments 
211.1   shall be extended in full and the remainder of the levies shall 
211.2   be reduced so that the total, including levies for bonds and 
211.3   judgments, does not exceed the preceding year's levy. 
211.4      (d) For purposes of this subdivision "property tax levy" 
211.5   shall not include the levy required to pay any general 
211.6   obligation bonds.  
211.7      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
211.8   levied in 2005 for taxes payable in 2006, and thereafter. 
211.9      Sec. 8.  Minnesota Statutes 2002, section 275.07, 
211.10  subdivision 1, is amended to read: 
211.11     Subdivision 1.  [CERTIFICATION OF LEVY.] (a) Except as 
211.12  provided under paragraph (b) or (c), the taxes voted by cities, 
211.13  counties, school districts, and special districts shall be 
211.14  certified by the proper authorities to the county auditor on or 
211.15  before five working days after December 20 1 in each year.  A 
211.16  town must certify the levy adopted by the town board to the 
211.17  county auditor by September 15 1 each year.  If the town board 
211.18  modifies the levy at a special town meeting after September 15 
211.19  1, the town board must recertify its levy to the county auditor 
211.20  on or before five working days after December 20 1.  The taxes 
211.21  certified shall not be reduced by the county auditor by the aid 
211.22  received under section 273.1398, subdivision 2, but shall be 
211.23  reduced by the county auditor by the aid received under section 
211.24  273.1398, subdivision 3.  If a city, town, county, school 
211.25  district, or special district fails to certify its levy by that 
211.26  date, its levy shall be the amount levied by it for the 
211.27  preceding year. 
211.28     (b)(i) The taxes voted by counties under sections 103B.241, 
211.29  103B.245, and 103B.251 shall be separately certified by the 
211.30  county to the county auditor on or before five working days 
211.31  after December 20 1 in each year.  The taxes certified shall not 
211.32  be reduced by the county auditor by the aid received under 
211.33  section 273.1398, subdivisions 2 and 3.  If a county fails to 
211.34  certify its levy by that date, its levy shall be the amount 
211.35  levied by it for the preceding year.  
211.36     (ii) For purposes of the proposed property tax notice under 
212.1   section 275.065 and the property tax statement under section 
212.2   276.04, for the first year in which the county implements the 
212.3   provisions of this paragraph, the county auditor shall reduce 
212.4   the county's levy for the preceding year to reflect any amount 
212.5   levied for water management purposes under clause (i) included 
212.6   in the county's levy. 
212.7      (c) A county or city to which the reverse referendum 
212.8   provisions under section 275.065, subdivision 9, apply shall 
212.9   certify the taxes to the county auditor by December 10, except 
212.10  that any county or city for which a petition has been filed 
212.11  under section 275.065, subdivision 9, must certify the day 
212.12  immediately following the election under that subdivision. 
212.13     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
212.14  levied in 2005 for taxes payable in 2006, and thereafter. 
212.15     Sec. 9.  [REPEALER.] 
212.16     (a) Minnesota Statutes 2002, section 275.065, subdivision 
212.17  3a, is repealed effective for notices prepared in 2003, payable 
212.18  in 2004 and thereafter. 
212.19     (b) Minnesota Statutes 2002, section 275.065, subdivision 
212.20  4, is repealed the day following final enactment. 
212.21                             ARTICLE 9
212.22                     LOCAL ECONOMIC DEVELOPMENT
212.23     Section 1.  Minnesota Statutes 2002, section 469.169, is 
212.24  amended by adding a subdivision to read: 
212.25     Subd. 16.  [ADDITIONAL BORDER CITY ALLOCATIONS.] (a) In 
212.26  addition to tax reductions authorized in subdivisions 7 to 15, 
212.27  the commissioner shall allocate $750,000 for tax reductions to 
212.28  border city enterprise zones in cities located on the western 
212.29  border of the state.  The commissioner shall make allocations to 
212.30  zones in cities on the western border on a per capita basis.  
212.31  Allocations made under this subdivision may be used for tax 
212.32  reductions as provided in section 469.171, or for other offsets 
212.33  of taxes imposed on or remitted by businesses located in the 
212.34  enterprise zone, but only if the municipality determines that 
212.35  the granting of the tax reduction or offset is necessary in 
212.36  order to retain a business within or attract a business to the 
213.1   zone.  Any portion of the allocation provided in this paragraph 
213.2   may alternatively be used for tax reductions under section 
213.3   469.1732 or 469.1734. 
213.4      (b) The commissioner shall allocate $750,000 for tax 
213.5   reductions under section 469.1732 or 469.1734 to cities with 
213.6   border city enterprise zones located on the western border of 
213.7   the state.  The commissioner shall allocate this amount among 
213.8   the cities on a per capita basis.  Any portion of the allocation 
213.9   provided in this paragraph may alternatively be used for tax 
213.10  reductions as provided in section 469.171. 
213.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
213.12  following final enactment. 
213.13     Sec. 2.  Minnesota Statutes 2002, section 469.1731, 
213.14  subdivision 3, is amended to read: 
213.15     Subd. 3.  [FILING.] The city must file a copy of the 
213.16  resolution and development plan with the commissioner of trade 
213.17  and economic development.  The designation takes effect for the 
213.18  first calendar year that begins more than 90 30 days after the 
213.19  filing. 
213.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
213.21  following final enactment. 
213.22     Sec. 3.  Minnesota Statutes 2002, section 469.174, 
213.23  subdivision 3, is amended to read: 
213.24     Subd. 3.  [BONDS.] (a) "Bonds" means any bonds, including 
213.25  refunding bonds, notes, interim certificates, debentures, 
213.26  interfund loans or advances, or other obligations issued: 
213.27     (1) by an authority under section 469.178; or which were 
213.28  issued 
213.29     (2) in aid of a project under any other law, except revenue 
213.30  bonds issued pursuant to sections 469.152 to 469.165, prior to 
213.31  August 1, 1979. 
213.32     (b) Bonds or other obligations include: 
213.33     (1) refunding bonds; 
213.34     (2) notes; 
213.35     (3) interim certificates; 
213.36     (4) debentures; and 
214.1      (5) interfund loans or advances qualifying under section 
214.2   469.178, subdivision 7. 
214.3      <b>[EFFECTIVE DATE.]</b> This section is effective at the same 
214.4   time as provided by Laws 2001, First Special Session chapter 5, 
214.5   article 15, section 3. 
214.6      Sec. 4.  Minnesota Statutes 2002, section 469.174, 
214.7   subdivision 6, is amended to read: 
214.8      Subd. 6.  [MUNICIPALITY.] "Municipality" means any the 
214.9   city, however organized, and with respect to in which the 
214.10  district is located, with the following exceptions: 
214.11     (1) for a project undertaken pursuant to sections 469.152 
214.12  to 469.165, "municipality" has the meaning given in sections 
214.13  469.152 to 469.165, and with respect to; and 
214.14     (2) for a project undertaken pursuant to sections 469.142 
214.15  to 469.151, or a county or multicounty project undertaken 
214.16  pursuant to sections 469.004 to 469.008, "municipality" also 
214.17  includes any means the county in which the district is located. 
214.18     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
214.19  for which the request for certification was made after July 31, 
214.20  1979. 
214.21     Sec. 5.  Minnesota Statutes 2002, section 469.174, 
214.22  subdivision 10, is amended to read: 
214.23     Subd. 10.  [REDEVELOPMENT DISTRICT.] (a) "Redevelopment 
214.24  district" means a type of tax increment financing district 
214.25  consisting of a project, or portions of a project, within which 
214.26  the authority finds by resolution that one or more of the 
214.27  following conditions, reasonably distributed throughout the 
214.28  district, exists: 
214.29     (1) parcels consisting of 70 percent of the area of the 
214.30  district are occupied by buildings, streets, utilities, paved or 
214.31  gravel parking lots, or other similar structures and more than 
214.32  50 percent of the buildings, not including outbuildings, are 
214.33  structurally substandard to a degree requiring substantial 
214.34  renovation or clearance; or 
214.35     (2) the property consists of vacant, unused, underused, 
214.36  inappropriately used, or infrequently used railyards, rail 
215.1   storage facilities, or excessive or vacated railroad 
215.2   rights-of-way; or 
215.3      (3) tank facilities, or property whose immediately previous 
215.4   use was for tank facilities, as defined in section 115C.02, 
215.5   subdivision 15, if the tank facilities: 
215.6      (i) have or had a capacity of more than 1,000,000 gallons; 
215.7      (ii) are located adjacent to rail facilities; and 
215.8      (iii) have been removed or are unused, underused, 
215.9   inappropriately used, or infrequently used. 
215.10     (b) For purposes of this subdivision, "structurally 
215.11  substandard" shall mean containing defects in structural 
215.12  elements or a combination of deficiencies in essential utilities 
215.13  and facilities, light and ventilation, fire protection including 
215.14  adequate egress, layout and condition of interior partitions, or 
215.15  similar factors, which defects or deficiencies are of sufficient 
215.16  total significance to justify substantial renovation or 
215.17  clearance. 
215.18     (c) A building is not structurally substandard if it is in 
215.19  compliance with the building code applicable to new buildings or 
215.20  could be modified to satisfy the building code at a cost of less 
215.21  than 15 percent of the cost of constructing a new structure of 
215.22  the same square footage and type on the site.  The municipality 
215.23  may find that a building is not disqualified as structurally 
215.24  substandard under the preceding sentence on the basis of 
215.25  reasonably available evidence, such as the size, type, and age 
215.26  of the building, the average cost of plumbing, electrical, or 
215.27  structural repairs, or other similar reliable evidence.  The 
215.28  municipality may not make such a determination without an 
215.29  interior inspection of the property, but need not have an 
215.30  independent, expert appraisal prepared of the cost of repair and 
215.31  rehabilitation of the building.  An interior inspection of the 
215.32  property is not required, if the municipality finds that (1) the 
215.33  municipality or authority is unable to gain access to the 
215.34  property after using its best efforts to obtain permission from 
215.35  the party that owns or controls the property; and (2) the 
215.36  evidence otherwise supports a reasonable conclusion that the 
216.1   building is structurally substandard.  Items of evidence that 
216.2   support such a conclusion include recent fire or police 
216.3   inspections, on-site property tax appraisals or housing 
216.4   inspections, exterior evidence of deterioration, or other 
216.5   similar reliable evidence.  Written documentation of the 
216.6   findings and reasons why an interior inspection was not 
216.7   conducted must be made and retained under section 469.175, 
216.8   subdivision 3, clause (1).  Failure of a building to be 
216.9   disqualified under the provisions of this paragraph is a 
216.10  necessary, but not a sufficient, condition to determining that 
216.11  the building is substandard.  
216.12     (d) A parcel is deemed to be occupied by a structurally 
216.13  substandard building for purposes of the finding under paragraph 
216.14  (a) if all of the following conditions are met: 
216.15     (1) the parcel was occupied by a substandard building 
216.16  within three years of the filing of the request for 
216.17  certification of the parcel as part of the district with the 
216.18  county auditor; 
216.19     (2) the substandard building was demolished or removed by 
216.20  the authority or the demolition or removal was financed by the 
216.21  authority or was done by a developer under a development 
216.22  agreement with the authority; 
216.23     (3) the authority found by resolution before the demolition 
216.24  or removal that the parcel was occupied by a structurally 
216.25  substandard building and that after demolition and clearance the 
216.26  authority intended to include the parcel within a district; and 
216.27     (4) upon filing the request for certification of the tax 
216.28  capacity of the parcel as part of a district, the authority 
216.29  notifies the county auditor that the original tax capacity of 
216.30  the parcel must be adjusted as provided by section 469.177, 
216.31  subdivision 1, paragraph (h) (f). 
216.32     (e) For purposes of this subdivision, a parcel is not 
216.33  occupied by buildings, streets, utilities, paved or gravel 
216.34  parking lots, or other similar structures unless 15 percent of 
216.35  the area of the parcel contains buildings, streets, utilities, 
216.36  paved or gravel parking lots, or other similar structures. 
217.1      (f) For districts consisting of two or more noncontiguous 
217.2   areas, each area must qualify as a redevelopment district under 
217.3   paragraph (a) to be included in the district, and the entire 
217.4   area of the district must satisfy paragraph (a). 
217.5      <b>[EFFECTIVE DATE.]</b> The amendment to Minnesota Statutes, 
217.6   section 469.174, subdivision 10, paragraph (c), confirms the 
217.7   intent of the legislature with regard to the original provisions 
217.8   of the language contained in Minnesota Statutes 2002, section 
217.9   469.174, subdivision 10, paragraph (c), and is retroactive to 
217.10  the effective date of the original language.  The amendment to 
217.11  Minnesota Statutes, section 469.174, subdivision 10, paragraph 
217.12  (d), is effective for districts for which the request for 
217.13  certification was received by the county after June 30, 2002. 
217.14     Sec. 6.  Minnesota Statutes 2002, section 469.174, 
217.15  subdivision 25, is amended to read: 
217.16     Subd. 25.  [INCREMENT.] "Increment," "tax increment," "tax 
217.17  increment revenues," "revenues derived from tax increment," and 
217.18  other similar terms for a district include: 
217.19     (1) taxes paid by the captured net tax capacity, but 
217.20  excluding any excess taxes, as computed under section 469.177; 
217.21     (2) the proceeds from the sale or lease of property, 
217.22  tangible or intangible, purchased by the authority with tax 
217.23  increments; 
217.24     (3) repayments of principal and interest received on loans 
217.25  or other advances made by the authority with tax increments; and 
217.26     (4) interest or other investment earnings on or from tax 
217.27  increments. 
217.28     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
217.29  for which the request for certification was made after June 30, 
217.30  1982, and payments of principal and interest received on loans 
217.31  or other advances that were made after June 30, 1997. 
217.32     Sec. 7.  Minnesota Statutes 2002, section 469.174, is 
217.33  amended by adding a subdivision to read: 
217.34     Subd. 29.  [QUALIFIED HOUSING DISTRICT.] "Qualified housing 
217.35  district" means: 
217.36     (1) a housing district for a residential rental project or 
218.1   projects in which the only properties receiving assistance from 
218.2   revenues derived from tax increments from the district meet the 
218.3   rent restriction requirements and the low-income occupancy test 
218.4   for a qualified low-income housing project under section 42(g) 
218.5   of the Internal Revenue Code of 1986, as amended through 
218.6   December 31, 2002, regardless of whether the project actually 
218.7   receives a low-income housing credit; or 
218.8      (2) a housing district for a single-family homeownership 
218.9   project or projects, if 95 percent or more of the homes 
218.10  receiving assistance from tax increments from the district are 
218.11  purchased by qualified purchasers.  A qualified purchaser means 
218.12  the first purchaser of a home after the tax increment assistance 
218.13  is provided whose income is at or below 85 percent of the median 
218.14  gross income for a family of the same size as the purchaser.  
218.15  Median gross income is the greater of (i) area median gross 
218.16  income, or (ii) the statewide median gross income, as determined 
218.17  by the secretary of Housing and Urban Development. 
218.18     <b>[EFFECTIVE DATE.]</b> This section applies to all districts for 
218.19  which the request for certification was made on or after January 
218.20  1, 2002, and to all districts to which the definition of 
218.21  qualified housing districts under Minnesota Statutes 2000, 
218.22  section 273.1399, applied. 
218.23     Sec. 8.  Minnesota Statutes 2002, section 469.175, 
218.24  subdivision 1, is amended to read: 
218.25     Subdivision 1.  [TAX INCREMENT FINANCING PLAN.] A tax 
218.26  increment financing plan shall contain:  
218.27     (1) a statement of objectives of an authority for the 
218.28  improvement of a project; 
218.29     (2) a statement as to the development program for the 
218.30  project, including the property within the project, if any, that 
218.31  the authority intends to acquire; 
218.32     (3) a list of any development activities that the plan 
218.33  proposes to take place within the project, for which contracts 
218.34  have been entered into at the time of the preparation of the 
218.35  plan, including the names of the parties to the contract, the 
218.36  activity governed by the contract, the cost stated in the 
219.1   contract, and the expected date of completion of that activity; 
219.2      (4) identification or description of the type of any other 
219.3   specific development reasonably expected to take place within 
219.4   the project, and the date when the development is likely to 
219.5   occur; 
219.6      (5) estimates of the following:  
219.7      (i) cost of the project, including administration 
219.8   administrative expenses, except that if part of the cost of the 
219.9   project is paid or financed with increment from the tax 
219.10  increment financing district, the tax increment financing plan 
219.11  for the district must contain an estimate of the amount of the 
219.12  cost of the project, including administrative expenses, that 
219.13  will be paid or financed with tax increments from the district; 
219.14     (ii) amount of bonded indebtedness to be incurred; 
219.15     (iii) sources of revenue to finance or otherwise pay public 
219.16  costs; 
219.17     (iv) the most recent net tax capacity of taxable real 
219.18  property within the tax increment financing district and within 
219.19  any subdistrict; 
219.20     (v) the estimated captured net tax capacity of the tax 
219.21  increment financing district at completion; and 
219.22     (vi) the duration of the tax increment financing district's 
219.23  and any subdistrict's existence; 
219.24     (6) statements of the authority's alternate estimates of 
219.25  the impact of tax increment financing on the net tax capacities 
219.26  of all taxing jurisdictions in which the tax increment financing 
219.27  district is located in whole or in part.  For purposes of one 
219.28  statement, the authority shall assume that the estimated 
219.29  captured net tax capacity would be available to the taxing 
219.30  jurisdictions without creation of the district, and for purposes 
219.31  of the second statement, the authority shall assume that none of 
219.32  the estimated captured net tax capacity would be available to 
219.33  the taxing jurisdictions without creation of the district or 
219.34  subdistrict; 
219.35     (7) identification and description of studies and analyses 
219.36  used to make the determination set forth in subdivision 3, 
220.1   clause (2); and 
220.2      (8) identification of all parcels to be included in the 
220.3   district or any subdistrict. 
220.4      <b>[EFFECTIVE DATE.]</b> This section applies to districts for 
220.5   which the request for certification was made after July 31, 
220.6   1979, and is effective for tax increment financing plans and 
220.7   modifications approved after June 30, 2003. 
220.8      Sec. 9.  Minnesota Statutes 2002, section 469.175, 
220.9   subdivision 3, is amended to read: 
220.10     Subd. 3.  [MUNICIPALITY APPROVAL.] (a) A county auditor 
220.11  shall not certify the original net tax capacity of a tax 
220.12  increment financing district until the tax increment financing 
220.13  plan proposed for that district has been approved by the 
220.14  municipality in which the district is located.  If an authority 
220.15  that proposes to establish a tax increment financing district 
220.16  and the municipality are not the same, the authority shall apply 
220.17  to the municipality in which the district is proposed to be 
220.18  located and shall obtain the approval of its tax increment 
220.19  financing plan by the municipality before the authority may use 
220.20  tax increment financing.  The municipality shall approve the tax 
220.21  increment financing plan only after a public hearing thereon 
220.22  after published notice in a newspaper of general circulation in 
220.23  the municipality at least once not less than ten days nor more 
220.24  than 30 days prior to the date of the hearing.  The published 
220.25  notice must include a map of the area of the district from which 
220.26  increments may be collected and, if the project area includes 
220.27  additional area, a map of the project area in which the 
220.28  increments may be expended.  The hearing may be held before or 
220.29  after the approval or creation of the project or it may be held 
220.30  in conjunction with a hearing to approve the project.  
220.31     (b) Before or at the time of approval of the tax increment 
220.32  financing plan, the municipality shall make the following 
220.33  findings, and shall set forth in writing the reasons and 
220.34  supporting facts for each determination: 
220.35     (1) that the proposed tax increment financing district is a 
220.36  redevelopment district, a renewal or renovation district, a 
221.1   housing district, a soils condition district, or an economic 
221.2   development district; if the proposed district is a 
221.3   redevelopment district or a renewal or renovation district, the 
221.4   reasons and supporting facts for the determination that the 
221.5   district meets the criteria of section 469.174, subdivision 10, 
221.6   paragraph (a), clauses (1) and (2), or subdivision 10a, must be 
221.7   documented in writing and retained and made available to the 
221.8   public by the authority until the district has been terminated; 
221.9      (2) that the proposed development or redevelopment, in the 
221.10  opinion of the municipality,: 
221.11     (i) the proposed development or redevelopment would not 
221.12  reasonably be expected to occur solely through private 
221.13  investment within the reasonably foreseeable future; and that 
221.14     (ii) the increased market value of the site that could 
221.15  reasonably be expected to occur without the use of tax increment 
221.16  financing would be less than the increase in the market value 
221.17  estimated to result from the proposed development after 
221.18  subtracting the present value of the projected tax increments 
221.19  for the maximum duration of the district permitted by the plan.  
221.20  In computing present values for purposes of this subdivision, 
221.21  the municipality must use a discount rate that does not exceed 
221.22  the greater of the rate specified under section 270.75 or 549.09 
221.23  for the last business day of the calendar month ending before 
221.24  publication of the notice under this subdivision.  The 
221.25  requirements of this clause item do not apply if the district is 
221.26  a qualified housing district, as defined in section 273.1399, 
221.27  subdivision 1; 
221.28     (3) that the tax increment financing plan conforms to the 
221.29  general plan for the development or redevelopment of the 
221.30  municipality as a whole; 
221.31     (4) that the tax increment financing plan will afford 
221.32  maximum opportunity, consistent with the sound needs of the 
221.33  municipality as a whole, for the development or redevelopment of 
221.34  the project by private enterprise; 
221.35     (5) that the municipality elects the method of tax 
221.36  increment computation set forth in section 469.177, subdivision 
222.1   3, clause (b), if applicable. 
222.2      (c) When the municipality and the authority are not the 
222.3   same, the municipality shall approve or disapprove the tax 
222.4   increment financing plan within 60 days of submission by the 
222.5   authority.  When the municipality and the authority are not the 
222.6   same, the municipality may not amend or modify a tax increment 
222.7   financing plan except as proposed by the authority pursuant to 
222.8   subdivision 4.  Once approved, the determination of the 
222.9   authority to undertake the project through the use of tax 
222.10  increment financing and the resolution of the governing body 
222.11  shall be conclusive of the findings therein and of the public 
222.12  need for the financing is presumed valid.  The determination of 
222.13  the authority is subject to judicial review under section 
222.14  469.1771 as to whether it was: 
222.15     (1) in excess of or contrary to the statutory authority; or 
222.16     (2) arbitrary and capricious. 
222.17     (d) For a district that is subject to the requirements of 
222.18  paragraph (b), clause (2), item (ii), the municipality's 
222.19  statement of reasons and supporting facts must include all of 
222.20  the following: 
222.21     (1) an estimate of the amount by which the market value of 
222.22  the site will increase without the use of tax increment 
222.23  financing; 
222.24     (2) an estimate of the increase in the market value that 
222.25  will result from the development or redevelopment to be assisted 
222.26  with tax increment financing; and 
222.27     (3) the present value of the projected tax increments for 
222.28  the maximum duration of the district permitted by the tax 
222.29  increment financing plan. 
222.30     (e) For purposes of this subdivision, "site" means the 
222.31  parcels on which the development or redevelopment to be assisted 
222.32  with tax increment financing will be located. 
222.33     <b>[EFFECTIVE DATE.]</b> This section is effective for 
222.34  determinations made after June 30, 2003, except the provisions 
222.35  of paragraph (e) apply to requests for certification of tax 
222.36  increment districts made after June 30, 1995. 
223.1      Sec. 10.  Minnesota Statutes 2002, section 469.175, 
223.2   subdivision 4, is amended to read: 
223.3      Subd. 4.  [MODIFICATION OF PLAN.] (a) A tax increment 
223.4   financing plan may be modified by an authority, provided that. 
223.5      (b) The authority may make the following modifications only 
223.6   upon the notice and after the discussion, public hearing, and 
223.7   findings required for approval of the original plan: 
223.8      (1) any reduction or enlargement of geographic area of the 
223.9   project or tax increment financing district, that does not meet 
223.10  the requirements of paragraph (e); 
223.11     (2) increase in amount of bonded indebtedness to be 
223.12  incurred, including; 
223.13     (3) a determination to capitalize interest on the debt if 
223.14  that determination was not a part of the original plan, or to 
223.15  increase or decrease the amount of interest on the debt to be 
223.16  capitalized,; 
223.17     (4) increase in the portion of the captured net tax 
223.18  capacity to be retained by the authority,; 
223.19     (5) increase in total estimated tax increment 
223.20  expenditures the estimate of the cost of the project, including 
223.21  administrative expenses, that will be paid or financed with tax 
223.22  increment from the district; or 
223.23     (6) designation of additional property to be acquired by 
223.24  the authority shall be approved upon the notice and after the 
223.25  discussion, public hearing, and findings required for approval 
223.26  of the original plan; provided that. 
223.27     (c) If an authority changes the type of district from 
223.28  housing, redevelopment, or economic development to another type 
223.29  of district, this change shall is not be considered a 
223.30  modification but shall require requires the authority to follow 
223.31  the procedure set forth in sections 469.174 to 469.179 for 
223.32  adoption of a new plan, including certification of the net tax 
223.33  capacity of the district by the county auditor.  
223.34     (d) If a redevelopment district or a renewal and renovation 
223.35  district is enlarged, the reasons and supporting facts for the 
223.36  determination that the addition to the district meets the 
224.1   criteria of section 469.174, subdivision 10, paragraph (a), 
224.2   clauses (1) and (2), or subdivision 10a, must be documented.  
224.3      (e) The requirements of this paragraph (b) do not apply if 
224.4   (1) the only modification is elimination of parcels from the 
224.5   project or district and (2)(A) the current net tax capacity of 
224.6   the parcels eliminated from the district equals or exceeds the 
224.7   net tax capacity of those parcels in the district's original net 
224.8   tax capacity or (B) the authority agrees that, notwithstanding 
224.9   section 469.177, subdivision 1, the original net tax capacity 
224.10  will be reduced by no more than the current net tax capacity of 
224.11  the parcels eliminated from the district.  The authority must 
224.12  notify the county auditor of any modification that reduces or 
224.13  enlarges the geographic area of a district or a project area.  
224.14     (b) (f) The geographic area of a tax increment financing 
224.15  district may be reduced, but shall not be enlarged after five 
224.16  years following the date of certification of the original net 
224.17  tax capacity by the county auditor or after August 1, 1984, for 
224.18  tax increment financing districts authorized prior to August 1, 
224.19  1979. 
224.20     <b>[EFFECTIVE DATE.]</b> This section applies to districts for 
224.21  which the request for certification was made after June 30, 
224.22  2003.  The development authority may elect to have this section 
224.23  apply to a tax increment financing plan or modification that was 
224.24  approved before July 1, 2004, by adopting before January 1, 
224.25  2004, a modification of the plan that states the amount of the 
224.26  cost of the project, including administrative expenses, that 
224.27  will be paid or financed with tax increments from the district.  
224.28  Section 469.175, subdivision 4, paragraph (b), does not apply to 
224.29  a modification adopted under this section if the modification is 
224.30  exclusively for the purpose of stating the amount of the cost of 
224.31  the project, including administrative expenses, that will be 
224.32  paid or financed with tax increment from the district.  For 
224.33  districts for which the request for certification was made after 
224.34  July 31, 1979, and for which this section is not effective, the 
224.35  total estimated tax increment expenditures are determined by 
224.36  considering all of the information in the tax increment 
225.1   financing plan and exhibits to the plan about estimated sources 
225.2   and uses of funds. 
225.3      For districts for which certification was requested after 
225.4   June 30, 1982, and before July 1, 2003, and for which the plan 
225.5   has not been amended after July 1, 2003, the limit on 
225.6   administrative expenses equals the greater of (1) nine percent 
225.7   of the increments for the district or (2) the amount determined 
225.8   under section 469.176, subdivision 3, and the tax increment 
225.9   financing plan. 
225.10     Sec. 11.  Minnesota Statutes 2002, section 469.175, 
225.11  subdivision 6, is amended to read: 
225.12     Subd. 6.  [ANNUAL FINANCIAL REPORTING.] (a) The state 
225.13  auditor shall develop a uniform system of accounting and 
225.14  financial reporting for tax increment financing districts.  The 
225.15  system of accounting and financial reporting shall, as nearly as 
225.16  possible: 
225.17     (1) provide for full disclosure of the sources and uses of 
225.18  public funds in the district; 
225.19     (2) permit comparison and reconciliation with the affected 
225.20  local government's accounts and financial reports; 
225.21     (3) permit auditing of the funds expended on behalf of a 
225.22  district, including a single district that is part of a 
225.23  multidistrict project or that is funded in part or whole through 
225.24  the use of a development account funded with tax increments from 
225.25  other districts or with other public money; 
225.26     (4) be consistent with generally accepted accounting 
225.27  principles. 
225.28     (b) The authority must annually submit to the state auditor 
225.29  a financial report in compliance with paragraph (a).  Copies of 
225.30  the report must also be provided to the county auditor and to 
225.31  the governing body of the municipality, if the authority is not 
225.32  the municipality.  To the extent necessary to permit compliance 
225.33  with the requirement of financial reporting, the county and any 
225.34  other appropriate local government unit or private entity must 
225.35  provide the necessary records or information to the authority or 
225.36  the state auditor as provided by the system of accounting and 
226.1   financial reporting developed pursuant to paragraph (a).  The 
226.2   authority must submit the annual report for a year on or before 
226.3   August 1 of the next year. 
226.4      (c) The annual financial report must also include the 
226.5   following items: 
226.6      (1) the original net tax capacity of the district and any 
226.7   subdistrict under section 469.177, subdivision 1; 
226.8      (2) the net tax capacity for the reporting period of the 
226.9   district and any subdistrict; 
226.10     (3) the captured net tax capacity of the district; 
226.11     (4) any fiscal disparity deduction from the captured net 
226.12  tax capacity under section 469.177, subdivision 3; 
226.13     (5) the captured net tax capacity retained for tax 
226.14  increment financing under section 469.177, subdivision 2, 
226.15  paragraph (a), clause (1); 
226.16     (6) any captured net tax capacity distributed among 
226.17  affected taxing districts under section 469.177, subdivision 2, 
226.18  paragraph (a), clause (2); 
226.19     (7) the type of district; 
226.20     (8) the date the municipality approved the tax increment 
226.21  financing plan and the date of approval of any modification of 
226.22  the tax increment financing plan, the approval of which requires 
226.23  notice, discussion, a public hearing, and findings under 
226.24  subdivision 4, paragraph (a); 
226.25     (9) the date the authority first requested certification of 
226.26  the original net tax capacity of the district and the date of 
226.27  the request for certification regarding any parcel added to the 
226.28  district; 
226.29     (10) the date the county auditor first certified the 
226.30  original net tax capacity of the district and the date of 
226.31  certification of the original net tax capacity of any parcel 
226.32  added to the district; 
226.33     (11) the month and year in which the authority has received 
226.34  or anticipates it will receive the first increment from the 
226.35  district; 
226.36     (12) the date the district must be decertified; 
227.1      (13) for the reporting period and prior years of the 
227.2   district, the actual amount received from, at least, the 
227.3   following categories: 
227.4      (i) tax increments paid by the captured net tax capacity 
227.5   retained for tax increment financing under section 469.177, 
227.6   subdivision 2, paragraph (a), clause (1), but excluding any 
227.7   excess taxes; 
227.8      (ii) tax increments that are interest or other investment 
227.9   earnings on or from tax increments; 
227.10     (iii) tax increments that are proceeds from the sale or 
227.11  lease of property, tangible or intangible, purchased by the 
227.12  authority with tax increments; 
227.13     (iv) tax increments that are repayments of loans or other 
227.14  advances made by the authority with tax increments; 
227.15     (v) bond or loan proceeds; 
227.16     (vi) special assessments; 
227.17     (vii) grants; and 
227.18     (viii) transfers from funds not exclusively associated with 
227.19  the district; 
227.20     (14) for the reporting period and for the prior years of 
227.21  the district, the amount budgeted under the tax increment 
227.22  financing plan, and the actual amount expended for, at least, 
227.23  the following categories: 
227.24     (i) acquisition of land and buildings through condemnation 
227.25  or purchase; 
227.26     (ii)  site improvements or preparation costs; 
227.27     (iii) installation of public utilities, parking facilities, 
227.28  streets, roads, sidewalks, or other similar public improvements; 
227.29     (iv) administrative costs, including the allocated cost of 
227.30  the authority; 
227.31     (v) public park facilities, facilities for social, 
227.32  recreational, or conference purposes, or other similar public 
227.33  improvements; and 
227.34     (vi) transfers to funds not exclusively associated with the 
227.35  district; 
227.36     (15) for properties sold to developers, the total cost of 
228.1   the property to the authority and the price paid by the 
228.2   developer; 
228.3      (16) the amount of any payments and the value of any 
228.4   in-kind benefits, such as physical improvements and the use of 
228.5   building space, that are paid or financed with tax increments 
228.6   and are provided to another governmental unit other than the 
228.7   municipality during the reporting period; 
228.8      (17) the amount of any payments for activities and 
228.9   improvements located outside of the district that are paid for 
228.10  or financed with tax increments; 
228.11     (18) the amount of payments of principal and interest that 
228.12  are made during the reporting period on any nondefeased: 
228.13     (i) general obligation tax increment financing bonds; 
228.14     (ii) other tax increment financing bonds; and 
228.15     (iii) notes and pay-as-you-go contracts; 
228.16     (19) the principal amount, at the end of the reporting 
228.17  period, of any nondefeased: 
228.18     (i) general obligation tax increment financing bonds; 
228.19     (ii) other tax increment financing bonds; and 
228.20     (iii) notes and pay-as-you-go contracts; 
228.21     (20) the amount of principal and interest payments that are 
228.22  due for the current calendar year on any nondefeased: 
228.23     (i) general obligation tax increment financing bonds; 
228.24     (ii) other tax increment financing bonds; and 
228.25     (iii) notes and pay-as-you-go contracts; 
228.26     (21) if the fiscal disparities contribution under chapter 
228.27  276A or 473F for the district is computed under section 469.177, 
228.28  subdivision 3, paragraph (a), the amount of increased property 
228.29  taxes imposed on other properties in the municipality that 
228.30  approved the tax increment financing plan as a result of the 
228.31  fiscal disparities contribution; 
228.32     (22) whether the tax increment financing plan or other 
228.33  governing document permits increment revenues to be expended: 
228.34     (i) to pay bonds, the proceeds of which were or may be 
228.35  expended on activities outside of the district; 
228.36     (ii) for deposit into a common bond fund from which money 
229.1   may be expended on activities located outside of the district; 
229.2   or 
229.3      (iii) to otherwise finance activities located outside of 
229.4   the tax increment financing district; and 
229.5      (23) the estimate, if any, contained in the tax increment 
229.6   financing plan of the amount of the cost of the project, 
229.7   including administrative expenses, that will be paid or financed 
229.8   with tax increment; and 
229.9      (24) any additional information the state auditor may 
229.10  require. 
229.11     (d) The commissioner of revenue shall prescribe the method 
229.12  of calculating the increased property taxes under paragraph (c), 
229.13  clause (21), and the form of the statement disclosing this 
229.14  information on the annual statement under subdivision 5. 
229.15     (e) The reporting requirements imposed by this subdivision 
229.16  apply to districts certified before, on, and after August 1, 
229.17  1979. 
229.18     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
229.19  the reports due in calendar year 2004. 
229.20     Sec. 12.  Minnesota Statutes 2002, section 469.176, 
229.21  subdivision 1c, is amended to read: 
229.22     Subd. 1c.  [DURATION LIMITS; PRE-1979 DISTRICTS.] (a) For 
229.23  tax increment financing districts created prior to August 1, 
229.24  1979, no tax increment shall be paid to the authority after 
229.25  April 1, 2001, or the term of a nondefeased bond or obligation 
229.26  outstanding on April 1, 1990, secured by increments from the 
229.27  district or project area, whichever time is greater, provided 
229.28  that in no case will a tax increment be paid to an authority 
229.29  after August 1, 2009, from such a district.  If a district's 
229.30  termination date is extended beyond April 1, 2001, because bonds 
229.31  were outstanding on April 1, 1990, with maturities extending 
229.32  beyond April 1, 2001, the following restrictions apply.  No 
229.33  increment collected from the district may be expended after 
229.34  April 1, 2001, except to pay or defease (i): 
229.35     (1) bonds issued before April 1, 1990, or (ii); 
229.36     (2) bonds issued to refund the principal of the outstanding 
230.1   bonds and pay associated issuance costs, provided the average 
230.2   maturity of the refunding bonds does not exceed the bonds 
230.3   refunded; 
230.4      (3) administrative expenses of the district required to be 
230.5   paid under section 469.176, subdivision 4h, paragraph (a); 
230.6      (4) transfers of increment permitted under section 
230.7   469.1763, subdivision 6; and 
230.8      (5) to repay any advance or payment made by the 
230.9   municipality or the authority after June 1, 2002, to pay any 
230.10  bonds listed in clause (1) or (2). 
230.11     (b) Each year, any increments from a district subject to 
230.12  this subdivision must be first applied to pay or defease 
230.13  obligations listed under paragraph (a), clauses (1) and (2), and 
230.14  administrative expenses under paragraph (a), clause (3).  Any 
230.15  remaining increments may be used for transfers of increments 
230.16  permitted under section 469.1763, subdivision 6. 
230.17     (c) When sufficient money has been received to pay in full 
230.18  or defease bonds under paragraph (a), clauses (1) and (2), the 
230.19  tax increment project or district must be decertified. 
230.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
230.21  following final enactment and applies to tax increment financing 
230.22  districts for which the request for certification was made 
230.23  before August 1, 1979. 
230.24     Sec. 13.  Minnesota Statutes 2002, section 469.176, 
230.25  subdivision 2, is amended to read: 
230.26     Subd. 2.  [EXCESS TAX INCREMENTS.] In any year in which the 
230.27  tax increment exceeds the amount necessary to pay the costs 
230.28  authorized by the tax increment financing plan, including the 
230.29  amount necessary to cancel any tax levy as provided in section 
230.30  475.61, subdivision 3, (a) The authority shall annually 
230.31  determine the amount of excess increments for a district, if 
230.32  any.  This determination must be based on the tax increment 
230.33  financing plan in effect on December 31 of the year and the 
230.34  increments and other revenues received as of December 31 of the 
230.35  year. 
230.36     (b) For purposes of this subdivision, "excess increments" 
231.1   equals the excess of: 
231.2      (1) total increments collected from the district since its 
231.3   certification, reduced by any excess increments paid under 
231.4   paragraph (c), clause (4), for a prior year, over 
231.5      (2) the total costs authorized by the tax increment 
231.6   financing plan to be paid with increments from the district, 
231.7   reduced, but not below zero, by the sum of: 
231.8      (i) the amounts of those authorized costs that have been 
231.9   paid from sources other than tax increments from the district; 
231.10     (ii) revenues, other than tax increments from the district, 
231.11  that are dedicated for or otherwise required to be used to pay 
231.12  those authorized costs and that the authority has received and 
231.13  that are not included in item (i); and 
231.14     (iii) the amount of principal and interest obligations due 
231.15  on outstanding bonds after December 31 of the year and not 
231.16  prepaid under paragraph (c) in a prior year. 
231.17     (c) The authority shall use the excess amount to do any 
231.18  of excess increment only to do one or more of the following:  
231.19     (1) prepay any outstanding bonds,; 
231.20     (2) discharge the pledge of tax increment therefor, for any 
231.21  outstanding bonds; 
231.22     (3) pay into an escrow account dedicated to the payment of 
231.23  such bond,; or 
231.24     (4) return the excess amount to the county auditor who 
231.25  shall distribute the excess amount to the municipality city or 
231.26  town, county, and school district in which the tax increment 
231.27  financing district is located in direct proportion to their 
231.28  respective local tax rates.  
231.29     (d) The county auditor must report to the commissioner of 
231.30  children, families, and learning the amount of any excess tax 
231.31  increment distributed to a school district within 30 days of the 
231.32  distribution. 
231.33     <b>[EFFECTIVE DATE.]</b> This section is effective for all tax 
231.34  increment financing districts, regardless of whether the request 
231.35  for certification was made before, on, or after August 1, 1979, 
231.36  and applies after August 1, 2003, except the amendment to 
232.1   paragraph (c), clause (4), applies retroactively to August 1, 
232.2   1979. 
232.3      Sec. 14.  Minnesota Statutes 2002, section 469.176, 
232.4   subdivision 3, is amended to read: 
232.5      Subd. 3.  [LIMITATION ON ADMINISTRATIVE EXPENSES.] (a) For 
232.6   districts for which certification was requested before August 1, 
232.7   1979, or after June 30, 1982 and before August 1, 2001, no tax 
232.8   increment shall be used to pay any administrative expenses for a 
232.9   project which exceed ten percent of the total estimated tax 
232.10  increment expenditures authorized by the tax increment financing 
232.11  plan or the total tax increment expenditures for the project, 
232.12  whichever is less.  
232.13     (b) For districts for which certification was requested 
232.14  after July 31, 1979, and before July 1, 1982, no tax increment 
232.15  shall be used to pay administrative expenses, as defined in 
232.16  Minnesota Statutes 1980, section 273.73, for a district which 
232.17  exceeds five percent of the total tax increment expenditures 
232.18  authorized by the tax increment financing plan or the 
232.19  total estimated tax increment expenditures for the district, 
232.20  whichever is less. 
232.21     (c) For districts for which certification was requested 
232.22  after July 31, 2001, no tax increment may be used to pay any 
232.23  administrative expenses for a project which exceed ten percent 
232.24  of total estimated tax increment expenditures authorized by the 
232.25  tax increment financing plan or the total tax increments, as 
232.26  defined in section 469.174, subdivision 25, clause (1), from the 
232.27  district, whichever is less. 
232.28     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
232.29  for which the request for certification was made before, on, or 
232.30  after August 1, 1979. 
232.31     Sec. 15.  Minnesota Statutes 2002, section 469.176, 
232.32  subdivision 4d, is amended to read: 
232.33     Subd. 4d.  [HOUSING DISTRICTS.] Revenue derived from tax 
232.34  increment from a housing district must be used solely to finance 
232.35  the cost of housing projects as defined in section 469.174, 
232.36  subdivision 11.  The cost of public improvements directly 
233.1   related to the housing projects and the allocated administrative 
233.2   expenses of the authority may be included in the cost of a 
233.3   housing project includes expenditures on: 
233.4      (1) public improvements directly related to a housing 
233.5   project; 
233.6      (2) public or private housing units, but not to exceed an 
233.7   amount equal to the average cost of all the units in the project 
233.8   multiplied by the number of units that are pledged to be income 
233.9   restricted; and 
233.10     (3) allocated administrative expenses of the authority. 
233.11     <b>[EFFECTIVE DATE.]</b> The provisions of this section apply to 
233.12  all districts, regardless of when the request for certification 
233.13  was made, and to expenditures of increments, regardless of 
233.14  whether they were made before or after the date of enactment. 
233.15     Sec. 16.  Minnesota Statutes 2002, section 469.176, 
233.16  subdivision 4l, is amended to read: 
233.17     Subd. 4l.  [PROHIBITED FACILITIES.] (a) No tax increment 
233.18  from any district may be used for: 
233.19     (1) for a commons area used as a public park; or 
233.20     (2) for a facility used for social, recreational, or 
233.21  conference purposes; or 
233.22     (3) to assist a development by paying costs the developer 
233.23  or owner otherwise would pay, if the developer or owner: 
233.24     (i) requested platting or subdivision of the parcel or 
233.25  parcels on which the development is located within two years 
233.26  before the authority approves the assistance; and 
233.27     (ii) did not disclose on or before making the request an 
233.28  intent to seek or accept assistance funded with tax increments. 
233.29     (b) This subdivision does Paragraph (a), clauses (1) and 
233.30  (2) do not apply to a privately owned facility for conference 
233.31  purposes or a parking structure. 
233.32     <b>[EFFECTIVE DATE.]</b> This section is effective for tax 
233.33  increment financing assistance provided under developer 
233.34  agreements entered into after June 30, 2003. 
233.35     Sec. 17.  Minnesota Statutes 2002, section 469.176, 
233.36  subdivision 7, is amended to read: 
234.1      Subd. 7.  [PARCELS NOT INCLUDABLE IN DISTRICTS.] (a) The 
234.2   authority may request inclusion in a tax increment financing 
234.3   district and the county auditor may certify the original tax 
234.4   capacity of a parcel or a part of a parcel that qualified under 
234.5   the provisions of section 273.111 or 273.112 or chapter 473H for 
234.6   taxes payable in any of the five calendar years before the 
234.7   filing of the request for certification only for: 
234.8      (1) a district in which 85 percent or more of the planned 
234.9   buildings and facilities (determined on the basis of square 
234.10  footage) are a qualified manufacturing facility or a qualified 
234.11  distribution facility or a combination of both; or 
234.12     (2) a qualified housing district as defined in section 
234.13  273.1399, subdivision 1. 
234.14     (b)(1) A distribution facility means buildings and other 
234.15  improvements to real property that are used to conduct 
234.16  activities in at least each of the following categories: 
234.17     (i) to store or warehouse tangible personal property; 
234.18     (ii) to take orders for shipment, mailing, or delivery; 
234.19     (iii) to prepare personal property for shipment, mailing, 
234.20  or delivery; and 
234.21     (iv) to ship, mail, or deliver property. 
234.22     (2) A manufacturing facility includes space used for 
234.23  manufacturing or producing tangible personal property, including 
234.24  processing resulting in the change in condition of the property, 
234.25  and space necessary for and related to the manufacturing 
234.26  activities. 
234.27     (3) To be a qualified facility, the owner or operator of a 
234.28  manufacturing or distribution facility must agree to pay and pay 
234.29  90 percent or more of the employees of the facility at a rate 
234.30  equal to or greater than 160 percent of the federal minimum wage 
234.31  for individuals over the age of 20. 
234.32     <b>[EFFECTIVE DATE.]</b> This section applies to all districts for 
234.33  which the request for certification was made on or after January 
234.34  1, 2002, and to all districts to which the definition of 
234.35  qualified housing districts under Minnesota Statutes 2000, 
234.36  section 273.1399, applied. 
235.1      Sec. 18.  Minnesota Statutes 2002, section 469.1763, 
235.2   subdivision 1, is amended to read: 
235.3      Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
235.4   section, the following terms have the meanings given. 
235.5      (b) "Activities" means acquisition of property, clearing of 
235.6   land, site preparation, soils correction, removal of hazardous 
235.7   waste or pollution, installation of utilities, construction of 
235.8   public or private improvements, and other similar activities, 
235.9   but only to the extent that tax increment revenues may be spent 
235.10  for such purposes under other law.  
235.11     (c) "Third party" means an entity other than (1) the person 
235.12  receiving the benefit of assistance financed with tax 
235.13  increments, or (2) the municipality or the development authority 
235.14  or other person substantially under the control of the 
235.15  municipality. 
235.16     (d) "Revenues derived from tax increments paid by 
235.17  properties in the district" means only tax increment as defined 
235.18  in section 469.174, subdivision 25, clause (1), and does not 
235.19  include tax increment as defined in section 469.174, subdivision 
235.20  25, clauses (2), (3), and (4). 
235.21     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
235.22  for which the request for certification was made after April 30, 
235.23  1990. 
235.24     Sec. 19.  Minnesota Statutes 2002, section 469.1763, 
235.25  subdivision 2, is amended to read: 
235.26     Subd. 2.  [EXPENDITURES OUTSIDE DISTRICT.] (a) For each tax 
235.27  increment financing district, an amount equal to at least 75 
235.28  percent of the total revenue derived from tax increments paid by 
235.29  properties in the district must be expended on activities in the 
235.30  district or to pay bonds, to the extent that the proceeds of the 
235.31  bonds were used to finance activities in the district or to pay, 
235.32  or secure payment of, debt service on credit enhanced bonds.  
235.33  For districts, other than redevelopment districts for which the 
235.34  request for certification was made after June 30, 1995, the 
235.35  in-district percentage for purposes of the preceding sentence is 
235.36  80 percent.  Not more than 25 percent of the total revenue 
236.1   derived from tax increments paid by properties in the district 
236.2   may be expended, through a development fund or otherwise, on 
236.3   activities outside of the district but within the defined 
236.4   geographic area of the project except to pay, or secure payment 
236.5   of, debt service on credit enhanced bonds.  For districts, other 
236.6   than redevelopment districts for which the request for 
236.7   certification was made after June 30, 1995, the pooling 
236.8   percentage for purposes of the preceding sentence is 20 
236.9   percent.  The revenue derived from tax increments for the 
236.10  district that are expended on costs under section 469.176, 
236.11  subdivision 4h, paragraph (b), may be deducted first before 
236.12  calculating the percentages that must be expended within and 
236.13  without the district.  
236.14     (b) In the case of a housing district, a housing project, 
236.15  as defined in section 469.174, subdivision 11, is an activity in 
236.16  the district.  
236.17     (c) All administrative expenses are for activities outside 
236.18  of the district. 
236.19     (d) The authority may elect, in the tax increment financing 
236.20  plan for the district, to increase by up to ten percentage 
236.21  points the permitted amount of expenditures for activities 
236.22  located outside the geographic area of the district under 
236.23  paragraph (a).  As permitted by section 469.176, subdivision 4k, 
236.24  the expenditures, including the permitted expenditures under 
236.25  paragraph (a), need not be made within the geographic area of 
236.26  the project.  Expenditures that meet the requirements of this 
236.27  paragraph are legally permitted expenditures of the district, 
236.28  notwithstanding section 469.176, subdivisions 4b, 4c, and 4j.  
236.29  To qualify for the increase under this paragraph, the 
236.30  expenditures must: 
236.31     (1) be used exclusively to assist housing that meets the 
236.32  requirement for a qualified low-income building, as that term is 
236.33  used in section 42 of the Internal Revenue Code; 
236.34     (2) not exceed the qualified basis of the housing, as 
236.35  defined under section 42(c) of the Internal Revenue Code, less 
236.36  the amount of any credit allowed under section 42 of the 
237.1   Internal Revenue Code; and 
237.2      (3) be used to: 
237.3      (i) acquire and prepare the site of the housing; 
237.4      (ii) acquire, construct, or rehabilitate the housing; or 
237.5      (iii) make public improvements directly related to the 
237.6   housing. 
237.7      <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
237.8   for which the request for certification was made after April 30, 
237.9   1990. 
237.10     Sec. 20.  Minnesota Statutes 2002, section 469.1763, 
237.11  subdivision 3, is amended to read: 
237.12     Subd. 3.  [FIVE-YEAR RULE.] (a) Revenues derived from tax 
237.13  increments are considered to have been expended on an activity 
237.14  within the district under subdivision 2 only if one of the 
237.15  following occurs: 
237.16     (1) before or within five years after certification of the 
237.17  district, the revenues are actually paid to a third party with 
237.18  respect to the activity; 
237.19     (2) bonds, the proceeds of which must be used to finance 
237.20  the activity, are issued and sold to a third party before or 
237.21  within five years after certification, the revenues are spent to 
237.22  repay the bonds, and the proceeds of the bonds either are, on 
237.23  the date of issuance, reasonably expected to be spent before the 
237.24  end of the later of (i) the five-year period, or (ii) a 
237.25  reasonable temporary period within the meaning of the use of 
237.26  that term under section 148(c)(1) of the Internal Revenue Code, 
237.27  or are deposited in a reasonably required reserve or replacement 
237.28  fund; 
237.29     (3) binding contracts with a third party are entered into 
237.30  for performance of the activity before or within five years 
237.31  after certification of the district and the revenues are spent 
237.32  under the contractual obligation; or 
237.33     (4) costs with respect to the activity are paid before or 
237.34  within five years after certification of the district and the 
237.35  revenues are spent to reimburse a party for payment of the 
237.36  costs, including interest on unreimbursed costs; or 
238.1      (5) expenditures are made for housing purposes as permitted 
238.2   by subdivision 2, paragraph (b). 
238.3      (b) For purposes of this subdivision, bonds include 
238.4   subsequent refunding bonds if the original refunded bonds meet 
238.5   the requirements of paragraph (a), clause (2). 
238.6      <b>[EFFECTIVE DATE.]</b> This section is effective for 
238.7   expenditures made after June 30, 2003. 
238.8      Sec. 21.  Minnesota Statutes 2002, section 469.1763, 
238.9   subdivision 4, is amended to read: 
238.10     Subd. 4.  [USE OF REVENUES FOR DECERTIFICATION.] (a) In 
238.11  each year beginning with the sixth year following certification 
238.12  of the district, if the applicable in-district percent of the 
238.13  revenues derived from tax increments paid by properties in the 
238.14  district that remain after exceeds the amount of expenditures 
238.15  that have been made for costs permitted under subdivision 3, an 
238.16  amount equal to the difference between the in-district percent 
238.17  of the revenues derived from tax increments paid by properties 
238.18  in the district and the amount of expenditures that have been 
238.19  made for costs permitted under subdivision 3 must be used and 
238.20  only used to pay or defease the following or be set aside to pay 
238.21  the following: 
238.22     (1) outstanding bonds, as defined in subdivision 3, 
238.23  paragraphs (a), clause (2), and (b); 
238.24     (2) contracts, as defined in subdivision 3, paragraph (a), 
238.25  clauses (3) and (4); or 
238.26     (3) credit enhanced bonds to which the revenues derived 
238.27  from tax increments are pledged, but only to the extent that 
238.28  revenues of the district for which the credit enhanced bonds 
238.29  were issued are insufficient to pay the bonds and to the extent 
238.30  that the increments from the applicable pooling percent share 
238.31  for the district are insufficient. 
238.32     (b) When the outstanding bonds have been defeased and when 
238.33  sufficient money has been set aside to pay contractual 
238.34  obligations as defined in subdivision 3, paragraph (a), clauses 
238.35  (3) and (4), the district must be decertified and the pledge of 
238.36  tax increment discharged. 
239.1      <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
239.2   for which the request for certification was made after April 30, 
239.3   1990. 
239.4      Sec. 22.  Minnesota Statutes 2002, section 469.1763, 
239.5   subdivision 6, is amended to read: 
239.6      Subd. 6.  [POOLING PERMITTED FOR DEFICITS.] (a) This 
239.7   subdivision applies only to districts for which the request for 
239.8   certification was made before August 1, 2001, and without regard 
239.9   to whether the request for certification was made prior to 
239.10  August 1, 1979. 
239.11     (b) The municipality for the district may transfer 
239.12  available increments from another tax increment financing 
239.13  district located in the municipality, if the transfer is 
239.14  necessary to eliminate a deficit in the district to which the 
239.15  increments are transferred.  A deficit in the district for 
239.16  purposes of this subdivision means the lesser of the following 
239.17  two amounts: 
239.18     (1)(i) the amount due during the calendar year to pay 
239.19  preexisting obligations of the district; minus 
239.20     (ii) the total increments collected or to be collected from 
239.21  properties located within the district that are available for 
239.22  the calendar year including amounts collected in prior years 
239.23  that are currently available; plus 
239.24     (iii) total increments from properties located in other 
239.25  districts in the municipality including amounts collected in 
239.26  prior years that are available to be used to meet the district's 
239.27  obligations under this section, excluding this subdivision, or 
239.28  other provisions of law (but excluding a special tax under 
239.29  section 469.1791 and the grant program under Laws 1997, chapter 
239.30  231, article 1, section 19, or Laws 2001, First Special Session 
239.31  chapter 5); or 
239.32     (2) the reduction in increments collected from properties 
239.33  located in the district for the calendar year as a result of the 
239.34  changes in class rates in Laws 1997, chapter 231, article 1; 
239.35  Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, 
239.36  and Laws 2001, First Special Session chapter 5, or the 
240.1   elimination of the general education tax levy under Laws 2001, 
240.2   First Special Session chapter 5. 
240.3      (c) A preexisting obligation means: 
240.4      (1) bonds issued and sold before August 1, 2001, or bonds 
240.5   issued pursuant to a binding contract requiring the issuance of 
240.6   bonds entered into before July 1, 2001, and bonds issued to 
240.7   refund such bonds or to reimburse expenditures made in 
240.8   conjunction with a signed contractual agreement entered into 
240.9   before August 1, 2001, to the extent that the bonds are secured 
240.10  by a pledge of increments from the tax increment financing 
240.11  district; and 
240.12     (2) binding contracts entered into before August 1, 2001, 
240.13  to the extent that the contracts require payments secured by a 
240.14  pledge of increments from the tax increment financing district. 
240.15     (d) The municipality may require a development authority, 
240.16  other than a seaway port authority, to transfer available 
240.17  increments including amounts collected in prior years that are 
240.18  currently available for any of its tax increment financing 
240.19  districts in the municipality to make up an insufficiency in 
240.20  another district in the municipality, regardless of whether the 
240.21  district was established by the development authority or another 
240.22  development authority.  This authority applies notwithstanding 
240.23  any law to the contrary, but applies only to a development 
240.24  authority that: 
240.25     (1) was established by the municipality; or 
240.26     (2) the governing body of which is appointed, in whole or 
240.27  part, by the municipality or an officer of the municipality or 
240.28  which consists, in whole or part, of members of the governing 
240.29  body of the municipality.  The municipality may use this 
240.30  authority only after it has first used all available increments 
240.31  of the receiving development authority to eliminate the 
240.32  insufficiency and exercised any permitted action under section 
240.33  469.1792, subdivision 3, for preexisting districts of the 
240.34  receiving development authority to eliminate the insufficiency. 
240.35     (e) The authority under this subdivision to spend tax 
240.36  increments outside of the area of the district from which the 
241.1   tax increments were collected: 
241.2      (1) may only be exercised after obtaining approval of the 
241.3   use of the increments, in writing, by the commissioner of 
241.4   revenue; 
241.5      (2) is an exception to the restrictions under section 
241.6   469.176, subdivision 4i, and the other provisions of this 
241.7   section, and the percentage restrictions under subdivision 2 
241.8   must be calculated after deducting increments spent under this 
241.9   subdivision from the total increments for the district; and 
241.10     (3) (2) applies notwithstanding the provisions of the Tax 
241.11  Increment Financing Act in effect for districts for which the 
241.12  request for certification was made before June 30, 1982, or any 
241.13  other law to the contrary. 
241.14     (f) If a preexisting obligation requires the development 
241.15  authority to pay an amount that is limited to the increment from 
241.16  the district or a specific development within the district and 
241.17  if the obligation requires paying a higher amount to the extent 
241.18  that increments are available, the municipality may determine 
241.19  that the amount due under the preexisting obligation equals the 
241.20  higher amount and may authorize the transfer of increments under 
241.21  this subdivision to pay up to the higher amount.  The existence 
241.22  of a guarantee of obligations by the individual or entity that 
241.23  would receive the payment under this paragraph is disregarded in 
241.24  the determination of eligibility to pool under this 
241.25  subdivision.  The authority to transfer increments under this 
241.26  paragraph may only be used to the extent that the payment of all 
241.27  other preexisting obligations in the municipality due during the 
241.28  calendar year have been satisfied. 
241.29     <b>[EFFECTIVE DATE.]</b> This section is effective retroactively 
241.30  to January 2, 2002, and thereafter. 
241.31     Sec. 23.  Minnesota Statutes 2002, section 469.177, 
241.32  subdivision 1, is amended to read: 
241.33     Subdivision 1.  [ORIGINAL NET TAX CAPACITY.] (a) Upon or 
241.34  after adoption of a tax increment financing plan, the auditor of 
241.35  any county in which the district is situated shall, upon request 
241.36  of the authority, certify the original net tax capacity of the 
242.1   tax increment financing district and that portion of the 
242.2   district overlying any subdistrict as described in the tax 
242.3   increment financing plan and shall certify in each year 
242.4   thereafter the amount by which the original net tax capacity has 
242.5   increased or decreased as a result of a change in tax exempt 
242.6   status of property within the district and any subdistrict, 
242.7   reduction or enlargement of the district or changes pursuant to 
242.8   subdivision 4.  
242.9      (b) For districts approved under section 469.175, 
242.10  subdivision 3, or parcels added to existing districts after May 
242.11  1, 1988, If the classification under section 273.13 of property 
242.12  located in a district changes to a classification that has a 
242.13  different assessment ratio, the original net tax capacity of 
242.14  that property must be redetermined at the time when its use is 
242.15  changed as if the property had originally been classified in the 
242.16  same class in which it is classified after its use is changed. 
242.17     (c) The amount to be added to the original net tax capacity 
242.18  of the district as a result of previously tax exempt real 
242.19  property within the district becoming taxable equals the net tax 
242.20  capacity of the real property as most recently assessed pursuant 
242.21  to section 273.18 or, if that assessment was made more than one 
242.22  year prior to the date of title transfer rendering the property 
242.23  taxable, the net tax capacity assessed by the assessor at the 
242.24  time of the transfer.  If improvements are made to tax exempt 
242.25  property after certification of the district and before the 
242.26  parcel becomes taxable, the assessor shall, at the request of 
242.27  the authority, separately assess the estimated market value of 
242.28  the improvements.  If the property becomes taxable, the county 
242.29  auditor shall add to original net tax capacity, the net tax 
242.30  capacity of the parcel, excluding the separately assessed 
242.31  improvements.  If substantial taxable improvements were made to 
242.32  a parcel after certification of the district and if the property 
242.33  later becomes tax exempt, in whole or part, as a result of the 
242.34  authority acquiring the property through foreclosure or exercise 
242.35  of remedies under a lease or other revenue agreement or as a 
242.36  result of tax forfeiture, the amount to be added to the original 
243.1   net tax capacity of the district as a result of the property 
243.2   again becoming taxable is the amount of the parcel's value that 
243.3   was included in original net tax capacity when the parcel was 
243.4   first certified.  The amount to be added to the original net tax 
243.5   capacity of the district as a result of enlargements equals the 
243.6   net tax capacity of the added real property as most recently 
243.7   certified by the commissioner of revenue as of the date of 
243.8   modification of the tax increment financing plan pursuant to 
243.9   section 469.175, subdivision 4. 
243.10     (d) For districts approved under section 469.175, 
243.11  subdivision 3, or parcels added to existing districts after May 
243.12  1, 1988, If the net tax capacity of a property increases because 
243.13  the property no longer qualifies under the Minnesota 
243.14  Agricultural Property Tax Law, section 273.111; the Minnesota 
243.15  Open Space Property Tax Law, section 273.112; or the 
243.16  Metropolitan Agricultural Preserves Act, chapter 473H, or 
243.17  because platted, unimproved property is improved or three years 
243.18  pass after approval of the plat under section 273.11, 
243.19  subdivision 1, the increase in net tax capacity must be added to 
243.20  the original net tax capacity.  
243.21     (e) The amount to be subtracted from the original net tax 
243.22  capacity of the district as a result of previously taxable real 
243.23  property within the district becoming tax exempt, or a reduction 
243.24  in the geographic area of the district, shall be the amount of 
243.25  original net tax capacity initially attributed to the property 
243.26  becoming tax exempt or being removed from the district.  If the 
243.27  net tax capacity of property located within the tax increment 
243.28  financing district is reduced by reason of a court-ordered 
243.29  abatement, stipulation agreement, voluntary abatement made by 
243.30  the assessor or auditor or by order of the commissioner of 
243.31  revenue, the reduction shall be applied to the original net tax 
243.32  capacity of the district when the property upon which the 
243.33  abatement is made has not been improved since the date of 
243.34  certification of the district and to the captured net tax 
243.35  capacity of the district in each year thereafter when the 
243.36  abatement relates to improvements made after the date of 
244.1   certification.  The county auditor may specify reasonable form 
244.2   and content of the request for certification of the authority 
244.3   and any modification thereof pursuant to section 469.175, 
244.4   subdivision 4.  
244.5      (f) If a parcel of property contained a substandard 
244.6   building that was demolished or removed and if the authority 
244.7   elects to treat the parcel as occupied by a substandard building 
244.8   under section 469.174, subdivision 10, paragraph (b), the 
244.9   auditor shall certify the original net tax capacity of the 
244.10  parcel using the greater of (1) the current net tax capacity of 
244.11  the parcel, or (2) the estimated market value of the parcel for 
244.12  the year in which the building was demolished or removed, but 
244.13  applying the class rates for the current year. 
244.14     <b>[EFFECTIVE DATE.]</b> The provisions of this section apply to 
244.15  all districts, regardless of when the request for certification 
244.16  was made, beginning for taxes payable in 2004.  The provisions 
244.17  only apply to classification changes enacted after January 1, 
244.18  2001, and for changes in use occurring after December 31, 2002. 
244.19     Sec. 24.  Minnesota Statutes 2002, section 469.177, 
244.20  subdivision 12, is amended to read: 
244.21     Subd. 12.  [DECERTIFICATION OF TAX INCREMENT FINANCING 
244.22  DISTRICT.] The county auditor shall decertify a tax increment 
244.23  financing district when the earliest of the following times is 
244.24  reached: 
244.25     (1) the applicable maximum duration limit under section 
244.26  469.176, subdivisions 1a to 1g; 
244.27     (2) the maximum duration limit, if any, provided by the 
244.28  municipality pursuant to section 469.176, subdivision 1; 
244.29     (3) the time of decertification specified in section 
244.30  469.1761, subdivision 4, if the commissioner of revenue issues 
244.31  an order of noncompliance and the maximum duration limit for 
244.32  economic development districts has been exceeded; 
244.33     (4) upon completion of the required actions to allow 
244.34  decertification under section 469.1763, subdivision 4; or 
244.35     (5) upon the later of receipt by the county auditor of a 
244.36  written request for decertification from the authority that 
245.1   requested certification of the original net tax capacity of the 
245.2   district or its successor or the decertification date specified 
245.3   in the request. 
245.4      <b>[EFFECTIVE DATE.]</b> This section is effective for all 
245.5   districts regardless of whether the request for certification 
245.6   was made before, on, or after August 1, 1979. 
245.7      Sec. 25.  Minnesota Statutes 2002, section 469.1771, 
245.8   subdivision 4, is amended to read: 
245.9      Subd. 4.  [LIMITATIONS.] (a) If the increments are pledged 
245.10  to repay bonds that were issued before the lawsuit was filed 
245.11  under this section, the damages under this section may not 
245.12  exceed the greater of (1) ten percent of the expenditures or 
245.13  revenues derived from increment, or (2) the amount of available 
245.14  revenues after paying debt services due on the bonds.  
245.15     (b) The court may abate all or part of the amount if it 
245.16  determines the unauthorized action or failure to perform the 
245.17  required action was taken in good faith and the payment would 
245.18  work an undue hardship on the authority or municipality. 
245.19     <b>[EFFECTIVE DATE.]</b> This section is effective for violations 
245.20  occurring after December 31, 1990. 
245.21     Sec. 26.  Minnesota Statutes 2002, section 469.1771, is 
245.22  amended by adding a subdivision to read: 
245.23     Subd. 7.  [LIMITATIONS ON ACTIONS.] An action under 
245.24  subdivision 1, paragraph (a), contesting the validity of a 
245.25  determination by an authority under section 469.175, subdivision 
245.26  3, must be commenced within the later of: 
245.27     (1) 180 days after the municipality's approval under 
245.28  section 469.175, subdivision 3; or 
245.29     (2) 90 days after the request for certification of the 
245.30  district is filed with the county auditor under section 469.177, 
245.31  subdivision 1. 
245.32     <b>[EFFECTIVE DATE.]</b> This section is effective for actions 
245.33  filed after the day following final enactment. 
245.34     Sec. 27.  Minnesota Statutes 2002, section 469.178, 
245.35  subdivision 7, is amended to read: 
245.36     Subd. 7.  [INTERFUND LOANS.] The authority or municipality 
246.1   may advance or loan money to finance expenditures under section 
246.2   469.176, subdivision 4, from its general fund or any other fund 
246.3   under which it has legal authority to do so.  The loan or 
246.4   advance must be approved authorized, by resolution of the 
246.5   governing body, before money is transferred, advanced, or spent, 
246.6   whichever is earliest.  The resolution may generally grant to 
246.7   the authority the power to make interfund loans under one or 
246.8   more tax increment financing plans or for one or more 
246.9   districts.  The terms and conditions for repayment of the loan 
246.10  must be provided in writing and include, at a minimum, the 
246.11  principal amount, the interest rate, and maximum term.  The 
246.12  maximum rate of interest permitted to be charged is limited to 
246.13  the greater of the rates specified under section 270.75 or 
246.14  549.09 as of the date or advance is made, unless the written 
246.15  agreement states that the maximum interest rate will fluctuate 
246.16  as the interest rates specified under section 270.75 or 549.09 
246.17  are from time to time adjusted. 
246.18     <b>[EFFECTIVE DATE.]</b> This section is effective for loans and 
246.19  advances made after July 31, 2001, and for districts for which 
246.20  the request for certification was made after July 31, 1979. 
246.21     Sec. 28.  Minnesota Statutes 2002, section 469.1791, 
246.22  subdivision 3, is amended to read: 
246.23     Subd. 3.  [PRECONDITIONS TO ESTABLISH DISTRICT.] (a) A city 
246.24  may establish a special taxing district within a tax increment 
246.25  financing district under this section only if the conditions 
246.26  under paragraphs (b) and (c) are met or if the city elects to 
246.27  exercise the authority under paragraph (d). 
246.28     (b) The city has determined that: 
246.29     (1) total tax increments from the district, including 
246.30  unspent increments from previous years and increments 
246.31  transferred under paragraph (c), will be insufficient to pay the 
246.32  amounts due in a year on preexisting obligations; and 
246.33     (2) this insufficiency of increments resulted from the 
246.34  reduction in property tax class rates enacted in the 1997 and 
246.35  1998 legislative sessions. 
246.36     (c) The city has agreed to transfer any available 
247.1   increments from other tax increment financing districts in the 
247.2   city to pay the preexisting obligations of the district under 
247.3   section 469.1763, subdivision 6.  This requirement does not 
247.4   apply to any available increments of a qualified housing 
247.5   district, as defined in section 273.1399, subdivision 1.  
247.6      (d) If a tax increment financing district does not qualify 
247.7   under paragraphs (b) and (c), the governing body may elect to 
247.8   establish a special taxing district under this section.  If the 
247.9   city elects to exercise this authority, increments from the tax 
247.10  increment financing district and the proceeds of the tax imposed 
247.11  under this section may only be used to pay preexisting 
247.12  obligations and reasonable administrative expenses of the 
247.13  authority for the tax increment financing district.  The tax 
247.14  increment financing district must be decertified when all 
247.15  preexisting obligations have been paid.  
247.16     <b>[EFFECTIVE DATE.]</b> This section applies to all districts for 
247.17  which the request for certification was made on or after January 
247.18  1, 2002, and to all districts to which the definition of 
247.19  qualified housing districts under Minnesota Statutes 2002, 
247.20  section 273.1399, applied. 
247.21     Sec. 29.  Minnesota Statutes 2002, section 469.1792, 
247.22  subdivision 1, is amended to read: 
247.23     Subdivision 1.  [SCOPE.] This section applies only to an 
247.24  authority with a preexisting district for which: 
247.25     (1) the increments from the district were insufficient to 
247.26  pay preexisting obligations as a result of the class rate 
247.27  changes or the elimination of the state-determined general 
247.28  education property tax levy under this act, or both; or 
247.29     (2)(i) the development authority has a binding contract, 
247.30  entered into before August 1, 2001, with a person requiring the 
247.31  authority to pay to the person an amount that may not exceed the 
247.32  increment from the district or a specific development within the 
247.33  district; and 
247.34     (ii) the authority is unable to pay the full amount under 
247.35  the contract from the pledged increments or other increments 
247.36  from the district that would have been due if the class rate 
248.1   changes or elimination of the state-determined general education 
248.2   property tax levy or both had not been made under Laws 2001, 
248.3   First Special Session chapter 5. 
248.4      <b>[EFFECTIVE DATE.]</b> This section is effective retroactively 
248.5   to the effective date of the original enactment of section 
248.6   469.1792, subdivision 1, and applies to all districts for which 
248.7   the request for certification was made after July 1, 1979. 
248.8      Sec. 30.  Minnesota Statutes 2002, section 469.1792, 
248.9   subdivision 2, is amended to read: 
248.10     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
248.11  the following terms have the meanings given. 
248.12     (b) "Preexisting district" means a tax increment financing 
248.13  district for which the request for certification was made before 
248.14  August 1, 2001. 
248.15     (c) "Preexisting obligation" means a bond or binding 
248.16  contract that: 
248.17     (1)(i) was issued or approved before August 1, 2001, or was 
248.18  issued pursuant to a binding contract entered into before August 
248.19  July 1, 2001; or 
248.20     (ii) was issued to refinance an obligation under item (i), 
248.21  if the refinancing does not increase the present value of the 
248.22  debt service; and 
248.23     (2) is secured by increments from a preexisting district. 
248.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
248.25  following final enactment and applies to districts for which the 
248.26  request for certification was made on, before, or after August 
248.27  1, 1979, and before August 1, 2001. 
248.28     Sec. 31.  Minnesota Statutes 2002, section 469.1792, 
248.29  subdivision 3, is amended to read: 
248.30     Subd. 3.  [ACTIONS AUTHORIZED.] (a) An authority with a 
248.31  district qualifying under this section may take either or both 
248.32  of the following actions for any or all of its preexisting 
248.33  districts: 
248.34     (1) the authority may elect that the original local tax 
248.35  rate under section 469.177, subdivision 1a, does not apply to 
248.36  the district; and 
249.1      (2) the authority may elect the fiscal disparities 
249.2   contribution will be computed under section 469.177, subdivision 
249.3   3, paragraph (a), regardless of the election that was made for 
249.4   the district or if the district is an economic development 
249.5   district for which the request for certification was made after 
249.6   June 30, 1997. 
249.7      (b) The authority may take action under this subdivision 
249.8   only after the municipality approves the action, by resolution, 
249.9   after notice and public hearing in the manner provided under 
249.10  section 469.175, subdivision 2 3. 
249.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
249.12  following final enactment and applies to districts for which the 
249.13  request for certification was made on, before, or after August 
249.14  1, 1979, and before August 1, 2001. 
249.15     Sec. 32.  [469.1794] [DURATION EXTENSION TO OFFSET 
249.16  DEFICITS.] 
249.17     Subdivision 1.  [AUTHORITY.] Subject to the conditions and 
249.18  limitations imposed by this section, an authority may, by 
249.19  resolution, extend the duration limit under section 469.176, 
249.20  subdivision 1b, 1c, 1e, or 1g, that applies to a preexisting 
249.21  district by up to the maximum number of years permitted under 
249.22  subdivision 5, plus any amount authorized by the commissioner of 
249.23  revenue under subdivision 6. 
249.24     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
249.25  the following terms have the meanings given. 
249.26     (b) "Extended district" means a tax increment financing 
249.27  district whose duration limit is extended under this section. 
249.28     (c) "Preexisting district" has the meaning given in section 
249.29  469.1792, subdivision 2. 
249.30     (d) "Preexisting obligation" has the meaning given in 
249.31  section 469.1792, subdivision 2. 
249.32     (e) "Qualifying obligation" means: 
249.33     (1) a preexisting obligation that is: 
249.34     (i) a general obligation bond of the municipality; 
249.35     (ii) a general obligation bond of the authority; 
249.36     (iii) a revenue bond of the authority to which other 
250.1   revenues or money of the authority in addition to tax increments 
250.2   are pledged to pay; or 
250.3      (iv) an interfund loan, including an advance or payment 
250.4   made by the municipality or authority after June 1, 2002, to pay 
250.5   an obligation listed in items (i) to (iii); or 
250.6      (2) a bond issued to refinance a preexisting obligation 
250.7   under clause (1). 
250.8      Subd. 3.  [PRECONDITIONS.] Before an authority may extend 
250.9   the duration of district under this section, the following 
250.10  conditions must be met with regard to the district: 
250.11     (1) the original local tax rate under section 469.177, 
250.12  subdivision 1a, does not apply under an election made under 
250.13  section 469.1792, subdivision 3, or under other operation of 
250.14  law; 
250.15     (2) for a district in the metropolitan area or taconite tax 
250.16  relief area, the fiscal disparities contribution is computed 
250.17  under section 469.177, subdivision 3, paragraph (a); 
250.18     (3) the municipality has transferred any available 
250.19  increments in other districts to pay qualified obligations of 
250.20  the district or other districts in the municipality under 
250.21  section 469.1763, subdivision 6; and 
250.22     (4) the authority finds that, taking into account all of 
250.23  the increments that are available to pay qualifying obligations 
250.24  for the district, the increments from the district will be 
250.25  insufficient to pay the amount of qualifying obligations and 
250.26  that the insufficiency is a result of (i) the changes in the 
250.27  class rates and (ii) elimination of the state-determined general 
250.28  education property tax levy under Laws 2001, First Special 
250.29  Session chapter 5. 
250.30     Subd. 4.  [NOTICE; HEARING; AND APPROVALS.] The authority 
250.31  may extend the duration of a district under this section only 
250.32  after: 
250.33     (1) the municipality has approved the extension after 
250.34  providing public notice and holding a hearing in the manner 
250.35  provided under section 469.175, subdivision 3; and 
250.36     (2) the governing bodies of the county and school district 
251.1   in which the district is located have approved the extension by 
251.2   resolution. 
251.3      Subd. 5.  [MAXIMUM EXTENSION.] (a) The maximum extension 
251.4   for a district under this subdivision equals the lesser of: 
251.5      (1) four years; or 
251.6      (2) the tax reform percentage for the district, determined 
251.7   under paragraph (b), multiplied by the remaining duration of the 
251.8   district rounded to the nearest whole number.  Fractions in 
251.9   excess of one-third are rounded up. 
251.10     (b) The tax reform percentage for the district, as 
251.11  estimated by the county auditor, equals: 
251.12     (1)(i) the total taxes paid by the original tax capacity 
251.13  for the district for taxes payable in 2001, minus 
251.14     (ii) the average of the total taxes paid by the original 
251.15  tax capacity for the district for taxes payable in 2002 and in 
251.16  2003, divided by 
251.17     (2) the total taxes paid by the original tax capacity for 
251.18  the district for taxes payable in 2001. 
251.19     (c) In the resolution approving the extension, the 
251.20  municipality may elect to treat all preexisting obligations as 
251.21  qualified obligations for purposes of this section.  If the 
251.22  municipality makes an election under this paragraph, the maximum 
251.23  duration is reduced by one-half of the amount otherwise 
251.24  permitted under paragraph (a).  
251.25     (d) The remaining duration of a district is the number of 
251.26  calendar years, beginning after December 31, 2001, in which the 
251.27  district may collect increment under its duration limit under 
251.28  section 469.176, subdivision 1b, 1c, 1e, or 1g, or a special law 
251.29  approved before January 1, 2002, as applicable. 
251.30     (e) For purposes of this subdivision, "taxes" exclude taxes 
251.31  levied against market value, rather than tax capacity, and the 
251.32  state general tax under section 275.025. 
251.33     Subd. 6.  [COMMISSIONER AUTHORITY.] (a) If the municipality 
251.34  determines that the extension permitted under subdivision 5 will 
251.35  not provide sufficient revenue to pay in full the amount of 
251.36  qualifying obligations, the municipality may apply to the 
252.1   commissioner of revenue for an additional duration extension.  
252.2   The commissioner may authorize an extension of the duration of 
252.3   the district of up to two years after determining that: 
252.4      (1) the insufficiency of revenues to pay the qualifying 
252.5   obligations, which will be offset by the additional extension of 
252.6   the duration limit, result from (i) the changes in the class 
252.7   rates and (ii) elimination of the state-determined general 
252.8   education property tax levy under Laws 2001, First Special 
252.9   Session chapter 5; 
252.10     (2) the municipality has or is transferring all available 
252.11  increments from other preexisting districts and after August 1, 
252.12  2001, has not entered into new obligations or authorized new 
252.13  spending that reduced the amount of those increments that are 
252.14  available for transfer to pay qualifying obligations; and 
252.15     (3) increases in increments over the term of the district 
252.16  are unlikely to eliminate the insufficiency. 
252.17     (b) The commissioner may: 
252.18     (1) establish the form of and time for applications under 
252.19  this subdivision; and 
252.20     (2) require the municipality to provide the information 
252.21  that the commissioner determines is necessary or useful in 
252.22  evaluating the application. 
252.23     (c) This subdivision does not apply to a district if the 
252.24  authority has made an election under subdivision 5, paragraph 
252.25  (c).  
252.26     (d) Applications for extensions under this subdivision may 
252.27  not be made more than three calendar years before the end of the 
252.28  maximum duration limit under subdivision 5 for the district. 
252.29     Subd. 7.  [LIMITS ON USE OF INCREMENTS.] (a) Tax increments 
252.30  of an extended district may only be used to pay preexisting 
252.31  obligations of the district and administrative expenses, 
252.32  effective upon the final required approval of the extension 
252.33  under this section.  All tax increments that are attributable to 
252.34  an extension of the duration of a district under this section 
252.35  must be used only to pay qualified obligations of the district.  
252.36  If increments from a district subject to this subdivision are 
253.1   pledged to pay preexisting obligations that are not qualified 
253.2   obligations, increments received under the duration limit, 
253.3   determined without regard to this section, must be used to pay 
253.4   qualified obligations and preexisting obligations that are not 
253.5   qualified obligations in proportion to their relative shares of 
253.6   all payments due on all preexisting obligations. 
253.7      (b) If the authority elects to extend the duration of a 
253.8   district under this section and if increments from one or more 
253.9   other districts are pledged to pay preexisting obligations of 
253.10  the extended district, increments from all of the districts may 
253.11  only be used to pay preexisting obligations and administrative 
253.12  expenses. 
253.13     Subd. 8.  [DECERTIFICATION.] An extended district must be 
253.14  decertified at the end of the first calendar year when 
253.15  sufficient increments have been received to pay the qualified 
253.16  obligations of the extended district.  Any remaining unspent 
253.17  increments must be distributed as excess increments under 
253.18  section 469.176, subdivision 2, clause (4). 
253.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
253.20  following final enactment and applies to districts for which the 
253.21  request for certification was made on, before, or after August 
253.22  1, 1979, and before August 1, 2001. 
253.23     Sec. 33.  Minnesota Statutes 2002, section 469.1813, 
253.24  subdivision 8, is amended to read: 
253.25     Subd. 8.  [LIMITATION ON ABATEMENTS.] In any year, the 
253.26  total amount of property taxes abated by a political subdivision 
253.27  under this section may not exceed (1) five percent of the 
253.28  current levy, or (2) $100,000, whichever is greater.  The limit 
253.29  under this subdivision does not apply to an uncollected 
253.30  abatement from a prior year that is added to the abatement levy. 
253.31     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
253.32  property taxes levied in 2003, payable in 2004. 
253.33     Sec. 34.  Minnesota Statutes 2002, section 469.1815, 
253.34  subdivision 1, is amended to read: 
253.35     Subdivision 1.  [INCLUSION IN PROPOSED AND FINAL LEVIES.] 
253.36  The political subdivision must add to its levy amount for the 
254.1   current year under sections 275.065 and 275.07 the total 
254.2   estimated amount of all current year abatements granted.  If all 
254.3   or a portion of an abatement levy for a prior year was 
254.4   uncollected, the political subdivision may add the uncollected 
254.5   amount to its abatement levy for the current year.  The tax 
254.6   amounts shown on the proposed notice under section 275.065, 
254.7   subdivision 3, and on the property tax statement under section 
254.8   276.04, subdivision 2, are the total amounts before the 
254.9   reduction of any abatements that will be granted on the property.
254.10     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
254.11  property taxes levied in 2003, payable in 2004. 
254.12     Sec. 35.  Laws 1997, chapter 231, article 10, section 25, 
254.13  is amended to read: 
254.14     Sec. 25.  [EFFECTIVE DATE.] 
254.15     Sections 1, 3 to 6, 7, and 10, are effective for districts 
254.16  for which the requests for certification are made after June 30, 
254.17  1997. 
254.18     Section 2, clauses clause (1) and is effective for all 
254.19  districts, regardless of whether the request for certification 
254.20  was made before, on, or after August 1, 1979.  Section 2, 
254.21  clause (4), are is effective for districts for which the 
254.22  requests for certification were made after July 31, 1979, and 
254.23  for payments and investment earnings received after July 1, 
254.24  1997.  Section 2, clauses (2) and (3), are effective for 
254.25  districts for which the request for certification was made after 
254.26  June 30, 1982, and proceeds from sales and leases of properties 
254.27  purchased by the authority after June 30, 1997, and repayments 
254.28  of advances and loans that were made after June 30, 1997.  
254.29     Sections 8 and 9 apply to all tax increment districts, 
254.30  whenever certified, insofar as the underlying law applies to 
254.31  them, and any uses of tax increment expended prior to the date 
254.32  of enactment of this act which are in compliance with the 
254.33  provisions of those sections are deemed valid. 
254.34     Sections 12 and 13 are effective on the day the chief 
254.35  clerical officer of the city of Columbia Heights complies with 
254.36  Minnesota Statutes, sections 645.021, subdivision 3. 
255.1      Sections 17 to 20 are effective the day following final 
255.2   enactment and upon compliance by the governing body with 
255.3   Minnesota Statutes, section 645.021, subdivision 3. 
255.4      Section 24 is effective the day following final enactment. 
255.5      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
255.6   following final enactment. 
255.7      Sec. 36.  Laws 2002, chapter 377, article 7, section 3, the 
255.8   effective date, is amended to read: 
255.9      [EFFECTIVE DATE.] This section is effective for increments 
255.10  payable in 2002 deficits occurring in calendar year 2000 and 
255.11  thereafter. 
255.12     Sec. 37.  Laws 2002, chapter 377, article 11, section 1, is 
255.13  amended to read: 
255.14     Section 1.  [CITY OF MOORHEAD; TAX LEVY AUTHORIZED.] 
255.15     (a) Each year the city of Moorhead may impose a tax on all 
255.16  class 3a and class 3b property located in the city in an amount 
255.17  which the city determines is equal to the reduction in revenues 
255.18  from increment from all tax increment financing districts in the 
255.19  city resulting from the class rate changes and the elimination 
255.20  of the state-determined general education property levy under 
255.21  Laws 2001, First Special Session chapter 5.  The proceeds of 
255.22  this tax and increments from the district may only be used to 
255.23  pay preexisting obligations as defined in Minnesota Statutes, 
255.24  section 469.1763, subdivision 6, whether general obligations or 
255.25  payable wholly from tax increments.  The tax must be levied and 
255.26  collected in the same manner and as part of the property tax 
255.27  levied by the city and is subject to the same administrative, 
255.28  penalty, and enforcement provisions.  A tax imposed under this 
255.29  section is a special levy and is not subject to levy limitations 
255.30  under Minnesota Statutes, section 275.71. 
255.31     (b) This section expires December 31, 2005 2010. 
255.32     <b>[EFFECTIVE DATE.]</b> This section is effective upon approval 
255.33  by and compliance with Minnesota Statutes, section 645.021, 
255.34  subdivision 3, by the governing body of the city of Moorhead. 
255.35     Sec. 38.  [CITY OF DULUTH; TAX INCREMENT FINANCING 
255.36  DISTRICT.] 
256.1      Subdivision 1.  [AUTHORIZATION.] Upon approval of the 
256.2   governing body of the city of Duluth, the Duluth economic 
256.3   development authority may create an economic development tax 
256.4   increment financing district for aircraft related facilities.  
256.5   The authority may establish a district only after entering a 
256.6   development agreement, which provides for construction of an 
256.7   aircraft maintenance facility with a minimum square footage of 
256.8   150,000 and requires employment of a minimum of 200 individuals 
256.9   with average annual compensation in excess of $30,000.  Except 
256.10  as otherwise provided in this section, the provisions of 
256.11  Minnesota Statutes, sections 469.174 to 469.179 apply to the 
256.12  district. 
256.13     Subd. 2.  [SPECIAL RULES.] (a) Notwithstanding the 
256.14  provisions of Minnesota Statutes, section 469.176, subdivision 
256.15  1b, paragraph (a), clause (3), no tax increment shall in any 
256.16  event be paid to the authority after 25 years after receipt by 
256.17  the authority of the first tax increment for the district 
256.18  authorized by this section. 
256.19     (b) The development in the district authorized by this 
256.20  section shall be deemed to be a purpose authorized under 
256.21  Minnesota Statutes, section 469.176, subdivision 4c, paragraph 
256.22  (a). 
256.23     (c) For purposes of Minnesota Statutes, section 469.177, 
256.24  subdivision 12, the applicable maximum duration limit of the 
256.25  district authorized by this section is as set forth in paragraph 
256.26  (a). 
256.27     <b>[EFFECTIVE DATE.]</b> This section is effective upon compliance 
256.28  with the requirements of Minnesota Statutes, sections 469.1782 
256.29  and 645.021. 
256.30     Sec. 39.  [HOPKINS TAX INCREMENT FINANCING DISTRICT.] 
256.31     Subdivision 1.  [DISTRICT EXTENSION.] (a) The governing 
256.32  body of the city of Hopkins may elect to extend the duration of 
256.33  its redevelopment tax increment financing district 2-11 by up to 
256.34  four additional years. 
256.35     (b) Notwithstanding any law to the contrary, effective upon 
256.36  approval of this subdivision, no increments may be spent on 
257.1   activities located outside of the area of the district, other 
257.2   than to pay administrative expenses. 
257.3      Subd. 2.  [FIVE-YEAR RULE.] The requirements of Minnesota 
257.4   Statutes, section 469.1763, subdivision 3, that activities must 
257.5   be undertaken within a five-year period from the date of 
257.6   certification of tax increment financing district must be 
257.7   considered to be met for the city of Hopkins redevelopment tax 
257.8   increment district 2-11, if the activities are undertaken within 
257.9   nine years from the date of certification of the district. 
257.10     <b>[EFFECTIVE DATE.]</b> Subdivision 1 is effective upon 
257.11  compliance with the provisions of Minnesota Statutes, sections 
257.12  469.1782, subdivision 2, and 645.021.  Subdivision 2 is 
257.13  effective upon compliance by the governing body of the city of 
257.14  Hopkins with the provisions of Minnesota Statutes, section 
257.15  645.021. 
257.16                             ARTICLE 10 
257.17                              MINERALS 
257.18     Section 1.  Minnesota Statutes 2002, section 272.02, is 
257.19  amended by adding a subdivision to read: 
257.20     Subd. 56.  [PROPERTY USED IN THE BUSINESS OF MINING SUBJECT 
257.21  TO THE NET PROCEEDS TAX.] The following property used in the 
257.22  business of mining subject to the net proceeds tax under section 
257.23  298.015 is exempt: 
257.24     (1) deposits of ores, metals, and minerals and the lands in 
257.25  which they are contained; 
257.26     (2) all real and personal property used in mining, 
257.27  producing, or refining ores, minerals, or metals, including 
257.28  lands occupied by or used in connection with the mining, 
257.29  quarrying, production, or refining facilities; and 
257.30     (3) concentrate or direct reduced ore. 
257.31  This exemption applies for each year that a person subject to 
257.32  tax under section 298.015 uses the property for mining, 
257.33  quarrying, producing, or refining ores, metals, or minerals. 
257.34     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
257.35  payable in 2004 and thereafter. 
257.36     Sec. 2.  Minnesota Statutes 2002, section 290.05, 
258.1   subdivision 1, is amended to read: 
258.2      Subdivision 1.  [EXEMPT ENTITIES.] The following 
258.3   corporations, individuals, estates, trusts, and organizations 
258.4   shall be exempted from taxation under this chapter, provided 
258.5   that every such person or corporation claiming exemption under 
258.6   this chapter, in whole or in part, must establish to the 
258.7   satisfaction of the commissioner the taxable status of any 
258.8   income or activity: 
258.9      (a) corporations, individuals, estates, and trusts engaged 
258.10  in the business of mining or producing iron ore and mining, 
258.11  producing, or refining other ores, metals, and minerals, the 
258.12  mining or, production, or refining of which is subject to the 
258.13  occupation tax imposed by section 298.01; but if any such 
258.14  corporation, individual, estate, or trust engages in any other 
258.15  business or activity or has income from any property not used in 
258.16  such business it shall be subject to this tax computed on the 
258.17  net income from such property or such other business or 
258.18  activity.  Royalty shall not be considered as income from the 
258.19  business of mining or producing iron ore within the meaning of 
258.20  this section; 
258.21     (b) the United States of America, the state of Minnesota or 
258.22  any political subdivision of either agencies or 
258.23  instrumentalities, whether engaged in the discharge of 
258.24  governmental or proprietary functions; and 
258.25     (c) any insurance company. 
258.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
258.27  years beginning after December 31, 2002. 
258.28     Sec. 3.  Minnesota Statutes 2002, section 290.17, 
258.29  subdivision 4, is amended to read: 
258.30     Subd. 4.  [UNITARY BUSINESS PRINCIPLE.] (a) If a trade or 
258.31  business conducted wholly within this state or partly within and 
258.32  partly without this state is part of a unitary business, the 
258.33  entire income of the unitary business is subject to 
258.34  apportionment pursuant to section 290.191.  Notwithstanding 
258.35  subdivision 2, paragraph (c), none of the income of a unitary 
258.36  business is considered to be derived from any particular source 
259.1   and none may be allocated to a particular place except as 
259.2   provided by the applicable apportionment formula.  The 
259.3   provisions of this subdivision do not apply to business income 
259.4   subject to subdivision 5, income of an insurance company, or 
259.5   income of an investment company determined under section 290.36, 
259.6   or income of a mine or mineral processing facility subject to 
259.7   tax under section 298.01. 
259.8      (b) The term "unitary business" means business activities 
259.9   or operations which result in a flow of value between them.  The 
259.10  term may be applied within a single legal entity or between 
259.11  multiple entities and without regard to whether each entity is a 
259.12  sole proprietorship, a corporation, a partnership or a trust.  
259.13     (c) Unity is presumed whenever there is unity of ownership, 
259.14  operation, and use, evidenced by centralized management or 
259.15  executive force, centralized purchasing, advertising, 
259.16  accounting, or other controlled interaction, but the absence of 
259.17  these centralized activities will not necessarily evidence a 
259.18  nonunitary business.  Unity is also presumed when business 
259.19  activities or operations are of mutual benefit, dependent upon 
259.20  or contributory to one another, either individually or as a 
259.21  group. 
259.22     (d) Where a business operation conducted in Minnesota is 
259.23  owned by a business entity that carries on business activity 
259.24  outside the state different in kind from that conducted within 
259.25  this state, and the other business is conducted entirely outside 
259.26  the state, it is presumed that the two business operations are 
259.27  unitary in nature, interrelated, connected, and interdependent 
259.28  unless it can be shown to the contrary.  
259.29     (e) Unity of ownership is not deemed to exist when a 
259.30  corporation is involved unless that corporation is a member of a 
259.31  group of two or more business entities and more than 50 percent 
259.32  of the voting stock of each member of the group is directly or 
259.33  indirectly owned by a common owner or by common owners, either 
259.34  corporate or noncorporate, or by one or more of the member 
259.35  corporations of the group.  For this purpose, the term "voting 
259.36  stock" shall include membership interests of mutual insurance 
260.1   holding companies formed under section 60A.077.  
260.2      (f) The net income and apportionment factors under section 
260.3   290.191 or 290.20 of foreign corporations and other foreign 
260.4   entities which are part of a unitary business shall not be 
260.5   included in the net income or the apportionment factors of the 
260.6   unitary business.  A foreign corporation or other foreign entity 
260.7   which is required to file a return under this chapter shall file 
260.8   on a separate return basis.  The net income and apportionment 
260.9   factors under section 290.191 or 290.20 of foreign operating 
260.10  corporations shall not be included in the net income or the 
260.11  apportionment factors of the unitary business except as provided 
260.12  in paragraph (g). 
260.13     (g) The adjusted net income of a foreign operating 
260.14  corporation shall be deemed to be paid as a dividend on the last 
260.15  day of its taxable year to each shareholder thereof, in 
260.16  proportion to each shareholder's ownership, with which such 
260.17  corporation is engaged in a unitary business.  Such deemed 
260.18  dividend shall be treated as a dividend under section 290.21, 
260.19  subdivision 4. 
260.20     Dividends actually paid by a foreign operating corporation 
260.21  to a corporate shareholder which is a member of the same unitary 
260.22  business as the foreign operating corporation shall be 
260.23  eliminated from the net income of the unitary business in 
260.24  preparing a combined report for the unitary business.  The 
260.25  adjusted net income of a foreign operating corporation shall be 
260.26  its net income adjusted as follows: 
260.27     (1) any taxes paid or accrued to a foreign country, the 
260.28  commonwealth of Puerto Rico, or a United States possession or 
260.29  political subdivision of any of the foregoing shall be a 
260.30  deduction; and 
260.31     (2) the subtraction from federal taxable income for 
260.32  payments received from foreign corporations or foreign operating 
260.33  corporations under section 290.01, subdivision 19d, clause (10), 
260.34  shall not be allowed. 
260.35     If a foreign operating corporation incurs a net loss, 
260.36  neither income nor deduction from that corporation shall be 
261.1   included in determining the net income of the unitary business. 
261.2      (h) For purposes of determining the net income of a unitary 
261.3   business and the factors to be used in the apportionment of net 
261.4   income pursuant to section 290.191 or 290.20, there must be 
261.5   included only the income and apportionment factors of domestic 
261.6   corporations or other domestic entities other than foreign 
261.7   operating corporations that are determined to be part of the 
261.8   unitary business pursuant to this subdivision, notwithstanding 
261.9   that foreign corporations or other foreign entities might be 
261.10  included in the unitary business.  
261.11     (i) Deductions for expenses, interest, or taxes otherwise 
261.12  allowable under this chapter that are connected with or 
261.13  allocable against dividends, deemed dividends described in 
261.14  paragraph (g), or royalties, fees, or other like income 
261.15  described in section 290.01, subdivision 19d, clause (10), shall 
261.16  not be disallowed. 
261.17     (j) Each corporation or other entity, except a sole 
261.18  proprietorship, that is part of a unitary business must file 
261.19  combined reports as the commissioner determines.  On the 
261.20  reports, all intercompany transactions between entities included 
261.21  pursuant to paragraph (h) must be eliminated and the entire net 
261.22  income of the unitary business determined in accordance with 
261.23  this subdivision is apportioned among the entities by using each 
261.24  entity's Minnesota factors for apportionment purposes in the 
261.25  numerators of the apportionment formula and the total factors 
261.26  for apportionment purposes of all entities included pursuant to 
261.27  paragraph (h) in the denominators of the apportionment formula. 
261.28     (k) If a corporation has been divested from a unitary 
261.29  business and is included in a combined report for a fractional 
261.30  part of the common accounting period of the combined report:  
261.31     (1) its income includable in the combined report is its 
261.32  income incurred for that part of the year determined by 
261.33  proration or separate accounting; and 
261.34     (2) its sales, property, and payroll included in the 
261.35  apportionment formula must be prorated or accounted for 
261.36  separately. 
262.1      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
262.2   years beginning after December 31, 2002. 
262.3      Sec. 4.  Minnesota Statutes 2002, section 290.191, 
262.4   subdivision 1, is amended to read: 
262.5      Subdivision 1.  [GENERAL RULE.] (a) Except as otherwise 
262.6   provided in section 290.17, subdivision 5, the net income from a 
262.7   trade or business carried on partly within and partly without 
262.8   this state must be apportioned to this state as provided in this 
262.9   section.  To the extent that an entity is exempt from taxation 
262.10  under this chapter as provided in section 290.05, the 
262.11  apportionment factors associated with the entity's exempt 
262.12  activities are excluded from the apportionment formula under 
262.13  this section. 
262.14     (b) For purposes of this section, "state" means a state of 
262.15  the United States, the District of Columbia, the commonwealth of 
262.16  Puerto Rico, or any territory or possession of the United States 
262.17  or any foreign country. 
262.18     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
262.19  years beginning after December 31, 2002. 
262.20     Sec. 5.  Minnesota Statutes 2002, section 297A.68, 
262.21  subdivision 4, is amended to read: 
262.22     Subd. 4.  [TACONITE, OTHER ORES, METALS, OR MINERALS; 
262.23  PRODUCTION MATERIALS.] Mill liners, grinding rods, and grinding 
262.24  balls that are substantially consumed in the production of 
262.25  taconite or other ores, metals, or minerals are exempt when sold 
262.26  to or stored, used, or consumed by persons taxed under the 
262.27  in-lieu provisions of chapter 298.  
262.28     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
262.29  purchases made after June 30, 2005. 
262.30     Sec. 6.  Minnesota Statutes 2002, section 297A.71, is 
262.31  amended by adding a subdivision to read: 
262.32     Subd. 32.  [CONSTRUCTION MATERIALS AND EQUIPMENT; 
262.33  NONFERROUS METALS AND MINERALS FACILITY.] Materials and supplies 
262.34  used or consumed in, and equipment incorporated into, the 
262.35  improvement or construction of an existing taconite ore 
262.36  processing facility to extract and refine nonferrous ores, 
263.1   metals, and minerals, including the construction, improvement, 
263.2   or expansion of a hydrometallurgical processing facility, are 
263.3   exempt.  This exemption includes any delivery or installation 
263.4   charges relating to materials, supplies, and equipment exempt 
263.5   under this section.  
263.6      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
263.7   purchases made after June 30, 2005, and before July 1, 2012. 
263.8      Sec. 7.  Minnesota Statutes 2002, section 298.001, is 
263.9   amended by adding a subdivision to read: 
263.10     Subd. 9.  [REFINING.] "Refining" means and is limited to 
263.11  refining: 
263.12     (1) of ores, metals, or mineral products, the mining, 
263.13  extraction, or quarrying of which were subject to tax under 
263.14  section 298.015; and 
263.15     (2) carried on by the entity, or an affiliated entity, that 
263.16  mined or extracted the metal or mineral products. 
263.17     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
263.18  years beginning after December 31, 2002. 
263.19     Sec. 8.  Minnesota Statutes 2002, section 298.01, 
263.20  subdivision 3, is amended to read: 
263.21     Subd. 3.  [OCCUPATION TAX; OTHER ORES.] Every person 
263.22  engaged in the business of mining, refining, or producing ores, 
263.23  metals, or minerals in this state, except iron ore or taconite 
263.24  concentrates, shall pay an occupation tax to the state of 
263.25  Minnesota as provided in this subdivision.  For purposes of this 
263.26  subdivision, mining includes the application of 
263.27  hydrometallurgical processes.  The tax is determined in the same 
263.28  manner as the tax imposed by section 290.02, except that 
263.29  sections 290.05, subdivision 1, clause (a), 290.0921, and 
263.30  290.17, subdivision 4, do not apply.  Except as provided in 
263.31  section 290.05, subdivision 1, paragraph (a), the tax is in 
263.32  addition to all other taxes. 
263.33     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
263.34  years beginning after December 31, 2002. 
263.35     Sec. 9.  Minnesota Statutes 2002, section 298.01, 
263.36  subdivision 3a, is amended to read: 
264.1      Subd. 3a.  [GROSS INCOME.] (a) For purposes of determining 
264.2   a person's taxable income under subdivision 3, gross income is 
264.3   determined by the amount of gross proceeds from mining in this 
264.4   state under section 298.016 and includes any gain or loss 
264.5   recognized from the sale or disposition of assets used in the 
264.6   business in this state. 
264.7      (b) In applying section 290.191, subdivision 5, transfers 
264.8   of ores, metals, or minerals that are subject to this chapter 
264.9   are deemed to be sales outside this state if the ores, metals, 
264.10  or minerals are transported out of this state after the ores 
264.11  have been converted to a commercially marketable quality. 
264.12     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
264.13  years beginning after December 31, 2002. 
264.14     Sec. 10.  Minnesota Statutes 2002, section 298.01, 
264.15  subdivision 4, is amended to read: 
264.16     Subd. 4.  [OCCUPATION TAX; IRON ORE; TACONITE 
264.17  CONCENTRATES.] A person engaged in the business of mining or 
264.18  producing of iron ore, taconite concentrates or direct reduced 
264.19  ore in this state shall pay an occupation tax to the state of 
264.20  Minnesota.  The tax is determined in the same manner as the tax 
264.21  imposed by section 290.02, except that sections 290.05, 
264.22  subdivision 1, clause (a), 290.0921, and 290.17, subdivision 4, 
264.23  do not apply.  The tax is in addition to all other taxes. 
264.24     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
264.25  years beginning after December 31, 2002. 
264.26     Sec. 11.  Minnesota Statutes 2002, section 298.015, 
264.27  subdivision 1, is amended to read: 
264.28     Subdivision 1.  [TAX IMPOSED.] A person engaged in the 
264.29  business of mining shall pay to the state of Minnesota for 
264.30  distribution as provided in section 298.018 a net proceeds tax 
264.31  equal to two percent of the net proceeds from mining in 
264.32  Minnesota.  The tax applies to all mineral and energy resources 
264.33  ores, metals, and minerals mined or, extracted, produced, or 
264.34  refined within the state of Minnesota except for sand, silica 
264.35  sand, gravel, building stone, crushed rock, limestone, granite, 
264.36  dimension granite, dimension stone, horticultural peat, clay, 
265.1   soil, iron ore, and taconite concentrates.  Except as provided 
265.2   in section 272.02, subdivision 56, the tax is in addition to all 
265.3   other taxes provided for by law.  
265.4      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
265.5   payable in 2004 and thereafter. 
265.6      Sec. 12.  Minnesota Statutes 2002, section 298.015, 
265.7   subdivision 2, is amended to read: 
265.8      Subd. 2.  [NET PROCEEDS.] For purposes of this section, the 
265.9   term "net proceeds" means the gross proceeds from mining, as 
265.10  defined in section 298.016, less the same deductions allowed in 
265.11  section 298.017 for purposes of determining taxable income under 
265.12  section 298.01, subdivision 3b.  No other credits or deductions 
265.13  shall apply to this tax except for those provided in section 
265.14  298.017.  
265.15     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
265.16  payable in 2004 and thereafter. 
265.17     Sec. 13.  Minnesota Statutes 2002, section 298.016, 
265.18  subdivision 4, is amended to read: 
265.19     Subd. 4.  [DEFINITIONS.] For the purposes of sections 
265.20  298.015 and 298.017, the terms defined in this subdivision have 
265.21  the meaning given them unless the context clearly indicates 
265.22  otherwise.  
265.23     (a) "Ores, metal, or mineral products" means all those 
265.24  mineral and energy resources ores, metals, and minerals subject 
265.25  to the tax provided in section 298.015. 
265.26     (b) "Exploration" means activities designed and engaged in 
265.27  to ascertain the existence, location, extent, or quality of any 
265.28  deposit of metal or mineral products prior to the development of 
265.29  a mining site.  
265.30     (c) "Development" means activities designed and engaged in 
265.31  to prepare or develop a potential mining site for mining after 
265.32  the existence of metal or mineral products in commercially 
265.33  marketable quantities has been disclosed including, but not 
265.34  limited to, the clearing of forestation, the building of roads, 
265.35  removal of overburden, or the sinking of shafts.  
265.36     (d) "Research" means activities designed and engaged in to 
266.1   create new or improved methods of mining, producing, processing, 
266.2   beneficiating, smelting, or refining metal or mineral products.  
266.3      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
266.4   years beginning after December 31, 2004. 
266.5      Sec. 14.  Minnesota Statutes 2002, section 298.018, is 
266.6   amended to read: 
266.7      298.018 [DISTRIBUTION OF PROCEEDS.] 
266.8      Subdivision 1.  [WITHIN TACONITE TAX RELIEF AREA GENERAL 
266.9   ALLOCATION.] (a) The commissioner of revenue shall deposit the 
266.10  proceeds of the tax paid under sections 298.015 to 298.017 on 
266.11  minerals and energy resources mined or extracted within the 
266.12  taconite tax relief area defined in section 273.134, paragraph 
266.13  (b), shall be allocated as follows: 
266.14     (1) five percent to the city or town within which the 
266.15  minerals or energy resources are mined or extracted; 
266.16     (2) ten percent to the taconite municipal aid account to be 
266.17  distributed as provided in section 298.282; 
266.18     (3) ten percent to the school district within which the 
266.19  minerals or energy resources are mined or extracted; 
266.20     (4) 20 percent to a group of school districts comprised of 
266.21  those school districts wherein the mineral or energy resource 
266.22  was mined or extracted or in which there is a qualifying 
266.23  municipality as defined by section 273.134, paragraph (b), in 
266.24  direct proportion to school district indexes as follows:  for 
266.25  each school district, its pupil units determined under section 
266.26  126C.05 for the prior school year shall be multiplied by the 
266.27  ratio of the average adjusted net tax capacity per pupil unit 
266.28  for school districts receiving aid under this clause as 
266.29  calculated pursuant to chapters 122A, 126C, and 127A for the 
266.30  school year ending prior to distribution to the adjusted net tax 
266.31  capacity per pupil unit of the district.  Each district shall 
266.32  receive that portion of the distribution which its index bears 
266.33  to the sum of the indices for all school districts that receive 
266.34  the distributions; 
266.35     (5) 20 percent to the county within which the minerals or 
266.36  energy resources are mined or extracted; 
267.1      (6) 20 percent to St. Louis county acting as the counties' 
267.2   fiscal agent to be distributed as provided in sections 273.134 
267.3   to 273.136; 
267.4      (7) five percent to the iron range resources and 
267.5   rehabilitation board for the purposes of section 298.22; 
267.6      (8) five percent to the northeast Minnesota economic 
267.7   protection trust fund; and 
267.8      (9) five percent to the taconite environmental protection 
267.9   fund in the general fund.  The proceeds of the tax must be 
267.10  allocated between the state general fund and local taxing 
267.11  districts as provided in this section. 
267.12     (b) The proceeds of the tax shall be distributed on July 15 
267.13  each year.  
267.14     Subd. 2.  [OUTSIDE TACONITE TAX RELIEF AREA GENERAL FUND 
267.15  SHARE.] The proceeds of the tax paid under sections 298.015 to 
267.16  298.017 on minerals and energy resources mined or extracted 
267.17  outside of the taconite tax relief area defined in section 
267.18  273.134, paragraph (b), shall be deposited in the general fund 
267.19  share equals the amount of the proceeds for the taxable year 
267.20  multiplied by a fraction, the numerator of which is the rate 
267.21  under the state general tax under section 275.025 and the 
267.22  denominator of which is the average total property tax rate 
267.23  applicable to property assessed under section 273.13, 
267.24  subdivision 24, for the unique areas in which the ores, metals, 
267.25  minerals, and processing facilities of the taxpayer are located. 
267.26     Subd. 3.  [FISCAL DISPARITIES SHARE.] If the ores, metals, 
267.27  minerals, or processing facility are located in the taconite tax 
267.28  relief area, as defined in section 276A.01, subdivision 2, or in 
267.29  the area, as defined in section 473F.02, subdivision 2, the 
267.30  commissioner of revenue shall pay 40 percent of the remainder of 
267.31  the proceeds after deducting the general fund share as a fiscal 
267.32  disparities share to the administrative auditor for the area 
267.33  under section 276A.02 or 473F.03.  The administrative auditor 
267.34  shall apportion the fiscal disparities share among the 
267.35  governmental units in proportion to each unit's distribution 
267.36  levy determined under section 276A.06, subdivision 3, paragraph 
268.1   (a), or 473F.08, subdivision 3, paragraph (a). 
268.2      Subd. 4.  [LOCAL TAXING DISTRICT SHARES.] (a) The 
268.3   commissioner shall pay the proceeds, less the general fund share 
268.4   under subdivision 2 and less any fiscal disparities share under 
268.5   subdivision 3, to the county auditor of the county in which the 
268.6   ores, metals, minerals, or processing facility are located.  If 
268.7   the ores, metals, minerals, or processing facilities of the 
268.8   taxpayer are located in two or more counties, the commissioner 
268.9   shall divide the proceeds between the counties based on their 
268.10  relative shares of the estimated market value of the ores, 
268.11  metals, minerals, and minerals processing facility, as 
268.12  determined under subdivision 5. 
268.13     (b) The county auditor shall allocate the proceeds of the 
268.14  tax among the taxing districts in which the ores, metals, 
268.15  minerals, and minerals processing facilities are located in the 
268.16  same proportions that property taxes are distributed.  If the 
268.17  ores, metals, minerals, or processing facilities are located 
268.18  within two or more unique taxing areas, the auditor shall use 
268.19  the estimated market values for the ores, metals, minerals, and 
268.20  property, determined under subdivision 5, to allocate the 
268.21  proceeds among the unique taxing areas. 
268.22     Subd. 5.  [MARKET VALUE ALLOCATION.] If the metals, 
268.23  minerals, and processing facilities of a taxpayer are located in 
268.24  two or more unique taxing areas, the commissioner shall 
268.25  determine the estimated market value of the taxpayer's ores, 
268.26  metals, minerals, and processing facilities that are in each 
268.27  taxing area.  In making this determination, the commissioner may 
268.28  use any data the commissioner determines is reliable, including 
268.29  information provided by the taxpayer. 
268.30     Subd. 6.  [TAX CAPACITY FOR STATE AID.] For each city, 
268.31  county, and school district that receives distributions under 
268.32  this section, the commissioner shall annually determine an 
268.33  adjusted net tax capacity equivalent amount, based on the 
268.34  distributions received under subdivisions 3 and 4 and its 
268.35  property tax rate.  These amounts must be used in the 
268.36  distribution of state aid under a formula using adjusted net tax 
269.1   capacity as a variable or factor in the distribution formula. 
269.2      Subd. 7.  [UNIQUE TAXING AREA.] For the purposes of this 
269.3   section, "unique taxing area" means the geographic area subject 
269.4   to the same set of local tax rates. 
269.5      <b>[EFFECTIVE DATE.]</b> This section is effective for 
269.6   distributions required to be made after July 15, 2003. 
269.7      Sec. 15.  Minnesota Statutes 2002, section 298.24, 
269.8   subdivision 1, is amended to read: 
269.9      Subdivision 1.  (a) For concentrate produced in 2001, 2002, 
269.10  and 2003, There is imposed upon taconite and iron sulphides, and 
269.11  upon the mining and quarrying thereof, and upon the production 
269.12  of iron ore concentrate therefrom, and upon the concentrate so 
269.13  produced, a tax of $2.103 $1.85 per gross ton of merchantable 
269.14  iron ore concentrate produced therefrom for concentrate produced 
269.15  in 2003, and $1.75 per gross ton for concentrate produced in 
269.16  2004 and thereafter.  
269.17     (b) For concentrates produced in 2004 and subsequent years, 
269.18  the tax rate shall be equal to the preceding year's tax rate 
269.19  plus an amount equal to the preceding year's tax rate multiplied 
269.20  by the percentage increase in the implicit price deflator from 
269.21  the fourth quarter of the second preceding year to the fourth 
269.22  quarter of the preceding year.  "Implicit price deflator" means 
269.23  the implicit price deflator for the gross domestic product 
269.24  prepared by the bureau of economic analysis of the United States 
269.25  Department of Commerce.  
269.26     (c) On concentrates produced in 1997 and thereafter, an 
269.27  additional tax is imposed equal to three cents per gross ton of 
269.28  merchantable iron ore concentrate for each one percent that the 
269.29  iron content of the product exceeds 72 percent, when dried at 
269.30  212 degrees Fahrenheit. 
269.31     (d) (c) The tax shall be imposed on the average of the 
269.32  production for the current year and the previous two years.  The 
269.33  rate of the tax imposed will be the current year's tax rate.  
269.34  This clause shall not apply in the case of the closing of a 
269.35  taconite facility if the property taxes on the facility would be 
269.36  higher if this clause and section 298.25 were not applicable.  
270.1      (e) (d) If the tax or any part of the tax imposed by this 
270.2   subdivision is held to be unconstitutional, a tax 
270.3   of $2.103 $1.85 per gross ton of merchantable iron ore 
270.4   concentrate produced for calendar year 2003, and $1.75 for 
270.5   calendar year 2004 and thereafter shall be imposed.  
270.6      (f) (e) Consistent with the intent of this subdivision to 
270.7   impose a tax based upon the weight of merchantable iron ore 
270.8   concentrate, the commissioner of revenue may indirectly 
270.9   determine the weight of merchantable iron ore concentrate 
270.10  included in fluxed pellets by subtracting the weight of the 
270.11  limestone, dolomite, or olivine derivatives or other basic flux 
270.12  additives included in the pellets from the weight of the 
270.13  pellets.  For purposes of this paragraph, "fluxed pellets" are 
270.14  pellets produced in a process in which limestone, dolomite, 
270.15  olivine, or other basic flux additives are combined with 
270.16  merchantable iron ore concentrate.  No subtraction from the 
270.17  weight of the pellets shall be allowed for binders, mineral and 
270.18  chemical additives other than basic flux additives, or moisture. 
270.19     (g) (f) (1) Notwithstanding any other provision of this 
270.20  subdivision, for the first two years of a plant's production of 
270.21  direct reduced ore, no tax is imposed under this section.  As 
270.22  used in this paragraph, "direct reduced ore" is ore that results 
270.23  in a product that has an iron content of at least 75 percent.  
270.24  For the third year of a plant's production of direct reduced 
270.25  ore, the rate to be applied to direct reduced ore is 25 percent 
270.26  of the rate otherwise determined under this subdivision.  For 
270.27  the fourth such production year, the rate is 50 percent of the 
270.28  rate otherwise determined under this subdivision; for the fifth 
270.29  such production year, the rate is 75 percent of the rate 
270.30  otherwise determined under this subdivision; and for all 
270.31  subsequent production years, the full rate is imposed. 
270.32     (2) Subject to clause (1), production of direct reduced ore 
270.33  in this state is subject to the tax imposed by this section, but 
270.34  if that production is not produced by a producer of taconite or 
270.35  iron sulfides, the production of taconite or iron sulfides 
270.36  consumed in the production of direct reduced iron in this state 
271.1   is not subject to the tax imposed by this section on taconite or 
271.2   iron sulfides. 
271.3      <b>[EFFECTIVE DATE.]</b> This section is effective for 
271.4   concentrates produced after January 1, 2003. 
271.5      Sec. 16.  Minnesota Statutes 2002, section 298.27, is 
271.6   amended to read: 
271.7      298.27 [COLLECTION AND PAYMENT OF TAX.] 
271.8      The taxes provided by section 298.24 shall be paid directly 
271.9   to each eligible county and the iron range resources and 
271.10  rehabilitation board.  The commissioner of revenue shall notify 
271.11  each producer of the amount to be paid each recipient prior to 
271.12  February 15.  Every person subject to taxes imposed by section 
271.13  298.24 shall file a correct report covering the preceding year.  
271.14  The report must contain the information required by the 
271.15  commissioner.  The report shall be filed by each producer on or 
271.16  before February 1.  A remittance equal to 50 percent of the 
271.17  total tax required to be paid hereunder in 2003 and 100 percent 
271.18  of the total tax required to be paid hereunder in 2004 and 
271.19  thereafter shall be paid on or before February 24.  A remittance 
271.20  equal to the remaining total tax required to be paid hereunder 
271.21  in 2003 shall be paid on or before August 24.  On or before 
271.22  February 25, and in 2003, August 25, the county auditor shall 
271.23  make distribution of the payments previously received by the 
271.24  county in the manner provided by section 298.28.  Reports shall 
271.25  be made and hearings held upon the determination of the tax in 
271.26  accordance with procedures established by the commissioner of 
271.27  revenue.  The commissioner of revenue shall have authority to 
271.28  make reasonable rules as to the form and manner of filing 
271.29  reports necessary for the determination of the tax hereunder, 
271.30  and by such rules may require the production of such information 
271.31  as may be reasonably necessary or convenient for the 
271.32  determination and apportionment of the tax.  All the provisions 
271.33  of the occupation tax law with reference to the assessment and 
271.34  determination of the occupation tax, including all provisions 
271.35  for appeals from or review of the orders of the commissioner of 
271.36  revenue relative thereto, but not including provisions for 
272.1   refunds, are applicable to the taxes imposed by section 298.24 
272.2   except in so far as inconsistent herewith.  If any person 
272.3   subject to section 298.24 shall fail to make the report provided 
272.4   for in this section at the time and in the manner herein 
272.5   provided, the commissioner of revenue shall in such case, upon 
272.6   information possessed or obtained, ascertain the kind and amount 
272.7   of ore mined or produced and thereon find and determine the 
272.8   amount of the tax due from such person.  There shall be added to 
272.9   the amount of tax due a penalty for failure to report on or 
272.10  before February 1, which penalty shall equal ten percent of the 
272.11  tax imposed and be treated as a part thereof. 
272.12     If any person responsible for making a tax payment at the 
272.13  time and in the manner herein provided fails to do so, there 
272.14  shall be imposed a penalty equal to ten percent of the amount so 
272.15  due, which penalty shall be treated as part of the tax due. 
272.16     In the case of any underpayment of the tax payment required 
272.17  herein, there may be added and be treated as part of the tax due 
272.18  a penalty equal to ten percent of the amount so underpaid. 
272.19     A person having a liability of $120,000 or more during a 
272.20  calendar year must remit all liabilities by means of a funds 
272.21  transfer as defined in section 336.4A-104, paragraph (a).  The 
272.22  funds transfer payment date, as defined in section 336.4A-401, 
272.23  must be on or before the date the tax is due.  If the date the 
272.24  tax is due is not a funds transfer business day, as defined in 
272.25  section 336.4A-105, paragraph (a), clause (4), the payment date 
272.26  must be on or before the funds transfer business day next 
272.27  following the date the tax is due. 
272.28     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
272.29  payable in 2004 and thereafter. 
272.30     Sec. 17.  Minnesota Statutes 2002, section 298.28, 
272.31  subdivision 9a, is amended to read: 
272.32     Subd. 9a.  [TACONITE ECONOMIC DEVELOPMENT FUND.] (a) 30.1 
272.33  cents per ton for distributions in 2002 and thereafter must be 
272.34  paid to the taconite economic development fund.  No distribution 
272.35  shall be made under this paragraph in 2004 or any subsequent 
272.36  year in which total industry production falls below 30 million 
273.1   tons.  Distribution shall only be made to a taconite producer's 
273.2   fund under section 298.227 if the producer timely pays its tax 
273.3   under section 298.24 by the dates provided under section 298.27, 
273.4   or pursuant to the due dates provided by an administrative 
273.5   agreement with the commissioner. 
273.6      (b) An amount equal to 50 percent of the tax under section 
273.7   298.24 for concentrate sold in the form of pellet chips and 
273.8   fines not exceeding 5/16 inch in size and not including crushed 
273.9   pellets shall be paid to the taconite economic development 
273.10  fund.  The amount paid shall not exceed $700,000 annually for 
273.11  all companies.  If the initial amount to be paid to the fund 
273.12  exceeds this amount, each company's payment shall be prorated so 
273.13  the total does not exceed $700,000. 
273.14     <b>[EFFECTIVE DATE.]</b> This section is effective for 
273.15  concentrates produced after January 1, 2003. 
273.16     Sec. 18.  Minnesota Statutes 2002, section 298.28, 
273.17  subdivision 11, is amended to read: 
273.18     Subd. 11.  [REMAINDER.] (a) The proceeds of the tax imposed 
273.19  by section 298.24 which remain after the distributions and 
273.20  payments in subdivisions 2 to 10a, as certified by the 
273.21  commissioner of revenue, and paragraphs (b), (c), (d), and (e) 
273.22  have been made, together with interest earned on all money 
273.23  distributed under this section prior to distribution, shall be 
273.24  divided between the taconite environmental protection fund 
273.25  created in section 298.223 and the northeast Minnesota economic 
273.26  protection trust fund created in section 298.292 as follows:  
273.27  Two-thirds to the taconite environmental protection fund and 
273.28  one-third to the northeast Minnesota economic protection trust 
273.29  fund.  The proceeds shall be placed in the respective special 
273.30  accounts. 
273.31     (b) There shall be distributed to each city, town, and 
273.32  county the amount that it received under section 294.26 in 
273.33  calendar year 1977; provided, however, that the amount 
273.34  distributed in 1981 to the unorganized territory number 2 of 
273.35  Lake county and the town of Beaver Bay based on the 
273.36  between-terminal trackage of Erie Mining Company will be 
274.1   distributed in 1982 and subsequent years to the unorganized 
274.2   territory number 2 of Lake county and the towns of Beaver Bay 
274.3   and Stony River based on the miles of track of Erie Mining 
274.4   Company in each taxing district. 
274.5      (c) There shall be distributed to the iron range resources 
274.6   and rehabilitation board the amounts it received in 1977 under 
274.7   section 298.22.  The amount distributed under this paragraph 
274.8   shall be expended within or for the benefit of the tax relief 
274.9   area defined in section 273.134. 
274.10     (d) There shall be distributed to each school district 62 
274.11  percent of the amount that it received under section 294.26 in 
274.12  calendar year 1977. 
274.13     (e) (d) In 2003 only, $100,000 must be distributed to a 
274.14  township located in a taconite tax relief area as defined in 
274.15  section 273.134, paragraph (a), that received $119,259 of 
274.16  homestead and agricultural credit aid and $182,014 in local 
274.17  government aid in 2001. 
274.18     <b>[EFFECTIVE DATE.]</b> This section is effective for 
274.19  concentrates produced after January 1, 2003. 
274.20     Sec. 19.  Minnesota Statutes 2002, section 298.75, 
274.21  subdivision 1, is amended to read: 
274.22     Subdivision 1.  [DEFINITIONS.] Except as may otherwise be 
274.23  provided, the following words, when used in this section, shall 
274.24  have the meanings herein ascribed to them.  
274.25     (1) "Aggregate material" shall mean nonmetallic natural 
274.26  mineral aggregate including, but not limited to sand, silica 
274.27  sand, gravel, crushed rock, limestone, granite, and borrow, but 
274.28  only if the borrow is transported on a public road, street, or 
274.29  highway.  Aggregate material shall not include dimension stone 
274.30  and dimension granite.  Aggregate material must be measured or 
274.31  weighed after it has been extracted from the pit, quarry, or 
274.32  deposit.  
274.33     (2) "Person" shall mean any individual, firm, partnership, 
274.34  corporation, organization, trustee, association, or other entity.
274.35     (3) "Operator" shall mean any person engaged in the 
274.36  business of removing aggregate material from the surface or 
275.1   subsurface of the soil, for the purpose of sale, either directly 
275.2   or indirectly, through the use of the aggregate material in a 
275.3   marketable product or service.  
275.4      (4) "Extraction site" shall mean a pit, quarry, or deposit 
275.5   containing aggregate material and any contiguous property to the 
275.6   pit, quarry, or deposit which is used by the operator for 
275.7   stockpiling the aggregate material.  
275.8      (5) "Importer" shall mean any person who buys aggregate 
275.9   material produced from a county not listed in paragraph (6) or 
275.10  another state and causes the aggregate material to be imported 
275.11  into a county in this state which imposes a tax on aggregate 
275.12  material.  
275.13     (6) "County" shall mean the counties of Pope, Stearns, 
275.14  Benton, Sherburne, Carver, Scott, Dakota, Le Sueur, Kittson, 
275.15  Marshall, Pennington, Red Lake, Polk, Norman, Mahnomen, Clay, 
275.16  Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, 
275.17  Sibley, Hennepin, Washington, Chisago, and Ramsey.  County also 
275.18  means any other county whose board has voted after a public 
275.19  hearing to impose the tax under this section and has notified 
275.20  the commissioner of revenue of the imposition of the tax. 
275.21     (7) "Borrow" shall mean granular borrow, consisting of 
275.22  durable particles of gravel and sand, crushed quarry or mine 
275.23  rock, crushed gravel or stone, or any combination thereof, the 
275.24  ratio of the portion passing the (#200) sieve divided by the 
275.25  portion passing the (1 inch) sieve may not exceed 20 percent by 
275.26  mass. 
275.27     <b>[EFFECTIVE DATE.]</b> This section is effective for borrow 
275.28  removed and transported on a public road, street, or highway on 
275.29  or after July 1, 2003. 
275.30     Sec. 20.  [TRANSITION PROVISION.] 
275.31     Each person with an alternative minimum tax credit on 
275.32  December 31, 2002, pursuant to Minnesota Statutes 2002, section 
275.33  298.01, may take that credit against occupation tax under the 
275.34  provisions of Minnesota Statutes 2002, section 298.01, 
275.35  subdivision 3d or 4e. 
275.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
276.1   following final enactment. 
276.2      Sec. 21.  [REPEALER.] 
276.3      (a) Minnesota Statutes 2002, section 298.01, subdivisions 
276.4   3c, 3d, 4d, and 4e, are repealed effective for taxable years 
276.5   beginning after December 31, 2002. 
276.6      (b) Minnesota Statutes 2002, section 298.017, is repealed 
276.7   effective for taxes payable in 2004 and thereafter. 
276.8      (c) Minnesota Statutes 2002, sections 298.24, subdivision 
276.9   3; 298.28, subdivisions 9, 9b, and 10; 298.2961; and 298.297, 
276.10  are repealed effective for concentrates produced after January 
276.11  1, 2003. 
276.12     (d) Laws 1984, chapter 652, section 2, is repealed.  This 
276.13  paragraph is effective for Benton county the day after the 
276.14  governing body of Benton county and its chief clerical officer 
276.15  timely complete their compliance with Minnesota Statutes, 
276.16  section 645.021, subdivisions 2 and 3.  This paragraph is 
276.17  effective for Stearns county the day after the governing body of 
276.18  Stearns county and its chief clerical officer timely complete 
276.19  their compliance with Minnesota Statutes, section 645.021, 
276.20  subdivisions 2 and 3. 
276.21                             ARTICLE 11 
276.22                           SPECIAL TAXES 
276.23     Section 1.  Minnesota Statutes 2002, section 270.60, 
276.24  subdivision 4, is amended to read: 
276.25     Subd. 4.  [PAYMENTS TO COUNTIES.] (a) The commissioner 
276.26  shall pay to a county in which an Indian gaming casino is 
276.27  located: 
276.28     (1) ten percent of the state share of all taxes generated 
276.29  from activities on reservations and collected under a tax 
276.30  agreement under this section with the tribal government for the 
276.31  reservation located in the county; or 
276.32     (2) five percent of excise taxes collected by the state 
276.33  that are determined by the department of revenue to have been 
276.34  generated from activities on a reservation located in the 
276.35  county, the tribal government of which does not have a tax 
276.36  agreement under this section and did not have a tax agreement on 
277.1   June 30, 2003. 
277.2      If the tribe has casinos located in more than one county, 
277.3   the payment must be divided equally among the counties in which 
277.4   the casinos are located. 
277.5      (b) The commissioner shall make the payments required under 
277.6   this subdivision by February 28 of the year following the year 
277.7   the taxes are collected. 
277.8      (c) An amount sufficient to make the payments authorized by 
277.9   this subdivision is annually appropriated from the general fund 
277.10  to the commissioner.  
277.11     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
277.12  collected after June 30, 2003. 
277.13     Sec. 2.  Minnesota Statutes 2002, section 287.12, is 
277.14  amended to read: 
277.15     287.12 [TAXES, HOW APPORTIONED.] 
277.16     (a) All taxes paid to the county treasurer under the 
277.17  provisions of sections 287.01 to 287.12 must be apportioned, 97 
277.18  percent to the general fund of the state, and three percent to 
277.19  the county revenue fund. 
277.20     (b) On or before the 20th day of each month the county 
277.21  treasurer shall determine and pay to the commissioner of revenue 
277.22  for deposit in the state treasury and credit to the general fund 
277.23  the state's portion of the receipts from the mortgage registry 
277.24  tax during the preceding month subject to the electronic payment 
277.25  requirements of section 270.771.  The county treasurer shall 
277.26  provide any related reports requested by the commissioner of 
277.27  revenue. 
277.28     (c) Counties must remit the state's portion of the June 
277.29  receipts collected through June 25 and the estimated state's 
277.30  portion of the receipts to be collected during the remainder of 
277.31  the month to the commissioner of revenue two business days 
277.32  before June 30 of each year.  The remaining amount of the June 
277.33  receipts is due on August 20. 
277.34     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
277.35     Sec. 3.  Minnesota Statutes 2002, section 287.29, 
277.36  subdivision 1, is amended to read: 
278.1      Subdivision 1.  [APPOINTMENT AND PAYMENT OF TAX PROCEEDS.] 
278.2   (a) The proceeds of the taxes levied and collected under 
278.3   sections 287.21 to 287.39 must be apportioned, 97 percent to the 
278.4   general fund of the state, and three percent to the county 
278.5   revenue fund. 
278.6      (b) On or before the 20th day of each month, the county 
278.7   treasurer shall determine and pay to the commissioner of revenue 
278.8   for deposit in the state treasury and credit to the general fund 
278.9   the state's portion of the receipts for deed tax from the 
278.10  preceding month subject to the electronic transfer requirements 
278.11  of section 270.771.  The county treasurer shall provide any 
278.12  related reports requested by the commissioner of revenue. 
278.13     (c) Counties must remit the state's portion of the June 
278.14  receipts collected through June 25 and the estimated state's 
278.15  portion of the receipts to be collected during the remainder of 
278.16  the month to the commissioner of revenue two business days 
278.17  before June 30 of each year.  The remaining amount of the June 
278.18  receipts is due on August 20. 
278.19     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
278.20     Sec. 4.  Minnesota Statutes 2002, section 287.31, is 
278.21  amended by adding a subdivision to read: 
278.22     Subd. 3.  [UNDERPAYMENTS OF ACCELERATED PAYMENT OF JUNE TAX 
278.23  RECEIPTS.] If a county fails to timely remit the state portion 
278.24  of the actual June tax receipts at the time required by section 
278.25  287.12 or 287.29, the county shall pay a penalty equal to ten 
278.26  percent of the state portion of actual June receipts less the 
278.27  amount remitted to the commissioner of revenue in June.  The 
278.28  penalty must not be imposed, however, if the amount remitted in 
278.29  June equals either: 
278.30     (1) 90 percent of the state's portion of the preceding 
278.31  May's receipts; or 
278.32     (2) 90 percent of the average monthly amount of the state's 
278.33  portion for the previous calendar year. 
278.34     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
278.35     Sec. 5.  Minnesota Statutes 2002, section 295.58, is 
278.36  amended to read: 
279.1      295.58 [DEPOSIT OF REVENUES AND PAYMENT OF REFUNDS.] 
279.2      The commissioner shall deposit all revenues, including 
279.3   penalties and interest, derived from the taxes imposed by 
279.4   sections 295.50 to 295.57 and from the insurance premiums tax 
279.5   imposed by section 297I.05, subdivision 5, on health maintenance 
279.6   organizations, community integrated service networks, and 
279.7   nonprofit health service plan corporations in the health care 
279.8   access fund.  There is annually appropriated from the health 
279.9   care access fund to the commissioner of revenue the amount 
279.10  necessary to make refunds under this chapter.  Beginning July 1, 
279.11  2005, the commissioner shall deposit all revenues, including 
279.12  penalties and interest, derived from the taxes imposed by 
279.13  sections 295.50 to 295.57 and from the insurance premiums tax 
279.14  imposed by section 297I.05, subdivision 5, on health maintenance 
279.15  organizations, community integrated service networks, and 
279.16  nonprofit health service plan corporations in the general fund.  
279.17  There is annually appropriated from the general fund to the 
279.18  commissioner of revenue the amount necessary to make refunds 
279.19  under this chapter. 
279.20     Sec. 6.  Minnesota Statutes 2002, section 297F.05, 
279.21  subdivision 1, is amended to read: 
279.22     Subdivision 1.  [RATES; CIGARETTES.] A tax is imposed upon 
279.23  the sale of cigarettes in this state, upon having cigarettes in 
279.24  possession in this state with intent to sell, upon any person 
279.25  engaged in business as a distributor, and upon the use or 
279.26  storage by consumers, at the following rates, subject to the 
279.27  discount provided in this chapter: 
279.28     (1) on cigarettes weighing not more than three pounds per 
279.29  thousand, 24 mills on each such cigarette; and 
279.30     (2) on cigarettes weighing more than three pounds per 
279.31  thousand, 48 mills on each such cigarette. 
279.32     <b>[EFFECTIVE DATE.]</b> This section is effective for sales of 
279.33  stamps made after June 30, 2003. 
279.34     Sec. 7.  Minnesota Statutes 2002, section 297F.08, 
279.35  subdivision 7, is amended to read: 
279.36     Subd. 7.  [PRICE OF STAMPS.] The commissioner shall sell 
280.1   stamps to any person licensed as a distributor at a discount of 
280.2   1.0 percent from the face amount of the stamps for the first 
280.3   $1,500,000 of such stamps purchased in any fiscal year; and at a 
280.4   discount of 0.6 percent on the remainder of such stamps 
280.5   purchased in any fiscal year.  The commissioner shall not sell 
280.6   stamps to any other person.  The commissioner may prescribe the 
280.7   method of shipment of the stamps to the distributor as well as 
280.8   the quantities of stamps purchased. 
280.9      <b>[EFFECTIVE DATE.]</b> This section is effective for sales of 
280.10  stamps made after June 30, 2003. 
280.11     Sec. 8.  Minnesota Statutes 2002, section 297F.09, 
280.12  subdivision 1, is amended to read: 
280.13     Subdivision 1.  [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 
280.14  or before the 18th day of each calendar month, a distributor 
280.15  with a place of business in this state shall file a return with 
280.16  the commissioner showing the quantity of cigarettes manufactured 
280.17  or brought in from outside the state or purchased during the 
280.18  preceding calendar month and the quantity of cigarettes sold or 
280.19  otherwise disposed of in this state and outside this state 
280.20  during that month.  A licensed distributor outside this state 
280.21  shall in like manner file a return showing the quantity of 
280.22  cigarettes shipped or transported into this state during the 
280.23  preceding calendar month.  Returns must be made in the form and 
280.24  manner prescribed by the commissioner and must contain any other 
280.25  information required by the commissioner.  The return must be 
280.26  accompanied by a remittance for the full unpaid tax liability 
280.27  shown by it.  The return for the May liability and 85 percent of 
280.28  the estimated June liability is due on the date payment of the 
280.29  tax is due. 
280.30     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
280.31     Sec. 9.  Minnesota Statutes 2002, section 297F.09, 
280.32  subdivision 2, is amended to read: 
280.33     Subd. 2.  [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 
280.34  On or before the 18th day of each calendar month, a distributor 
280.35  with a place of business in this state shall file a return with 
280.36  the commissioner showing the quantity and wholesale sales price 
281.1   of each tobacco product: 
281.2      (1) brought, or caused to be brought, into this state for 
281.3   sale; and 
281.4      (2) made, manufactured, or fabricated in this state for 
281.5   sale in this state, during the preceding calendar month.  
281.6   Every licensed distributor outside this state shall in like 
281.7   manner file a return showing the quantity and wholesale sales 
281.8   price of each tobacco product shipped or transported to 
281.9   retailers in this state to be sold by those retailers, during 
281.10  the preceding calendar month.  Returns must be made in the form 
281.11  and manner prescribed by the commissioner and must contain any 
281.12  other information required by the commissioner.  The return must 
281.13  be accompanied by a remittance for the full tax liability shown, 
281.14  less 1.5 percent of the liability as compensation to reimburse 
281.15  the distributor for expenses incurred in the administration of 
281.16  this chapter.  The return for the May liability and 85 percent 
281.17  of the estimated June liability is due on the date payment of 
281.18  the tax is due. 
281.19     <b>[EFFECTIVE DATE.]</b> The part of this section abolishing the 
281.20  1.5 percent reimbursement is effective for sales made after June 
281.21  30, 2003.  The rest of this section is effective January 1, 2004.
281.22     Sec. 10.  Minnesota Statutes 2002, section 297F.09, is 
281.23  amended by adding a subdivision to read: 
281.24     Subd. 10.  [ACCELERATED TAX PAYMENT; CIGARETTE OR TOBACCO 
281.25  PRODUCTS DISTRIBUTOR.] A cigarette or tobacco products 
281.26  distributor having a liability of $120,000 or more during a 
281.27  fiscal year ending June 30, shall remit the June liability for 
281.28  the next year in the following manner:  
281.29     (a) Two business days before June 30 of the year, the 
281.30  distributor shall remit the actual May liability and 85 percent 
281.31  of the estimated June liability to the commissioner and file the 
281.32  return in the form and manner prescribed by the commissioner. 
281.33     (b) On or before August 18 of the year, the distributor 
281.34  shall submit a return showing the actual June liability and pay 
281.35  any additional amount of tax not remitted in June.  A penalty is 
281.36  imposed equal to ten percent of the amount of June liability 
282.1   required to be paid in June, less the amount remitted in June.  
282.2   However, the penalty is not imposed if the amount remitted in 
282.3   June equals the lesser of:  
282.4      (1) 85 percent of the actual June liability; or 
282.5      (2) 85 percent of the preceding May's liability. 
282.6      <b>[EFFECTIVE DATE.]</b> This section is effective for taxpayers 
282.7   having a liability of $120,000 or more during the fiscal year 
282.8   ending June 30, 2003, and each fiscal year thereafter, and for 
282.9   accelerated payments becoming due in 2004 and thereafter. 
282.10     Sec. 11.  Minnesota Statutes 2002, section 297F.10, 
282.11  subdivision 1, is amended to read: 
282.12     Subdivision 1.  [TAX AND USE TAX ON CIGARETTES.] Revenue 
282.13  received from cigarette taxes, as well as related penalties, 
282.14  interest, license fees, and miscellaneous sources of revenue 
282.15  shall be deposited by the commissioner in the state treasury and 
282.16  credited as follows: 
282.17     (a) first to the general obligation special tax bond debt 
282.18  service account in each fiscal year the amount required to 
282.19  increase the balance on hand in the account on each December 1 
282.20  to an amount equal to the full amount of principal and interest 
282.21  to come due on all outstanding bonds whose debt service is 
282.22  payable primarily from the proceeds of the tax to and including 
282.23  the second following July 1; and 
282.24     (b) after the requirements of paragraph (a) have been met: 
282.25     (1) the revenue produced by one mill 3.25 mills of the tax 
282.26  on cigarettes weighing not more than three pounds a thousand and 
282.27  two 6.5 mills of the tax on cigarettes weighing more than three 
282.28  pounds a thousand must be credited to the Minnesota future 
282.29  resources fund academic health center special revenue fund 
282.30  hereby created; and 
282.31     (2) the revenue produced by 1.25 mills of the tax on 
282.32  cigarettes weighing not more than three pounds a thousand and 
282.33  2.5 mills of the tax on cigarettes weighing more than three 
282.34  pounds a thousand must be credited to the medical education and 
282.35  research costs account hereby created in the special revenue 
282.36  fund; and 
283.1      (3) the balance of the revenues derived from taxes, 
283.2   penalties, and interest (under this chapter) and from license 
283.3   fees and miscellaneous sources of revenue shall be credited to 
283.4   the general fund. 
283.5      <b>[EFFECTIVE DATE.]</b> This section is effective for all 
283.6   revenues received after June 30, 2003. 
283.7      Sec. 12.  [297F.24] [FEE IN LIEU OF SETTLEMENT.] 
283.8      Subdivision 1.  [FEE IMPOSED.] (a) A fee is imposed upon 
283.9   the sale of nonsettlement cigarettes in this state, upon having 
283.10  nonsettlement cigarettes in possession in this state with intent 
283.11  to sell, upon any person engaged in business as a distributor, 
283.12  and upon the use or storage by consumers of nonsettlement 
283.13  cigarettes.  The fee equals a rate of 1.75 cents per cigarette. 
283.14     (b) The purpose of this fee is to: 
283.15     (1) ensure that manufacturers of nonsettlement cigarettes 
283.16  pay fees to the state that are comparable to costs attributable 
283.17  to the use of the cigarettes; 
283.18     (2) prevent manufacturers of nonsettlement cigarettes from 
283.19  undermining the state's policy of discouraging underage smoking 
283.20  by offering nonsettlement cigarettes at prices substantially 
283.21  below the cigarettes of other manufacturers; and 
283.22     (3) fund such other purposes as the legislature determines 
283.23  appropriate. 
283.24     Subd. 2.  [NONSETTLEMENT CIGARETTES.] For purposes of this 
283.25  section, a "nonsettlement cigarette" means a cigarette 
283.26  manufactured by a person other than a manufacturer that: 
283.27     (1) is making annual payments to the state of Minnesota 
283.28  under a settlement of the lawsuit styled as State v. Philip 
283.29  Morris Inc., No. C1-94-8565 (Minnesota District Court, Second 
283.30  Judicial District), if the style of cigarettes is included in 
283.31  computation of the payments under the agreement; or 
283.32     (2) has voluntarily entered into an agreement with the 
283.33  state of Minnesota, approved by the attorney general, agreeing 
283.34  to terms similar to those contained in the settlement agreement, 
283.35  identified in clause (1) including making annual payments to the 
283.36  state, with respect to its national sales of the style of 
284.1   cigarettes, equal to at least 75 percent of the payments that 
284.2   would apply if the manufacturer was one of the four original 
284.3   parties to the settlement agreement required to make annual 
284.4   payments to the state. 
284.5      Subd. 3.  [COLLECTION AND ADMINISTRATION.] The commissioner 
284.6   shall administer the fee under this section in the same manner 
284.7   as the excise tax imposed under section 297F.05 and all of the 
284.8   provisions of this chapter apply as if the fee were a tax 
284.9   imposed under section 297F.05.  The commissioner shall deposit 
284.10  the proceeds of the fee in the general fund. 
284.11     <b>[EFFECTIVE DATE.]</b> This section is effective for sales of 
284.12  nonsettlement cigarettes made after June 30, 2003. 
284.13     Sec. 13.  Minnesota Statutes 2002, section 297G.01, is 
284.14  amended by adding a subdivision to read: 
284.15     Subd. 21.  [LOW-ALCOHOL DAIRY COCKTAIL.] "Low-alcohol dairy 
284.16  cocktail" means a premixed cocktail, or any other product except 
284.17  liqueur-filled candy, that: 
284.18     (1) consists primarily of milk products; 
284.19     (2) contains distilled spirits; 
284.20     (3) is drinkable as a beverage or is promoted as an 
284.21  alcoholic product; and 
284.22     (4) contains less than 3.2 percent alcohol by volume. 
284.23     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
284.24  after June 30, 2003. 
284.25     Sec. 14.  Minnesota Statutes 2002, section 297G.03, 
284.26  subdivision 1, is amended to read: 
284.27     Subdivision 1.  [GENERAL RATE; DISTILLED SPIRITS AND WINE.] 
284.28  The following excise tax is imposed on all distilled spirits and 
284.29  wine manufactured, imported, sold, or possessed in this state: 
284.30                                  Standard             Metric
284.31  (a) Distilled spirits,      $5.03 per gallon   $1.33 per liter
284.32  liqueurs, cordials, 
284.33  and specialties regardless 
284.34  of alcohol content 
284.35  (excluding ethyl alcohol) 
284.36  (b) Wine containing         $ .30 per gallon   $ .08 per liter 
285.1   14 percent or less
285.2   alcohol by volume 
285.3   (except cider as defined 
285.4   in section 297G.01, 
285.5   subdivision 3a) 
285.6   (c) Wine containing         $ .95 per gallon   $ .25 per liter
285.7   more than 14 percent 
285.8   but not more than 21
285.9   percent alcohol by volume 
285.10  (d) Wine containing more    $1.82 per gallon   $ .48 per liter
285.11  than 21 percent but not 
285.12  more than 24 percent
285.13  alcohol by volume 
285.14  (e) Wine containing more    $3.52 per gallon   $ .93 per liter
285.15  than 24 percent alcohol
285.16  by volume
285.17  (f) Natural and             $1.82 per gallon   $ .48 per liter
285.18  artificial sparkling wines
285.19  containing alcohol 
285.20  (g) Cider as defined in     $ .15 per gallon   $ .04 per liter
285.21  section 297G.01,
285.22  subdivision 3a
285.23  (h) Low alcohol dairy       $ .08 per gallon   $ .02 per liter
285.24  cocktails
285.25     In computing the tax on a package of distilled spirits or 
285.26  wine, a proportional tax at a like rate on all fractional parts 
285.27  of a gallon or liter must be paid, except that the tax on a 
285.28  fractional part of a gallon less than 1/16 of a gallon is the 
285.29  same as for 1/16 of a gallon. 
285.30     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
285.31  after June 30, 2003. 
285.32     Sec. 15.  Minnesota Statutes 2002, section 297G.09, is 
285.33  amended by adding a subdivision to read: 
285.34     Subd. 9.  [ACCELERATED TAX PAYMENT; PENALTY.] A person 
285.35  liable for tax under this chapter having a liability of $120,000 
285.36  or more during a fiscal year ending June 30, shall remit the 
286.1   June liability for the next year in the following manner:  
286.2      (a) Two business days before June 30 of the year, the 
286.3   taxpayer shall remit the actual May liability and 85 percent of 
286.4   the estimated June liability to the commissioner and file the 
286.5   return in the form and manner prescribed by the commissioner. 
286.6      (b) On or before August 18 of the year, the taxpayer shall 
286.7   submit a return showing the actual June liability and pay any 
286.8   additional amount of tax not remitted in June.  A penalty is 
286.9   imposed equal to ten percent of the amount of June liability 
286.10  required to be paid in June less the amount remitted in June.  
286.11  However, the penalty is not imposed if the amount remitted in 
286.12  June equals the lesser of:  
286.13     (1) 85 percent of the actual June liability; or 
286.14     (2) 85 percent of the preceding May liability. 
286.15     <b>[EFFECTIVE DATE.]</b> This section is effective for taxpayers 
286.16  having a liability of $120,000 or more during the fiscal year 
286.17  ending June 30, 2003, and each fiscal year thereafter, and for 
286.18  accelerated payments becoming due in 2004 and thereafter. 
286.19     Sec. 16.  Minnesota Statutes 2002, section 325D.421, is 
286.20  amended by adding a subdivision to read: 
286.21     Subd. 1a.  [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 
286.22  person may not transport or cause to be transported from this 
286.23  state cigarettes for sale in another state without first 
286.24  affixing to the cigarettes the stamp required by the state in 
286.25  which the cigarettes are to be sold or paying any other excise 
286.26  tax on the cigarettes imposed by the state in which the 
286.27  cigarettes are to be sold. 
286.28     (b) A person may not affix to cigarettes the stamp required 
286.29  by another state or pay any other excise tax on the cigarettes 
286.30  imposed by another state if the other state prohibits stamps 
286.31  from being affixed to the cigarettes, prohibits the payment of 
286.32  any other excise tax on the cigarettes, or prohibits the sale of 
286.33  the cigarettes. 
286.34     (c) Not later than 15 days after the end of each calendar 
286.35  quarter, a person who transports or causes to be transported 
286.36  from this state cigarettes for sale in another state shall 
287.1   submit to the attorney general a report identifying the quantity 
287.2   and style of each brand of the cigarettes transported or caused 
287.3   to be transported in the preceding calendar quarter, and the 
287.4   name and address of each recipient of the cigarettes. 
287.5      (d) For purposes of this subdivision, "person" has the 
287.6   meaning given in section 297F.01, subdivision 12, and includes a 
287.7   common or contract carrier or a public warehouse only if the 
287.8   carrier or warehouse is owned, in whole or in part, directly or 
287.9   indirectly, by such a person. 
287.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
287.11  following final enactment. 
287.12     Sec. 17.  Minnesota Statutes 2002, section 325D.421, 
287.13  subdivision 2, is amended to read: 
287.14     Subd. 2.  [PRIVATE CAUSE OF ACTION.] (a) In addition to any 
287.15  other private remedy provided by law, any person that sustains 
287.16  economic damages or commercial injury as a result of any 
287.17  violation of subdivision 1 or 1a may bring an action for 
287.18  appropriate injunctive or other equitable relief, actual 
287.19  damages, if any, sustained by reason of the violation, and, as 
287.20  determined by the court, interest on the damages from the date 
287.21  of the complaint, taxable costs, and reasonable attorney fees.  
287.22     (b) If the trier of fact finds that the violation is 
287.23  egregious, it may increase the recovery to an amount not in 
287.24  excess of three times the actual damages sustained by reason of 
287.25  the violation.  The trier of fact may, in addition, award 
287.26  exemplary damages for violations of subdivision 1, paragraph 
287.27  (c), equal to the difference between the permitted legal price 
287.28  and the actual price for the sales. 
287.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
287.30  following final enactment. 
287.31     Sec. 18.  Minnesota Statutes 2002, section 349.16, is 
287.32  amended by adding a subdivision to read: 
287.33     Subd. 11.  [AGREEMENT TO PAY TAXES.] An organization which 
287.34  is recognized by federal law, regulation, or other ruling as a 
287.35  quasi-governmental organization that would otherwise be exempt 
287.36  from one or more taxes under chapter 297E must agree to pay all 
288.1   taxes under chapter 297E on lawful gambling conducted by the 
288.2   organization as a condition of receiving or renewing a license 
288.3   or premises permit. 
288.4                              ARTICLE 12 
288.5             DEPARTMENT INCOME, CORPORATE FRANCHISE, AND 
288.6                        ESTATE TAX INITIATIVES 
288.7      Section 1.  Minnesota Statutes 2002, section 289A.19, 
288.8   subdivision 4, is amended to read: 
288.9      Subd. 4.  [ESTATE TAX RETURNS.] When in the commissioner's 
288.10  judgment good cause exists, the commissioner may extend the time 
288.11  for filing an estate tax return for not more than six months.  
288.12  When an extension to file the federal estate tax return has been 
288.13  granted under section 6081 of the Internal Revenue Code, the 
288.14  time for filing the estate tax return is extended for that 
288.15  period.  
288.16     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
288.17  decedents dying after December 31, 2001. 
288.18     Sec. 2.  Minnesota Statutes 2002, section 289A.31, is 
288.19  amended by adding a subdivision to read: 
288.20     Subd. 8.  [LIABILITY OF VENDOR FOR REPAYMENT OF REFUND.] If 
288.21  an individual income tax refund resulting from claiming an 
288.22  education credit under section 290.0674 is paid by means of 
288.23  directly depositing the proceeds of the refund into a bank 
288.24  account controlled by the vendor of the product or service upon 
288.25  which the education credit is based, and the commissioner 
288.26  subsequently disallows the credit, the commissioner may seek 
288.27  repayment of the refund from the vendor.  The amount of the 
288.28  repayment must be assessed and collected in the same time and 
288.29  manner as an erroneous refund under section 289A.37, subdivision 
288.30  2. 
288.31     <b>[EFFECTIVE DATE.]</b> This section is effective for refunds 
288.32  paid to accounts controlled by a vendor on or after the day 
288.33  following final enactment. 
288.34     Sec. 3.  Minnesota Statutes 2002, section 289A.56, 
288.35  subdivision 3, is amended to read: 
288.36     Subd. 3.  [WITHHOLDING TAX, ENTERTAINER WITHHOLDING TAX, 
289.1   WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, ESTATE 
289.2   TAX, AND SALES TAX OVERPAYMENTS.] When a refund is due for 
289.3   overpayments of withholding tax, entertainer withholding tax, or 
289.4   withholding from payments to out-of-state contractors, or estate 
289.5   tax, interest is computed from the date of payment to the date 
289.6   the refund is paid or credited.  For purposes of this 
289.7   subdivision, the date of payment is the later of the date the 
289.8   tax was finally due or was paid. 
289.9      For the purposes of computing interest on estate tax 
289.10  refunds, interest is paid from the later of the date of 
289.11  overpayment, the date the estate tax return is due, or the date 
289.12  the original estate tax return is filed to the date the refund 
289.13  is paid. 
289.14     For purposes of computing interest on sales and use tax 
289.15  refunds, interest is paid from the date of payment to the date 
289.16  the refund is paid or credited, if the refund claim includes a 
289.17  detailed schedule reflecting the tax periods covered in the 
289.18  claim.  If the refund claim submitted does not include a 
289.19  detailed schedule reflecting the tax periods covered in the 
289.20  claim, interest is computed from the date the claim was filed. 
289.21     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
289.22  decedents dying after December 31, 2003. 
289.23     Sec. 4.  Minnesota Statutes 2002, section 289A.60, 
289.24  subdivision 7, is amended to read: 
289.25     Subd. 7.  [PENALTY FOR FRIVOLOUS RETURN.] If a taxpayer 
289.26  files what purports to be a tax return or a claim for refund but 
289.27  which does not contain information on which the substantial 
289.28  correctness of the purported return or claim for refund may be 
289.29  judged or contains information that on its face shows that the 
289.30  purported return or claim for refund is substantially incorrect 
289.31  and the conduct is due to a position that is frivolous or a 
289.32  desire that appears on the purported return or claim for refund 
289.33  to delay or impede the administration of Minnesota tax laws, 
289.34  then the individual shall pay a penalty of $500 the greater of 
289.35  $1,000 or 25 percent of the amount of tax required to be shown 
289.36  on the return.  In a proceeding involving the issue of whether 
290.1   or not a person is liable for this penalty, the burden of proof 
290.2   is on the commissioner.  
290.3      <b>[EFFECTIVE DATE.]</b> This section is effective for returns 
290.4   filed after December 31, 2003. 
290.5      Sec. 5.  Minnesota Statutes 2002, section 290.01, 
290.6   subdivision 19a, is amended to read: 
290.7      Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
290.8   individuals, estates, and trusts, there shall be added to 
290.9   federal taxable income: 
290.10     (1)(i) interest income on obligations of any state other 
290.11  than Minnesota or a political or governmental subdivision, 
290.12  municipality, or governmental agency or instrumentality of any 
290.13  state other than Minnesota exempt from federal income taxes 
290.14  under the Internal Revenue Code or any other federal statute; 
290.15  and 
290.16     (ii) exempt-interest dividends as defined in section 
290.17  852(b)(5) of the Internal Revenue Code, except the portion of 
290.18  the exempt-interest dividends derived from interest income on 
290.19  obligations of the state of Minnesota or its political or 
290.20  governmental subdivisions, municipalities, governmental agencies 
290.21  or instrumentalities, but only if the portion of the 
290.22  exempt-interest dividends from such Minnesota sources paid to 
290.23  all shareholders represents 95 percent or more of the 
290.24  exempt-interest dividends that are paid by the regulated 
290.25  investment company as defined in section 851(a) of the Internal 
290.26  Revenue Code, or the fund of the regulated investment company as 
290.27  defined in section 851(g) of the Internal Revenue Code, making 
290.28  the payment; and 
290.29     (iii) for the purposes of items (i) and (ii), interest on 
290.30  obligations of an Indian tribal government described in section 
290.31  7871(c) of the Internal Revenue Code shall be treated as 
290.32  interest income on obligations of the state in which the tribe 
290.33  is located; 
290.34     (2) the amount of income taxes paid or accrued within the 
290.35  taxable year under this chapter and income taxes paid to any 
290.36  other state or to any province or territory of Canada, to the 
291.1   extent allowed as a deduction under section 63(d) of the 
291.2   Internal Revenue Code, but the addition may not be more than the 
291.3   amount by which the itemized deductions as allowed under section 
291.4   63(d) of the Internal Revenue Code exceeds the amount of the 
291.5   standard deduction as defined in section 63(c) of the Internal 
291.6   Revenue Code.  For the purpose of this paragraph, the 
291.7   disallowance of itemized deductions under section 68 of the 
291.8   Internal Revenue Code of 1986, income tax is the last itemized 
291.9   deduction disallowed; 
291.10     (3) the capital gain amount of a lump sum distribution to 
291.11  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
291.12  Reform Act of 1986, Public Law Number 99-514, applies; 
291.13     (4) the amount of income taxes paid or accrued within the 
291.14  taxable year under this chapter and income taxes paid to any 
291.15  other state or any province or territory of Canada, to the 
291.16  extent allowed as a deduction in determining federal adjusted 
291.17  gross income.  For the purpose of this paragraph, income taxes 
291.18  do not include the taxes imposed by sections 290.0922, 
291.19  subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
291.20     (5) the amount of expense, interest, or taxes disallowed 
291.21  pursuant to section 290.10; 
291.22     (6) the amount of a partner's pro rata share of net income 
291.23  which does not flow through to the partner because the 
291.24  partnership elected to pay the tax on the income under section 
291.25  6242(a)(2) of the Internal Revenue Code; and 
291.26     (7) 80 percent of the depreciation deduction allowed under 
291.27  section 168(k) of the Internal Revenue Code.  For purposes of 
291.28  this clause, if the taxpayer has an activity that in the taxable 
291.29  year generates a deduction for depreciation under section 168(k) 
291.30  and the activity generates a loss for the taxable year that the 
291.31  taxpayer is not allowed to claim for the taxable year, "the 
291.32  depreciation allowed under section 168(k)" for the taxable year 
291.33  is limited to excess of the depreciation claimed by the activity 
291.34  under section 168(k) over the amount of the loss from the 
291.35  activity that is not allowed in the taxable year.  In succeeding 
291.36  taxable years when the losses not allowed in the taxable year 
292.1   are allowed, the depreciation under section 168(k) is allowed. 
292.2      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
292.3   years ending after September 10, 2001. 
292.4      Sec. 6.  Minnesota Statutes 2002, section 290.01, 
292.5   subdivision 19b, is amended to read: 
292.6      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
292.7   individuals, estates, and trusts, there shall be subtracted from 
292.8   federal taxable income: 
292.9      (1) interest income on obligations of any authority, 
292.10  commission, or instrumentality of the United States to the 
292.11  extent includable in taxable income for federal income tax 
292.12  purposes but exempt from state income tax under the laws of the 
292.13  United States; 
292.14     (2) if included in federal taxable income, the amount of 
292.15  any overpayment of income tax to Minnesota or to any other 
292.16  state, for any previous taxable year, whether the amount is 
292.17  received as a refund or as a credit to another taxable year's 
292.18  income tax liability; 
292.19     (3) the amount paid to others, less the amount used to 
292.20  claim the credit allowed under section 290.0674, not to exceed 
292.21  $1,625 for each qualifying child in grades kindergarten to 6 and 
292.22  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
292.23  textbooks, and transportation of each qualifying child in 
292.24  attending an elementary or secondary school situated in 
292.25  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
292.26  wherein a resident of this state may legally fulfill the state's 
292.27  compulsory attendance laws, which is not operated for profit, 
292.28  and which adheres to the provisions of the Civil Rights Act of 
292.29  1964 and chapter 363.  For the purposes of this clause, 
292.30  "tuition" includes fees or tuition as defined in section 
292.31  290.0674, subdivision 1, clause (1).  As used in this clause, 
292.32  "textbooks" includes books and other instructional materials and 
292.33  equipment purchased or leased for use in elementary and 
292.34  secondary schools in teaching only those subjects legally and 
292.35  commonly taught in public elementary and secondary schools in 
292.36  this state.  Equipment expenses qualifying for deduction 
293.1   includes expenses as defined and limited in section 290.0674, 
293.2   subdivision 1, clause (3).  "Textbooks" does not include 
293.3   instructional books and materials used in the teaching of 
293.4   religious tenets, doctrines, or worship, the purpose of which is 
293.5   to instill such tenets, doctrines, or worship, nor does it 
293.6   include books or materials for, or transportation to, 
293.7   extracurricular activities including sporting events, musical or 
293.8   dramatic events, speech activities, driver's education, or 
293.9   similar programs.  For purposes of the subtraction provided by 
293.10  this clause, "qualifying child" has the meaning given in section 
293.11  32(c)(3) of the Internal Revenue Code; 
293.12     (4) income as provided under section 290.0802; 
293.13     (5) to the extent included in federal adjusted gross 
293.14  income, income realized on disposition of property exempt from 
293.15  tax under section 290.491; 
293.16     (6) to the extent not deducted in determining federal 
293.17  taxable income or used to claim the long-term care insurance 
293.18  credit under section 290.0672, the amount paid for health 
293.19  insurance of self-employed individuals as determined under 
293.20  section 162(l) of the Internal Revenue Code, except that the 
293.21  percent limit does not apply.  If the individual deducted 
293.22  insurance payments under section 213 of the Internal Revenue 
293.23  Code of 1986, the subtraction under this clause must be reduced 
293.24  by the lesser of: 
293.25     (i) the total itemized deductions allowed under section 
293.26  63(d) of the Internal Revenue Code, less state, local, and 
293.27  foreign income taxes deductible under section 164 of the 
293.28  Internal Revenue Code and the standard deduction under section 
293.29  63(c) of the Internal Revenue Code; or 
293.30     (ii) the lesser of (A) the amount of insurance qualifying 
293.31  as "medical care" under section 213(d) of the Internal Revenue 
293.32  Code to the extent not deducted under section 162(1) of the 
293.33  Internal Revenue Code or excluded from income or (B) the total 
293.34  amount deductible for medical care under section 213(a); 
293.35     (7) the exemption amount allowed under Laws 1995, chapter 
293.36  255, article 3, section 2, subdivision 3; 
294.1      (8) to the extent included in federal taxable income, 
294.2   postservice benefits for youth community service under section 
294.3   124D.42 for volunteer service under United States Code, title 
294.4   42, sections 12601 to 12604; 
294.5      (9) (7) to the extent not deducted in determining federal 
294.6   taxable income by an individual who does not itemize deductions 
294.7   for federal income tax purposes for the taxable year, an amount 
294.8   equal to 50 percent of the excess of charitable contributions 
294.9   allowable as a deduction for the taxable year under section 
294.10  170(a) of the Internal Revenue Code over $500; 
294.11     (10) (8) for taxable years beginning before January 1, 
294.12  2008, the amount of the federal small ethanol producer credit 
294.13  allowed under section 40(a)(3) of the Internal Revenue Code 
294.14  which is included in gross income under section 87 of the 
294.15  Internal Revenue Code; 
294.16     (11) (9) for individuals who are allowed a federal foreign 
294.17  tax credit for taxes that do not qualify for a credit under 
294.18  section 290.06, subdivision 22, an amount equal to the carryover 
294.19  of subnational foreign taxes for the taxable year, but not to 
294.20  exceed the total subnational foreign taxes reported in claiming 
294.21  the foreign tax credit.  For purposes of this clause, "federal 
294.22  foreign tax credit" means the credit allowed under section 27 of 
294.23  the Internal Revenue Code, and "carryover of subnational foreign 
294.24  taxes" equals the carryover allowed under section 904(c) of the 
294.25  Internal Revenue Code minus national level foreign taxes to the 
294.26  extent they exceed the federal foreign tax credit; and 
294.27     (12) (10) in each of the five tax years immediately 
294.28  following the tax year in which an addition is required under 
294.29  subdivision 19a, clause (7), an amount equal to one-fifth of the 
294.30  delayed depreciation.  For purposes of this clause, "delayed 
294.31  depreciation" means the amount of the addition made by the 
294.32  taxpayer under subdivision 19a, clause (7), minus the positive 
294.33  value of any net operating loss under section 172 of the 
294.34  Internal Revenue Code generated for the tax year of the 
294.35  addition.  The resulting delayed depreciation cannot be less 
294.36  than zero. 
295.1      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
295.2   beginning after December 31, 2003. 
295.3      Sec. 7.  Minnesota Statutes 2002, section 290.01, 
295.4   subdivision 19c, is amended to read: 
295.5      Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
295.6   INCOME.] For corporations, there shall be added to federal 
295.7   taxable income: 
295.8      (1) the amount of any deduction taken for federal income 
295.9   tax purposes for income, excise, or franchise taxes based on net 
295.10  income or related minimum taxes, including but not limited to 
295.11  the tax imposed under section 290.0922, paid by the corporation 
295.12  to Minnesota, another state, a political subdivision of another 
295.13  state, the District of Columbia, or any foreign country or 
295.14  possession of the United States; 
295.15     (2) interest not subject to federal tax upon obligations 
295.16  of:  the United States, its possessions, its agencies, or its 
295.17  instrumentalities; the state of Minnesota or any other state, 
295.18  any of its political or governmental subdivisions, any of its 
295.19  municipalities, or any of its governmental agencies or 
295.20  instrumentalities; the District of Columbia; or Indian tribal 
295.21  governments; 
295.22     (3) exempt-interest dividends received as defined in 
295.23  section 852(b)(5) of the Internal Revenue Code; 
295.24     (4) the amount of any net operating loss deduction taken 
295.25  for federal income tax purposes under section 172 or 832(c)(10) 
295.26  of the Internal Revenue Code or operations loss deduction under 
295.27  section 810 of the Internal Revenue Code; 
295.28     (5) the amount of any special deductions taken for federal 
295.29  income tax purposes under sections 241 to 247 of the Internal 
295.30  Revenue Code; 
295.31     (6) losses from the business of mining, as defined in 
295.32  section 290.05, subdivision 1, clause (a), that are not subject 
295.33  to Minnesota income tax; 
295.34     (7) the amount of any capital losses deducted for federal 
295.35  income tax purposes under sections 1211 and 1212 of the Internal 
295.36  Revenue Code; 
296.1      (8) the exempt foreign trade income of a foreign sales 
296.2   corporation under sections 921(a) and 291 of the Internal 
296.3   Revenue Code; 
296.4      (9) the amount of percentage depletion deducted under 
296.5   sections 611 through 614 and 291 of the Internal Revenue Code; 
296.6      (10) for certified pollution control facilities placed in 
296.7   service in a taxable year beginning before December 31, 1986, 
296.8   and for which amortization deductions were elected under section 
296.9   169 of the Internal Revenue Code of 1954, as amended through 
296.10  December 31, 1985, the amount of the amortization deduction 
296.11  allowed in computing federal taxable income for those 
296.12  facilities; 
296.13     (11) the amount of any deemed dividend from a foreign 
296.14  operating corporation determined pursuant to section 290.17, 
296.15  subdivision 4, paragraph (g); 
296.16     (12) the amount of any environmental tax paid under section 
296.17  59(a) of the Internal Revenue Code; 
296.18     (13) the amount of a partner's pro rata share of net income 
296.19  which does not flow through to the partner because the 
296.20  partnership elected to pay the tax on the income under section 
296.21  6242(a)(2) of the Internal Revenue Code; 
296.22     (14) the amount of net income excluded under section 114 of 
296.23  the Internal Revenue Code; 
296.24     (15) any increase in subpart F income, as defined in 
296.25  section 952(a) of the Internal Revenue Code, for the taxable 
296.26  year when subpart F income is calculated without regard to the 
296.27  provisions of section 614 of Public Law Number 107-147; and 
296.28     (16) 80 percent of the depreciation deduction allowed under 
296.29  section 168(k) of the Internal Revenue Code.  For purposes of 
296.30  this clause, if the taxpayer has an activity that in the taxable 
296.31  year generates a deduction for depreciation under section 168(k) 
296.32  and the activity generates a loss for the taxable year that the 
296.33  taxpayer is not allowed to claim for the taxable year, "the 
296.34  depreciation allowed under section 168(k)" for the taxable year 
296.35  is limited to excess of the depreciation claimed by the activity 
296.36  under section 168(k) over the amount of the loss from the 
297.1   activity that is not allowed in the taxable year.  In succeeding 
297.2   taxable years when the losses not allowed in the taxable year 
297.3   are allowed, the depreciation under section 168(k) is allowed. 
297.4      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
297.5   years ending after September 10, 2001. 
297.6      Sec. 8.  Minnesota Statutes 2002, section 290.01, 
297.7   subdivision 19d, is amended to read: 
297.8      Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
297.9   TAXABLE INCOME.] For corporations, there shall be subtracted 
297.10  from federal taxable income after the increases provided in 
297.11  subdivision 19c:  
297.12     (1) the amount of foreign dividend gross-up added to gross 
297.13  income for federal income tax purposes under section 78 of the 
297.14  Internal Revenue Code; 
297.15     (2) the amount of salary expense not allowed for federal 
297.16  income tax purposes due to claiming the federal jobs credit 
297.17  under section 51 of the Internal Revenue Code; 
297.18     (3) any dividend (not including any distribution in 
297.19  liquidation) paid within the taxable year by a national or state 
297.20  bank to the United States, or to any instrumentality of the 
297.21  United States exempt from federal income taxes, on the preferred 
297.22  stock of the bank owned by the United States or the 
297.23  instrumentality; 
297.24     (4) amounts disallowed for intangible drilling costs due to 
297.25  differences between this chapter and the Internal Revenue Code 
297.26  in taxable years beginning before January 1, 1987, as follows: 
297.27     (i) to the extent the disallowed costs are represented by 
297.28  physical property, an amount equal to the allowance for 
297.29  depreciation under Minnesota Statutes 1986, section 290.09, 
297.30  subdivision 7, subject to the modifications contained in 
297.31  subdivision 19e; and 
297.32     (ii) to the extent the disallowed costs are not represented
297.33  by physical property, an amount equal to the allowance for cost 
297.34  depletion under Minnesota Statutes 1986, section 290.09, 
297.35  subdivision 8; 
297.36     (5) the deduction for capital losses pursuant to sections 
298.1   1211 and 1212 of the Internal Revenue Code, except that: 
298.2      (i) for capital losses incurred in taxable years beginning 
298.3   after December 31, 1986, capital loss carrybacks shall not be 
298.4   allowed; 
298.5      (ii) for capital losses incurred in taxable years beginning 
298.6   after December 31, 1986, a capital loss carryover to each of the 
298.7   15 taxable years succeeding the loss year shall be allowed; 
298.8      (iii) for capital losses incurred in taxable years 
298.9   beginning before January 1, 1987, a capital loss carryback to 
298.10  each of the three taxable years preceding the loss year, subject 
298.11  to the provisions of Minnesota Statutes 1986, section 290.16, 
298.12  shall be allowed; and 
298.13     (iv) for capital losses incurred in taxable years beginning 
298.14  before January 1, 1987, a capital loss carryover to each of the 
298.15  five taxable years succeeding the loss year to the extent such 
298.16  loss was not used in a prior taxable year and subject to the 
298.17  provisions of Minnesota Statutes 1986, section 290.16, shall be 
298.18  allowed; 
298.19     (6) an amount for interest and expenses relating to income 
298.20  not taxable for federal income tax purposes, if (i) the income 
298.21  is taxable under this chapter and (ii) the interest and expenses 
298.22  were disallowed as deductions under the provisions of section 
298.23  171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
298.24  federal taxable income; 
298.25     (7) in the case of mines, oil and gas wells, other natural 
298.26  deposits, and timber for which percentage depletion was 
298.27  disallowed pursuant to subdivision 19c, clause (11), a 
298.28  reasonable allowance for depletion based on actual cost.  In the 
298.29  case of leases the deduction must be apportioned between the 
298.30  lessor and lessee in accordance with rules prescribed by the 
298.31  commissioner.  In the case of property held in trust, the 
298.32  allowable deduction must be apportioned between the income 
298.33  beneficiaries and the trustee in accordance with the pertinent 
298.34  provisions of the trust, or if there is no provision in the 
298.35  instrument, on the basis of the trust's income allocable to 
298.36  each; 
299.1      (8) for certified pollution control facilities placed in 
299.2   service in a taxable year beginning before December 31, 1986, 
299.3   and for which amortization deductions were elected under section 
299.4   169 of the Internal Revenue Code of 1954, as amended through 
299.5   December 31, 1985, an amount equal to the allowance for 
299.6   depreciation under Minnesota Statutes 1986, section 290.09, 
299.7   subdivision 7; 
299.8      (9) amounts included in federal taxable income that are due 
299.9   to refunds of income, excise, or franchise taxes based on net 
299.10  income or related minimum taxes paid by the corporation to 
299.11  Minnesota, another state, a political subdivision of another 
299.12  state, the District of Columbia, or a foreign country or 
299.13  possession of the United States to the extent that the taxes 
299.14  were added to federal taxable income under section 290.01, 
299.15  subdivision 19c, clause (1), in a prior taxable year; 
299.16     (10) 80 percent of royalties, fees, or other like income 
299.17  accrued or received from a foreign operating corporation or a 
299.18  foreign corporation which is part of the same unitary business 
299.19  as the receiving corporation; 
299.20     (11) income or gains from the business of mining as defined 
299.21  in section 290.05, subdivision 1, clause (a), that are not 
299.22  subject to Minnesota franchise tax; 
299.23     (12) the amount of handicap access expenditures in the 
299.24  taxable year which are not allowed to be deducted or capitalized 
299.25  under section 44(d)(7) of the Internal Revenue Code; 
299.26     (13) the amount of qualified research expenses not allowed 
299.27  for federal income tax purposes under section 280C(c) of the 
299.28  Internal Revenue Code, but only to the extent that the amount 
299.29  exceeds the amount of the credit allowed under section 290.068; 
299.30     (14) the amount of salary expenses not allowed for federal 
299.31  income tax purposes due to claiming the Indian employment credit 
299.32  under section 45A(a) of the Internal Revenue Code; 
299.33     (15) the amount of any refund of environmental taxes paid 
299.34  under section 59A of the Internal Revenue Code; 
299.35     (16) for taxable years beginning before January 1, 2008, 
299.36  the amount of the federal small ethanol producer credit allowed 
300.1   under section 40(a)(3) of the Internal Revenue Code which is 
300.2   included in gross income under section 87 of the Internal 
300.3   Revenue Code; 
300.4      (17) for a corporation whose foreign sales corporation, as 
300.5   defined in section 922 of the Internal Revenue Code, constituted 
300.6   a foreign operating corporation during any taxable year ending 
300.7   before January 1, 1995, and a return was filed by August 15, 
300.8   1996, claiming the deduction under this section 290.21, 
300.9   subdivision 4, for income received from the foreign operating 
300.10  corporation, an amount equal to 1.23 multiplied by the amount of 
300.11  income excluded under section 114 of the Internal Revenue Code, 
300.12  provided the income is not income of a foreign operating 
300.13  company; 
300.14     (18) any decrease in subpart F income, as defined in 
300.15  section 952(a) of the Internal Revenue Code, for the taxable 
300.16  year when subpart F income is calculated without regard to the 
300.17  provisions of section 614 of Public Law Number 107-147; and 
300.18     (19) in each of the five tax years immediately following 
300.19  the tax year in which an addition is required under subdivision 
300.20  19c, clause (16), an amount equal to one-fifth of the delayed 
300.21  depreciation.  For purposes of this clause, "delayed 
300.22  depreciation" means the amount of the addition made by the 
300.23  taxpayer under subdivision 19c, clause (16).  The resulting 
300.24  delayed depreciation cannot be less than zero. 
300.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
300.26  following final enactment. 
300.27     Sec. 9.  Minnesota Statutes 2002, section 290.06, 
300.28  subdivision 2c, is amended to read: 
300.29     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
300.30  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
300.31  married individuals filing joint returns and surviving spouses 
300.32  as defined in section 2(a) of the Internal Revenue Code must be 
300.33  computed by applying to their taxable net income the following 
300.34  schedule of rates: 
300.35     (1) On the first $25,680, 5.35 percent; 
300.36     (2) On all over $25,680, but not over $102,030, 7.05 
301.1   percent; 
301.2      (3) On all over $102,030, 7.85 percent. 
301.3      Married individuals filing separate returns, estates, and 
301.4   trusts must compute their income tax by applying the above rates 
301.5   to their taxable income, except that the income brackets will be 
301.6   one-half of the above amounts.  
301.7      (b) The income taxes imposed by this chapter upon unmarried 
301.8   individuals must be computed by applying to taxable net income 
301.9   the following schedule of rates: 
301.10     (1) On the first $17,570, 5.35 percent; 
301.11     (2) On all over $17,570, but not over $57,710, 7.05 
301.12  percent; 
301.13     (3) On all over $57,710, 7.85 percent. 
301.14     (c) The income taxes imposed by this chapter upon unmarried 
301.15  individuals qualifying as a head of household as defined in 
301.16  section 2(b) of the Internal Revenue Code must be computed by 
301.17  applying to taxable net income the following schedule of rates: 
301.18     (1) On the first $21,630, 5.35 percent; 
301.19     (2) On all over $21,630, but not over $86,910, 7.05 
301.20  percent; 
301.21     (3) On all over $86,910, 7.85 percent. 
301.22     (d) In lieu of a tax computed according to the rates set 
301.23  forth in this subdivision, the tax of any individual taxpayer 
301.24  whose taxable net income for the taxable year is less than an 
301.25  amount determined by the commissioner must be computed in 
301.26  accordance with tables prepared and issued by the commissioner 
301.27  of revenue based on income brackets of not more than $100.  The 
301.28  amount of tax for each bracket shall be computed at the rates 
301.29  set forth in this subdivision, provided that the commissioner 
301.30  may disregard a fractional part of a dollar unless it amounts to 
301.31  50 cents or more, in which case it may be increased to $1. 
301.32     (e) An individual who is not a Minnesota resident for the 
301.33  entire year must compute the individual's Minnesota income tax 
301.34  as provided in this subdivision.  After the application of the 
301.35  nonrefundable credits provided in this chapter, the tax 
301.36  liability must then be multiplied by a fraction in which:  
302.1      (1) the numerator is the individual's Minnesota source 
302.2   federal adjusted gross income as defined in section 62 of the 
302.3   Internal Revenue Code and increased by the additions required 
302.4   under section 290.01, subdivision 19a, clauses (1), (5), and 
302.5   (6), and reduced by the Minnesota assignable portion of the 
302.6   subtraction for United States government interest under section 
302.7   290.01, subdivision 19b, clause (1), after applying the 
302.8   allocation and assignability provisions of section 290.081, 
302.9   clause (a), or 290.17; and 
302.10     (2) the denominator is the individual's federal adjusted 
302.11  gross income as defined in section 62 of the Internal Revenue 
302.12  Code of 1986, increased by the amounts specified in section 
302.13  290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 
302.14  by the amounts specified in section 290.01, subdivision 19b, 
302.15  clause (1). 
302.16     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
302.17  beginning after December 31, 2002. 
302.18     Sec. 10.  Minnesota Statutes 2002, section 290.0671, 
302.19  subdivision 1, is amended to read: 
302.20     Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
302.21  allowed a credit against the tax imposed by this chapter equal 
302.22  to a percentage of earned income.  To receive a credit, a 
302.23  taxpayer must be eligible for a credit under section 32 of the 
302.24  Internal Revenue Code.  
302.25     (b) For individuals with no qualifying children, the credit 
302.26  equals 1.9125 percent of the first $4,620 of earned income.  The 
302.27  credit is reduced by 1.9125 percent of earned income or modified 
302.28  adjusted gross income, whichever is greater, in excess of 
302.29  $5,770, but in no case is the credit less than zero. 
302.30     (c) For individuals with one qualifying child, the credit 
302.31  equals 8.5 percent of the first $6,920 of earned income and 8.5 
302.32  percent of earned income over $12,080 but less than $13,450.  
302.33  The credit is reduced by 5.73 percent of earned income or 
302.34  modified adjusted gross income, whichever is greater, in excess 
302.35  of $15,080, but in no case is the credit less than zero. 
302.36     (d) For individuals with two or more qualifying children, 
303.1   the credit equals ten percent of the first $9,720 of earned 
303.2   income and 20 percent of earned income over $14,860 but less 
303.3   than $16,800.  The credit is reduced by 10.3 percent of earned 
303.4   income or modified adjusted gross income, whichever is greater, 
303.5   in excess of $17,890, but in no case is the credit less than 
303.6   zero. 
303.7      (e) For a nonresident or part-year resident, the credit 
303.8   must be allocated based on the percentage calculated under 
303.9   section 290.06, subdivision 2c, paragraph (e). 
303.10     (f) For a person who was a resident for the entire tax year 
303.11  and has earned income not subject to tax under this chapter, the 
303.12  credit must be allocated based on the ratio of federal adjusted 
303.13  gross income reduced by the earned income not subject to tax 
303.14  under this chapter over federal adjusted gross income. 
303.15     (g) For tax years beginning after December 31, 2001, and 
303.16  before December 31, 2004, the $5,770 in paragraph (b) is 
303.17  increased to $6,770, the $15,080 in paragraph (c) is increased 
303.18  to $16,080, and the $17,890 in paragraph (d) is increased to 
303.19  $18,890, after being adjusted for inflation under subdivision 7, 
303.20  are each increased by $1,000 for married taxpayers filing joint 
303.21  returns. 
303.22     (h) For tax years beginning after December 31, 2004, and 
303.23  before December 31, 2007, the $5,770 in paragraph (b) is 
303.24  increased to $7,770, the $15,080 in paragraph (c) is increased 
303.25  to $17,080, and the $17,890 in paragraph (d) is increased to 
303.26  $19,890, after being adjusted for inflation under subdivision 7, 
303.27  are each increased by $2,000 for married taxpayers filing joint 
303.28  returns. 
303.29     (i) For tax years beginning after December 31, 2007, and 
303.30  before December 31, 2010, the $5,770 in paragraph (b) is 
303.31  increased to $8,770, the $15,080 in paragraph (c) is increased 
303.32  to $18,080, and the $17,890 in paragraph (d) is increased to 
303.33  $20,890, after being adjusted for inflation under subdivision 7, 
303.34  are each increased by $3,000 for married taxpayers filing joint 
303.35  returns.  For tax years beginning after December 31, 2008, the 
303.36  $3,000 is adjusted annually for inflation under subdivision 7. 
304.1      (j) The commissioner shall construct tables showing the 
304.2   amount of the credit at various income levels and make them 
304.3   available to taxpayers.  The tables shall follow the schedule 
304.4   contained in this subdivision, except that the commissioner may 
304.5   graduate the transition between income brackets. 
304.6      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
304.7   beginning after December 31, 2002. 
304.8      Sec. 11.  Minnesota Statutes 2002, section 290.0675, 
304.9   subdivision 2, is amended to read: 
304.10     Subd. 2.  [CREDIT ALLOWED.] A married couple filing a joint 
304.11  return is allowed a credit against the tax imposed under section 
304.12  290.06.  
304.13     The minimum taxable income for the married couple to be 
304.14  eligible for the credit is $25,680, and the minimum earned 
304.15  income in order for the couple to be eligible for the credit is 
304.16  $14,250 for each spouse. 
304.17     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
304.18  beginning after December 31, 2002. 
304.19     Sec. 12.  Minnesota Statutes 2002, section 290.0675, 
304.20  subdivision 3, is amended to read: 
304.21     Subd. 3.  [CREDIT AMOUNT.] The credit amount is the 
304.22  difference between the tax on the couple's joint Minnesota 
304.23  taxable income under the rates and income levels in section 
304.24  290.06, subdivision 2c, paragraph (a), as adjusted for the 
304.25  taxable year by section 290.06, subdivision 2d, and the sum of 
304.26  the tax under the rates and income levels of section 290.06, 
304.27  subdivision 2c, paragraph (b), as adjusted for the taxable year 
304.28  by section 290.06, subdivision 2d, on the earned income of the 
304.29  lesser-earning spouse, and the tax under the rates and income 
304.30  levels of section 290.06, subdivision 2c, paragraph (b), as 
304.31  adjusted for the taxable year by section 290.06, subdivision 2d, 
304.32  on the couple's joint Minnesota taxable income, minus the earned 
304.33  income of the lesser-earning spouse. 
304.34     The commissioner of revenue shall prepare and make 
304.35  available to taxpayers a comprehensive table showing the credit 
304.36  under this section at brackets of earnings of the lesser-earning 
305.1   spouse and joint taxable income.  The brackets of earnings shall 
305.2   not be more than $2,000. 
305.3      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
305.4   beginning after December 31, 2002. 
305.5      Sec. 13.  Minnesota Statutes 2002, section 290.0679, 
305.6   subdivision 2, is amended to read: 
305.7      Subd. 2.  [CONDITIONS FOR ASSIGNMENT.] A qualifying 
305.8   taxpayer may assign all or part of an anticipated refund for the 
305.9   current and future taxable years to a financial institution or a 
305.10  qualifying organization.  A financial institution or qualifying 
305.11  organization accepting assignment must pay the amount secured by 
305.12  the assignment to a third-party vendor.  The commissioner of 
305.13  children, families, and learning shall provide a list of 
305.14  categories of, upon request from a third-party vendor, certify 
305.15  that the vendor's products and services that qualify for the 
305.16  education credit to financial institutions and qualifying 
305.17  organizations.  A denial of a certification is subject to the 
305.18  contested case procedure under chapter 14.  A financial 
305.19  institution or qualifying organization that accepts assignments 
305.20  under this section must verify as part of the assignment 
305.21  documentation that the product or service to be provided by the 
305.22  third-party vendor qualifies has been certified by the 
305.23  commissioner of children, families, and learning as qualifying 
305.24  for the education credit.  The amount assigned for the current 
305.25  and future taxable years may not exceed the maximum allowable 
305.26  education credit for the current taxable year.  Both the 
305.27  taxpayer and spouse must consent to the assignment of a refund 
305.28  from a joint return. 
305.29     <b>[EFFECTIVE DATE.]</b> This section is effective for assignments 
305.30  made on or after the day following final enactment. 
305.31     Sec. 14.  Minnesota Statutes 2002, section 290.0802, 
305.32  subdivision 1, is amended to read: 
305.33     Subdivision 1.  [DEFINITIONS.] For purposes of this 
305.34  section, the following terms have the meanings given. 
305.35     (a) "Adjusted gross income" means federal adjusted gross 
305.36  income as used in section 22(d) of the Internal Revenue Code for 
306.1   the taxable year, plus a lump sum distribution as defined in 
306.2   section 402(e)(3) of the Internal Revenue Code, and less any 
306.3   pension, annuity, or disability benefits included in federal 
306.4   gross income but not subject to state taxation other than the 
306.5   subtraction allowed under section 290.01, subdivision 19b, 
306.6   clause (4). 
306.7      (b) "Disability income" means disability income as defined 
306.8   in section 22(c)(2)(B)(iii) of the Internal Revenue Code. 
306.9      (c) "Nontaxable retirement and disability benefits" means 
306.10  the amount of pension, annuity, or disability benefits that 
306.11  would be included in the reduction under section 22(c)(3) of the 
306.12  Internal Revenue Code and pension, annuity, or disability 
306.13  benefits included in federal gross income but not subject to 
306.14  state taxation other than the subtraction allowed under section 
306.15  290.01, subdivision 19b, clause (4). 
306.16     (d) "Qualified individual" means a qualified individual as 
306.17  defined in section 22(b) of the Internal Revenue Code. 
306.18     (e) "Social security benefits above the second federal 
306.19  threshold" means the amount of social security benefits included 
306.20  in federal taxable income due to the provisions of section 13215 
306.21  of the Omnibus Budget Reconciliation Act of 1993, Public Law 
306.22  Number 103-66. 
306.23     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
306.24  beginning after December 31, 2002. 
306.25     Sec. 15.  Minnesota Statutes 2002, section 291.005, 
306.26  subdivision 1, is amended to read: 
306.27     Subdivision 1.  Unless the context otherwise clearly 
306.28  requires, the following terms used in this chapter shall have 
306.29  the following meanings: 
306.30     (1) "Federal gross estate" means the gross estate of a 
306.31  decedent as valued and otherwise determined for federal estate 
306.32  tax purposes by federal taxing authorities pursuant to the 
306.33  provisions of the Internal Revenue Code. 
306.34     (2) "Minnesota gross estate" means the federal gross estate 
306.35  of a decedent after (a) excluding therefrom any property 
306.36  included therein which has its situs outside Minnesota and 
307.1   pensions exempt from tax under this chapter pursuant to section 
307.2   352.15, subdivision 1; 353.15, subdivision 1; 354.10, 
307.3   subdivision 1; 354B.30; or 354C.165, and (b) including therein 
307.4   any property omitted from the federal gross estate which is 
307.5   includable therein, has its situs in Minnesota, and was not 
307.6   disclosed to federal taxing authorities.  
307.7      (3) "Personal representative" means the executor, 
307.8   administrator or other person appointed by the court to 
307.9   administer and dispose of the property of the decedent.  If 
307.10  there is no executor, administrator or other person appointed, 
307.11  qualified, and acting within this state, then any person in 
307.12  actual or constructive possession of any property having a situs 
307.13  in this state which is included in the federal gross estate of 
307.14  the decedent shall be deemed to be a personal representative to 
307.15  the extent of the property and the Minnesota estate tax due with 
307.16  respect to the property. 
307.17     (4) "Resident decedent" means an individual whose domicile 
307.18  at the time of death was in Minnesota. 
307.19     (5) "Nonresident decedent" means an individual whose 
307.20  domicile at the time of death was not in Minnesota. 
307.21     (6) "Situs of property" means, with respect to real 
307.22  property, the state or country in which it is located; with 
307.23  respect to tangible personal property, the state or country in 
307.24  which it was normally kept or located at the time of the 
307.25  decedent's death; and with respect to intangible personal 
307.26  property, the state or country in which the decedent was 
307.27  domiciled at death. 
307.28     (7) "Commissioner" means the commissioner of revenue or any 
307.29  person to whom the commissioner has delegated functions under 
307.30  this chapter. 
307.31     (8) "Internal Revenue Code" means the United States 
307.32  Internal Revenue Code of 1986, as amended through December 31, 
307.33  2000 2002. 
307.34     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
307.35  decedents dying after December 31, 2002. 
307.36     Sec. 16.  Minnesota Statutes 2002, section 291.03, 
308.1   subdivision 1, is amended to read: 
308.2      Subdivision 1.  [TAX AMOUNT.] The tax imposed shall be an 
308.3   amount equal to the proportion of the maximum credit computed 
308.4   under section 2011 of the Internal Revenue Code, as amended 
308.5   through December 31, 2000, for state death taxes as the 
308.6   Minnesota gross estate bears to the value of the federal gross 
308.7   estate.  For a resident decedent, the tax shall be the maximum 
308.8   credit computed under section 2011 of the Internal Revenue Code 
308.9   reduced by the amount of the death tax paid the other state and 
308.10  credited against the federal estate tax if this results in a 
308.11  larger amount of tax than the proportionate amount of the 
308.12  credit.  The tax determined under this paragraph shall not be 
308.13  greater than the federal estate tax computed under section 2001 
308.14  of the Internal Revenue Code after the allowance of the federal 
308.15  credits allowed under section 2010 of the Internal Revenue Code 
308.16  of 1986, as amended through December 31, 2000.  For the purposes 
308.17  of this section, expenses which are deducted for federal income 
308.18  tax purposes under section 642(g) of the Internal Revenue Code 
308.19  as amended through December 31, 2002, are not allowable in 
308.20  computing the tax under this chapter. 
308.21     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
308.22  decedents dying after December 31, 2002. 
308.23     Sec. 17.  Minnesota Statutes 2002, section 352.15, 
308.24  subdivision 1, is amended to read: 
308.25     Subdivision 1.  [EXEMPTION; EXCEPTIONS.] None of the money, 
308.26  annuities, or other benefits mentioned in this chapter is 
308.27  assignable either in law or in equity or subject to state estate 
308.28  tax, or to execution, levy, attachment, garnishment, or other 
308.29  legal process, except as provided in subdivision 1a or section 
308.30  518.58, 518.581, or 518.6111.  
308.31     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
308.32  decedents dying after December 31, 2002. 
308.33     Sec. 18.  Minnesota Statutes 2002, section 353.15, 
308.34  subdivision 1, is amended to read: 
308.35     Subdivision 1.  [EXEMPTION; EXCEPTIONS.] No money, annuity, 
308.36  or benefit provided for in this chapter is assignable or subject 
309.1   to any state estate tax, or to execution, levy, attachment, 
309.2   garnishment, or legal process, except as provided in subdivision 
309.3   2 or section 518.58, 518.581, or 518.6111.  
309.4      <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
309.5   decedents dying after December 31, 2002. 
309.6      Sec. 19.  Minnesota Statutes 2002, section 354.10, 
309.7   subdivision 1, is amended to read: 
309.8      Subdivision 1.  [EXEMPTION; EXCEPTIONS.] The right of a 
309.9   teacher to take advantage of the benefits provided by this 
309.10  chapter, is a personal right only and is not assignable.  All 
309.11  money to the credit of a teacher's account in the fund or any 
309.12  money payable to the teacher from the fund belongs to the state 
309.13  of Minnesota until actually paid to the teacher or a beneficiary 
309.14  under this chapter.  The association may acknowledge a properly 
309.15  completed power of attorney form.  An assignment or attempted 
309.16  assignment of a teacher's interest in the fund, or of the 
309.17  beneficiary's interest in the fund, by a teacher or a 
309.18  beneficiary is void and exempt from taxation under chapter 291 
309.19  and from garnishment or levy under attachment or execution, 
309.20  except as provided in subdivision 2 or 3, or section 518.58, 
309.21  518.581, or 518.6111.  
309.22     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
309.23  decedents dying after December 31, 2002. 
309.24     Sec. 20.  Minnesota Statutes 2002, section 354B.30, is 
309.25  amended to read: 
309.26     354B.30 [PROHIBITION ON LOANS OR PRETERMINATION 
309.27  DISTRIBUTIONS.] 
309.28     (a) No participant may obtain a loan from the plan or 
309.29  obtain any distribution from the plan at a time before the 
309.30  participant terminates the employment that gave rise to plan 
309.31  coverage. 
309.32     (b) No amounts to the credit of the plan are assignable 
309.33  either in law or in equity, are subject to state estate tax, or 
309.34  are subject to execution, levy, attachment, garnishment, or 
309.35  other legal process, except as provided in section 518.58, 
309.36  518.581, or 518.6111.  
310.1      <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
310.2   decedents dying after December 31, 2002. 
310.3      Sec. 21.  Minnesota Statutes 2002, section 354C.165, is 
310.4   amended to read: 
310.5      354C.165 [PROHIBITION ON LOANS OR PRETERMINATION 
310.6   DISTRIBUTIONS.] 
310.7      (a) Except as provided in paragraph (c), no participant may 
310.8   obtain a loan or any distribution from the plan before the 
310.9   participant terminates the employment that gave rise to plan 
310.10  coverage. 
310.11     (b) No amounts to the credit of the plan are assignable 
310.12  either in law or in equity, are subject to state estate tax, or 
310.13  are subject to execution, levy, attachment, garnishment, or 
310.14  other legal process, except as provided in section 518.58, 
310.15  518.581, or 518.6111.  
310.16     (c) Unless prohibited by or subject to a penalty under 
310.17  federal law, a teacher who is a participant in the supplemental 
310.18  retirement plan may request, in writing, a transfer of all or a 
310.19  portion of the funds accumulated in the person's supplemental 
310.20  plan account to the teachers retirement association to purchase 
310.21  service credit under sections 354.53, 354.533, 354.534, 354.535, 
310.22  354.536, 354.537, and 354.538 or to the teachers retirement fund 
310.23  association to purchase service credit under sections 354A.097, 
310.24  354A.098, 354A.099, 354A.101, 354A.102, 354A.103, and 354A.104.  
310.25  Upon receipt of a valid request, the board shall execute the 
310.26  transfer.  The transfer must be a fund-to-fund transfer, and in 
310.27  no event shall the participant directly receive any of the funds 
310.28  while still employed by the board.  In no event may the board 
310.29  transfer more than the participant's account balance.  The 
310.30  board, in cooperation with the executive director of the 
310.31  teachers retirement association, shall develop the forms for 
310.32  requesting a transfer and the procedures for executing the 
310.33  requested transfers. 
310.34     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
310.35  decedents dying after December 31, 2002. 
310.36     Sec. 22.  Laws 2001, First Special Session chapter 5, 
311.1   article 9, section 12, the effective date, is amended to read: 
311.2      <b>[EFFECTIVE DATE.]</b> This section is effective for assignment 
311.3   of refunds filed with the commissioner after December 31, 2001.  
311.4   The time period for filing assignments expires December 31, 
311.5   2003, but assignments filed on or before that date remain in 
311.6   effect until satisfied or canceled. 
311.7      Sec. 23.  [REPEALER.] 
311.8      (a) Minnesota Statutes 2002, sections 290.0671, subdivision 
311.9   3; and 290.0675, subdivision 5, are repealed effective for tax 
311.10  years beginning after December 31, 2002. 
311.11     (b) Minnesota Rules, parts 8007.0300, subpart 3; 8009.7100; 
311.12  8009.7200; 8009.7300; 8009.7400; and 8092.1000, are repealed 
311.13  effective the day following final enactment.  
311.14                             ARTICLE 13
311.15                           FEDERAL UPDATE 
311.16     Section 1.  Minnesota Statutes 2002, section 289A.02, 
311.17  subdivision 7, is amended to read: 
311.18     Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
311.19  defined otherwise, "Internal Revenue Code" means the Internal 
311.20  Revenue Code of 1986, as amended through March 15 December 31, 
311.21  2002. 
311.22     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
311.23  following final enactment. 
311.24     Sec. 2.  Minnesota Statutes 2002, section 290.01, 
311.25  subdivision 19, is amended to read: 
311.26     Subd. 19.  [NET INCOME.] The term "net income" means the 
311.27  federal taxable income, as defined in section 63 of the Internal 
311.28  Revenue Code of 1986, as amended through the date named in this 
311.29  subdivision, incorporating any elections made by the taxpayer in 
311.30  accordance with the Internal Revenue Code in determining federal 
311.31  taxable income for federal income tax purposes, and with the 
311.32  modifications provided in subdivisions 19a to 19f. 
311.33     In the case of a regulated investment company or a fund 
311.34  thereof, as defined in section 851(a) or 851(g) of the Internal 
311.35  Revenue Code, federal taxable income means investment company 
311.36  taxable income as defined in section 852(b)(2) of the Internal 
312.1   Revenue Code, except that:  
312.2      (1) the exclusion of net capital gain provided in section 
312.3   852(b)(2)(A) of the Internal Revenue Code does not apply; 
312.4      (2) the deduction for dividends paid under section 
312.5   852(b)(2)(D) of the Internal Revenue Code must be applied by 
312.6   allowing a deduction for capital gain dividends and 
312.7   exempt-interest dividends as defined in sections 852(b)(3)(C) 
312.8   and 852(b)(5) of the Internal Revenue Code; and 
312.9      (3) the deduction for dividends paid must also be applied 
312.10  in the amount of any undistributed capital gains which the 
312.11  regulated investment company elects to have treated as provided 
312.12  in section 852(b)(3)(D) of the Internal Revenue Code.  
312.13     The net income of a real estate investment trust as defined 
312.14  and limited by section 856(a), (b), and (c) of the Internal 
312.15  Revenue Code means the real estate investment trust taxable 
312.16  income as defined in section 857(b)(2) of the Internal Revenue 
312.17  Code.  
312.18     The net income of a designated settlement fund as defined 
312.19  in section 468B(d) of the Internal Revenue Code means the gross 
312.20  income as defined in section 468B(b) of the Internal Revenue 
312.21  Code. 
312.22     The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
312.23  1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
312.24  1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
312.25  Protection Act, Public Law Number 104-188, the provisions of 
312.26  Public Law Number 104-117, the provisions of sections 313(a) and 
312.27  (b)(1), 602(a), 913(b), 941, 961, 971, 1001(a) and (b), 1002, 
312.28  1003, 1012, 1013, 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 
312.29  1111(a), 1131(b) and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) 
312.30  and (h), and 1604(d)(1) of the Taxpayer Relief Act of 1997, 
312.31  Public Law Number 105-34, the provisions of section 6010 of the 
312.32  Internal Revenue Service Restructuring and Reform Act of 1998, 
312.33  Public Law Number 105-206, the provisions of section 4003 of the 
312.34  Omnibus Consolidated and Emergency Supplemental Appropriations 
312.35  Act, 1999, Public Law Number 105-277, and the provisions of 
312.36  section 318 of the Consolidated Appropriation Act of 2001, 
313.1   Public Law Number 106-554, shall become effective at the time 
313.2   they become effective for federal purposes. 
313.3      The Internal Revenue Code of 1986, as amended through 
313.4   December 31, 1996, shall be in effect for taxable years 
313.5   beginning after December 31, 1996. 
313.6      The provisions of sections 202(a) and (b), 221(a), 225, 
313.7   312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 
313.8   (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 
313.9   1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 
313.10  1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 
313.11  of the Taxpayer Relief Act of 1997, Public Law Number 105-34, 
313.12  the provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 
313.13  7002, and 7003 of the Internal Revenue Service Restructuring and 
313.14  Reform Act of 1998, Public Law Number 105-206, the provisions of 
313.15  section 3001 of the Omnibus Consolidated and Emergency 
313.16  Supplemental Appropriations Act, 1999, Public Law Number 
313.17  105-277, the provisions of section 3001 of the Miscellaneous 
313.18  Trade and Technical Corrections Act of 1999, Public Law Number 
313.19  106-36, and the provisions of section 316 of the Consolidated 
313.20  Appropriation Act of 2001, Public Law Number 106-554, shall 
313.21  become effective at the time they become effective for federal 
313.22  purposes. 
313.23     The Internal Revenue Code of 1986, as amended through 
313.24  December 31, 1997, shall be in effect for taxable years 
313.25  beginning after December 31, 1997. 
313.26     The provisions of sections 5002, 6009, 6011, and 7001 of 
313.27  the Internal Revenue Service Restructuring and Reform Act of 
313.28  1998, Public Law Number 105-206, the provisions of section 9010 
313.29  of the Transportation Equity Act for the 21st Century, Public 
313.30  Law Number 105-178, the provisions of sections 1004, 4002, and 
313.31  5301 of the Omnibus Consolidation and Emergency Supplemental 
313.32  Appropriations Act, 1999, Public Law Number 105-277, the 
313.33  provision of section 303 of the Ricky Ray Hemophilia Relief Fund 
313.34  Act of 1998, Public Law Number 105-369, the provisions of 
313.35  sections 532, 534, 536, 537, and 538 of the Ticket to Work and 
313.36  Work Incentives Improvement Act of 1999, Public Law Number 
314.1   106-170, the provisions of the Installment Tax Correction Act of 
314.2   2000, Public Law Number 106-573, and the provisions of section 
314.3   309 of the Consolidated Appropriation Act of 2001, Public Law 
314.4   Number 106-554, shall become effective at the time they become 
314.5   effective for federal purposes. 
314.6      The Internal Revenue Code of 1986, as amended through 
314.7   December 31, 1998, shall be in effect for taxable years 
314.8   beginning after December 31, 1998.  
314.9      The provisions of the FSC Repeal and Extraterritorial 
314.10  Income Exclusion Act of 2000, Public Law Number 106-519, and the 
314.11  provision of section 412 of the Job Creation and Worker 
314.12  Assistance Act of 2002, Public Law Number 107-147, shall become 
314.13  effective at the time it became effective for federal purposes. 
314.14     The Internal Revenue Code of 1986, as amended through 
314.15  December 31, 1999, shall be in effect for taxable years 
314.16  beginning after December 31, 1999.  The provisions of sections 
314.17  306 and 401 of the Consolidated Appropriation Act of 2001, 
314.18  Public Law Number 106-554, and the provision of section 
314.19  632(b)(2)(A) of the Economic Growth and Tax Relief 
314.20  Reconciliation Act of 2001, Public Law Number 107-16, and 
314.21  provisions of sections 101 and 402 of the Job Creation and 
314.22  Worker Assistance Act of 2002, Public Law Number 107-147, shall 
314.23  become effective at the same time it became effective for 
314.24  federal purposes. 
314.25     The Internal Revenue Code of 1986, as amended through 
314.26  December 31, 2000, shall be in effect for taxable years 
314.27  beginning after December 31, 2000.  The provisions of sections 
314.28  659a and 671 of the Economic Growth and Tax Relief 
314.29  Reconciliation Act of 2001, Public Law Number 107-16, the 
314.30  provisions of sections 104, 105, and 111 of the Victims of 
314.31  Terrorism Tax Relief Act of 2001, Public Law Number 107-134, and 
314.32  the provisions of sections 201, 403, 413, and 606 of the Job 
314.33  Creation and Worker Assistance Act of 2002, Public Law Number 
314.34  107-147, shall become effective at the same time it became 
314.35  effective for federal purposes. 
314.36     The Internal Revenue Code of 1986, as amended through March 
315.1   15, 2002, shall be in effect for taxable years beginning after 
315.2   December 31, 2001. 
315.3      The provisions of sections 101 and 102 of the Victims of 
315.4   Terrorism Tax Relief Act of 2001, Public Law Number 107-134, 
315.5   shall become effective at the same time it becomes effective for 
315.6   federal purposes. 
315.7      The Internal Revenue Code of 1986, as amended through 
315.8   December 31, 2002, shall be in effect for taxable years 
315.9   beginning after December 31, 2002. 
315.10     Except as otherwise provided, references to the Internal 
315.11  Revenue Code in subdivisions 19a to 19g mean the code in effect 
315.12  for purposes of determining net income for the applicable year. 
315.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
315.14  following final enactment. 
315.15     Sec. 3.  Minnesota Statutes 2002, section 290.01, 
315.16  subdivision 31, is amended to read: 
315.17     Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
315.18  defined otherwise, "Internal Revenue Code" means the Internal 
315.19  Revenue Code of 1986, as amended through March 15 December 31, 
315.20  2002. 
315.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
315.22  following final enactment. 
315.23     Sec. 4.  Minnesota Statutes 2002, section 290A.03, 
315.24  subdivision 15, is amended to read: 
315.25     Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
315.26  means the Internal Revenue Code of 1986, as amended 
315.27  through March 15 December 31, 2002. 
315.28     <b>[EFFECTIVE DATE.]</b> This section is effective for refunds 
315.29  payable for rents paid in 2003 and thereafter and property taxes 
315.30  payable in 2004 and thereafter. 
315.31                             ARTICLE 14
315.32                DEPARTMENT PROPERTY TAX INITIATIVES 
315.33     Section 1.  Minnesota Statutes 2002, section 270.06, is 
315.34  amended to read: 
315.35     270.06 [POWERS AND DUTIES.] 
315.36     The commissioner of revenue shall: 
316.1      (1) have and exercise general supervision over the 
316.2   administration of the assessment and taxation laws of the state, 
316.3   over assessors, town, county, and city boards of review and 
316.4   equalization, and all other assessing officers in the 
316.5   performance of their duties, to the end that all assessments of 
316.6   property be made relatively just and equal in compliance with 
316.7   the laws of the state; 
316.8      (2) confer with, advise, and give the necessary 
316.9   instructions and directions to local assessors and local boards 
316.10  of review throughout the state as to their duties under the laws 
316.11  of the state; 
316.12     (3) direct proceedings, actions, and prosecutions to be 
316.13  instituted to enforce the laws relating to the liability and 
316.14  punishment of public officers and officers and agents of 
316.15  corporations for failure or negligence to comply with the 
316.16  provisions of the laws of this state governing returns of 
316.17  assessment and taxation of property, and cause complaints to be 
316.18  made against local assessors, members of boards of equalization, 
316.19  members of boards of review, or any other assessing or taxing 
316.20  officer, to the proper authority, for their removal from office 
316.21  for misconduct or negligence of duty; 
316.22     (4) require county attorneys to assist in the commencement 
316.23  of prosecutions in actions or proceedings for removal, 
316.24  forfeiture and punishment for violation of the laws of this 
316.25  state in respect to the assessment and taxation of property in 
316.26  their respective districts or counties; 
316.27     (5) require town, city, county, and other public officers 
316.28  to report information as to the assessment of property, 
316.29  collection of taxes received from licenses and other sources, 
316.30  and such other information as may be needful in the work of the 
316.31  department of revenue, in such form and upon such blanks as the 
316.32  commissioner may prescribe; 
316.33     (6) require individuals, copartnerships, companies, 
316.34  associations, and corporations to furnish information concerning 
316.35  their capital, funded or other debt, current assets and 
316.36  liabilities, earnings, operating expenses, taxes, as well as all 
317.1   other statements now required by law for taxation purposes; 
317.2      (7) subpoena witnesses, at a time and place reasonable 
317.3   under the circumstances, to appear and give testimony, and to 
317.4   produce books, records, papers and documents for inspection and 
317.5   copying relating to any matter which the commissioner may have 
317.6   authority to investigate or determine; 
317.7      (8) issue a subpoena which does not identify the person or 
317.8   persons with respect to whose liability the subpoena is issued, 
317.9   but only if (a) the subpoena relates to the investigation of a 
317.10  particular person or ascertainable group or class of persons, 
317.11  (b) there is a reasonable basis for believing that such person 
317.12  or group or class of persons may fail or may have failed to 
317.13  comply with any law administered by the commissioner, (c) the 
317.14  information sought to be obtained from the examination of the 
317.15  records (and the identity of the person or persons with respect 
317.16  to whose liability the subpoena is issued) is not readily 
317.17  available from other sources, (d) the subpoena is clear and 
317.18  specific as to the information sought to be obtained, and (e) 
317.19  the information sought to be obtained is limited solely to the 
317.20  scope of the investigation.  Provided further that the party 
317.21  served with a subpoena which does not identify the person or 
317.22  persons with respect to whose tax liability the subpoena is 
317.23  issued shall have the right, within 20 days after service of the 
317.24  subpoena, to petition the district court for the judicial 
317.25  district in which lies the county in which that party is located 
317.26  for a determination as to whether the commissioner of revenue 
317.27  has complied with all the requirements in (a) to (e), and thus, 
317.28  whether the subpoena is enforceable.  If no such petition is 
317.29  made by the party served within the time prescribed, the 
317.30  subpoena shall have the force and effect of a court order; 
317.31     (9) cause the deposition of witnesses residing within or 
317.32  without the state, or absent therefrom, to be taken, upon notice 
317.33  to the interested party, if any, in like manner that depositions 
317.34  of witnesses are taken in civil actions in the district court, 
317.35  in any matter which the commissioner may have authority to 
317.36  investigate or determine; 
318.1      (10) investigate the tax laws of other states and countries 
318.2   and to formulate and submit to the legislature such legislation 
318.3   as the commissioner may deem expedient to prevent evasions of 
318.4   assessment and taxing laws, and secure just and equal taxation 
318.5   and improvement in the system of assessment and taxation in this 
318.6   state; 
318.7      (11) consult and confer with the governor upon the subject 
318.8   of taxation, the administration of the laws in regard thereto, 
318.9   and the progress of the work of the department of revenue, and 
318.10  furnish the governor, from time to time, such assistance and 
318.11  information as the governor may require relating to tax matters; 
318.12     (12) transmit to the governor, on or before the third 
318.13  Monday in December of each even-numbered year, and to each 
318.14  member of the legislature, on or before November 15 of each 
318.15  even-numbered year, the report of the department of revenue for 
318.16  the preceding years, showing all the taxable property in the 
318.17  state and the value of the same, in tabulated form; 
318.18     (13) inquire into the methods of assessment and taxation 
318.19  and ascertain whether the assessors faithfully discharge their 
318.20  duties, particularly as to their compliance with the laws 
318.21  requiring the assessment of all property not exempt from 
318.22  taxation; 
318.23     (14) administer and enforce the assessment and collection 
318.24  of state taxes and fees, including the use of any remedy 
318.25  available to nongovernmental creditors, and, from time to time, 
318.26  make, publish, and distribute rules for the administration and 
318.27  enforcement of assessments and fees laws administered by the 
318.28  commissioner and state tax laws.  The rules have the force of 
318.29  law; 
318.30     (15) prepare blank forms for the returns required by state 
318.31  tax law and distribute them throughout the state, furnishing 
318.32  them subject to charge on application; 
318.33     (16) prescribe rules governing the qualification and 
318.34  practice of agents, attorneys, or other persons representing 
318.35  taxpayers before the commissioner.  The rules may require that 
318.36  those persons, agents, and attorneys show that they are of good 
319.1   character and in good repute, have the necessary qualifications 
319.2   to give taxpayers valuable services, and are otherwise competent 
319.3   to advise and assist taxpayers in the presentation of their case 
319.4   before being recognized as representatives of taxpayers.  After 
319.5   due notice and opportunity for hearing, the commissioner may 
319.6   suspend and bar from further practice before the commissioner 
319.7   any person, agent, or attorney who is shown to be incompetent or 
319.8   disreputable, who refuses to comply with the rules, or who with 
319.9   intent to defraud, willfully or knowingly deceives, misleads, or 
319.10  threatens a taxpayer or prospective taxpayer, by words, 
319.11  circular, letter, or by advertisement.  This clause does not 
319.12  curtail the rights of individuals to appear in their own behalf 
319.13  or partners or corporations' officers to appear in behalf of 
319.14  their respective partnerships or corporations; 
319.15     (17) appoint agents as the commissioner considers necessary 
319.16  to make examinations and determinations.  The agents have the 
319.17  rights and powers conferred on the commissioner to subpoena, 
319.18  examine, and copy books, records, papers, or memoranda, subpoena 
319.19  witnesses, administer oaths and affirmations, and take 
319.20  testimony.  In addition to administrative subpoenas of the 
319.21  commissioner and the agents, upon demand of the commissioner or 
319.22  an agent, the court administrator of any district court shall 
319.23  issue a subpoena for the attendance of a witness or the 
319.24  production of books, papers, records, or memoranda before the 
319.25  agent for inspection and copying.  Disobedience of a court 
319.26  administrator's subpoena shall be punished by the district court 
319.27  of the district in which the subpoena is issued, or in the case 
319.28  of a subpoena issued by the commissioner or an agent, by the 
319.29  district court of the district in which the party served with 
319.30  the subpoena is located, in the same manner as contempt of the 
319.31  district court; 
319.32     (18) appoint and employ additional help, purchase supplies 
319.33  or materials, or incur other expenditures in the enforcement of 
319.34  state tax laws as considered necessary.  The salaries of all 
319.35  agents and employees provided for in this chapter shall be fixed 
319.36  by the appointing authority, subject to the approval of the 
320.1   commissioner of administration; 
320.2      (19) execute and administer any agreement with the 
320.3   secretary of the treasury of the United States or a 
320.4   representative of another state regarding the exchange of 
320.5   information and administration of the tax laws; 
320.6      (20) authorize the use of unmarked motor vehicles to 
320.7   conduct seizures or criminal investigations pursuant to the 
320.8   commissioner's authority; and 
320.9      (21) exercise other powers and perform other duties 
320.10  required of or imposed upon the commissioner of revenue by law.  
320.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
320.12  following final enactment. 
320.13     Sec. 2.  Minnesota Statutes 2002, section 270.10, 
320.14  subdivision 1a, is amended to read: 
320.15     Subd. 1a.  [NOTIFICATION TO TAXPAYER.] At the same time 
320.16  that notice of the assessment, determination, or order of the 
320.17  commissioner is given to a taxpayer, the taxpayer must be 
320.18  notified in writing of the right to appeal to the tax court, and 
320.19  if applicable, to the small claims division.  Except in the case 
320.20  of mathematical or clerical errors, the notice must contain a 
320.21  description of the basis for, including applicable law and other 
320.22  factors considered in the determination, and a listing of the 
320.23  amounts of tax due, interest, additions to tax, and penalties.  
320.24  Failure to provide all the required information does not 
320.25  invalidate the notice for purposes of satisfying statutory 
320.26  notice requirements if the notice contains sufficient 
320.27  information to advise the taxpayer that an assessment, order, or 
320.28  other determination has been made.  The taxpayer may request 
320.29  further clarification within the time provided for appealing the 
320.30  determination.  In any notice of assessment, determination, or 
320.31  order dealing with property valuation or assessment for property 
320.32  tax purposes by the commissioner of revenue or a local unit of 
320.33  government, the taxpayer must be notified in writing that a 
320.34  taxpayer must appeal to the town or city board of equalization 
320.35  and to the county board of equalization before appealing to the 
320.36  small claims division of the tax court, except for those 
321.1   taxpayers whose original assessments are determined by the 
321.2   commissioner of revenue.  
321.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
321.4   following final enactment. 
321.5      Sec. 3.  Minnesota Statutes 2002, section 272.02, is 
321.6   amended by adding a subdivision to read: 
321.7      Subd. 56.  [COMPREHENSIVE HEALTH ASSOCIATION.] All property 
321.8   owned by the comprehensive health association is exempt to the 
321.9   extent provided in section 62E.10, subdivision 1. 
321.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
321.11  following final enactment. 
321.12     Sec. 4.  Minnesota Statutes 2002, section 272.02, is 
321.13  amended by adding a subdivision to read: 
321.14     Subd. 57.  [PRIVATE CEMETERIES.] All property owned by 
321.15  private cemeteries is exempt to the extent provided in section 
321.16  307.09. 
321.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
321.18  following final enactment. 
321.19     Sec. 5.  Minnesota Statutes 2002, section 272.02, is 
321.20  amended by adding a subdivision to read: 
321.21     Subd. 58.  [WESTERN LAKE SUPERIOR SANITARY BOARD.] All 
321.22  property owned, leased, controlled, used, or occupied for 
321.23  public, governmental, and municipal purposes by the Western Lake 
321.24  Superior Sanitary Board is exempt to the extent provided in 
321.25  section 458D.23. 
321.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
321.27  following final enactment. 
321.28     Sec. 6.  Minnesota Statutes 2002, section 272.02, is 
321.29  amended by adding a subdivision to read: 
321.30     Subd. 59.  [UNFINISHED SALE OR RENTAL PROJECTS.] Unfinished 
321.31  sale or rental projects are exempt to the extent provided in 
321.32  section 469.155, subdivision 17. 
321.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
321.34  following final enactment. 
321.35     Sec. 7.  Minnesota Statutes 2002, section 272.02, is 
321.36  amended by adding a subdivision to read: 
322.1      Subd. 60.  [SKYWAYS.] The pedestrian skyway system, 
322.2   underground pedestrian concourse, the people mover system, and 
322.3   publicly owned parking structures are exempt to the extent 
322.4   provided in section 469.127. 
322.5      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
322.6   following final enactment. 
322.7      Sec. 8.  Minnesota Statutes 2002, section 272.02, is 
322.8   amended by adding a subdivision to read: 
322.9      Subd. 61.  [MUNICIPAL RECREATION FACILITIES.] All property 
322.10  acquired and used by a city is exempt to the extent provided in 
322.11  section 471.191, subdivision 4. 
322.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
322.13  following final enactment. 
322.14     Sec. 9.  Minnesota Statutes 2002, section 272.02, is 
322.15  amended by adding a subdivision to read: 
322.16     Subd. 62.  [WATER AND WASTEWATER TREATMENT 
322.17  FACILITIES.] Related facilities owned by water and wastewater 
322.18  treatment providers who have contracted with a municipality to 
322.19  provide capital intensive public services to the municipality 
322.20  are exempt to the extent provided in section 471A.05. 
322.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
322.22  following final enactment. 
322.23     Sec. 10.  Minnesota Statutes 2002, section 272.12, is 
322.24  amended to read: 
322.25     272.12 [CONVEYANCES, TAXES PAID BEFORE RECORDING.] 
322.26     When: 
322.27     (a) a deed or other instrument conveying land, 
322.28     (b) a plat of any town site or addition thereto, 
322.29     (c) a survey required pursuant to section 508.47, 
322.30     (d) a condominium plat subject to chapter 515 or 515A or a 
322.31  declaration that contains such a plat, or 
322.32     (e) a common interest community plat subject to chapter 
322.33  515B or a declaration that contains such a plat, 
322.34  is presented to the county auditor for transfer, the auditor 
322.35  shall ascertain from the records if there be taxes delinquent 
322.36  upon the land described therein, or if it has been sold for 
323.1   taxes.  An assignment of a sheriff's or referee's certificate of 
323.2   sale, when the certificate of sale describes real estate, and 
323.3   certificates of redemption from mortgage or lien foreclosure 
323.4   sales, when the certificate of redemption encompasses real 
323.5   estate and is issued to a junior creditor, are considered 
323.6   instruments conveying land for the purposes of this section and 
323.7   section 272.121.  If there are taxes delinquent, the auditor 
323.8   shall certify to the same; and upon payment of such taxes, or in 
323.9   case no taxes are delinquent, shall transfer the land upon the 
323.10  books of the auditor's office, and note upon the instrument, 
323.11  over official signature, the words, "no delinquent taxes and 
323.12  transfer entered," or, if the land described has been sold or 
323.13  assigned to an actual purchaser for taxes, the words "paid by 
323.14  sale of land described within;" and, unless such statement is 
323.15  made upon such instrument, the county recorder or the registrar 
323.16  of titles shall refuse to receive or record the same; provided, 
323.17  that sheriff's or referees' certificates of sale on execution or 
323.18  foreclosure of a lien or mortgage, certificates of redemption 
323.19  from mortgage or lien foreclosure sales issued to the redeeming 
323.20  mortgagor or lienee, deeds of distribution made by a personal 
323.21  representative in probate proceedings, decrees and judgments, 
323.22  receivers receipts, patents, and copies of town or statutory 
323.23  city plats, in case the original plat filed in the office of the 
323.24  county recorder has been lost or destroyed, and the instruments 
323.25  releasing, removing and discharging reversionary and forfeiture 
323.26  provisions affecting title to land and instruments releasing, 
323.27  removing or discharging easement rights in land or building or 
323.28  other restrictions, may be recorded without such certificate; 
323.29  and, provided that instruments conveying land and, as 
323.30  appurtenant thereto an easement over adjacent tract or tracts of 
323.31  land, may be recorded without such certificate as to the land 
323.32  covered by such easement; and provided further, that any 
323.33  instrument granting an easement made in favor of any public 
323.34  utility or pipe line for conveying gas, liquids or solids in 
323.35  suspension, in the nature of a right-of-way over, along, across 
323.36  or under a tract of land may be recorded without such 
324.1   certificate as to the land covered by such easement.  Any 
324.2   instrument amending or restating the declarations, bylaws, 
324.3   plats, or other enabling Documents governing homeowners 
324.4   associations of condominiums, townhouses, common interest 
324.5   ownership communities, and other planned unit developments may 
324.6   be recorded without the auditor's certificate to the extent 
324.7   provided in section 515B.1-116(f). 
324.8      A deed of distribution made by a personal representative in 
324.9   a probate proceeding, a decree, or a judgment that conveys land 
324.10  shall be presented to the county auditor, who shall transfer the 
324.11  land upon the books of the auditor's office and note upon the 
324.12  instrument, over official signature, the words, "transfer 
324.13  entered", and the instrument may then be recorded.  A decree or 
324.14  judgment that affects title to land but does not convey land may 
324.15  be recorded without presentation to the auditor. 
324.16     A violation of this section by the county recorder or the 
324.17  registrar of titles shall be a gross misdemeanor, and, in 
324.18  addition to the punishment therefor, the recorder or registrar 
324.19  shall be liable to the grantee of any instrument so recorded for 
324.20  the amount of any damages sustained. 
324.21     When, as a condition to permitting the recording of deed or 
324.22  other instrument affecting the title to real estate previously 
324.23  forfeited to the state under the provisions of sections 281.16 
324.24  to 281.25, county officials, after such real estate has been 
324.25  purchased or repurchased, have required the payment of taxes 
324.26  erroneously assumed to have accrued against such real estate 
324.27  after forfeiture and before the date of purchase or repurchase, 
324.28  the sum required to be so paid shall be refunded to the persons 
324.29  entitled thereto out of moneys in the funds in which the sum so 
324.30  paid was placed.  Delinquent taxes are those taxes deemed 
324.31  delinquent under section 279.02. 
324.32     <b>[EFFECTIVE DATE.]</b> This section is effective for deeds or 
324.33  instruments accepted for recording or registration on or after 
324.34  July 1, 2003. 
324.35     Sec. 11.  Minnesota Statutes 2002, section 273.05, 
324.36  subdivision 1, is amended to read: 
325.1      Subdivision 1.  [APPOINTMENT OF TOWN AND CITY ASSESSORS.] 
325.2   Notwithstanding any other provision of law all town assessors 
325.3   shall be appointed by the town board, and notwithstanding any 
325.4   charter provisions to the contrary, all city assessors shall be 
325.5   appointed by the city council or other appointing authority as 
325.6   provided by law or charter.  Such assessors shall be residents 
325.7   of the state but need not be a resident of the town or city for 
325.8   which they are appointed.  They shall be selected and appointed 
325.9   because of their knowledge and training in the field of property 
325.10  taxation.  All town and statutory city assessors shall be 
325.11  appointed for indefinite terms.  A town or statutory city 
325.12  assessor who is an employee may be dismissed by the appointing 
325.13  authority for cause.  The term of the town or city assessors may 
325.14  be terminated at any time by the town board or city council on 
325.15  charges by the commissioner of revenue of inefficiency or 
325.16  neglect of duty.  Vacancies in the office of town or city 
325.17  assessor shall be filled within 90 days by appointment of the 
325.18  respective appointing authority indicated above.  If the vacancy 
325.19  is not filled within 90 days, the office shall be terminated.  
325.20  When a vacancy in the office of town or city assessor is not 
325.21  filled by appointment, and it is imperative that the office of 
325.22  assessor be filled, the county auditor shall appoint some 
325.23  resident of the county as assessor for such town or city.  The 
325.24  county auditor may appoint the county assessor as assessor for 
325.25  such town or city, in which case the town or city shall pay to 
325.26  the county treasurer the amount determined by the county auditor 
325.27  to be due for the services performed and expenses incurred by 
325.28  the county assessor in acting as assessor for such town or 
325.29  city.  The term of any town or statutory city assessor in a 
325.30  county electing in accordance with section 273.052 shall be 
325.31  terminated as provided in section 273.055. 
325.32     The commissioner of revenue may recommend to the state 
325.33  board of assessors the nonrenewal, suspension, or revocation of 
325.34  an assessor's license as provided in sections 270.41 to 270.53. 
325.35     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
325.36  following final enactment and applies to every town or city 
326.1   assessor whether that assessor was appointed before, on, or 
326.2   after the effective date. 
326.3      Sec. 12.  Minnesota Statutes 2002, section 273.061, is 
326.4   amended by adding a subdivision to read: 
326.5      Subd. 1a.  [COMPATIBLE OFFICES.] A person appointed as the 
326.6   county assessor also may serve as the county auditor, county 
326.7   treasurer, or county auditor-treasurer if those offices are 
326.8   appointive, provided that the person in the combined appointed 
326.9   office must not serve on the county board of appeal and 
326.10  equalization under section 274.13.  In a county in which the 
326.11  functions of the county assessor are combined with those of the 
326.12  county auditor or county auditor-treasurer, the county board may 
326.13  not delegate any authority, power, or responsibility under 
326.14  section 375.192, subdivision 4. 
326.15     <b>[EFFECTIVE DATE.]</b> This section is effective January 2, 2004.
326.16     Sec. 13.  Minnesota Statutes 2002, section 273.061, is 
326.17  amended by adding a subdivision to read: 
326.18     Subd. 1b.  [COMPATIBLE OFFICES IN COUNTIES CHANGING TO 
326.19  APPOINTED AUDITOR.] In a county in which the office of auditor, 
326.20  treasurer, or auditor-treasurer is an elective position, a 
326.21  person appointed as the county assessor also may serve as the 
326.22  county auditor, county treasurer, or county auditor-treasurer if 
326.23  a proposal to make the affected office appointive has been 
326.24  approved as required by other law and will be effective within 
326.25  five years. 
326.26     <b>[EFFECTIVE DATE.]</b> This section is effective January 2, 2004.
326.27     Sec. 14.  Minnesota Statutes 2002, section 273.061, is 
326.28  amended by adding a subdivision to read: 
326.29     Subd. 1c.  [INCOMPATIBLE OFFICES.] The person appointed as 
326.30  the county assessor must not also be the county attorney, a 
326.31  county board member, an elected county auditor, an elected 
326.32  county treasurer, an elected county auditor-treasurer, a town 
326.33  board supervisor for a town in the same county, or a city mayor 
326.34  or council member for a city in the same county.  The person 
326.35  appointed as the city assessor must not also be a city council 
326.36  member or mayor for the same city.  A person appointed as the 
327.1   town assessor must not also be a town board supervisor for the 
327.2   same town.  Except as provided in subdivision 1b, an assessor 
327.3   who accepts a position that is incompatible with the office of 
327.4   assessor is deemed to have resigned from the assessor position. 
327.5      <b>[EFFECTIVE DATE.]</b> This section is effective January 2, 2004.
327.6      Sec. 15.  Minnesota Statutes 2002, section 273.11, 
327.7   subdivision 1a, is amended to read: 
327.8      Subd. 1a.  [LIMITED MARKET VALUE.] In the case of all 
327.9   property classified as agricultural homestead or nonhomestead, 
327.10  residential homestead or nonhomestead, timber, or noncommercial 
327.11  seasonal residential recreational residential, the assessor 
327.12  shall compare the value with the taxable portion of the value 
327.13  determined in the preceding assessment.  
327.14     For assessment year 2002, the amount of the increase shall 
327.15  not exceed the greater of (1) ten percent of the value in the 
327.16  preceding assessment, or (2) 15 percent of the difference 
327.17  between the current assessment and the preceding assessment. 
327.18     For assessment year 2003, the amount of the increase shall 
327.19  not exceed the greater of (1) 12 percent of the value in the 
327.20  preceding assessment, or (2) 20 percent of the difference 
327.21  between the current assessment and the preceding assessment. 
327.22     For assessment year 2004, the amount of the increase shall 
327.23  not exceed the greater of (1) 15 percent of the value in the 
327.24  preceding assessment, or (2) 25 percent of the difference 
327.25  between the current assessment and the preceding assessment. 
327.26     For assessment year 2005, the amount of the increase shall 
327.27  not exceed the greater of (1) 15 percent of the value in the 
327.28  preceding assessment, or (2) 33 percent of the difference 
327.29  between the current assessment and the preceding assessment.  
327.30     For assessment year 2006, the amount of the increase shall 
327.31  not exceed the greater of (1) 15 percent of the value in the 
327.32  preceding assessment, or (2) 50 percent of the difference 
327.33  between the current assessment and the preceding assessment. 
327.34     This limitation shall not apply to increases in value due 
327.35  to improvements.  For purposes of this subdivision, the term 
327.36  "assessment" means the value prior to any exclusion under 
328.1   subdivision 16. 
328.2      The provisions of this subdivision shall be in effect 
328.3   through assessment year 2006 as provided in this subdivision. 
328.4      For purposes of the assessment/sales ratio study conducted 
328.5   under section 127A.48, and the computation of state aids paid 
328.6   under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 
328.7   477A, market values and net tax capacities determined under this 
328.8   subdivision and subdivision 16, shall be used. 
328.9      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
328.10  following final enactment. 
328.11     Sec. 16.  Minnesota Statutes 2002, section 273.124, 
328.12  subdivision 1, is amended to read: 
328.13     Subdivision 1.  [GENERAL RULE.] (a) Residential real estate 
328.14  that is occupied and used for the purposes of a homestead by its 
328.15  owner, who must be a Minnesota resident, is a residential 
328.16  homestead.  
328.17     Agricultural land, as defined in section 273.13, 
328.18  subdivision 23, that is occupied and used as a homestead by its 
328.19  owner, who must be a Minnesota resident, is an agricultural 
328.20  homestead. 
328.21     Dates for establishment of a homestead and homestead 
328.22  treatment provided to particular types of property are as 
328.23  provided in this section.  
328.24     Property held by a trustee under a trust is eligible for 
328.25  homestead classification if the requirements under this chapter 
328.26  are satisfied. 
328.27     The assessor shall require proof, as provided in 
328.28  subdivision 13, of the facts upon which classification as a 
328.29  homestead may be determined.  Notwithstanding any other law, the 
328.30  assessor may at any time require a homestead application to be 
328.31  filed in order to verify that any property classified as a 
328.32  homestead continues to be eligible for homestead status.  
328.33  Notwithstanding any other law to the contrary, the department of 
328.34  revenue may, upon request from an assessor, verify whether an 
328.35  individual who is requesting or receiving homestead 
328.36  classification has filed a Minnesota income tax return as a 
329.1   resident for the most recent taxable year for which the 
329.2   information is available. 
329.3      When there is a name change or a transfer of homestead 
329.4   property, the assessor may reclassify the property in the next 
329.5   assessment unless a homestead application is filed to verify 
329.6   that the property continues to qualify for homestead 
329.7   classification. 
329.8      (b) For purposes of this section, homestead property shall 
329.9   include property which is used for purposes of the homestead but 
329.10  is separated from the homestead by a road, street, lot, 
329.11  waterway, or other similar intervening property.  The term "used 
329.12  for purposes of the homestead" shall include but not be limited 
329.13  to uses for gardens, garages, or other outbuildings commonly 
329.14  associated with a homestead, but shall not include vacant land 
329.15  held primarily for future development.  In order to receive 
329.16  homestead treatment for the noncontiguous property, the owner 
329.17  must use the property for the purposes of the homestead, and 
329.18  must apply to the assessor, both by the deadlines given in 
329.19  subdivision 9.  After initial qualification for the homestead 
329.20  treatment, additional applications for subsequent years are not 
329.21  required. 
329.22     (c) Residential real estate that is occupied and used for 
329.23  purposes of a homestead by a relative of the owner is a 
329.24  homestead but only to the extent of the homestead treatment that 
329.25  would be provided if the related owner occupied the property.  
329.26  For purposes of this paragraph and paragraph (g), "relative" 
329.27  means a parent, stepparent, child, stepchild, grandparent, 
329.28  grandchild, brother, sister, uncle, aunt, nephew, or niece.  
329.29  This relationship may be by blood or marriage.  Property that 
329.30  has been classified as seasonal residential recreational 
329.31  residential property at any time during which it has been owned 
329.32  by the current owner or spouse of the current owner will not be 
329.33  reclassified as a homestead unless it is occupied as a homestead 
329.34  by the owner; this prohibition also applies to property that, in 
329.35  the absence of this paragraph, would have been classified as 
329.36  seasonal residential recreational residential property at the 
330.1   time when the residence was constructed.  Neither the related 
330.2   occupant nor the owner of the property may claim a property tax 
330.3   refund under chapter 290A for a homestead occupied by a 
330.4   relative.  In the case of a residence located on agricultural 
330.5   land, only the house, garage, and immediately surrounding one 
330.6   acre of land shall be classified as a homestead under this 
330.7   paragraph, except as provided in paragraph (d). 
330.8      (d) Agricultural property that is occupied and used for 
330.9   purposes of a homestead by a relative of the owner, is a 
330.10  homestead, only to the extent of the homestead treatment that 
330.11  would be provided if the related owner occupied the property, 
330.12  and only if all of the following criteria are met: 
330.13     (1) the relative who is occupying the agricultural property 
330.14  is a son, daughter, grandson, granddaughter, father, or mother 
330.15  of the owner of the agricultural property or a son, daughter, 
330.16  grandson, or granddaughter of the spouse of the owner of the 
330.17  agricultural property; 
330.18     (2) the owner of the agricultural property must be a 
330.19  Minnesota resident; 
330.20     (3) the owner of the agricultural property must not receive 
330.21  homestead treatment on any other agricultural property in 
330.22  Minnesota; and 
330.23     (4) the owner of the agricultural property is limited to 
330.24  only one agricultural homestead per family under this paragraph. 
330.25     Neither the related occupant nor the owner of the property 
330.26  may claim a property tax refund under chapter 290A for a 
330.27  homestead occupied by a relative qualifying under this 
330.28  paragraph.  For purposes of this paragraph, "agricultural 
330.29  property" means the house, garage, other farm buildings and 
330.30  structures, and agricultural land. 
330.31     Application must be made to the assessor by the owner of 
330.32  the agricultural property to receive homestead benefits under 
330.33  this paragraph.  The assessor may require the necessary proof 
330.34  that the requirements under this paragraph have been met. 
330.35     (e) In the case of property owned by a property owner who 
330.36  is married, the assessor must not deny homestead treatment in 
331.1   whole or in part if only one of the spouses occupies the 
331.2   property and the other spouse is absent due to:  (1) marriage 
331.3   dissolution proceedings, (2) legal separation, (3) employment or 
331.4   self-employment in another location, or (4) other personal 
331.5   circumstances causing the spouses to live separately, not 
331.6   including an intent to obtain two homestead classifications for 
331.7   property tax purposes.  To qualify under clause (3), the 
331.8   spouse's place of employment or self-employment must be at least 
331.9   50 miles distant from the other spouse's place of employment, 
331.10  and the homesteads must be at least 50 miles distant from each 
331.11  other.  Homestead treatment, in whole or in part, shall not be 
331.12  denied to the owner's spouse who previously occupied the 
331.13  residence with the owner if the absence of the owner is due to 
331.14  one of the exceptions provided in this paragraph. 
331.15     (f) The assessor must not deny homestead treatment in whole 
331.16  or in part if: 
331.17     (1) in the case of a property owner who is not married, the 
331.18  owner is absent due to residence in a nursing home, boarding 
331.19  care facility, or an elderly assisted living facility property 
331.20  as defined in section 273.13, subdivision 25a, and the property 
331.21  is not otherwise occupied; or 
331.22     (2) in the case of a property owner who is married, the 
331.23  owner or the owner's spouse or both are absent due to residence 
331.24  in a nursing home, boarding care facility, or an elderly 
331.25  assisted living facility property as defined in section 273.13, 
331.26  subdivision 25a, and the property is not occupied or is occupied 
331.27  only by the owner's spouse. 
331.28     (g) If an individual is purchasing property with the intent 
331.29  of claiming it as a homestead and is required by the terms of 
331.30  the financing agreement to have a relative shown on the deed as 
331.31  a coowner, the assessor shall allow a full homestead 
331.32  classification.  This provision only applies to first-time 
331.33  purchasers, whether married or single, or to a person who had 
331.34  previously been married and is purchasing as a single individual 
331.35  for the first time.  The application for homestead benefits must 
331.36  be on a form prescribed by the commissioner and must contain the 
332.1   data necessary for the assessor to determine if full homestead 
332.2   benefits are warranted. 
332.3      (h) If residential or agricultural real estate is occupied 
332.4   and used for purposes of a homestead by a child of a deceased 
332.5   owner and the property is subject to jurisdiction of probate 
332.6   court, the child shall receive relative homestead classification 
332.7   under paragraph (c) or (d) to the same extent they would be 
332.8   entitled to it if the owner was still living, until the probate 
332.9   is completed.  For purposes of this paragraph, "child" includes 
332.10  a relationship by blood or by marriage. 
332.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
332.12  following final enactment. 
332.13     Sec. 17.  Minnesota Statutes 2002, section 273.13, 
332.14  subdivision 25, is amended to read: 
332.15     Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
332.16  estate containing four or more units and used or held for use by 
332.17  the owner or by the tenants or lessees of the owner as a 
332.18  residence for rental periods of 30 days or more.  Class 4a also 
332.19  includes hospitals licensed under sections 144.50 to 144.56, 
332.20  other than hospitals exempt under section 272.02, and contiguous 
332.21  property used for hospital purposes, without regard to whether 
332.22  the property has been platted or subdivided.  The market value 
332.23  of class 4a property has a class rate of 1.8 percent for taxes 
332.24  payable in 2002, 1.5 percent for taxes payable in 2003, and 1.25 
332.25  percent for taxes payable in 2004 and thereafter, except that 
332.26  class 4a property consisting of a structure for which 
332.27  construction commenced after June 30, 2001, has a class rate of 
332.28  1.25 percent of market value for taxes payable in 2003 and 
332.29  subsequent years. 
332.30     (b) Class 4b includes: 
332.31     (1) residential real estate containing less than four units 
332.32  that does not qualify as class 4bb, other than seasonal 
332.33  residential, and recreational property; 
332.34     (2) manufactured homes not classified under any other 
332.35  provision; 
332.36     (3) a dwelling, garage, and surrounding one acre of 
333.1   property on a nonhomestead farm classified under subdivision 23, 
333.2   paragraph (b) containing two or three units; and 
333.3      (4) unimproved property that is classified residential as 
333.4   determined under subdivision 33.  
333.5      The market value of class 4b property has a class rate of 
333.6   1.5 percent for taxes payable in 2002, and 1.25 percent for 
333.7   taxes payable in 2003 and thereafter. 
333.8      (c) Class 4bb includes: 
333.9      (1) nonhomestead residential real estate containing one 
333.10  unit, other than seasonal residential, and recreational 
333.11  property; and 
333.12     (2) a single family dwelling, garage, and surrounding one 
333.13  acre of property on a nonhomestead farm classified under 
333.14  subdivision 23, paragraph (b). 
333.15     Class 4bb property has the same class rates as class 1a 
333.16  property under subdivision 22. 
333.17     Property that has been classified as seasonal recreational 
333.18  residential recreational property at any time during which it 
333.19  has been owned by the current owner or spouse of the current 
333.20  owner does not qualify for class 4bb. 
333.21     (d) Class 4c property includes: 
333.22     (1) except as provided in subdivision 22, paragraph (c), 
333.23  real property devoted to temporary and seasonal residential 
333.24  occupancy for recreation purposes, including real property 
333.25  devoted to temporary and seasonal residential occupancy for 
333.26  recreation purposes and not devoted to commercial purposes for 
333.27  more than 250 days in the year preceding the year of 
333.28  assessment.  For purposes of this clause, property is devoted to 
333.29  a commercial purpose on a specific day if any portion of the 
333.30  property is used for residential occupancy, and a fee is charged 
333.31  for residential occupancy.  In order for a property to be 
333.32  classified as class 4c, seasonal residential recreational 
333.33  residential for commercial purposes, at least 40 percent of the 
333.34  annual gross lodging receipts related to the property must be 
333.35  from business conducted during 90 consecutive days and either 
333.36  (i) at least 60 percent of all paid bookings by lodging guests 
334.1   during the year must be for periods of at least two consecutive 
334.2   nights; or (ii) at least 20 percent of the annual gross receipts 
334.3   must be from charges for rental of fish houses, boats and 
334.4   motors, snowmobiles, downhill or cross-country ski equipment, or 
334.5   charges for marina services, launch services, and guide 
334.6   services, or the sale of bait and fishing tackle.  For purposes 
334.7   of this determination, a paid booking of five or more nights 
334.8   shall be counted as two bookings.  Class 4c also includes 
334.9   commercial use real property used exclusively for recreational 
334.10  purposes in conjunction with class 4c property devoted to 
334.11  temporary and seasonal residential occupancy for recreational 
334.12  purposes, up to a total of two acres, provided the property is 
334.13  not devoted to commercial recreational use for more than 250 
334.14  days in the year preceding the year of assessment and is located 
334.15  within two miles of the class 4c property with which it is 
334.16  used.  Class 4c property classified in this clause also includes 
334.17  the remainder of class 1c resorts provided that the entire 
334.18  property including that portion of the property classified as 
334.19  class 1c also meets the requirements for class 4c under this 
334.20  clause; otherwise the entire property is classified as class 3.  
334.21  Owners of real property devoted to temporary and seasonal 
334.22  residential occupancy for recreation purposes and all or a 
334.23  portion of which was devoted to commercial purposes for not more 
334.24  than 250 days in the year preceding the year of assessment 
334.25  desiring classification as class 1c or 4c, must submit a 
334.26  declaration to the assessor designating the cabins or units 
334.27  occupied for 250 days or less in the year preceding the year of 
334.28  assessment by January 15 of the assessment year.  Those cabins 
334.29  or units and a proportionate share of the land on which they are 
334.30  located will be designated class 1c or 4c as otherwise 
334.31  provided.  The remainder of the cabins or units and a 
334.32  proportionate share of the land on which they are located will 
334.33  be designated as class 3a.  The owner of property desiring 
334.34  designation as class 1c or 4c property must provide guest 
334.35  registers or other records demonstrating that the units for 
334.36  which class 1c or 4c designation is sought were not occupied for 
335.1   more than 250 days in the year preceding the assessment if so 
335.2   requested.  The portion of a property operated as a (1) 
335.3   restaurant, (2) bar, (3) gift shop, and (4) other nonresidential 
335.4   facility operated on a commercial basis not directly related to 
335.5   temporary and seasonal residential occupancy for recreation 
335.6   purposes shall not qualify for class 1c or 4c; 
335.7      (2) qualified property used as a golf course if: 
335.8      (i) it is open to the public on a daily fee basis.  It may 
335.9   charge membership fees or dues, but a membership fee may not be 
335.10  required in order to use the property for golfing, and its green 
335.11  fees for golfing must be comparable to green fees typically 
335.12  charged by municipal courses; and 
335.13     (ii) it meets the requirements of section 273.112, 
335.14  subdivision 3, paragraph (d). 
335.15     A structure used as a clubhouse, restaurant, or place of 
335.16  refreshment in conjunction with the golf course is classified as 
335.17  class 3a property; 
335.18     (3) real property up to a maximum of one acre of land owned 
335.19  by a nonprofit community service oriented organization; provided 
335.20  that the property is not used for a revenue-producing activity 
335.21  for more than six days in the calendar year preceding the year 
335.22  of assessment and the property is not used for residential 
335.23  purposes on either a temporary or permanent basis.  For purposes 
335.24  of this clause, a "nonprofit community service oriented 
335.25  organization" means any corporation, society, association, 
335.26  foundation, or institution organized and operated exclusively 
335.27  for charitable, religious, fraternal, civic, or educational 
335.28  purposes, and which is exempt from federal income taxation 
335.29  pursuant to section 501(c)(3), (10), or (19) of the Internal 
335.30  Revenue Code of 1986, as amended through December 31, 1990.  For 
335.31  purposes of this clause, "revenue-producing activities" shall 
335.32  include but not be limited to property or that portion of the 
335.33  property that is used as an on-sale intoxicating liquor or 3.2 
335.34  percent malt liquor establishment licensed under chapter 340A, a 
335.35  restaurant open to the public, bowling alley, a retail store, 
335.36  gambling conducted by organizations licensed under chapter 349, 
336.1   an insurance business, or office or other space leased or rented 
336.2   to a lessee who conducts a for-profit enterprise on the 
336.3   premises.  Any portion of the property which is used for 
336.4   revenue-producing activities for more than six days in the 
336.5   calendar year preceding the year of assessment shall be assessed 
336.6   as class 3a.  The use of the property for social events open 
336.7   exclusively to members and their guests for periods of less than 
336.8   24 hours, when an admission is not charged nor any revenues are 
336.9   received by the organization shall not be considered a 
336.10  revenue-producing activity; 
336.11     (4) post-secondary student housing of not more than one 
336.12  acre of land that is owned by a nonprofit corporation organized 
336.13  under chapter 317A and is used exclusively by a student 
336.14  cooperative, sorority, or fraternity for on-campus housing or 
336.15  housing located within two miles of the border of a college 
336.16  campus; 
336.17     (5) manufactured home parks as defined in section 327.14, 
336.18  subdivision 3; 
336.19     (6) real property that is actively and exclusively devoted 
336.20  to indoor fitness, health, social, recreational, and related 
336.21  uses, is owned and operated by a not-for-profit corporation, and 
336.22  is located within the metropolitan area as defined in section 
336.23  473.121, subdivision 2; 
336.24     (7) a leased or privately owned noncommercial aircraft 
336.25  storage hangar not exempt under section 272.01, subdivision 2, 
336.26  and the land on which it is located, provided that: 
336.27     (i) the land is on an airport owned or operated by a city, 
336.28  town, county, metropolitan airports commission, or group 
336.29  thereof; and 
336.30     (ii) the land lease, or any ordinance or signed agreement 
336.31  restricting the use of the leased premise, prohibits commercial 
336.32  activity performed at the hangar. 
336.33     If a hangar classified under this clause is sold after June 
336.34  30, 2000, a bill of sale must be filed by the new owner with the 
336.35  assessor of the county where the property is located within 60 
336.36  days of the sale; and 
337.1      (8) residential real estate, a portion of which is used by 
337.2   the owner for homestead purposes, and that is also a place of 
337.3   lodging, if all of the following criteria are met: 
337.4      (i) rooms are provided for rent to transient guests that 
337.5   generally stay for periods of 14 or fewer days; 
337.6      (ii) meals are provided to persons who rent rooms, the cost 
337.7   of which is incorporated in the basic room rate; 
337.8      (iii) meals are not provided to the general public except 
337.9   for special events on fewer than seven days in the calendar year 
337.10  preceding the year of the assessment; and 
337.11     (iv) the owner is the operator of the property. 
337.12  The market value subject to the 4c classification under this 
337.13  clause is limited to five rental units.  Any rental units on the 
337.14  property in excess of five, must be valued and assessed as class 
337.15  3a.  The portion of the property used for purposes of a 
337.16  homestead by the owner must be classified as class 1a property 
337.17  under subdivision 22. 
337.18     Class 4c property has a class rate of 1.5 percent of market 
337.19  value, except that (i) each parcel of seasonal residential 
337.20  recreational property not used for commercial purposes has the 
337.21  same class rates as class 4bb property, (ii) manufactured home 
337.22  parks assessed under clause (5) have the same class rate as 
337.23  class 4b property, (iii) commercial-use seasonal residential 
337.24  recreational property has a class rate of one percent for the 
337.25  first $500,000 of market value, which includes any market value 
337.26  receiving the one percent rate under subdivision 22, and 1.25 
337.27  percent for the remaining market value, (iv) the market value of 
337.28  property described in clause (4) has a class rate of one 
337.29  percent, (v) the market value of property described in clauses 
337.30  (2) and (6) has a class rate of 1.25 percent, and (vi) that 
337.31  portion of the market value of property in clause (8) qualifying 
337.32  for class 4c property has a class rate of 1.25 percent.  
337.33     (e) Class 4d property is qualifying low-income rental 
337.34  housing certified to the assessor by the housing finance agency 
337.35  under sections 273.126 and 462A.071.  Class 4d includes land in 
337.36  proportion to the total market value of the building that is 
338.1   qualifying low-income rental housing.  For all properties 
338.2   qualifying as class 4d, the market value determined by the 
338.3   assessor must be based on the normal approach to value using 
338.4   normal unrestricted rents. 
338.5      Class 4d property has a class rate of 0.9 percent for taxes 
338.6   payable in 2002, and one percent for taxes payable in 2003 and 
338.7   1.25 percent for taxes payable in 2004 and thereafter.  
338.8      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
338.9   following final enactment. 
338.10     Sec. 18.  Minnesota Statutes 2002, section 273.1398, 
338.11  subdivision 4b, is amended to read: 
338.12     Subd. 4b.  [COURT EXPENDITURES; MAINTENANCE OF EFFORT.] (a) 
338.13  Until the costs of court administration as defined under section 
338.14  480.183, subdivision 3, in a county have been transferred to the 
338.15  state, each county in a judicial district transferring court 
338.16  administration costs to state funding after July 1, 2001, shall 
338.17  budget for the funding of these costs an amount at least equal 
338.18  to the certified budget amount for calendar year 2001, increased 
338.19  by six percent for each year from 2001 to 2003 and by eight 
338.20  percent from 2004 to the year of the transfer.  The county shall 
338.21  budget, fund, and authorize expenditures not less than the 
338.22  amount calculated under this paragraph plus the temporary aid 
338.23  amount under subdivision 4c for maintenance of effort of 
338.24  administrative costs. 
338.25     (b) By July 15, 2001, the court shall certify to each 
338.26  county in the judicial district its cost of court administration 
338.27  as defined under section 480.183, subdivision 3, based on 2001 
338.28  budgets.  In making that determination, the court shall exclude 
338.29  the budget costs of the county for the following categories: 
338.30     (1) rent; 
338.31     (2) examiner of titles; 
338.32     (3) civil court appointed attorneys for civil matters; 
338.33     (4) hospitalization costs; and 
338.34     (5) cost of maintaining vital statistics. 
338.35     The amount of funding provided by a county for courts that 
338.36  is increased by the maintenance of effort requirement may not be 
339.1   used by a county to pay the costs described in clauses (1) to 
339.2   (5). 
339.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
339.4   following final enactment. 
339.5      Sec. 19.  Minnesota Statutes 2002, section 273.372, is 
339.6   amended to read: 
339.7      273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD 
339.8   VALUATIONS.] 
339.9      An appeal by a utility or railroad company concerning the 
339.10  exemption, valuation, or classification on of property for which 
339.11  the commissioner of revenue has provided the city or county 
339.12  assessor with commissioner's orders valuations by order, or for 
339.13  which the commissioner has recommended values to the city or 
339.14  county assessor, must be brought against the commissioner in tax 
339.15  court or in district court of the county where the property is 
339.16  located, and not against the county or taxing district where the 
339.17  property is located.  If the appeal to a court is of from an 
339.18  order of the commissioner, it must be brought under chapter 
339.19  271.  If the appeal is from the exemption, valuation, 
339.20  classification, or tax that results from implementation of the 
339.21  commissioner's order or recommendation, it must be brought under 
339.22  chapter 278, and the procedures provisions in that chapter 
339.23  apply, except that service shall be on the commissioner only and 
339.24  not on the county officials specified in section 278.01, 
339.25  subdivision 1.  This provision applies to the property contained 
339.26  under described in sections 273.33, 273.35, 273.36, and 273.37, 
339.27  but only if the appealed values have remained unchanged from 
339.28  those provided to the city or county by the commissioner.  If 
339.29  the exemption, valuation, or classification being appealed has 
339.30  been changed by the city or county, then the action must be 
339.31  brought under chapter 278 in the county where the property is 
339.32  located and proper service must be made upon the county 
339.33  officials as specified in section 278.01, subdivision 1. 
339.34     Upon filing of any appeal by a utility company or railroad 
339.35  against the commissioner, the commissioner shall give notice by 
339.36  first class mail to each county which would be affected by the 
340.1   appeal. 
340.2      Companies that submit the reports under section 270.82 or 
340.3   273.371 by the date specified in that section, or by the date 
340.4   specified by the commissioner in an extension, may appeal 
340.5   administratively to the commissioner under the procedures in 
340.6   section 270.11, subdivision 6, prior to bringing an action in 
340.7   tax court or in district court, however, instituting an 
340.8   administrative appeal with the commissioner does not change or 
340.9   modify the deadline in section 271.06 for appealing an order of 
340.10  the commissioner in tax court or the deadline in section 278.01 
340.11  for bringing an action filing a property tax claim or objection 
340.12  in tax court or district court. 
340.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
340.14  following final enactment. 
340.15     Sec. 20.  Minnesota Statutes 2002, section 273.42, 
340.16  subdivision 2, is amended to read: 
340.17     Subd. 2.  Owners of land that is an agricultural or 
340.18  nonagricultural homestead, nonhomestead agricultural land, 
340.19  rental residential property, and both commercial and 
340.20  noncommercial seasonal residential recreational property, as 
340.21  those terms are defined in section 273.13 listed on records of 
340.22  the county auditor or county treasurer over which runs a high 
340.23  voltage transmission line as defined in section 116C.52, 
340.24  subdivision 3 with a capacity of 200 kilovolts or more, except a 
340.25  high voltage transmission line the construction of which was 
340.26  commenced prior to July 1, 1974, shall receive a property tax 
340.27  credit in an amount determined by multiplying a fraction, the 
340.28  numerator of which is the length of high voltage transmission 
340.29  line which runs over that parcel and the denominator of which is 
340.30  the total length of that particular line running over all 
340.31  property within the city or township by ten percent of the 
340.32  transmission line tax revenue derived from the tax on that 
340.33  portion of the line within the city or township pursuant to 
340.34  section 273.36.  In the case of property owners in unorganized 
340.35  townships, the property tax credit shall be determined by 
340.36  multiplying a fraction, the numerator of which is the length of 
341.1   the qualifying high voltage transmission line which runs over 
341.2   the parcel and the denominator of which is the total length of 
341.3   the qualifying high voltage transmission line running over all 
341.4   property within all the unorganized townships within the county, 
341.5   by the total utility property tax credit fund amount available 
341.6   within the county for that year pursuant to subdivision 1.  
341.7   Where a right-of-way width is shared by more than one property 
341.8   owner, the numerator shall be adjusted by multiplying the length 
341.9   of line on the parcel by the proportion of the total width on 
341.10  the parcel owned by that property owner.  The amount of credit 
341.11  for which the property qualifies shall not exceed 20 percent of 
341.12  the total gross tax on the parcel prior to deduction of the 
341.13  state paid agricultural credit and the state paid homestead 
341.14  credit, provided that, if the property containing the 
341.15  right-of-way is included in a parcel which exceeds 40 acres, the 
341.16  total gross tax on the parcel shall be multiplied by a fraction, 
341.17  the numerator of which is the sum of the number of acres in each 
341.18  quarter-quarter section or portion thereof which contains a 
341.19  right-of-way and the denominator of which is the total number of 
341.20  acres in the parcel set forth on the tax statement, and the 
341.21  maximum credit shall be 20 percent of the product of that 
341.22  computation, prior to deduction of those credits.  The auditor 
341.23  of the county in which the affected parcel is located shall 
341.24  calculate the amount of the credit due for each parcel and 
341.25  transmit that information to the county treasurer.  The county 
341.26  auditor, in computing the credit received pursuant to section 
341.27  273.135, shall reduce the gross tax by the amount of the credit 
341.28  received pursuant to this section, unless the amount of the 
341.29  credit would be less than $10. 
341.30     If, after the county auditor has computed the credit to 
341.31  those qualifying property owners in unorganized townships, there 
341.32  is money remaining in the utility property tax credit fund, then 
341.33  that excess amount in the fund shall be returned to the general 
341.34  school fund of the county. 
341.35     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
341.36  following final enactment. 
342.1      Sec. 21.  Minnesota Statutes 2002, section 274.01, 
342.2   subdivision 1, is amended to read: 
342.3      Subdivision 1.  [ORDINARY BOARD; MEETINGS, DEADLINES, 
342.4   GRIEVANCES.] (a) The town board of a town, or the council or 
342.5   other governing body of a city, is the board of appeal and 
342.6   equalization except (1) in cities whose charters provide for a 
342.7   board of equalization or (2) in any city or town that has 
342.8   transferred its local board of review power and duties to the 
342.9   county board as provided in subdivision 3.  The county assessor 
342.10  shall fix a day and time when the board or the board of 
342.11  equalization shall meet in the assessment districts of the 
342.12  county.  Notwithstanding any law or city charter to the 
342.13  contrary, a city board of equalization shall be referred to as a 
342.14  board of appeal and equalization.  On or before February 15 of 
342.15  each year the assessor shall give written notice of the time to 
342.16  the city or town clerk.  Notwithstanding the provisions of any 
342.17  charter to the contrary, the meetings must be held between April 
342.18  1 and May 31 each year.  The clerk shall give published and 
342.19  posted notice of the meeting at least ten days before the date 
342.20  of the meeting.  
342.21     The board shall meet at the office of the clerk to review 
342.22  the assessment and classification of property in the town or 
342.23  city.  No changes in valuation or classification which are 
342.24  intended to correct errors in judgment by the county assessor 
342.25  may be made by the county assessor after the board has adjourned 
342.26  in those cities or towns that hold a local board of review; 
342.27  however, corrections of errors that are merely clerical in 
342.28  nature or changes that extend homestead treatment to property 
342.29  are permitted after adjournment until the tax extension date for 
342.30  that assessment year.  The changes must be fully documented and 
342.31  maintained in the assessor's office and must be available for 
342.32  review by any person.  A copy of the changes made during this 
342.33  period in those cities or towns that hold a local board of 
342.34  review must be sent to the county board no later than December 
342.35  31 of the assessment year.  
342.36     (b) The board shall determine whether the taxable property 
343.1   in the town or city has been properly placed on the list and 
343.2   properly valued by the assessor.  If real or personal property 
343.3   has been omitted, the board shall place it on the list with its 
343.4   market value, and correct the assessment so that each tract or 
343.5   lot of real property, and each article, parcel, or class of 
343.6   personal property, is entered on the assessment list at its 
343.7   market value.  No assessment of the property of any person may 
343.8   be raised unless the person has been duly notified of the intent 
343.9   of the board to do so.  On application of any person feeling 
343.10  aggrieved, the board shall review the assessment or 
343.11  classification, or both, and correct it as appears just.  The 
343.12  board may not make an individual market value adjustment or 
343.13  classification change that would benefit the property in cases 
343.14  where the owner or other person having control over the property 
343.15  will not permit the assessor to inspect the property and the 
343.16  interior of any buildings or structures.  
343.17     (c) A local board may reduce assessments upon petition of 
343.18  the taxpayer but the total reductions must not reduce the 
343.19  aggregate assessment made by the county assessor by more than 
343.20  one percent.  If the total reductions would lower the aggregate 
343.21  assessments made by the county assessor by more than one 
343.22  percent, none of the adjustments may be made.  The assessor 
343.23  shall correct any clerical errors or double assessments 
343.24  discovered by the board without regard to the one percent 
343.25  limitation.  
343.26     (d) A local board does not have authority to grant an 
343.27  exemption or to order property removed from the tax rolls. 
343.28     (e) A majority of the members may act at the meeting, and 
343.29  adjourn from day to day until they finish hearing the cases 
343.30  presented.  The assessor shall attend, with the assessment books 
343.31  and papers, and take part in the proceedings, but must not 
343.32  vote.  The county assessor, or an assistant delegated by the 
343.33  county assessor shall attend the meetings.  The board shall list 
343.34  separately, on a form appended to the assessment book, all 
343.35  omitted property added to the list by the board and all items of 
343.36  property increased or decreased, with the market value of each 
344.1   item of property, added or changed by the board, placed opposite 
344.2   the item.  The county assessor shall enter all changes made by 
344.3   the board in the assessment book.  
344.4      (e) (f) Except as provided in subdivision 3, if a person 
344.5   fails to appear in person, by counsel, or by written 
344.6   communication before the board after being duly notified of the 
344.7   board's intent to raise the assessment of the property, or if a 
344.8   person feeling aggrieved by an assessment or classification 
344.9   fails to apply for a review of the assessment or classification, 
344.10  the person may not appear before the county board of appeal and 
344.11  equalization for a review of the assessment or classification.  
344.12  This paragraph does not apply if an assessment was made after 
344.13  the local board meeting, as provided in section 273.01, or if 
344.14  the person can establish not having received notice of market 
344.15  value at least five days before the local board meeting.  
344.16     (f) (g) The local board must complete its work and adjourn 
344.17  within 20 days from the time of convening stated in the notice 
344.18  of the clerk, unless a longer period is approved by the 
344.19  commissioner of revenue.  No action taken after that date is 
344.20  valid.  All complaints about an assessment or classification 
344.21  made after the meeting of the board must be heard and determined 
344.22  by the county board of equalization.  A nonresident may, at any 
344.23  time, before the meeting of the board file written objections to 
344.24  an assessment or classification with the county assessor.  The 
344.25  objections must be presented to the board at its meeting by the 
344.26  county assessor for its consideration. 
344.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
344.28  following final enactment. 
344.29     Sec. 22.  Minnesota Statutes 2002, section 274.13, 
344.30  subdivision 1, is amended to read: 
344.31     Subdivision 1.  [MEMBERS; MEETINGS; RULES FOR EQUALIZING 
344.32  ASSESSMENTS.] The county commissioners, or a majority of them, 
344.33  with the county auditor, or, if the auditor cannot be present, 
344.34  the deputy county auditor, or, if there is no deputy, the court 
344.35  administrator of the district court, shall form a board for the 
344.36  equalization of the assessment of the property of the county, 
345.1   including the property of all cities whose charters provide for 
345.2   a board of equalization.  This board shall be referred to as the 
345.3   county board of appeal and equalization.  The board shall meet 
345.4   annually, on the date specified in section 274.14, at the office 
345.5   of the auditor.  Each member shall take an oath to fairly and 
345.6   impartially perform duties as a member.  The board shall examine 
345.7   and compare the returns of the assessment of property of the 
345.8   towns or districts, and equalize them so that each tract or lot 
345.9   of real property and each article or class of personal property 
345.10  is entered on the assessment list at its market value, subject 
345.11  to the following rules: 
345.12     (1) The board shall raise the valuation of each tract or 
345.13  lot of real property which in its opinion is returned below its 
345.14  market value to the sum believed to be its market value.  The 
345.15  board must first give notice of intention to raise the valuation 
345.16  to the person in whose name it is assessed, if the person is a 
345.17  resident of the county.  The notice must fix a time and place 
345.18  for a hearing.  
345.19     (2) The board shall reduce the valuation of each tract or 
345.20  lot which in its opinion is returned above its market value to 
345.21  the sum believed to be its market value. 
345.22     (3) The board shall raise the valuation of each class of 
345.23  personal property which in its opinion is returned below its 
345.24  market value to the sum believed to be its market value.  It 
345.25  shall raise the aggregate value of the personal property of 
345.26  individuals, firms, or corporations, when it believes that the 
345.27  aggregate valuation, as returned, is less than the market value 
345.28  of the taxable personal property possessed by the individuals, 
345.29  firms, or corporations, to the sum it believes to be the market 
345.30  value.  The board must first give notice to the persons of 
345.31  intention to do so.  The notice must set a time and place for a 
345.32  hearing. 
345.33     (4) The board shall reduce the valuation of each class of 
345.34  personal property that is returned above its market value to the 
345.35  sum it believes to be its market value.  Upon complaint of a 
345.36  party aggrieved, the board shall reduce the aggregate valuation 
346.1   of the individual's personal property, or of any class of 
346.2   personal property for which the individual is assessed, which in 
346.3   its opinion has been assessed at too large a sum, to the sum it 
346.4   believes was the market value of the individual's personal 
346.5   property of that class.  
346.6      (5) The board must not reduce the aggregate value of all 
346.7   the property of its county, as submitted to the county board of 
346.8   equalization, with the additions made by the auditor under this 
346.9   chapter, by more than one percent of its whole valuation.  The 
346.10  board may raise the aggregate valuation of real property, and of 
346.11  each class of personal property, of the county, or of any town 
346.12  or district of the county, when it believes it is below the 
346.13  market value of the property, or class of property, to the 
346.14  aggregate amount it believes to be its market value. 
346.15     (6) The board shall change the classification of any 
346.16  property which in its opinion is not properly classified. 
346.17     (7) The board does not have the authority to grant an 
346.18  exemption or to order property removed from the tax rolls. 
346.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
346.20  following final enactment. 
346.21     Sec. 23.  Minnesota Statutes 2002, section 275.025, 
346.22  subdivision 1, is amended to read: 
346.23     Subdivision 1.  [LEVY AMOUNT.] The state general levy is 
346.24  levied against commercial-industrial property and 
346.25  seasonal residential recreational property, as defined in this 
346.26  section.  The state general levy base amount is $592,000,000 for 
346.27  taxes payable in 2002.  For taxes payable in subsequent years, 
346.28  the levy base amount is increased each year by multiplying the 
346.29  levy base amount for the prior year by the sum of one plus the 
346.30  rate of increase, if any, in the implicit price deflator for 
346.31  government consumption expenditures and gross investment for 
346.32  state and local governments prepared by the Bureau of Economic 
346.33  Analysts of the United States Department of Commerce for the 
346.34  12-month period ending March 31 of the year prior to the year 
346.35  the taxes are payable.  The tax under this section is not 
346.36  treated as a local tax rate under section 469.177 and is not the 
347.1   levy of a governmental unit under chapters 276A and 473F.  
347.2   Beginning in fiscal year 2004, and in each year thereafter, the 
347.3   commissioner of finance shall deposit in an education reserve 
347.4   account, which account is hereby established, the increased 
347.5   amount of the state general levy received for deposit in the 
347.6   general fund for that year over the amount of the state general 
347.7   levy received for deposit in the general fund in fiscal year 
347.8   2003.  The amounts in the education reserve account do not lapse 
347.9   or cancel each year, but remain until appropriated by law for 
347.10  education aid or higher education funding. 
347.11     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
347.12  payable in 2004 and thereafter, except that the change from 
347.13  "seasonal recreational property" to "seasonal residential 
347.14  recreational property" is effective the day following final 
347.15  enactment. 
347.16     Sec. 24.  Minnesota Statutes 2002, section 275.025, 
347.17  subdivision 3, is amended to read: 
347.18     Subd. 3.  [SEASONAL RESIDENTIAL RECREATIONAL TAX CAPACITY.] 
347.19  For the purposes of this section, "seasonal residential 
347.20  recreational tax capacity" means the tax capacity of all class 
347.21  4c(1) property under section 273.13, subdivision 25, except that 
347.22  the first $76,000 of market value of each noncommercial class 
347.23  4c(1) property has a tax capacity for this purpose equal to 40 
347.24  percent of its tax capacity under section 273.13. 
347.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
347.26  following final enactment. 
347.27     Sec. 25.  Minnesota Statutes 2002, section 275.025, 
347.28  subdivision 4, is amended to read: 
347.29     Subd. 4.  [APPORTIONMENT AND LEVY OF STATE GENERAL TAX.] 
347.30  The state general tax must be distributed among the counties by 
347.31  applying a uniform rate to each county's commercial-industrial 
347.32  tax capacity and its seasonal residential recreational tax 
347.33  capacity.  Within each county, the tax must be levied by 
347.34  applying a uniform rate against commercial-industrial tax 
347.35  capacity and seasonal residential recreational tax capacity.  By 
347.36  November 1 On or before October 10 each year, the commissioner 
348.1   of revenue shall certify the a preliminary state general levy 
348.2   rate to each county auditor that must be used to prepare the 
348.3   notices of proposed property taxes for taxes payable in the 
348.4   following year.  By January 1 of each year, the commissioner 
348.5   shall certify the final state general levy rate to each county 
348.6   auditor that shall be used in spreading taxes.  
348.7      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
348.8   payable in 2004 and thereafter, except that the change from 
348.9   "seasonal recreational tax capacity" to "seasonal residential 
348.10  recreational tax capacity" is effective the day following final 
348.11  enactment. 
348.12     Sec. 26.  Minnesota Statutes 2002, section 276.10, is 
348.13  amended to read: 
348.14     276.10 [APPORTIONMENT AND DISTRIBUTION OF FUNDS.] 
348.15     On the settlement day determined in section 276.09 for each 
348.16  year, the county auditor and county treasurer shall distribute 
348.17  all undistributed funds in the treasury.  The funds must be 
348.18  apportioned as provided by law, and credited to the state, town, 
348.19  city, school district, special district and each county fund.  
348.20  Within 20 days after the distribution is completed, the county 
348.21  auditor shall report to the state auditor in the form prescribed 
348.22  by the state auditor.  The county auditor shall issue a warrant 
348.23  for the payment of money in the county treasury to the credit of 
348.24  the state, town, city, school district, or special districts on 
348.25  application of the persons entitled to receive the payment.  The 
348.26  county auditor may apply the local tax rate from the year before 
348.27  the year of distribution when apportioning and distributing 
348.28  delinquent tax proceeds, if the composition of the previous 
348.29  year's local tax rate between taxing districts is not 
348.30  significantly different from the local tax rate that existed for 
348.31  the year of the delinquency.  
348.32     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
348.33  payable in 2004 and thereafter. 
348.34     Sec. 27.  Minnesota Statutes 2002, section 276.11, 
348.35  subdivision 1, is amended to read: 
348.36     Subdivision 1.  [GENERALLY.] As soon as practical after the 
349.1   settlement day determined in section 276.09, the county 
349.2   treasurer shall pay to the state treasurer or the treasurer of a 
349.3   town, city, school district, or special district, on the warrant 
349.4   of the county auditor, all receipts of taxes levied by the 
349.5   taxing district and deliver up all orders and other evidences of 
349.6   indebtedness of the taxing district, taking triplicate receipts 
349.7   for them.  The treasurer shall file one of the receipts with the 
349.8   county auditor, and shall return one by mail on the day of its 
349.9   receipt to the clerk of the town, city, school district, or 
349.10  special district to which payment was made.  The clerk shall 
349.11  keep the receipt in the clerk's office.  Upon written request of 
349.12  the taxing district, to the extent practicable, the county 
349.13  treasurer shall make partial payments of amounts collected 
349.14  periodically in advance of the next settlement and 
349.15  distribution.  A statement prepared by the county treasurer must 
349.16  accompany each payment.  It must state the years for which taxes 
349.17  included in the payment were collected and, for each year, the 
349.18  amount of the taxes and any penalties on the tax.  Upon written 
349.19  request of a taxing district, except school districts, the 
349.20  county treasurer shall pay at least 70 percent of the estimated 
349.21  collection within 30 days after the settlement date determined 
349.22  in section 276.09.  Within seven business days after the due 
349.23  date, or 28 calendar days after the postmark date on the 
349.24  envelopes containing real or personal property tax statements, 
349.25  whichever is latest, the county treasurer shall pay to the 
349.26  treasurer of the school districts 50 percent of the estimated 
349.27  collections arising from taxes levied by and belonging to the 
349.28  school district, unless the school district elects to receive 50 
349.29  percent of the estimated collections arising from taxes levied 
349.30  by and belonging to the school district after making a 
349.31  proportionate reduction to reflect any loss in collections as 
349.32  the result of any delay in mailing tax statements.  In that 
349.33  case, 50 percent of those adjusted, estimated collections shall 
349.34  be paid by the county treasurer to the treasurer of the school 
349.35  district within seven business days of the due date.  The 
349.36  remaining 50 percent of the estimated collections must be paid 
350.1   to the treasurer of the school district within the next seven 
350.2   business days of the later of the dates in the preceding 
350.3   sentence, unless the school district elects to receive the 
350.4   remainder of its estimated collections after a proportionate 
350.5   reduction has been made to reflect any loss in collections as 
350.6   the result of any delay in mailing tax statements.  In that 
350.7   case, the remaining 50 percent of those adjusted, estimated 
350.8   collections shall be paid by the county treasurer to the 
350.9   treasurer of the school district within 14 days of the due 
350.10  date.  The treasurer shall pay the balance of the amounts 
350.11  collected to the state before June 30, or to a municipal 
350.12  corporation or other body within 60 days after the settlement 
350.13  date determined in section 276.09.  After 45 days interest at an 
350.14  annual rate of eight percent accrues and must be paid to the 
350.15  taxing district.  Interest must be paid upon appropriation from 
350.16  the general revenue fund of the county.  If not paid, it may be 
350.17  recovered by the taxing district, in a civil action. 
350.18     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
350.19  payable in 2004 and thereafter. 
350.20     Sec. 28.  [276.112] [STATE PROPERTY TAXES; COUNTY 
350.21  TREASURER.] 
350.22     On or before January 25 each year, for the period ending 
350.23  December 31 of the prior year, on or before June 29 each year, 
350.24  for the period ending on the most recent settlement day 
350.25  determined in section 276.09, and on or before December 2 of 
350.26  each year, for the period ending November 20, the county 
350.27  treasurer must make full settlement with the county auditor 
350.28  according to sections 276.09, 276.10, and 276.111 for all 
350.29  receipts of state property taxes levied under section 275.025, 
350.30  and must transmit those receipts to the commissioner of revenue 
350.31  by electronic means. 
350.32     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
350.33  following final enactment. 
350.34     Sec. 29.  Minnesota Statutes 2002, section 277.20, 
350.35  subdivision 2, is amended to read: 
350.36     Subd. 2.  [FILING OF LIEN FOR ENFORCEABILITY.] The lien 
351.1   imposed by subdivision 1 is not enforceable against any 
351.2   purchaser, mortgagee, pledgee, holder of a Uniform Commercial 
351.3   Code security interest, mechanic's lienor, or judgment lien 
351.4   creditor until a notice of lien has been filed by the county 
351.5   treasurer in the office of the county recorder of the county in 
351.6   which the property is situated, or, in the case of personal 
351.7   property belonging to an individual who is not a resident of 
351.8   this state, or that is a corporation, partnership, or other 
351.9   organization, in the office of the secretary of state.  Priority 
351.10  of a lien created under Laws 1991, chapter 291, article 15, 
351.11  shall be determined in accordance with the provisions of section 
351.12  507.34.  Liens filed in the office of the county recorder shall 
351.13  be filed with the state tax liens filed pursuant to section 
351.14  270.69, and the index shall indicate the name of the county for 
351.15  which the lien was filed.  If the land is registered, the notice 
351.16  of lien shall be filed in the office of the registrar of titles 
351.17  of the county in which the property is registered.  
351.18  Notwithstanding any other law to the contrary, the county 
351.19  treasurer is exempt from the payment of fees when the lien is 
351.20  offered for filing or recording; the fee for filing or recording 
351.21  the lien must be paid at the time the release of lien is offered 
351.22  for filing or recording.  Notwithstanding any law to the 
351.23  contrary, the fee for filing or recording the lien or the 
351.24  release of lien is $15.  
351.25     <b>[EFFECTIVE DATE.]</b> This section is effective for liens filed 
351.26  on or after the day following final enactment. 
351.27     Sec. 30.  Minnesota Statutes 2002, section 279.06, 
351.28  subdivision 1, is amended to read: 
351.29     Subdivision 1.  [LIST AND NOTICE.] Within five days after 
351.30  the filing of such list, the court administrator shall return a 
351.31  copy thereof to the county auditor, with a notice prepared and 
351.32  signed by the court administrator, and attached thereto, which 
351.33  may be substantially in the following form: 
351.34     State of Minnesota        )                            
351.35                               ) ss.                        
351.36     County of ............... )                            
352.1                                               District Court
352.2                                .......... Judicial District.
352.3      The state of Minnesota, to all persons, companies, or 
352.4   corporations who have or claim any estate, right, title, or 
352.5   interest in, claim to, or lien upon, any of the several parcels 
352.6   of land described in the list hereto attached: 
352.7      The list of taxes and penalties on real property for the 
352.8   county of ............................... remaining delinquent 
352.9   on the first Monday in January, ......., has been filed in the 
352.10  office of the court administrator of the district court of said 
352.11  county, of which that hereto attached is a copy.  Therefore, 
352.12  you, and each of you, are hereby required to file in the office 
352.13  of said court administrator, on or before the 20th day after the 
352.14  publication of this notice and list, your answer, in writing, 
352.15  setting forth any objection or defense you may have to the 
352.16  taxes, or any part thereof, upon any parcel of land described in 
352.17  the list, in, to, or on which you have or claim any estate, 
352.18  right, title, interest, claim, or lien, and, in default thereof, 
352.19  judgment will be entered against such parcel of land for the 
352.20  taxes on such list appearing against it, and for all penalties, 
352.21  interest, and costs.  Based upon said judgment, the land shall 
352.22  be sold to the state of Minnesota on the second Monday in May, 
352.23  .......  The period of redemption for all lands sold to the 
352.24  state at a tax judgment sale shall be three years from the date 
352.25  of sale to the state of Minnesota if the land is within an 
352.26  incorporated area unless it is: 
352.27     (a) nonagricultural homesteaded land as defined in section 
352.28  273.13, subdivision 22; 
352.29     (b) homesteaded agricultural land as defined in section 
352.30  273.13, subdivision 23, paragraph (a); 
352.31     (c) seasonal residential recreational land as defined in 
352.32  section 273.13, subdivisions 22, paragraph (c), and 25, 
352.33  paragraph (c) (d), clause (5) (1), in which event the period of 
352.34  redemption is five years from the date of sale to the state of 
352.35  Minnesota; 
352.36     (d) abandoned property and pursuant to section 281.173 a 
353.1   court order has been entered shortening the redemption period to 
353.2   five weeks; or 
353.3      (e) vacant property as described under section 281.174, 
353.4   subdivision 2, and for which a court order is entered shortening 
353.5   the redemption period under section 281.174. 
353.6      The period of redemption for all other lands sold to the 
353.7   state at a tax judgment sale shall be five years from the date 
353.8   of sale.  
353.9      Inquiries as to the proceedings set forth above can be made 
353.10  to the county auditor of ..... county whose address is ..... .  
353.11      (Signed) ............................................., 
353.12      Court Administrator of the District Court of the County 
353.13      of .................................................... 
353.14      (Here insert list.) 
353.15     The list referred to in the notice shall be substantially 
353.16  in the following form: 
353.17     List of real property for the county of 
353.18  ......................., on which taxes remain delinquent on the 
353.19  first Monday in January, .......: 
353.20                        Town of (Fairfield), 
353.21                     Township (40), Range (20), 
353.22   Names (and 
353.23   Current Filed 
353.24   Addresses) for 
353.25   the Taxpayers 
353.26   and Fee Owners 
353.27   and in Addition 
353.28   Those Parties 
353.29   Who Have Filed 
353.30   Their Addresses                            Tax 
353.31   Pursuant to     Subdivision of            Parcel   Total Tax 
353.32   section 276.041    Section       Section  Number  and Penalty
353.33                                                       $ cts.
353.34   John Jones  S.E. 1/4 of S.W. 1/4    10    23101       2.20  
353.35   (825 Fremont  
353.36   Fairfield, MN 
354.1    55000) 
354.2    Bruce Smith  That part of N.E. 1/4 
354.3    (2059 Hand   of S.W. 1/4 desc. as 
354.4    Fairfield,   follows:  Beg. at the 
354.5    MN 55000)    S.E. corner of said 
354.6    and          N.E. 1/4 of S.W. 1/4;  
354.7    Fairfield    thence N. along the E.  
354.8    State Bank   line of said N.E. 1/4 
354.9    (100 Main    of S.W. 1/4 a distance 
354.10   Street       of 600 ft.; thence W. 
354.11   Fairfield,   parallel with the S. 
354.12   MN 55000)    line of said N.E. 1/4 
354.13                of S.W. 1/4 a distance 
354.14                of 600 ft.; thence S. 
354.15                parallel with said E. 
354.16                line a distance of 600 
354.17                ft. to S. line of said 
354.18                N.E. 1/4 of S.W. 1/4;
354.19                thence E. along said S. 
354.20                line a distance of 600 
354.21                ft. to the point of 
354.22                beg. ...............    21    33211       3.15  
354.23     As to platted property, the form of heading shall conform 
354.24  to circumstances and be substantially in the following form:  
354.25                        City of (Smithtown) 
354.26                  Brown's Addition, or Subdivision 
354.27   Names (and 
354.28   Current Filed 
354.29   Addresses) for 
354.30   the Taxpayers 
354.31   and Fee Owners 
354.32   and in Addition 
354.33   Those Parties 
354.34   Who have Filed 
354.35   Their Addresses                         Tax 
354.36   Pursuant to                            Parcel      Total Tax 
355.1    section 276.041     Lot     Block      Number     and Penalty
355.2                                                        $ cts.
355.3    John Jones           15         9      58243          2.20 
355.4    (825 Fremont 
355.5    Fairfield, 
355.6    MN 55000) 
355.7    Bruce Smith          16         9      58244          3.15 
355.8    (2059 Hand 
355.9    Fairfield, 
355.10   MN 55000) 
355.11   and 
355.12   Fairfield 
355.13   State Bank 
355.14   (100 Main Street 
355.15   Fairfield, 
355.16   MN 55000) 
355.17     The names, descriptions, and figures employed in 
355.18  parentheses in the above forms are merely for purposes of 
355.19  illustration. 
355.20     The name of the town, township, range or city, and addition 
355.21  or subdivision, as the case may be, shall be repeated at the 
355.22  head of each column of the printed lists as brought forward from 
355.23  the preceding column.  
355.24     Errors in the list shall not be deemed to be a material 
355.25  defect to affect the validity of the judgment and sale. 
355.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
355.27  following final enactment. 
355.28     Sec. 31.  Minnesota Statutes 2002, section 281.17, is 
355.29  amended to read: 
355.30     281.17 [PERIOD FOR REDEMPTION.] 
355.31     Except for properties for which the period of redemption 
355.32  has been limited under sections 281.173 and 281.174, the 
355.33  following periods for redemption apply. 
355.34     The period of redemption for all lands sold to the state at 
355.35  a tax judgment sale shall be three years from the date of sale 
355.36  to the state of Minnesota if the land is within an incorporated 
356.1   area unless it is:  (a) nonagricultural homesteaded land as 
356.2   defined in section 273.13, subdivision 22; (b) homesteaded 
356.3   agricultural land as defined in section 273.13, subdivision 23, 
356.4   paragraph (a); or (c) seasonal residential recreational land as 
356.5   defined in section 273.13, subdivision 22, paragraph (c), or 25, 
356.6   paragraph (d), clause (1), for which the period of redemption is 
356.7   five years from the date of sale to the state of Minnesota. 
356.8      The period of redemption for homesteaded lands as defined 
356.9   in section 273.13, subdivision 22, located in a targeted 
356.10  neighborhood as defined in Laws 1987, chapter 386, article 6, 
356.11  section 4, and sold to the state at a tax judgment sale is three 
356.12  years from the date of sale.  The period of redemption for all 
356.13  lands located in a targeted neighborhood as defined in Laws 
356.14  1987, chapter 386, article 6, section 4, except (1) homesteaded 
356.15  lands as defined in section 273.13, subdivision 22, and (2) for 
356.16  periods of redemption beginning after June 30, 1991, but before 
356.17  July 1, 1996, lands located in the Loring Park targeted 
356.18  neighborhood on which a notice of lis pendens has been served, 
356.19  and sold to the state at a tax judgment sale is one year from 
356.20  the date of sale. 
356.21     The period of redemption for all real property constituting 
356.22  a mixed municipal solid waste disposal facility that is a 
356.23  qualified facility under section 115B.39, subdivision 1, is one 
356.24  year from the date of the sale to the state of Minnesota. 
356.25     The period of redemption for all other lands sold to the 
356.26  state at a tax judgment sale shall be five years from the date 
356.27  of sale, except that the period of redemption for nonhomesteaded 
356.28  agricultural land as defined in section 273.13, subdivision 23, 
356.29  paragraph (b), shall be two years from the date of sale if at 
356.30  that time that property is owned by a person who owns one or 
356.31  more parcels of property on which taxes are delinquent, and the 
356.32  delinquent taxes are more than 25 percent of the prior year's 
356.33  school district levy. 
356.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
356.35  following final enactment. 
356.36     Sec. 32.  Minnesota Statutes 2002, section 282.01, 
357.1   subdivision 7a, is amended to read: 
357.2      Subd. 7a.  [CITY SALES; ALTERNATE PROCEDURES.] Land located 
357.3   in a home rule charter or statutory city, or in a town which 
357.4   cannot be improved because of noncompliance with local 
357.5   ordinances regarding minimum area, shape, frontage or access may 
357.6   be sold by the county auditor pursuant to this subdivision if 
357.7   the auditor determines that a nonpublic sale will encourage the 
357.8   approval of sale of the land by the city or town and promote its 
357.9   return to the tax rolls.  If the physical characteristics of the 
357.10  land indicate that its highest and best use will be achieved by 
357.11  combining it with an adjoining parcel and the city or town has 
357.12  not adopted a local ordinance governing minimum area, shape, 
357.13  frontage, or access, the land may also be sold pursuant to this 
357.14  subdivision.  If the property consists of an undivided interest 
357.15  in land or land and improvements, the property may also be sold 
357.16  to the other owners under this subdivision.  The sale of land 
357.17  pursuant to this subdivision shall be subject to any conditions 
357.18  imposed by the county board pursuant to section 282.03.  The 
357.19  governing body of the city or town may recommend to the county 
357.20  board conditions to be imposed on the sale.  The county auditor 
357.21  may restrict the sale to owners of lands adjoining the land to 
357.22  be sold.  The county auditor shall conduct the sale by sealed 
357.23  bid or may select another means of sale.  The land shall be sold 
357.24  to the highest bidder but in no event shall the land be sold for 
357.25  less than its appraised value.  All owners of land adjoining the 
357.26  land to be sold shall be given a written notice at least 30 days 
357.27  prior to the sale.  
357.28     This subdivision shall be liberally construed to encourage 
357.29  the sale and utilization of tax-forfeited land, to eliminate 
357.30  nuisances and dangerous conditions and to increase compliance 
357.31  with land use ordinances. 
357.32     <b>[EFFECTIVE DATE.]</b> This section is effective for sales 
357.33  occurring on or after the day following final enactment. 
357.34     Sec. 33.  Minnesota Statutes 2002, section 282.08, is 
357.35  amended to read: 
357.36     282.08 [APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.] 
358.1      The net proceeds from the sale or rental of any parcel of 
358.2   forfeited land, or from the sale of products from the forfeited 
358.3   land, must be apportioned by the county auditor to the taxing 
358.4   districts interested in the land, as follows: 
358.5      (1) the amounts necessary to pay the state general tax levy 
358.6   against the parcel for taxes payable in the year for which the 
358.7   tax judgment was entered, and for each subsequent payable year 
358.8   up to and including the year of forfeiture, must be apportioned 
358.9   to the state; 
358.10     (2) the portion required to pay any amounts included in the 
358.11  appraised value under section 282.01, subdivision 3, as 
358.12  representing increased value due to any public improvement made 
358.13  after forfeiture of the parcel to the state, but not exceeding 
358.14  the amount certified by the clerk of the municipality must be 
358.15  apportioned to the municipal subdivision entitled to it; 
358.16     (2) (3) the portion required to pay any amount included in 
358.17  the appraised value under section 282.019, subdivision 5, 
358.18  representing increased value due to response actions taken after 
358.19  forfeiture of the parcel to the state, but not exceeding the 
358.20  amount of expenses certified by the pollution control agency or 
358.21  the commissioner of agriculture, must be apportioned to the 
358.22  agency or the commissioner of agriculture and deposited in the 
358.23  fund from which the expenses were paid; 
358.24     (3) (4) the portion of the remainder required to discharge 
358.25  any special assessment chargeable against the parcel for 
358.26  drainage or other purpose whether due or deferred at the time of 
358.27  forfeiture, must be apportioned to the municipal subdivision 
358.28  entitled to it; and 
358.29     (4) (5) any balance must be apportioned as follows: 
358.30     (i) The county board may annually by resolution set aside 
358.31  no more than 30 percent of the receipts remaining to be used for 
358.32  timber development on tax-forfeited land and dedicated memorial 
358.33  forests, to be expended under the supervision of the county 
358.34  board.  It must be expended only on projects approved by the 
358.35  commissioner of natural resources. 
358.36     (ii) The county board may annually by resolution set aside 
359.1   no more than 20 percent of the receipts remaining to be used for 
359.2   the acquisition and maintenance of county parks or recreational 
359.3   areas as defined in sections 398.31 to 398.36, to be expended 
359.4   under the supervision of the county board. 
359.5      (iii) Any balance remaining must be apportioned as 
359.6   follows:  county, 40 percent; town or city, 20 percent; and 
359.7   school district, 40 percent, provided, however, that in 
359.8   unorganized territory that portion which would have accrued to 
359.9   the township must be administered by the county board of 
359.10  commissioners. 
359.11     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
359.12  payable in 2004 and thereafter. 
359.13     Sec. 34.  Minnesota Statutes 2002, section 290C.02, 
359.14  subdivision 3, is amended to read: 
359.15     Subd. 3.  [CLAIMANT.] "Claimant" means a person, as that 
359.16  term is defined in section 290.01, subdivision 2, who owns 
359.17  forest land in Minnesota and files an application authorized by 
359.18  the Sustainable Forest Incentive Act.  For purposes of section 
359.19  290C.11, claimant also includes any person bound by the covenant 
359.20  required in section 290C.04.  No more than one claimant is 
359.21  entitled to a payment under this chapter with respect to any 
359.22  tract, parcel, or piece of land enrolled under this chapter that 
359.23  has been assigned the same parcel identification number.  When 
359.24  enrolled forest land is owned by two or more persons, the owners 
359.25  must determine between them which person may claim the payments 
359.26  provided under sections 290C.01 to 290C.11. 
359.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
359.28  following final enactment. 
359.29     Sec. 35.  Minnesota Statutes 2002, section 290C.02, 
359.30  subdivision 7, is amended to read: 
359.31     Subd. 7.  [FOREST MANAGEMENT PLAN.] "Forest management 
359.32  plan" means a written document providing a framework for 
359.33  site-specific healthy, productive, and sustainable forest 
359.34  resources.  A forest management plan must include at least the 
359.35  following:  (i) owner-specific forest management goals for the 
359.36  property land; (ii) a reliable field inventory of the individual 
360.1   forest cover types, their age, and density; (iii) a description 
360.2   of the soil type and quality; (iv) an aerial photo and/or map of 
360.3   the vegetation and other natural features of the property land 
360.4   clearly indicating the boundaries of the property land and of 
360.5   the forest land; (v) the proposed future conditions of the 
360.6   property land; (vi) prescriptions to meet proposed future 
360.7   conditions of the property land; (vii) a recommended timetable 
360.8   for implementing the prescribed activities; and (viii) a legal 
360.9   description of the parcels land encompassing the parcels 
360.10  included in the plan.  All management activities prescribed in a 
360.11  plan must be in accordance with the recommended timber 
360.12  harvesting and forest management guidelines.  The commissioner 
360.13  of natural resources shall provide a framework for plan content 
360.14  and updating and revising plans. 
360.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
360.16  following final enactment. 
360.17     Sec. 36.  Minnesota Statutes 2002, section 290C.03, is 
360.18  amended to read: 
360.19     290C.03 [ELIGIBILITY REQUIREMENTS.] 
360.20     (a) Property Land may be enrolled in the sustainable forest 
360.21  incentive program under this chapter if all of the following 
360.22  conditions are met: 
360.23     (1) property the land consists of at least 20 contiguous 
360.24  acres and at least 50 percent of the land must meet the 
360.25  definition of forest land in section 88.01, subdivision 7, 
360.26  during the enrollment; 
360.27     (2) a forest management plan for the property land must be 
360.28  prepared by an approved plan writer and implemented during the 
360.29  period in which the land is enrolled; 
360.30     (3) timber harvesting and forest management guidelines must 
360.31  be used in conjunction with any timber harvesting or forest 
360.32  management activities conducted on the land during the period in 
360.33  which the land is enrolled; 
360.34     (4) the property land must be enrolled for a minimum of 
360.35  eight years; 
360.36     (5) there are no delinquent property taxes on the property 
361.1   land; and 
361.2      (6) claimants enrolling more than 1,920 acres in the 
361.3   sustainable forest incentive program must allow year-round, 
361.4   nonmotorized access to fish and wildlife resources on enrolled 
361.5   land except within one-fourth mile of a permanent dwelling or 
361.6   during periods of high fire hazard as determined by the 
361.7   commissioner of natural resources. 
361.8      (b) Claimants required to allow access under paragraph (a), 
361.9   clause (6), do not by that action: 
361.10     (1) extend any assurance that the land is safe for any 
361.11  purpose; 
361.12     (2) confer upon the person the legal status of an invitee 
361.13  or licensee to whom a duty of care is owed; or 
361.14     (3) assume responsibility for or incur liability for any 
361.15  injury to the person or property caused by an act or omission of 
361.16  the person. 
361.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
361.18  following final enactment. 
361.19     Sec. 37.  Minnesota Statutes 2002, section 290C.07, is 
361.20  amended to read: 
361.21     290C.07 [CALCULATION OF INCENTIVE PAYMENT.] 
361.22     An approved claimant under the sustainable forest incentive 
361.23  program is eligible to receive an annual payment.  The payment 
361.24  shall equal the greater of: 
361.25     (1) the difference between the property tax that would be 
361.26  paid on the property land using the previous year's statewide 
361.27  average total township tax rate and the class rate for class 2b 
361.28  timberland under section 273.13, subdivision 23, paragraph (b), 
361.29  if the property land were valued at (i) the average statewide 
361.30  timberland market value per acre calculated under section 
361.31  290C.06, and (ii) the average statewide timberland current use 
361.32  value per acre calculated under section 290C.02, subdivision 5; 
361.33     (2) two-thirds of the property tax amount determined by 
361.34  using the previous year's statewide average total township tax 
361.35  rate, the estimated market value per acre as calculated in 
361.36  section 290C.06, and the class rate for 2b timberland under 
362.1   section 273.13, subdivision 23, paragraph (b); or 
362.2      (3) $1.50 per acre for each acre enrolled in the 
362.3   sustainable forest incentive program. 
362.4      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
362.5   following final enactment. 
362.6      Sec. 38.  Minnesota Statutes 2002, section 290C.09, is 
362.7   amended to read: 
362.8      290C.09 [REMOVAL FOR PROPERTY TAX DELINQUENCY.] 
362.9      The commissioner shall immediately remove any property land 
362.10  enrolled in the sustainable forest incentive program for which 
362.11  taxes are determined to be delinquent as provided in chapter 279 
362.12  and shall notify the claimant of such action.  Lands terminated 
362.13  from the sustainable forest incentive program under this section 
362.14  are not entitled to any payments provided in this chapter and 
362.15  are subject to removal penalties prescribed in section 290C.11.  
362.16  The claimant has 60 days from the receipt of notice from the 
362.17  commissioner under this section to pay the delinquent taxes.  If 
362.18  the delinquent taxes are paid within this 60-day period, the 
362.19  lands shall be reinstated in the program as if they had not been 
362.20  withdrawn and without the payment of a penalty. 
362.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
362.22  following final enactment. 
362.23     Sec. 39.  Minnesota Statutes 2002, section 290C.10, is 
362.24  amended to read: 
362.25     290C.10 [WITHDRAWAL PROCEDURES.] 
362.26     An approved claimant under the sustainable forest incentive 
362.27  program for a minimum of four years may notify the commissioner 
362.28  of the intent to terminate enrollment.  Within 90 days of 
362.29  receipt of notice to terminate enrollment, the commissioner 
362.30  shall inform the claimant in writing, acknowledging receipt of 
362.31  this notice and indicating the effective date of termination 
362.32  from the sustainable forest incentive program.  Termination of 
362.33  enrollment in the sustainable forest incentive program occurs on 
362.34  January 1 of the fifth calendar year that begins after receipt 
362.35  by the commissioner of the termination notice.  After the 
362.36  commissioner issues an effective date of termination, a claimant 
363.1   wishing to continue the property's land's enrollment in the 
363.2   sustainable forest incentive program beyond the termination date 
363.3   must apply for enrollment as prescribed in section 290C.04.  A 
363.4   claimant who withdraws a parcel of land from this program may 
363.5   not reenroll the parcel for a period of three years.  Within 90 
363.6   days after the termination date, the commissioner shall execute 
363.7   and acknowledge a document releasing the land from the covenant 
363.8   required under this chapter.  The document must be mailed to the 
363.9   claimant and is entitled to be recorded.  The commissioner may 
363.10  allow early withdrawal from the Sustainable Forest Incentive Act 
363.11  without penalty in cases of condemnation for a public purpose 
363.12  notwithstanding the provisions of this section. 
363.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
363.14  following final enactment. 
363.15     Sec. 40.  Minnesota Statutes 2002, section 290C.11, is 
363.16  amended to read: 
363.17     290C.11 [PENALTIES FOR REMOVAL.] 
363.18     (a) If the commissioner determines that property land 
363.19  enrolled in the sustainable forest incentive program is in 
363.20  violation of the conditions for enrollment as specified in 
363.21  section 290C.03, the commissioner shall notify the claimant of 
363.22  the intent to remove all enrolled land from the sustainable 
363.23  forest incentive program.  The claimant has 60 days to appeal 
363.24  this determination. The appeal must be made in writing to the 
363.25  commissioner, who shall, within 60 days, notify the claimant as 
363.26  to the outcome of the appeal.  Within 60 days after the 
363.27  commissioner denies an appeal, or within 120 days after the 
363.28  commissioner received a written appeal if the commissioner has 
363.29  not made a determination in that time, the owner may appeal to 
363.30  tax court under chapter 271 as if the appeal is from an order of 
363.31  the commissioner. 
363.32     (b) If the commissioner determines the property land is to 
363.33  be removed from the sustainable forest incentive program, the 
363.34  claimant is liable for payment to the commissioner in the amount 
363.35  equal to the payments received under this chapter for the 
363.36  previous four-year period, plus interest.  The claimant has 90 
364.1   days to satisfy the payment for removal of land from the 
364.2   sustainable forest incentive program under this section.  If the 
364.3   penalty is not paid within the 90-day period under this 
364.4   paragraph, the commissioner shall certify the amount to the 
364.5   county auditor for collection as a part of the general ad 
364.6   valorem real property taxes on the land in the following taxes 
364.7   payable year.  
364.8      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
364.9   following final enactment. 
364.10     Sec. 41.  [290C.12] [DEATH OF CLAIMANT.] 
364.11     Within one year after the death of the claimant, the 
364.12  claimant's heir, devisee, or estate must either: 
364.13     (1) notify the commissioner of election to terminate 
364.14  enrollment in the sustainable forest incentive program; or 
364.15     (2) make an application under this chapter to continue 
364.16  enrollment of the land in the program.  
364.17     Upon notification under clause (1), the commissioner shall 
364.18  terminate the enrollment and issue a document releasing the land 
364.19  from the covenant as provided in section 290C.04, paragraph 
364.20  (c).  Penalties under section 290C.11 shall not apply.  If the 
364.21  application under clause (2) is approved, the land is enrolled 
364.22  in the program without a break.  If the commissioner does not 
364.23  receive notification within one year after the date of death, 
364.24  enrollment in the program shall be terminated and penalties 
364.25  under section 290C.11 shall not apply. 
364.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
364.27  following final enactment, except in the case of claimants dying 
364.28  prior to the day following final enactment, heirs, devisees, or 
364.29  estates may make the election either six months after the 
364.30  effective date of this provision or one year after the death of 
364.31  the claimant, whichever is later. 
364.32     Sec. 42.  Minnesota Statutes 2002, section 469.1792, 
364.33  subdivision 3, is amended to read: 
364.34     Subd. 3.  [ACTIONS AUTHORIZED.] (a) An authority with a 
364.35  district qualifying under this section may take either or both 
364.36  of the following actions for any or all of its preexisting 
365.1   districts: 
365.2      (1) the authority may elect that the original local tax 
365.3   rate under section 469.177, subdivision 1a, does not apply to 
365.4   the district; and 
365.5      (2) the authority may elect the fiscal disparities 
365.6   contribution will be computed under section 469.177, subdivision 
365.7   3, paragraph (a), regardless of the election that was made for 
365.8   the district. 
365.9      (b) The authority may take action under this subdivision 
365.10  only after the municipality approves the action, by resolution, 
365.11  after notice and public hearing in the manner provided under 
365.12  section 469.175, subdivision 2.  To be effective for taxes 
365.13  payable in the following year, the resolution must be adopted 
365.14  and the county auditor must be notified of the adoption on or 
365.15  before July 1. 
365.16     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
365.17  payable in 2004 and thereafter. 
365.18     Sec. 43.  Minnesota Statutes 2002, section 473F.07, 
365.19  subdivision 4, is amended to read: 
365.20     Subd. 4.  [DISTRIBUTION NET TAX CAPACITY.] The 
365.21  administrative auditor shall determine the proportion which the 
365.22  index of each municipality bears to the sum of the indices of 
365.23  all municipalities and shall then multiply this proportion in 
365.24  the case of each municipality, by the areawide net tax capacity, 
365.25  provided that if the distribution net tax capacity for a 
365.26  municipality is less than 95 percent of the municipality's 
365.27  previous year distribution net tax capacity, and more than ten 
365.28  percent of the municipality's fiscal capacity consists of 
365.29  manufactured home property, the municipality's distribution net 
365.30  tax capacity will be increased to 95 percent of the previous 
365.31  year net tax capacity and the distribution net tax capacity of 
365.32  other municipalities in the area will be proportionately reduced.
365.33     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
365.34  payable in 2004 and subsequent years. 
365.35     Sec. 44.  Minnesota Statutes 2002, section 515B.1-116, is 
365.36  amended to read: 
366.1      515B.1-116 [RECORDING.] 
366.2      (a) A declaration, bylaws, any amendment to a declaration 
366.3   or bylaws, and any other instrument affecting a common interest 
366.4   community shall be entitled to be recorded.  In those counties 
366.5   which have a tract index, the county recorder shall enter the 
366.6   declaration in the tract index for each unit affected.  The 
366.7   registrar of titles shall file the declaration in accordance 
366.8   with section 508.351 or 508A.351. 
366.9      (b) The recording officer shall upon request promptly 
366.10  assign a number (CIC number) to a common interest community to 
366.11  be formed or to a common interest community resulting from the 
366.12  merger of two or more common interest communities. 
366.13     (c) Documents recorded pursuant to this chapter shall in 
366.14  the case of registered land be filed, and references to the 
366.15  recording of documents shall mean filed in the case of 
366.16  registered land. 
366.17     (d) Subject to any specific requirements of this chapter, 
366.18  if a recorded document relating to a common interest community 
366.19  purports to require a certain vote or signatures approving any 
366.20  restatement or amendment of the document by a certain number or 
366.21  percentage of unit owners or secured parties, and if the 
366.22  amendment or restatement is to be recorded pursuant to this 
366.23  chapter, an affidavit of the president or secretary of the 
366.24  association stating that the required vote or signatures have 
366.25  been obtained shall be attached to the document to be recorded 
366.26  and shall constitute prima facie evidence of the representations 
366.27  contained therein. 
366.28     (e) If a common interest community is located on registered 
366.29  land, the recording fee for any document affecting two or more 
366.30  units shall be the then-current fee for registering the document 
366.31  on the certificates of title for the first ten affected 
366.32  certificates and one-third of the then-current fee for each 
366.33  additional affected certificate.  This provision shall not apply 
366.34  to recording fees for deeds of conveyance, with the exception of 
366.35  deeds given pursuant to sections 515B.2-119 and 515B.3-112. 
366.36     (f) Except as permitted under this subsection, a recording 
367.1   officer shall not file or record a declaration creating a new 
367.2   common interest community, unless the county treasurer has 
367.3   certified that the property taxes payable in the current year 
367.4   for the real estate included in the proposed common interest 
367.5   community have been paid.  This certification is in addition to 
367.6   the certification for delinquent taxes required by section 
367.7   272.12.  In the case of preexisting common interest communities, 
367.8   the recording officer shall accept, file, and record the 
367.9   following instruments, without requiring a certification as to 
367.10  the current or delinquent taxes on any of the units in the 
367.11  common interest community:  (i) a declaration subjecting the 
367.12  common interest community to this chapter; (ii) a declaration 
367.13  changing the form of a common interest community pursuant to 
367.14  section 515B.2-123; or (iii) an amendment to or restatement of 
367.15  the declaration, bylaws, or CIC plat.  In order for the 
367.16  instruments an instrument to be accepted and recorded under the 
367.17  preceding sentence, the assessor must certify or otherwise 
367.18  inform the recording officer that, for taxes payable in the 
367.19  current year, the assessor has allocated taxable values to each 
367.20  unit or has separately assessed each unit instrument must not 
367.21  create or change unit or common area boundaries. 
367.22     <b>[EFFECTIVE DATE.]</b> This section is effective for deeds or 
367.23  instruments accepted for recording or registration on or after 
367.24  July 1, 2003. 
367.25     Sec. 45.  Laws 2001, First Special Session chapter 5, 
367.26  article 3, section 61, the effective date, is amended to read: 
367.27     <b>[EFFECTIVE DATE.]</b> This section is effective August 1, 2001, 
367.28  for deeds issued on or after August 1, 2001.  This section is 
367.29  effective August 1, 2006, for deeds issued before August 1, 2001.
367.30     Sec. 46.  Laws 2001, First Special Session chapter 5, 
367.31  article 3, section 63, the effective date, is amended to read: 
367.32     <b>[EFFECTIVE DATE.]</b> This section is effective August 1, 2001, 
367.33  for deeds issued on or after August 1, 2001.  This section is 
367.34  effective August 1, 2006, for deeds issued before August 1, 2001.
367.35     Sec. 47.  Laws 2002, chapter 377, article 6, section 4, the 
367.36  effective date, is amended to read: 
368.1      <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
368.2   payable in 2004 May 16, 2002, and thereafter. 
368.3      Sec. 48.  [PRE-1940 HOUSING PERCENTAGE.] 
368.4      For the purposes of determining local government aid 
368.5   payment amounts for aids payable in 2003, the "pre-1940 housing 
368.6   percentage" factor shall be based upon the 1990 federal census, 
368.7   notwithstanding Minnesota Statutes 2002, section 477A.011, 
368.8   subdivision 30. 
368.9      <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
368.10  payable in 2003 only. 
368.11     Sec. 49.  [REPEALER.] 
368.12     (a) Minnesota Statutes 2002, section 274.04, is repealed. 
368.13     (b) Minnesota Statutes 2002, section 477A.065, is repealed 
368.14  effective for aid payable in 2004 and thereafter. 
368.15     (c) Minnesota Rules, parts 8106.0100, subparts 11, 15, and 
368.16  16; and 8106.0200, are repealed effective the day following 
368.17  final enactment. 
368.18                             ARTICLE 15 
368.19              DEPARTMENT SALES AND USE TAX INITIATIVES 
368.20     Section 1.  Minnesota Statutes 2002, section 289A.50, 
368.21  subdivision 2a, is amended to read: 
368.22     Subd. 2a.  [REFUND OF SALES TAX TO PURCHASERS.] (a) If a 
368.23  vendor has collected from a purchaser a tax on a transaction 
368.24  that is not subject to the tax imposed by chapter 297A, the 
368.25  purchaser may apply directly to the commissioner for a refund 
368.26  under this section if: 
368.27     (a) (1) the purchaser is currently registered or was 
368.28  registered during the period of the claim, to collect and remit 
368.29  the sales tax or to remit the use tax; and 
368.30     (2) either 
368.31     (b) (i) the amount of the refund to be applied for exceeds 
368.32  $500, or 
368.33     (ii) the amount of the refund to be applied for does not 
368.34  exceed $500, but the purchaser also applies for a capital 
368.35  equipment claim at the same time, and the total of the two 
368.36  refunds exceeds $500. 
369.1      (b) The purchaser may not file more than two applications 
369.2   for refund under this subdivision in a calendar year. 
369.3      <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
369.4   filed on or after the day following final enactment. 
369.5      Sec. 2.  Minnesota Statutes 2002, section 289A.60, is 
369.6   amended by adding a subdivision to read: 
369.7      Subd. 25.  [PENALTY FOR FAILURE TO PROPERLY COMPLETE SALES 
369.8   TAX RETURN.] A person who fails to report local sales tax on a 
369.9   sales tax return or who fails to report local sales tax on 
369.10  separate tax lines on the sales tax return is subject to a 
369.11  penalty of five percent of the amount of tax not properly 
369.12  reported on the return.  A person who files a consolidated tax 
369.13  return but fails to report location information is subject to a 
369.14  $500 penalty for each return not containing location 
369.15  information.  In addition, the commissioner may revoke the 
369.16  privilege for a taxpayer to file consolidated returns and may 
369.17  require the taxpayer to separately register each location and to 
369.18  file a tax return for each location. 
369.19     <b>[EFFECTIVE DATE.]</b> This section is effective for returns 
369.20  filed after June 30, 2003. 
369.21     Sec. 3.  Minnesota Statutes 2002, section 297A.61, 
369.22  subdivision 3, is amended to read: 
369.23     Subd. 3.  [SALE AND PURCHASE.] (a) "Sale" and "purchase" 
369.24  include, but are not limited to, each of the transactions listed 
369.25  in this subdivision. 
369.26     (b) Sale and purchase include: 
369.27     (1) any transfer of title or possession, or both, of 
369.28  tangible personal property, whether absolutely or conditionally, 
369.29  for a consideration in money or by exchange or barter; and 
369.30     (2) the leasing of or the granting of a license to use or 
369.31  consume, for a consideration in money or by exchange or barter, 
369.32  tangible personal property, other than a manufactured home used 
369.33  for residential purposes for a continuous period of 30 days or 
369.34  more. 
369.35     (c) Sale and purchase include the production, fabrication, 
369.36  printing, or processing of tangible personal property for a 
370.1   consideration for consumers who furnish either directly or 
370.2   indirectly the materials used in the production, fabrication, 
370.3   printing, or processing. 
370.4      (d) Sale and purchase include the preparing for a 
370.5   consideration of food.  Notwithstanding section 297A.67, 
370.6   subdivision 2, taxable food includes, but is not limited to, the 
370.7   following: 
370.8      (1) prepared food sold by the retailer; 
370.9      (2) soft drinks; 
370.10     (3) candy; and 
370.11     (4) all food sold through vending machines. 
370.12     (e) A sale and a purchase includes the furnishing for a 
370.13  consideration of electricity, gas, water, or steam for use or 
370.14  consumption within this state. 
370.15     (f) A sale and a purchase includes the transfer for a 
370.16  consideration of computer software.  
370.17     (g) A sale and a purchase includes the furnishing for a 
370.18  consideration of the following services: 
370.19     (1) the privilege of admission to places of amusement, 
370.20  recreational areas, or athletic events, and the making available 
370.21  of amusement devices, tanning facilities, reducing salons, steam 
370.22  baths, turkish baths, health clubs, and spas or athletic 
370.23  facilities; 
370.24     (2) lodging and related services by a hotel, rooming house, 
370.25  resort, campground, motel, or trailer camp and the granting of 
370.26  any similar license to use real property other than the renting 
370.27  or leasing of it for a continuous period of 30 days or more; 
370.28     (3) nonresidential parking services, whether on a 
370.29  contractual, hourly, or other periodic basis, except for parking 
370.30  at a meter; 
370.31     (4) the granting of membership in a club, association, or 
370.32  other organization if: 
370.33     (i) the club, association, or other organization makes 
370.34  available for the use of its members sports and athletic 
370.35  facilities, without regard to whether a separate charge is 
370.36  assessed for use of the facilities; and 
371.1      (ii) use of the sports and athletic facility is not made 
371.2   available to the general public on the same basis as it is made 
371.3   available to members.  
371.4   Granting of membership means both onetime initiation fees and 
371.5   periodic membership dues.  Sports and athletic facilities 
371.6   include golf courses; tennis, racquetball, handball, and squash 
371.7   courts; basketball and volleyball facilities; running tracks; 
371.8   exercise equipment; swimming pools; and other similar athletic 
371.9   or sports facilities; 
371.10     (5) delivery of aggregate materials and concrete block by a 
371.11  third party if the delivery would be subject to the sales tax if 
371.12  provided by the seller of the aggregate material or concrete 
371.13  block; and 
371.14     (6) services as provided in this clause: 
371.15     (i) laundry and dry cleaning services including cleaning, 
371.16  pressing, repairing, altering, and storing clothes, linen 
371.17  services and supply, cleaning and blocking hats, and carpet, 
371.18  drapery, upholstery, and industrial cleaning.  Laundry and dry 
371.19  cleaning services do not include services provided by coin 
371.20  operated facilities operated by the customer; 
371.21     (ii) motor vehicle washing, waxing, and cleaning services, 
371.22  including services provided by coin operated facilities operated 
371.23  by the customer, and rustproofing, undercoating, and towing of 
371.24  motor vehicles; 
371.25     (iii) building and residential cleaning, maintenance, and 
371.26  disinfecting and exterminating services; 
371.27     (iv) detective, security, burglar, fire alarm, and armored 
371.28  car services; but not including services performed within the 
371.29  jurisdiction they serve by off-duty licensed peace officers as 
371.30  defined in section 626.84, subdivision 1, or services provided 
371.31  by a nonprofit organization for monitoring and electronic 
371.32  surveillance of persons placed on in-home detention pursuant to 
371.33  court order or under the direction of the Minnesota department 
371.34  of corrections; 
371.35     (v) pet grooming services; 
371.36     (vi) lawn care, fertilizing, mowing, spraying and sprigging 
372.1   services; garden planting and maintenance; tree, bush, and shrub 
372.2   pruning, bracing, spraying, and surgery; indoor plant care; 
372.3   tree, bush, shrub, and stump removal; and tree trimming for 
372.4   public utility lines.  Services performed under a construction 
372.5   contract for the installation of shrubbery, plants, sod, trees, 
372.6   bushes, and similar items are not taxable; 
372.7      (vii) massages, except when provided by a licensed health 
372.8   care facility or professional or upon written referral from a 
372.9   licensed health care facility or professional for treatment of 
372.10  illness, injury, or disease; and 
372.11     (viii) the furnishing of lodging, board, and care services 
372.12  for animals in kennels and other similar arrangements, but 
372.13  excluding veterinary and horse boarding services. 
372.14     In applying the provisions of this chapter, the terms 
372.15  "tangible personal property" and "sales at retail" include 
372.16  taxable services listed in clause (6), items (i) to (vi) and 
372.17  (viii) and the provision of these taxable services, unless 
372.18  specifically provided otherwise.  Services performed by an 
372.19  employee for an employer are not taxable.  Services performed by 
372.20  a partnership or association for another partnership or 
372.21  association are not taxable if one of the entities owns or 
372.22  controls more than 80 percent of the voting power of the equity 
372.23  interest in the other entity.  Services performed between 
372.24  members of an affiliated group of corporations are not taxable.  
372.25  For purposes of this section the preceding sentence, "affiliated 
372.26  group of corporations" includes those entities that would be 
372.27  classified as members of an affiliated group under United States 
372.28  Code, title 26, section 1504, and that are eligible to file a 
372.29  consolidated tax return for federal income tax purposes. 
372.30     (h) A sale and a purchase includes the furnishing for a 
372.31  consideration of tangible personal property or taxable services 
372.32  by the United States or any of its agencies or 
372.33  instrumentalities, or the state of Minnesota, its agencies, 
372.34  instrumentalities, or political subdivisions. 
372.35     (i) A sale and a purchase includes the furnishing for a 
372.36  consideration of telecommunications services, including cable 
373.1   television services and direct satellite services.  
373.2   Telecommunications services are taxed to the extent allowed 
373.3   under federal law if those services: 
373.4      (1) either (i) originate and terminate in this state; or 
373.5   (ii) originate in this state and terminate outside the state and 
373.6   the service is charged to a telephone number telecommunications 
373.7   customer located in this state or to the account of any 
373.8   transmission instrument in this state; or (iii) originate 
373.9   outside this state and terminate in this state and the service 
373.10  is charged to a telephone number telecommunications customer 
373.11  located in this state or to the account of any transmission 
373.12  instrument in this state; or 
373.13     (2) are rendered by providing a private communications 
373.14  service for which the customer has one or more locations within 
373.15  Minnesota connected to the service and the service is charged to 
373.16  a telephone number telecommunications customer located in this 
373.17  state or to the account of any transmission instrument in this 
373.18  state. 
373.19     All charges for mobile telecommunications services, as 
373.20  defined in United States Code, title 4, section 124, are deemed 
373.21  to be provided by the customer's home service provider and 
373.22  sourced to the customer's place of primary use and are subject 
373.23  to tax based upon the customer's place of primary use in 
373.24  accordance with the Mobile Telecommunications Sourcing Act, 
373.25  United States Code, title 4, sections 116 to 126.  All other 
373.26  definitions and provisions of the Mobile Telecommunications 
373.27  Sourcing Act as provided in United States Code, title 4, are 
373.28  hereby adopted. 
373.29     (j) A sale and a purchase includes the furnishing for a 
373.30  consideration of installation if the installation charges would 
373.31  be subject to the sales tax if the installation were provided by 
373.32  the seller of the item being installed. 
373.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
373.34  following final enactment. 
373.35     Sec. 4.  Minnesota Statutes 2002, section 297A.61, 
373.36  subdivision 12, is amended to read: 
374.1      Subd. 12.  [FARM MACHINERY.] (a) "Farm machinery" means new 
374.2   or used machinery, equipment, implements, accessories, and 
374.3   contrivances used directly and principally in the agricultural 
374.4   production for sale, but not including the processing, of 
374.5   livestock, dairy animals, dairy products, poultry and poultry 
374.6   products, fruits, vegetables, trees and shrubs, plants, forage, 
374.7   grains, and bees and apiary products.  
374.8      (b) Farm machinery includes including, but not limited to: 
374.9      (1) machinery for the preparation, seeding, or cultivation 
374.10  of soil for growing agricultural crops and sod, for the 
374.11  harvesting and threshing of agricultural products, or for the 
374.12  harvesting or mowing of sod; 
374.13     (2) barn cleaners, milking systems, grain dryers, feeding 
374.14  systems including stationary feed bunks, and similar 
374.15  installations, whether or not the equipment is installed by the 
374.16  seller and becomes part of the real property; and 
374.17     (3) irrigation equipment sold for exclusively agricultural 
374.18  use, including pumps, pipe fittings, valves, sprinklers, and 
374.19  other equipment necessary to the operation of an irrigation 
374.20  system when sold as part of an irrigation system, whether or not 
374.21  the equipment is installed by the seller and becomes part of the 
374.22  real property;. 
374.23     (4) logging equipment, including chain saws used for 
374.24  commercial logging; 
374.25     (5) fencing used for the containment of farmed cervidae, as 
374.26  defined in section 17.451, subdivision 2; 
374.27     (6) primary and backup generator units used to generate 
374.28  electricity for the purpose of operating farm machinery, as 
374.29  defined in this subdivision, or providing light or space heating 
374.30  necessary for the production of livestock, dairy animals, dairy 
374.31  products, or poultry and poultry products; 
374.32     (7) aquaculture production equipment as defined in 
374.33  subdivision 13; and 
374.34     (8) equipment used for maple syrup harvesting.  
374.35     (c) (b) Farm machinery does not include: 
374.36     (1) repair or replacement parts; 
375.1      (2) tools, shop equipment, grain bins, fencing material 
375.2   except fencing material covered by paragraph (b), clause (5), 
375.3   communication equipment, and other farm supplies; 
375.4      (3) motor vehicles taxed under chapter 297B; 
375.5      (4) snowmobiles or snow blowers; or 
375.6      (5) lawn mowers except those used in the production of sod 
375.7   for sale, or garden-type tractors or garden tillers; or 
375.8      (6) machinery, equipment, implements, accessories, and 
375.9   contrivances used directly in the production of horses not 
375.10  raised for slaughter, fur-bearing animals, or research animals. 
375.11     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
375.12  purchases made after June 30, 2003. 
375.13     Sec. 5.  Minnesota Statutes 2002, section 297A.61, 
375.14  subdivision 34, is amended to read: 
375.15     Subd. 34.  [FOOD SOLD THROUGH VENDING MACHINES.] "Food sold 
375.16  through vending machines" means food dispensed from a machine or 
375.17  other mechanical device that accepts payment including honor 
375.18  payments. 
375.19     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
375.20  purchases made on or after the day following final enactment. 
375.21     Sec. 6.  Minnesota Statutes 2002, section 297A.61, is 
375.22  amended by adding a subdivision to read: 
375.23     Subd. 35.  [AGRICULTURAL PRODUCTION.] "Agricultural 
375.24  production" includes, but is not limited to, horticulture, 
375.25  silviculture, floriculture, maple syrup harvesting, and the 
375.26  raising of pets, livestock as defined in section 17A.03, 
375.27  subdivision 5, poultry, dairy and poultry products, bees and 
375.28  apiary products, agricultural crops, sod, fur-bearing animals, 
375.29  research animals, and horses. 
375.30     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
375.31  purchases made after June 30, 2003. 
375.32     Sec. 7.  Minnesota Statutes 2002, section 297A.665, is 
375.33  amended to read: 
375.34     297A.665 [PRESUMPTION OF TAX; BURDEN OF PROOF.] 
375.35     (a) For the purpose of the proper administration of this 
375.36  chapter and to prevent evasion of the tax, until the contrary is 
376.1   established, it is presumed that:  
376.2      (1) all gross receipts are subject to the tax; and 
376.3      (2) all retail sales for delivery in Minnesota are for 
376.4   storage, use, or other consumption in Minnesota.  
376.5      (b) The burden of proving that a sale is not a taxable 
376.6   retail sale is on the seller.  However, the seller may take from 
376.7   the purchaser at the time of the sale an a fully completed 
376.8   exemption certificate claiming that the property purchased is 
376.9   for resale or that the sale is otherwise exempt from the tax 
376.10  imposed by this chapter which conclusively relieves the seller 
376.11  from collecting and remitting the tax.  This relief from 
376.12  liability does not apply to a seller who fraudulently fails to 
376.13  collect the tax or solicits purchasers to participate in the 
376.14  unlawful claim of an exemption.  If a seller claiming that 
376.15  certain sales are exempt, who does is not possess in possession 
376.16  of the required exemption certificates, must acquire the 
376.17  certificates within 60 days after receiving written notice from 
376.18  the commissioner that the certificates are required, deductions 
376.19  claimed by the seller that required delivery of the certificates 
376.20  must be disallowed.  If the certificates are not 
376.21  obtained delivered to the commissioner within the 60-day period, 
376.22  the sales are considered taxable sales under this 
376.23  chapter. commissioner may verify the reason or basis for the 
376.24  exemption claimed in the certificates before allowing any 
376.25  deductions.  A deduction must not be granted on the basis of 
376.26  certificates delivered to the commissioner after the 60-day 
376.27  period. 
376.28     (c) A purchaser of tangible personal property or any items 
376.29  listed in section 297A.63 that are shipped or brought to 
376.30  Minnesota by the purchaser has the burden of proving that the 
376.31  property was not purchased from a retailer for storage, use, or 
376.32  consumption in Minnesota.  
376.33     <b>[EFFECTIVE DATE.]</b> This section is effective for exemption 
376.34  certificates received for sales occurring after June 30, 2003. 
376.35     Sec. 8.  Minnesota Statutes 2002, section 297A.67, 
376.36  subdivision 2, is amended to read: 
377.1      Subd. 2.  [FOOD AND FOOD INGREDIENTS.] Food and food 
377.2   ingredients are exempt.  For purposes of this subdivision, 
377.3   "food" and "food ingredients" mean substances, whether in 
377.4   liquid, concentrated, solid, frozen, dried, or dehydrated form, 
377.5   that are sold for ingestion or chewing by humans and are 
377.6   consumed for their taste or nutritional value.  Food and food 
377.7   ingredients exempt under this subdivision do not include candy, 
377.8   soft drinks, food sold through vending machines, and prepared 
377.9   foods.  Food and food ingredients do not include alcoholic 
377.10  beverages, dietary supplements, and tobacco.  For purposes of 
377.11  this subdivision, "alcoholic beverages" means beverages that are 
377.12  suitable for human consumption and contain one-half of one 
377.13  percent or more of alcohol by volume.  For purposes of this 
377.14  subdivision, "tobacco" means cigarettes, cigars, chewing or pipe 
377.15  tobacco, or any other item that contains tobacco.  For purposes 
377.16  of this subdivision, "dietary supplements" means any product, 
377.17  other than tobacco, intended to supplement the diet that: 
377.18     (1) contains one or more of the following dietary 
377.19  ingredients: 
377.20     (i) a vitamin; 
377.21     (ii) a mineral; 
377.22     (iii) an herb or other botanical; 
377.23     (iv) an amino acid; 
377.24     (v) a dietary substance for use by humans to supplement the 
377.25  diet by increasing the total dietary intake; and 
377.26     (vi) a concentrate, metabolite, constituent, extract, or 
377.27  combination of any ingredient described in items (i) to (v); 
377.28     (2) is intended for ingestion in tablet, capsule, powder, 
377.29  softgel, gelcap, or liquid form, or if not intended for 
377.30  ingestion in such form, is not represented as conventional food 
377.31  and is not represented for use as a sole item of a meal or of 
377.32  the diet; and 
377.33     (3) is required to be labeled as a dietary supplement, 
377.34  identifiable by the supplement facts box found on the label and 
377.35  as required pursuant to Code of Federal Regulations, title 21, 
377.36  section 101.36. 
378.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
378.2   following final enactment. 
378.3      Sec. 9.  Minnesota Statutes 2002, section 297A.68, 
378.4   subdivision 5, is amended to read: 
378.5      Subd. 5.  [CAPITAL EQUIPMENT.] (a) Capital equipment is 
378.6   exempt.  The tax must be imposed and collected as if the rate 
378.7   under section 297A.62, subdivision 1, applied, and then refunded 
378.8   in the manner provided in section 297A.75. 
378.9      "Capital equipment" means machinery and equipment purchased 
378.10  or leased, and used in this state by the purchaser or lessee 
378.11  primarily for manufacturing, fabricating, mining, or refining 
378.12  tangible personal property to be sold ultimately at retail if 
378.13  the machinery and equipment are essential to the integrated 
378.14  production process of manufacturing, fabricating, mining, or 
378.15  refining.  Capital equipment also includes machinery and 
378.16  equipment used to electronically transmit results retrieved by a 
378.17  customer of an online computerized data retrieval system. 
378.18     (b) Capital equipment includes, but is not limited to: 
378.19     (1) machinery and equipment used to operate, control, or 
378.20  regulate the production equipment; 
378.21     (2) machinery and equipment used for research and 
378.22  development, design, quality control, and testing activities; 
378.23     (3) environmental control devices that are used to maintain 
378.24  conditions such as temperature, humidity, light, or air pressure 
378.25  when those conditions are essential to and are part of the 
378.26  production process; 
378.27     (4) materials and supplies used to construct and install 
378.28  machinery or equipment; 
378.29     (5) repair and replacement parts, including accessories, 
378.30  whether purchased as spare parts, repair parts, or as upgrades 
378.31  or modifications to machinery or equipment; 
378.32     (6) materials used for foundations that support machinery 
378.33  or equipment; 
378.34     (7) materials used to construct and install special purpose 
378.35  buildings used in the production process; and 
378.36     (8) ready-mixed concrete trucks equipment in which the 
379.1   ready-mixed concrete is mixed as part of the delivery 
379.2   process regardless if mounted on a chassis and leases of 
379.3   ready-mixed concrete trucks. 
379.4      (c) Capital equipment does not include the following: 
379.5      (1) motor vehicles taxed under chapter 297B; 
379.6      (2) machinery or equipment used to receive or store raw 
379.7   materials; 
379.8      (3) building materials, except for materials included in 
379.9   paragraph (b), clauses (6) and (7); 
379.10     (4) machinery or equipment used for nonproduction purposes, 
379.11  including, but not limited to, the following:  plant security, 
379.12  fire prevention, first aid, and hospital stations; support 
379.13  operations or administration; pollution control; and plant 
379.14  cleaning, disposal of scrap and waste, plant communications, 
379.15  space heating, cooling, lighting, or safety; 
379.16     (5) farm machinery and aquaculture production equipment as 
379.17  defined by section 297A.61, subdivisions 12 and 13; 
379.18     (6) machinery or equipment purchased and installed by a 
379.19  contractor as part of an improvement to real property; or 
379.20     (7) any other item that is not essential to the integrated 
379.21  process of manufacturing, fabricating, mining, or refining. 
379.22     (d) For purposes of this subdivision: 
379.23     (1) "Equipment" means independent devices or tools separate 
379.24  from machinery but essential to an integrated production 
379.25  process, including computers and computer software, used in 
379.26  operating, controlling, or regulating machinery and equipment; 
379.27  and any subunit or assembly comprising a component of any 
379.28  machinery or accessory or attachment parts of machinery, such as 
379.29  tools, dies, jigs, patterns, and molds.  
379.30     (2) "Fabricating" means to make, build, create, produce, or 
379.31  assemble components or property to work in a new or different 
379.32  manner. 
379.33     (3) "Integrated production process" means a process or 
379.34  series of operations through which tangible personal property is 
379.35  manufactured, fabricated, mined, or refined.  For purposes of 
379.36  this clause, (i) manufacturing begins with the removal of raw 
380.1   materials from inventory and ends when the last process prior to 
380.2   loading for shipment has been completed; (ii) fabricating begins 
380.3   with the removal from storage or inventory of the property to be 
380.4   assembled, processed, altered, or modified and ends with the 
380.5   creation or production of the new or changed product; (iii) 
380.6   mining begins with the removal of overburden from the site of 
380.7   the ores, minerals, stone, peat deposit, or surface materials 
380.8   and ends when the last process before stockpiling is completed; 
380.9   and (iv) refining begins with the removal from inventory or 
380.10  storage of a natural resource and ends with the conversion of 
380.11  the item to its completed form. 
380.12     (4) "Machinery" means mechanical, electronic, or electrical 
380.13  devices, including computers and computer software, that are 
380.14  purchased or constructed to be used for the activities set forth 
380.15  in paragraph (a), beginning with the removal of raw materials 
380.16  from inventory through completion of the product, including 
380.17  packaging of the product. 
380.18     (4) (5) "Machinery and equipment used for pollution control"
380.19  means machinery and equipment used solely to eliminate, prevent, 
380.20  or reduce pollution resulting from an activity described in 
380.21  paragraph (a).  
380.22     (5) (6) "Manufacturing" means an operation or series of 
380.23  operations where raw materials are changed in form, composition, 
380.24  or condition by machinery and equipment and which results in the 
380.25  production of a new article of tangible personal property.  For 
380.26  purposes of this subdivision, "manufacturing" includes the 
380.27  generation of electricity or steam to be sold at retail. 
380.28     (6) (7) "Mining" means the extraction of minerals, ores, 
380.29  stone, or peat. 
380.30     (7) (8) "Online data retrieval system" means a system whose 
380.31  cumulation of information is equally available and accessible to 
380.32  all its customers. 
380.33     (8) (9) "Primarily" means machinery and equipment used 50 
380.34  percent or more of the time in an activity described in 
380.35  paragraph (a). 
380.36     (9) (10) "Refining" means the process of converting a 
381.1   natural resource to a an intermediate or finished product, 
381.2   including the treatment of water to be sold at retail. 
381.3      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
381.4   purchases made after December 31, 2003. 
381.5      Sec. 10.  Minnesota Statutes 2002, section 297A.68, is 
381.6   amended by adding a subdivision to read: 
381.7      Subd. 39.  [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 
381.8   tangible personal property or services is exempt from tax for a 
381.9   period of six months from the effective date of the law change 
381.10  that results in the imposition of the tax under this chapter if: 
381.11     (1) the act imposing the tax does not have transitional 
381.12  effective date language for existing construction contracts and 
381.13  construction bids; and 
381.14     (2) the requirements of paragraph (b) are met. 
381.15     (b) A sale is tax exempt under paragraph (a) if it meets 
381.16  the requirements of either clause (1) or (2): 
381.17     (1) For a construction contract: 
381.18     (i) the goods or services sold must be used for the 
381.19  performance of a bona fide written lump sum or fixed price 
381.20  construction contract; 
381.21     (ii) the contract must be entered into before the date the 
381.22  goods or services become subject to the sales tax; 
381.23     (iii) the contract must not provide for allocation of 
381.24  future taxes; and 
381.25     (iv) for each qualifying contract the contractor must give 
381.26  the seller documentation of the contract on which an exemption 
381.27  is to be claimed. 
381.28     (2) For a bid: 
381.29     (i) the goods or services sold must be used pursuant to an 
381.30  obligation of a bid or bids; 
381.31     (ii) the bid or bids must be submitted and accepted before 
381.32  the date the goods or services became subject to the sales tax; 
381.33     (iii) the bid or bids must not be able to be withdrawn, 
381.34  modified, or changed without forfeiting a bond; and 
381.35     (iv) for each qualifying bid, the contractor must give the 
381.36  seller documentation of the bid on which an exemption is to be 
382.1   claimed. 
382.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
382.3   following final enactment. 
382.4      Sec. 11.  Minnesota Statutes 2002, section 297A.69, 
382.5   subdivision 2, is amended to read: 
382.6      Subd. 2.  [MATERIALS CONSUMED IN AGRICULTURAL PRODUCTION.] 
382.7   (a) Materials stored, used, or consumed in agricultural 
382.8   production of personal property intended to be sold ultimately 
382.9   at retail are exempt, whether or not the item becomes an 
382.10  ingredient or constituent part of the property produced.  
382.11  Materials that qualify for this exemption include, but are not 
382.12  limited to, the following: 
382.13     (1) feeds, seeds, trees, fertilizers, and herbicides, 
382.14  including when purchased for use by farmers in a federal or 
382.15  state farm or conservation program; 
382.16     (2) materials sold to a veterinarian to be used or consumed 
382.17  in the care, medication, and treatment of agricultural 
382.18  production animals and horses; 
382.19     (3) chemicals, including chemicals used for cleaning food 
382.20  processing machinery and equipment; 
382.21     (4) materials, including chemicals, fuels, and electricity 
382.22  purchased by persons engaged in agricultural production to treat 
382.23  waste generated as a result of the production process; 
382.24     (5) fuels, electricity, gas, and steam used or consumed in 
382.25  the production process, except that electricity, gas, or steam 
382.26  used for space heating, cooling, or lighting is exempt if (i) it 
382.27  is in excess of the average climate control or lighting for the 
382.28  production area, and (ii) it is necessary to produce that 
382.29  particular product; 
382.30     (6) petroleum products and lubricants; 
382.31     (7) packaging materials, including returnable containers 
382.32  used in packaging food and beverage products; and 
382.33     (8) accessory tools and equipment that are separate 
382.34  detachable units with an ordinary useful life of less than 12 
382.35  months used in producing a direct effect upon the product. 
382.36  Machinery, equipment, implements, tools, accessories, 
383.1   appliances, contrivances, and furniture and fixtures, except 
383.2   those listed in this clause are not included within this 
383.3   exemption. 
383.4      (b) For purposes of this subdivision, "agricultural 
383.5   production" includes, but is not limited to, horticulture, 
383.6   floriculture, maple syrup harvesting, and the raising of pets, 
383.7   fur-bearing animals, research animals, horses, farmed cervidae 
383.8   as defined in section 17.451, subdivision 2, llamas as defined 
383.9   in section 17.455, subdivision 2, and ratitae as defined in 
383.10  section 17.453, subdivision 3. 
383.11     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
383.12  purchases made after December 31, 2003. 
383.13     Sec. 12.  Minnesota Statutes 2002, section 297A.69, 
383.14  subdivision 3, is amended to read: 
383.15     Subd. 3.  [FARM MACHINERY REPAIR AND REPLACEMENT PARTS.] 
383.16  Repair and replacement parts, except tires, used for maintenance 
383.17  or repair of farm machinery, logging equipment, and aquaculture 
383.18  production equipment are exempt, if the part replaces a farm 
383.19  machinery part assigned a specific or generic part number by the 
383.20  manufacturer of the farm machinery.  
383.21     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
383.22  purchases made after June 30, 2003. 
383.23     Sec. 13.  Minnesota Statutes 2002, section 297A.69, 
383.24  subdivision 4, is amended to read: 
383.25     Subd. 4.  [FARM MACHINERY, EQUIPMENT, AND FENCING.] The 
383.26  following machinery, equipment, and fencing is exempt: 
383.27     (1) farm machinery is exempt.; 
383.28     (2) logging equipment, including chain saws used for 
383.29  commercial logging; 
383.30     (3) fencing used for the containment of farmed cervidae, as 
383.31  defined in section 17.451, subdivision 2; 
383.32     (4) primary and backup generator units used to generate 
383.33  electricity for the purpose of operating farm machinery, 
383.34  aquacultural production equipment, or logging equipment, or 
383.35  providing light or space heating necessary for the production of 
383.36  livestock, dairy animals, dairy products, or poultry and poultry 
384.1   products; and 
384.2      (5) aquaculture production equipment.  
384.3      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
384.4   purchases made after June 30, 2003. 
384.5      Sec. 14.  Minnesota Statutes 2002, section 297B.025, 
384.6   subdivision 1, is amended to read: 
384.7      Subdivision 1.  [NONCOLLECTOR VEHICLE.] Purchase or use of 
384.8   a passenger automobile as defined in section 168.011, 
384.9   subdivision 7, shall be taxed pursuant to section 297B.02, 
384.10  subdivision 2, if the passenger automobile is (1) is in the 
384.11  tenth or subsequent year of vehicle life, and (2) is not an 
384.12  above-market automobile as designated by the registrar of motor 
384.13  vehicles does not have a resale value of $3,000 or more, as 
384.14  determined using nationally recognized sources of information on 
384.15  automobile resale values, as designated by the registrar of 
384.16  motor vehicles. 
384.17     The registrar of motor vehicles shall prepare, and 
384.18  distribute to all deputy motor vehicle registrars by July 15, 
384.19  1985, a listing by make, model, and year of above-market 
384.20  automobiles.  Except as provided by subdivision 2, the registrar 
384.21  must include in the list all automobiles with a resale value of 
384.22  $3,000 or more, as determined using nationally recognized 
384.23  sources of information on automobile resale values.  The 
384.24  registrar shall revise the list by February 1 of each year.  The 
384.25  initial list and all subsequent revisions must include only 
384.26  those automobiles which are in the tenth or subsequent year of 
384.27  vehicle life.  
384.28     <b>[EFFECTIVE DATE.]</b> This section is effective for vehicles 
384.29  purchased after June 30, 2003. 
384.30     Sec. 15.  Minnesota Statutes 2002, section 297B.025, 
384.31  subdivision 2, is amended to read: 
384.32     Subd. 2.  [COLLECTOR VEHICLE.] A passenger automobile that 
384.33  is registered under section 168.10, subdivision 1a, 1b, 1c, 1d, 
384.34  or 1h, or a fire truck registered under section 168.10, 
384.35  subdivision 1c, shall be taxed under section 297B.02, 
384.36  subdivision 3, and the registrar shall not designate as an 
385.1   above-market automobile a passenger automobile or a fire truck 
385.2   registered under those subdivisions.  If the vehicle is 
385.3   subsequently registered in another class not under section 
385.4   168.10, subdivision 1a, 1b, 1c, 1d, or 1h, within one year of 
385.5   the date of registration under those subdivisions, it shall be 
385.6   subject to the full excise tax imposed under subdivision 1. 
385.7      <b>[EFFECTIVE DATE.]</b> This section is effective for vehicles 
385.8   purchased after December 31, 2003. 
385.9      Sec. 16.  Minnesota Statutes 2002, section 297B.035, 
385.10  subdivision 1, is amended to read: 
385.11     Subdivision 1.  [ORDINARY COURSE OF BUSINESS.] Except as 
385.12  provided in this section, motor vehicles purchased for resale in 
385.13  the ordinary course of business or used by any motor vehicle 
385.14  dealer, as defined in section 168.011, subdivision 21, who is 
385.15  licensed under section 168.27, subdivision 2 or 3, which bear 
385.16  dealer plates as authorized by section 168.27, subdivision 16, 
385.17  shall be exempt from the provisions of this chapter. 
385.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
385.19  following final enactment. 
385.20     Sec. 17.  [REPEALER.] 
385.21     (a) Minnesota Statutes 2002, section 297A.72, subdivision 
385.22  1, is repealed effective for exemption certificates received for 
385.23  sales occurring after June 30, 2003. 
385.24     (b) Minnesota Statutes 2002, section 297A.97, is repealed 
385.25  effective for sales and purchases occurring after December 31, 
385.26  2003. 
385.27     (c) Minnesota Rules, parts 8130.0800, subparts 5 and 12; 
385.28  8130.1300; 8130.1600, subpart 5; 8130.1700, subparts 3 and 4; 
385.29  8130.4800, subpart 2; 8130.7500, subpart 5; 8130.8000; and 
385.30  8130.8300, are repealed effective the day following final 
385.31  enactment. 
385.32                             ARTICLE 16 
385.33                DEPARTMENT SPECIAL TAXES INITIATIVES 
385.34     Section 1.  Minnesota Statutes 2002, section 115B.24, 
385.35  subdivision 8, is amended to read: 
385.36     Subd. 8.  [PENALTIES; ENFORCEMENT.] The audit, penalty and 
386.1   enforcement provisions applicable to corporate franchise taxes 
386.2   imposed under chapter 290 apply to the taxes imposed under 
386.3   section 115B.22 and those provisions shall be administered by 
386.4   the commissioner.  
386.5      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
386.6   following final enactment. 
386.7      Sec. 2.  Minnesota Statutes 2002, section 295.50, 
386.8   subdivision 9b, is amended to read: 
386.9      Subd. 9b.  [PATIENT SERVICES.] (a) "Patient services" means 
386.10  inpatient and outpatient services and other goods and services 
386.11  provided by hospitals, surgical centers, or health care 
386.12  providers.  They include the following health care goods and 
386.13  services provided to a patient or consumer: 
386.14     (1) bed and board; 
386.15     (2) nursing services and other related services; 
386.16     (3) use of hospitals, surgical centers, or health care 
386.17  provider facilities; 
386.18     (4) medical social services; 
386.19     (5) drugs, biologicals, supplies, appliances, and 
386.20  equipment; 
386.21     (6) other diagnostic or therapeutic items or services; 
386.22     (7) medical or surgical services; 
386.23     (8) items and services furnished to ambulatory patients not 
386.24  requiring emergency care; 
386.25     (9) emergency services; and 
386.26     (10) covered services listed in section 256B.0625 and in 
386.27  Minnesota Rules, parts 9505.0170 to 9505.0475. 
386.28     (b) "Patient services" does not include:  
386.29     (1) services provided to nursing homes licensed under 
386.30  chapter 144A; and 
386.31     (2) examinations for purposes of utilization reviews, 
386.32  insurance claims or eligibility, litigation, and employment, 
386.33  including reviews of medical records for those purposes; 
386.34     (3) services provided by community residential mental 
386.35  health facilities licensed under Minnesota Rules, parts 
386.36  9520.0500 to 9520.0690; 
387.1      (4) services provided by community support programs and 
387.2   family community support programs approved under Minnesota 
387.3   Rules, parts 9535.1700 to 9535.1760; 
387.4      (5) services provided by community mental health centers as 
387.5   defined in section 245.62, subdivision 2; 
387.6      (6) services provided by assisted living programs and 
387.7   congregate housing programs; and 
387.8      (7) hospice care services. 
387.9      <b>[EFFECTIVE DATE.]</b> This section is effective for gross 
387.10  revenues received after December 31, 2002. 
387.11     Sec. 3.  Minnesota Statutes 2002, section 295.53, 
387.12  subdivision 1, is amended to read: 
387.13     Subdivision 1.  [EXEMPTIONS.] (a) The following payments 
387.14  are excluded from the gross revenues subject to the hospital, 
387.15  surgical center, or health care provider taxes under sections 
387.16  295.50 to 295.57 295.59: 
387.17     (1) payments received for services provided under the 
387.18  Medicare program, including payments received from the 
387.19  government, and organizations governed by sections 1833 and 1876 
387.20  of title XVIII of the federal Social Security Act, United States 
387.21  Code, title 42, section 1395, and enrollee deductibles, 
387.22  coinsurance, and copayments, whether paid by the Medicare 
387.23  enrollee or by a Medicare supplemental coverage as defined in 
387.24  section 62A.011, subdivision 3, clause (10).  Payments for 
387.25  services not covered by Medicare are taxable; 
387.26     (2) medical assistance payments including payments received 
387.27  directly from the government or from a prepaid plan; 
387.28     (3) payments received for home health care services; 
387.29     (4) payments received from hospitals or surgical centers 
387.30  for goods and services on which liability for tax is imposed 
387.31  under section 295.52 or the source of funds for the payment is 
387.32  exempt under clause (1), (2), (7), (8), (10), (13), 
387.33  or (20) (17); 
387.34     (5) payments received from health care providers for goods 
387.35  and services on which liability for tax is imposed under this 
387.36  chapter or the source of funds for the payment is exempt under 
388.1   clause (1), (2), (7), (8), (10), (13), or (20) (17); 
388.2      (6) amounts paid for legend drugs, other than nutritional 
388.3   products, to a wholesale drug distributor who is subject to tax 
388.4   under section 295.52, subdivision 3, reduced by reimbursements 
388.5   received for legend drugs otherwise exempt under this chapter; 
388.6      (7) payments received under the general assistance medical 
388.7   care program including payments received directly from the 
388.8   government or from a prepaid plan; 
388.9      (8) payments received for providing services under the 
388.10  MinnesotaCare program including payments received directly from 
388.11  the government or from a prepaid plan and enrollee deductibles, 
388.12  coinsurance, and copayments.  For purposes of this clause, 
388.13  coinsurance means the portion of payment that the enrollee is 
388.14  required to pay for the covered service; 
388.15     (9) payments received by a health care provider or the 
388.16  wholly owned subsidiary of a health care provider for care 
388.17  provided outside Minnesota; 
388.18     (10) payments received from the chemical dependency fund 
388.19  under chapter 254B; 
388.20     (11) payments received in the nature of charitable 
388.21  donations that are not designated for providing patient services 
388.22  to a specific individual or group; 
388.23     (12) payments received for providing patient services 
388.24  incurred through a formal program of health care research 
388.25  conducted in conformity with federal regulations governing 
388.26  research on human subjects.  Payments received from patients or 
388.27  from other persons paying on behalf of the patients are subject 
388.28  to tax; 
388.29     (13) payments received from any governmental agency for 
388.30  services benefiting the public, not including payments made by 
388.31  the government in its capacity as an employer or insurer; 
388.32     (14) payments received for services provided by community 
388.33  residential mental health facilities licensed under Minnesota 
388.34  Rules, parts 9520.0500 to 9520.0690, community support programs 
388.35  and family community support programs approved under Minnesota 
388.36  Rules, parts 9535.1700 to 9535.1760, and community mental health 
389.1   centers as defined in section 245.62, subdivision 2; 
389.2      (15) (14) government payments received by a regional 
389.3   treatment center; 
389.4      (16) payments received for hospice care services; 
389.5      (17) (15) payments received by a health care provider for 
389.6   hearing aids and related equipment or prescription eyewear 
389.7   delivered outside of Minnesota; 
389.8      (18) (16) payments received by an educational institution 
389.9   from student tuition, student activity fees, health care service 
389.10  fees, government appropriations, donations, or grants.  Fee for 
389.11  service payments and payments for extended coverage are taxable; 
389.12  and 
389.13     (19) payments received for services provided by:  assisted 
389.14  living programs and congregate housing programs; and 
389.15     (20) (17) payments received under the federal Employees 
389.16  Health Benefits Act, United States Code, title 5, section 
389.17  8909(f), as amended by the Omnibus Reconciliation Act of 1990. 
389.18     (b) Payments received by wholesale drug distributors for 
389.19  legend drugs sold directly to veterinarians or veterinary bulk 
389.20  purchasing organizations are excluded from the gross revenues 
389.21  subject to the wholesale drug distributor tax under sections 
389.22  295.50 to 295.59. 
389.23     <b>[EFFECTIVE DATE.]</b> This section is effective for gross 
389.24  revenues received after December 31, 2002. 
389.25     Sec. 4.  Minnesota Statutes 2002, section 297F.01, 
389.26  subdivision 21a, is amended to read: 
389.27     Subd. 21a.  [UNLICENSED SELLER.] "Unlicensed seller" means 
389.28  anyone who is not licensed under section 297F.03 or 461.12 to 
389.29  sell the particular product to the purchaser or possessor of the 
389.30  product. 
389.31     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
389.32     Sec. 5.  Minnesota Statutes 2002, section 297F.01, 
389.33  subdivision 23, is amended to read: 
389.34     Subd. 23.  [WHOLESALE SALES PRICE.] "Wholesale sales price" 
389.35  means the established price stated on the price list in effect 
389.36  at the time of sale for which a manufacturer or person sells a 
390.1   tobacco product to a distributor, exclusive of any discount, 
390.2   promotional offer, or other reduction.  For purposes of this 
390.3   subdivision, "price list" means the manufacturer's price at 
390.4   which tobacco products are made available for sale to all 
390.5   distributors on an ongoing basis. 
390.6      <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
390.7      Sec. 6.  Minnesota Statutes 2002, section 297F.06, 
390.8   subdivision 4, is amended to read: 
390.9      Subd. 4.  [TOBACCO PRODUCTS USE TAX.] The tobacco products 
390.10  use tax does not apply to the possession, use, or storage of 
390.11  tobacco products in quantities of: that have an aggregate cost 
390.12  in any calendar month to the consumer of $100 or less. 
390.13     (1) not more than 50 cigars; 
390.14     (2) not more than ten ounces snuff or snuff powder; 
390.15     (3) not more than one pound smoking or chewing tobacco or 
390.16  any other tobacco product in the possession of any one consumer. 
390.17     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
390.18     Sec. 7.  Minnesota Statutes 2002, section 297F.20, 
390.19  subdivision 1, is amended to read: 
390.20     Subdivision 1.  [PENALTIES FOR FAILURE TO FILE OR PAY.] (a) 
390.21  A person or consumer required to file a return, report, or other 
390.22  document with the commissioner who fails to do so is guilty of a 
390.23  misdemeanor. 
390.24     (b) A person or consumer required to pay or to collect and 
390.25  remit a tax under this chapter, who fails to do so when 
390.26  required, is guilty of a misdemeanor. 
390.27     <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
390.28  committed on or after July 1, 2003. 
390.29     Sec. 8.  Minnesota Statutes 2002, section 297F.20, 
390.30  subdivision 2, is amended to read: 
390.31     Subd. 2.  [PENALTIES FOR KNOWING FAILURE TO FILE OR PAY.] 
390.32  (a) A person or consumer required to file a return, report, or 
390.33  other document with the commissioner, who knowingly, rather than 
390.34  accidentally, inadvertently, or negligently, fails to file it 
390.35  when required, is guilty of a gross misdemeanor.  
390.36     (b) A person or consumer required to pay or to collect and 
391.1   remit a tax under this chapter, who knowingly, rather than 
391.2   accidentally, inadvertently, or negligently, fails to file it 
391.3   when required, is guilty of a gross misdemeanor. 
391.4      <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
391.5   committed on or after July 1, 2003. 
391.6      Sec. 9.  Minnesota Statutes 2002, section 297F.20, 
391.7   subdivision 3, is amended to read: 
391.8      Subd. 3.  [FALSE OR FRAUDULENT RETURNS; PENALTIES.] (a) A 
391.9   person or consumer who files with the commissioner a return, 
391.10  report, or other document, or who maintains or provides invoices 
391.11  subject to review by the commissioner under this chapter, known 
391.12  by the person or consumer to be fraudulent or false concerning a 
391.13  material matter, is guilty of a felony. 
391.14     (b) A person or consumer who knowingly aids or assists in, 
391.15  or advises in the preparation or presentation of a return, 
391.16  report, invoice, or other document that is fraudulent or false 
391.17  concerning a material matter, whether or not the falsity or 
391.18  fraud is committed with the knowledge or consent of the 
391.19  person or consumer authorized or required to present the return, 
391.20  report, invoice, or other document, is guilty of a felony. 
391.21     <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
391.22  committed on or after July 1, 2003. 
391.23     Sec. 10.  Minnesota Statutes 2002, section 297F.20, 
391.24  subdivision 6, is amended to read: 
391.25     Subd. 6.  [UNSTAMPED CIGARETTES; UNTAXED TOBACCO PRODUCTS.] 
391.26  (a) A person, other than a licensed distributor or a consumer, 
391.27  who possesses, receives, or transports more than 200 but fewer 
391.28  than 5,000 unstamped cigarettes, or up to $100 $350 worth of 
391.29  untaxed tobacco products is guilty of a misdemeanor. 
391.30     (b) A person, other than a licensed distributor or a 
391.31  consumer, who possesses, receives, or transports 5,000 or more, 
391.32  but fewer than 20,001 unstamped cigarettes, or up to $500 more 
391.33  than $350 but less than $1,400 worth of untaxed tobacco products 
391.34  is guilty of a gross misdemeanor. 
391.35     (c) A person, other than a licensed distributor or a 
391.36  consumer, who possesses, receives, or transports more than 
392.1   20,000 unstamped cigarettes, or $500 $1,400 or more worth of 
392.2   untaxed tobacco products is guilty of a felony. 
392.3      (d) For purposes of this subdivision, an individual in 
392.4   possession of more than 4,999 unstamped cigarettes, or more than 
392.5   $350 worth of untaxed tobacco products, is presumed not to be a 
392.6   consumer. 
392.7      <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
392.8   committed on or after July 1, 2003. 
392.9      Sec. 11.  Minnesota Statutes 2002, section 297F.20, 
392.10  subdivision 9, is amended to read: 
392.11     Subd. 9.  [PURCHASES FROM UNLICENSED SELLERS.] (a) No 
392.12  retailer or subjobber shall purchase cigarettes or tobacco 
392.13  products from any person who is not licensed under section 
392.14  297F.03 as a licensed distributor or subjobber. 
392.15     (b) A retailer, or subjobber, or consumer who purchases 
392.16  from an unlicensed seller more than 200 but fewer than 5,000 
392.17  cigarettes or up to $100 $350 worth of tobacco products is 
392.18  guilty of a misdemeanor. 
392.19     (b) (c) A retailer, or subjobber, or consumer who 
392.20  purchases from an unlicensed seller 5,000 or more, but fewer 
392.21  than 20,001 cigarettes or up to $500 more than $350 but less 
392.22  than $1,400 worth of untaxed tobacco products is guilty of a 
392.23  gross misdemeanor. 
392.24     (c) (d) A retailer, or subjobber, or consumer who 
392.25  purchases from an unlicensed seller more than 20,000 cigarettes 
392.26  or $500 $1,400 or more worth of tobacco products is guilty of a 
392.27  felony. 
392.28     <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
392.29  committed on or after July 1, 2003. 
392.30     Sec. 12.  Minnesota Statutes 2002, section 297I.01, 
392.31  subdivision 9, is amended to read: 
392.32     Subd. 9.  [GROSS PREMIUMS.] "Gross premiums" means total 
392.33  premiums paid by policyholders and applicants of policies, 
392.34  whether received in the form of money or other valuable 
392.35  consideration, on property, persons, lives, interests and other 
392.36  risks located, resident, or to be performed in this state, but 
393.1   excluding consideration and premiums for reinsurance assumed 
393.2   from other insurance companies.  The term "gross premiums" 
393.3   includes the total consideration paid to bail bond agents for 
393.4   bail bonds.  For title insurance companies, "gross premiums" 
393.5   means the charge for title insurance made by a title insurance 
393.6   company or its agents according to the company's rate filing 
393.7   approved by the commissioner of commerce without a deduction for 
393.8   commissions paid to or retained by the agent.  Gross premiums of 
393.9   a title insurance company does not include any other charge or 
393.10  fee for abstracting, searching, or examining the title, or 
393.11  escrow, closing, or other related services.  The term "gross 
393.12  premiums" includes any workers' compensation special 
393.13  compensation fund premium surcharge pursuant to section 176.129. 
393.14     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
393.15  following final enactment. 
393.16     Sec. 13.  Minnesota Statutes 2002, section 297I.20, is 
393.17  amended to read: 
393.18     297I.20 [GUARANTY ASSOCIATION ASSESSMENT OFFSET OFFSETS 
393.19  AGAINST PREMIUM TAXES.] 
393.20     Subdivision 1.  [GUARANTY ASSOCIATION ASSESSMENT OFFSETS.] 
393.21  (a) An insurance company may offset against its premium tax 
393.22  liability to this state any amount paid for assessments made for 
393.23  insolvencies which occur after July 31, 1994, under sections 
393.24  60C.01 to 60C.22; and any amount paid for assessments made after 
393.25  July 31, 1994, under Minnesota Statutes 1992, sections 61B.01 to 
393.26  61B.16, or under sections 61B.18 to 61B.32 as follows: 
393.27     (1) Each such assessment shall give rise to an amount of 
393.28  offset equal to 20 percent of the amount of the assessment for 
393.29  each of the five calendar years following the year in which the 
393.30  assessment was paid. 
393.31     (2) The amount of offset initially determined for each 
393.32  taxable year is the sum of the amounts determined under clause 
393.33  (1) for that taxable year. 
393.34     (b)(1) Each year the commissioner shall compare total 
393.35  guaranty association assessments levied over the preceding five 
393.36  calendar years to the sum of all premium tax and corporate 
394.1   franchise tax revenues collected from insurance companies, 
394.2   without reduction for any guaranty association assessment offset 
394.3   in the preceding calendar year, referred to in this subdivision 
394.4   as "preceding year insurance tax revenues." 
394.5      (2) If total guaranty association assessments levied over 
394.6   the preceding five years exceed the preceding year insurance tax 
394.7   revenues, insurance companies must be allowed only a 
394.8   proportionate part of the premium tax offset calculated under 
394.9   paragraph (a) for the current calendar year. 
394.10     (3) The proportionate part of the premium tax offset 
394.11  allowed in the current calendar year is determined by 
394.12  multiplying the amount calculated under paragraph (a) by a 
394.13  fraction.  The numerator of the fraction equals the preceding 
394.14  year insurance tax revenues, and its denominator equals total 
394.15  guaranty association assessments levied over the preceding 
394.16  five-year period. 
394.17     (4) The proportionate part of the premium tax offset that 
394.18  is not allowed must be carried forward to subsequent tax years 
394.19  and added to the amount of premium tax offset calculated under 
394.20  paragraph (a) prior to application of the limitation imposed by 
394.21  this paragraph. 
394.22     (5) Any amount carried forward from prior years must be 
394.23  allowed before allowance of the offset for the current year 
394.24  calculated under paragraph (a). 
394.25     (6) The premium tax offset limitation must be calculated 
394.26  separately for (i) insurance companies subject to assessment 
394.27  under sections 60C.01 to 60C.22, and (ii) insurance companies 
394.28  subject to assessment under Minnesota Statutes 1992, sections 
394.29  61B.01 to 61B.16, or 61B.18 to 61B.32. 
394.30     (7) When the premium tax offset is limited by this 
394.31  provision, the commissioner shall notify affected insurance 
394.32  companies on a timely basis for purposes of completing premium 
394.33  and corporate franchise tax returns.  
394.34     (8) The guaranty associations created under sections 60C.01 
394.35  to 60C.22, Minnesota Statutes 1992, sections 61B.01 to 61B.16, 
394.36  and 61B.18 to 61B.32, shall provide the commissioner with the 
395.1   necessary information on guaranty association assessments. 
395.2      (c)(1) If the offset determined by the application of 
395.3   paragraphs (a) and (b) exceeds the insurance company's premium 
395.4   tax liability under this section prior to allowance of the 
395.5   credit for premium taxes, then the insurance company may carry 
395.6   forward the excess, referred to in this subdivision as the 
395.7   "carryforward credit" to subsequent taxable years. 
395.8      (2) The carryforward credit is allowed as an offset against 
395.9   premium tax liability for the first succeeding year to the 
395.10  extent that the premium tax liability for that year exceeds the 
395.11  amount of the allowable offset for the year determined under 
395.12  paragraphs (a) and (b). 
395.13     (3) The carryforward credit must be reduced, but not below 
395.14  zero, by the amount of the carryforward credit allowed as an 
395.15  offset against the premium tax under this paragraph.  The 
395.16  remainder, if any, of the carryforward credit must be carried 
395.17  forward to succeeding taxable years until the entire 
395.18  carryforward credit has been credited against the insurance 
395.19  company's liability for premium tax under this chapter if 
395.20  applicable for that taxable year. 
395.21     (d) When an insurer has offset against taxes its payment of 
395.22  an assessment of the Minnesota life and health guaranty 
395.23  association, and the association pays the insurer a refund with 
395.24  respect to the assessment under Minnesota Statutes 1992, section 
395.25  61B.07, subdivision 6, or 61B.24, subdivision 6, then the refund 
395.26  reduces the insurer's carryforward credit under paragraph (c).  
395.27  If the refund exceeds the amount of the carryforward credit, the 
395.28  excess amount must be repaid to the state by the insurers to the 
395.29  extent of the offset in the manner the commissioner requires. 
395.30     Subd. 2.  [JOINT UNDERWRITING ASSOCIATION OFFSET.] An 
395.31  assessment made pursuant to section 62I.06, subdivision 6, shall 
395.32  be deductible by the member from past or future premium taxes 
395.33  due the state. 
395.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
395.35  following final enactment. 
395.36     Sec. 14.  [REVISOR'S INSTRUCTION.] 
396.1      In the next edition of Minnesota Rules, the revisor shall 
396.2   delete any references to the sections repealed in section 15, 
396.3   paragraph (a). 
396.4      Sec. 15.  [REPEALER.] 
396.5      (a) Minnesota Statutes 2002, sections 294.01; 294.02; 
396.6   294.021; 294.03; 294.06; 294.07; 294.08; 294.09; 294.10; 294.11; 
396.7   and 294.12, are repealed effective the day following final 
396.8   enactment. 
396.9      (b) Minnesota Rules, parts 8125.1000; 8125.1300, subpart 1; 
396.10  and 8125.1400, are repealed effective the day following final 
396.11  enactment. 
396.12                             ARTICLE 17 
396.13         DEPARTMENT COLLECTIONS AND COMPLIANCE INITIATIVES 
396.14     Section 1.  [270.278] [PENALTY FOR FILING CERTAIN DOCUMENTS 
396.15  AGAINST DEPARTMENT OF REVENUE EMPLOYEES.] 
396.16     Subdivision 1.  [DEFINITIONS.] (a) "Recording office" means 
396.17  a county recorder, registrar of titles, or secretary of state in 
396.18  this state or another state. 
396.19     (b) "Filing party" means the person or persons requesting 
396.20  or causing another person to request that the recording office 
396.21  accept documents or instruments for recording or filing. 
396.22     Subd. 2.  [INVALID DOCUMENTS NAMING THE COMMISSIONER OR 
396.23  DEPARTMENT OF REVENUE EMPLOYEES.] Filing a document, including a 
396.24  nonconsensual common law lien under section 514.99, that 
396.25  purports to create a claim against the commissioner of revenue 
396.26  or an employee of the department of revenue based on performance 
396.27  or nonperformance of duties by the commissioner or employee is 
396.28  invalid unless accompanied by a specific order from a court of 
396.29  competent jurisdiction authorizing the filing of the document or 
396.30  unless a specific statute authorizes the filing of the document. 
396.31     Subd. 3.  [CIVIL PENALTY.] If a filing party causes a 
396.32  document described in subdivision 2 to be recorded in a 
396.33  recording office, the commissioner may assess a penalty against 
396.34  the filing party of $1,000 per document filed, payable to the 
396.35  general fund.  An order assessing a penalty under this section 
396.36  is reviewable administratively under section 289A.65 and is 
397.1   appealable to tax court under chapter 271.  The penalty is 
397.2   collected and paid in the same manner as income tax.  The 
397.3   penalty is in addition to any other remedy available to the 
397.4   commissioner of revenue or to an employee of the department of 
397.5   revenue against whom the document has been filed.  
397.6      <b>[EFFECTIVE DATE.]</b> This section is effective for documents 
397.7   filed on or after July 1, 2003. 
397.8      Sec. 2.  Minnesota Statutes 2002, section 270.69, is 
397.9   amended by adding a subdivision to read: 
397.10     Subd. 16.  [ATTACHMENT TO PROCEEDS OF PROPERTY.] Any lien 
397.11  imposed under this section attaches to the proceeds of property 
397.12  with the same priority that the lien has with respect to the 
397.13  property itself.  "Proceeds of property" means proceeds from the 
397.14  sale, lease, license, exchange, or other disposition of the 
397.15  property, including insurance proceeds arising from the loss or 
397.16  destruction of the property. 
397.17     <b>[EFFECTIVE DATE.]</b> This section is effective for all liens, 
397.18  whether imposed prior to, on, or after the day following final 
397.19  enactment. 
397.20     Sec. 3.  Minnesota Statutes 2002, section 270.701, 
397.21  subdivision 2, is amended to read: 
397.22     Subd. 2.  [NOTICE OF SALE.] The commissioner shall as soon 
397.23  as practicable after the seizure of the property give notice of 
397.24  sale of the property to the owner, in the manner of service 
397.25  prescribed in subdivision 1.  In the case of personal property, 
397.26  the notice shall be served at least 10 days prior to the sale.  
397.27  In the case of real property, the notice shall be served at 
397.28  least four weeks prior to the sale.  The commissioner shall also 
397.29  cause public notice of each sale to be made.  In the case of 
397.30  personal property, notice shall be posted at least 10 days prior 
397.31  to the sale at the county courthouse for the county where the 
397.32  seizure is made, and in not less than two other public 
397.33  places.  For purposes of this requirement, the Internet is a 
397.34  public place for posting the information.  In the case of real 
397.35  property, six weeks' published notice shall be given prior to 
397.36  the sale, in a newspaper published or generally circulated in 
398.1   the county.  The notice of sale provided in this subdivision 
398.2   shall specify the property to be sold, and the time, place, 
398.3   manner and conditions of the sale.  Whenever levy is made 
398.4   without regard to the 30-day period provided in section 270.70, 
398.5   subdivision 2, public notice of sale of the property seized 
398.6   shall not be made within the 30-day period unless section 
398.7   270.702 (relating to sale of perishable goods) is applicable.  
398.8      <b>[EFFECTIVE DATE.]</b> This section is effective for notices of 
398.9   sales posted on or after the day following final enactment. 
398.10     Sec. 4.  Minnesota Statutes 2002, section 270.701, is 
398.11  amended by adding a subdivision to read: 
398.12     Subd. 7.  [SALE OF SEIZED SECURITIES.] (a) At the time of 
398.13  levy on securities, the commissioner shall provide notice to the 
398.14  taxpayer that the securities may be sold after ten days from the 
398.15  date of seizure.  
398.16     (b) If the commissioner levies upon nonexempt publicly 
398.17  traded securities and the value of the securities is less than 
398.18  or equal to the total obligation for which the levy is done, 
398.19  after ten days the person who possesses or controls the 
398.20  securities shall liquidate the securities in a commercially 
398.21  reasonable manner.  After liquidation, the person shall transfer 
398.22  the proceeds to the commissioner, less any applicable 
398.23  commissions or fees, or both, which are charged in the normal 
398.24  course of business.  
398.25     (c) If the commissioner levies upon nonexempt publicly 
398.26  traded securities and the value of the securities exceeds the 
398.27  total amount of the levy, the owner of the securities may, 
398.28  within seven days after receipt of the department's notice of 
398.29  levy given pursuant to subdivision 1, instruct the person who 
398.30  possesses or controls the securities which securities are to be 
398.31  sold to satisfy the obligation.  If the owner does not provide 
398.32  instructions for liquidation, the person who possesses or 
398.33  controls the securities shall liquidate the securities in an 
398.34  amount sufficient to pay the obligation, plus any applicable 
398.35  commissions or fees, or both, which are charged in the normal 
398.36  course of business, beginning with the nonexempt securities 
399.1   purchased most recently.  After liquidation, the person who 
399.2   possesses or controls the securities shall transfer to the 
399.3   commissioner the amount of money needed to satisfy the levy. 
399.4      <b>[EFFECTIVE DATE.]</b> This section is effective for sales of 
399.5   securities seized on or after the day following final enactment. 
399.6      Sec. 5.  Minnesota Statutes 2002, section 270.72, 
399.7   subdivision 2, is amended to read: 
399.8      Subd. 2.  [DEFINITIONS.] For purposes of this section, the 
399.9   following terms have the meanings given.  
399.10     (a) "Taxes" are mean all taxes payable to the commissioner 
399.11  including penalties and interest due on the taxes. 
399.12     (b) "Delinquent taxes" do not include a tax liability if 
399.13  (i) an administrative or court action which contests the amount 
399.14  or validity of the liability has been filed or served, (ii) the 
399.15  appeal period to contest the tax liability has not expired, or 
399.16  (iii) the applicant has entered into a payment agreement and is 
399.17  current with the payments.  
399.18     (c) "Applicant" means an individual if the license is 
399.19  issued to or in the name of an individual or the corporation or 
399.20  partnership if the license is issued to or in the name of a 
399.21  corporation or partnership.  "Applicant" also means an officer 
399.22  of a corporation, a member of a partnership, or an individual 
399.23  who is liable for delinquent taxes, either for the entity for 
399.24  which the license is at issue or for another entity for which 
399.25  the liability was incurred, or personally as a licensee.  In the 
399.26  case of a license transfer, "applicant" also means both the 
399.27  transferor and the transferee of the license.  "Applicant" also 
399.28  means any holder of a license. 
399.29     (d) "License" includes means any permit, registration, 
399.30  certification, or other form of approval authorized by statute 
399.31  or rule to be issued by the state or a political subdivision of 
399.32  the state as a condition of doing business or conducting a 
399.33  trade, profession, or occupation in Minnesota, specifically 
399.34  including, but not limited to, a contract for space rental at 
399.35  the Minnesota state fair and authorization to operate 
399.36  concessions or rides at county and local fairs, festivals, or 
400.1   events. 
400.2      (e) "Licensing authority" includes the Minnesota state fair 
400.3   board and county and local boards or governing bodies. 
400.4      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
400.5   following final enactment. 
400.6      Sec. 6.  Minnesota Statutes 2002, section 270A.03, 
400.7   subdivision 2, is amended to read: 
400.8      Subd. 2.  [CLAIMANT AGENCY.] "Claimant agency" means any 
400.9   state agency, as defined by section 14.02, subdivision 2, the 
400.10  regents of the University of Minnesota, any district court of 
400.11  the state, any county, any statutory or home rule charter city 
400.12  presenting a claim for a municipal hospital or a public library 
400.13  or a municipal ambulance service, a hospital district, a private 
400.14  nonprofit hospital that leases its building from the county in 
400.15  which it is located, any public agency responsible for child 
400.16  support enforcement, any public agency responsible for the 
400.17  collection of court-ordered restitution, and any public agency 
400.18  established by general or special law that is responsible for 
400.19  the administration of a low-income housing program, and the 
400.20  Minnesota collection enterprise as defined in section 16D.02, 
400.21  subdivision 8, for the purpose of collecting the costs imposed 
400.22  under section 16D.11. 
400.23     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
400.24  following final enactment. 
400.25     Sec. 7.  Minnesota Statutes 2002, section 289A.31, 
400.26  subdivision 3, is amended to read: 
400.27     Subd. 3.  [TRANSFEREES AND FIDUCIARIES.] The amounts of the 
400.28  following liabilities are, except as otherwise provided in 
400.29  section 289A.38, subdivision 13, assessed, collected, and paid 
400.30  in the same manner and subject to the same provisions and 
400.31  limitations as a deficiency in a tax imposed by chapter 290, 
400.32  including any provisions of law for the collection of taxes: 
400.33     (1) the liability, at law or in equity, of a transferee of 
400.34  property of a taxpayer for tax or overpayment of a refund, 
400.35  including interest, additional amounts, and additions to the tax 
400.36  or overpayment provided by law, imposed upon the taxpayer by 
401.1   chapter 290 or provided for in chapter 290A; and 
401.2      (2) the liability of a fiduciary under subdivision 4 for 
401.3   the payment of tax from the estate of the taxpayer.  The 
401.4   liability may reflect the amount of tax shown on the return or 
401.5   any deficiency in tax.  
401.6      <b>[EFFECTIVE DATE.]</b> This section is effective for refunds 
401.7   paid on or after the day following final enactment. 
401.8      Sec. 8.  Minnesota Statutes 2002, section 289A.31, 
401.9   subdivision 4, is amended to read: 
401.10     Subd. 4.  [TAX AS A PERSONAL DEBT OF A FIDUCIARY.] The A 
401.11  tax imposed by chapter 290 and an overpayment of a refund 
401.12  provided for in chapter 290A, and interest and penalties, is a 
401.13  personal debt of the taxpayer from the time the liability 
401.14  arises, regardless of when the time for discharging the 
401.15  liability by payment occurs.  The debt is, in the case of the 
401.16  personal representative of the estate of a decedent and in the 
401.17  case of any fiduciary, that of the individual in the 
401.18  individual's official or fiduciary capacity only, unless the 
401.19  individual has voluntarily distributed the assets held in that 
401.20  capacity without reserving sufficient assets to pay the tax, 
401.21  interest, and penalties, in which event the individual is 
401.22  personally liable for the deficiency.  
401.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
401.24  imposed and property tax refunds claimed on or after the day 
401.25  following final enactment. 
401.26     Sec. 9.  Minnesota Statutes 2002, section 289A.36, 
401.27  subdivision 7, is amended to read: 
401.28     Subd. 7.  [APPLICATION TO COURT FOR ENFORCEMENT OF 
401.29  SUBPOENA.] (a) Disobedience of subpoenas issued under this 
401.30  section shall be punished by the district court of the district 
401.31  in which the party served with the subpoena is located, in the 
401.32  same manner as contempt of the district court.  
401.33     (b) Disobedience of a subpoena issued under subdivision 9 
401.34  shall be punished by the district court for Ramsey County in the 
401.35  same manner as contempt of the district court.  In addition to 
401.36  contempt remedies, the court may issue any order the court deems 
402.1   reasonably necessary to enforce compliance with the subpoena. 
402.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
402.3   following final enactment. 
402.4      Sec. 10.  Minnesota Statutes 2002, section 289A.36, is 
402.5   amended by adding a subdivision to read: 
402.6      Subd. 9.  [ACCESS TO RECORDS IN CONNECTION WITH EXAMINATION 
402.7   OF BUSINESSES LOCATED OUTSIDE THE STATE.] (a) In order to 
402.8   determine whether a business located outside the state of 
402.9   Minnesota is required to file a return under this chapter, the 
402.10  commissioner may examine the relevant records and files of the 
402.11  business. 
402.12     (b) To the full extent permitted by the Minnesota and 
402.13  United States constitutions, the commissioner may compel 
402.14  production of those relevant records and files by subpoena.  The 
402.15  subpoena may be served on the secretary of state along with the 
402.16  address to which service of the subpoena is to be sent and a fee 
402.17  of $50.  The secretary of state shall forward a copy of the 
402.18  subpoena to the business using the procedures for service of 
402.19  process in section 5.25, subdivision 6.  
402.20     (c) The commissioner shall pay the reasonable cost of 
402.21  producing records subject to subpoena under this subdivision if: 
402.22     (1) the subpoenaed party cannot produce the records without 
402.23  undue burden; and 
402.24     (2) the examination made pursuant to paragraph (a) shows 
402.25  that the subpoenaed party is not required to file a return under 
402.26  this chapter. 
402.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
402.28  following final enactment. 
402.29     Sec. 11.  Minnesota Statutes 2002, section 289A.36, is 
402.30  amended by adding a subdivision to read: 
402.31     Subd. 10.  [PENALTY.] In addition to sanctions imposed 
402.32  under subdivision 7, a penalty of $250 per day is imposed on any 
402.33  business that is in violation of a court order to comply with a 
402.34  subpoena that is seeking information necessary for the 
402.35  commissioner to be able to determine whether the business is 
402.36  required to file a return or pay a tax.  The maximum penalty is 
403.1   $25,000.  Upon the request of the commissioner, the court shall 
403.2   determine the amount of the penalty and enter it as a judgment 
403.3   in favor of the commissioner.  The penalty is not payable until 
403.4   the judgment is entered. 
403.5      <b>[EFFECTIVE DATE.]</b> This section is effective for violations 
403.6   of court orders to enforce subpoenas issued on or after the day 
403.7   following final enactment. 
403.8      Sec. 12.  Minnesota Statutes 2002, section 297A.85, is 
403.9   amended to read: 
403.10     297A.85 [CANCELLATION OF PERMITS.] 
403.11     The commissioner may cancel a permit if one of the 
403.12  following conditions occurs: 
403.13     (1) the permit holder has not filed a sales or use tax 
403.14  return for at least one year; 
403.15     (2) the permit holder has not reported any sales or use tax 
403.16  liability on the permit holder's returns for at least two years; 
403.17  or 
403.18     (3) the permit holder requests cancellation of the permit; 
403.19  or 
403.20     (4) the permit is subject to cancellation pursuant to 
403.21  section 297A.86, subdivision 2, paragraph (a). 
403.22     <b>[EFFECTIVE DATE.]</b> This section is effective for 
403.23  cancellations of permits done on or after the day following 
403.24  final enactment. 
403.25     Sec. 13.  [REPEALER.] 
403.26     Minnesota Statutes 2002, section 270.691, subdivision 8, is 
403.27  repealed effective the day following final enactment. 
403.28                             ARTICLE 18 
403.29                            BLUE WATERS 
403.30     Section 1.  Minnesota Statutes 2002, section 273.13, 
403.31  subdivision 23, is amended to read: 
403.32     Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
403.33  land including any improvements that is homesteaded.  The market 
403.34  value of the house and garage and immediately surrounding one 
403.35  acre of land has the same class rates as class 1a property under 
403.36  subdivision 22.  The value of the remaining land including 
404.1   improvements up to and including $600,000 market value has a net 
404.2   class rate of 0.55 percent of market value.  The remaining 
404.3   property over $600,000 market value has a class rate of one 
404.4   percent of market value. 
404.5      (b) Class 2b property is (1) real estate, rural in 
404.6   character and used exclusively for growing trees for timber, 
404.7   lumber, and wood and wood products; (2) real estate that is not 
404.8   improved with a structure and is used exclusively for growing 
404.9   trees for timber, lumber, and wood and wood products, if the 
404.10  owner has participated or is participating in a cost-sharing 
404.11  program for afforestation, reforestation, or timber stand 
404.12  improvement on that particular property, administered or 
404.13  coordinated by the commissioner of natural resources; (3) real 
404.14  estate that is nonhomestead agricultural land; or (4) a landing 
404.15  area or public access area of a privately owned public use 
404.16  airport.  Class 2b property has a net class rate of one percent 
404.17  of market value. 
404.18     (c) Agricultural land as used in this section means 
404.19  contiguous acreage of ten acres or more, used during the 
404.20  preceding year for agricultural purposes.  "Agricultural 
404.21  purposes" as used in this section means the raising or 
404.22  cultivation of agricultural products or enrollment in the 
404.23  Reinvest in Minnesota program under sections 103F.501 to 
404.24  103F.535 or the federal Conservation Reserve Program as 
404.25  contained in Public Law Number 99-198.  Contiguous acreage on 
404.26  the same parcel, or contiguous acreage on an immediately 
404.27  adjacent parcel under the same ownership, may also qualify as 
404.28  agricultural land, but only if it is pasture, timber, waste, 
404.29  unusable wild land, or land included in state or federal farm 
404.30  programs.  Agricultural classification for property shall be 
404.31  determined excluding the house, garage, and immediately 
404.32  surrounding one acre of land, and shall not be based upon the 
404.33  market value of any residential structures on the parcel or 
404.34  contiguous parcels under the same ownership. 
404.35     (d) Real estate, excluding the house, garage, and 
404.36  immediately surrounding one acre of land, of less than ten acres 
405.1   which is exclusively and intensively used for raising or 
405.2   cultivating agricultural products, shall be considered as 
405.3   agricultural land.  
405.4      Land shall be classified as agricultural even if all or a 
405.5   portion of the agricultural use of that property is the leasing 
405.6   to, or use by another person for agricultural purposes. 
405.7      Classification under this subdivision is not determinative 
405.8   for qualifying under section 273.111. 
405.9      The property classification under this section supersedes, 
405.10  for property tax purposes only, any locally administered 
405.11  agricultural policies or land use restrictions that define 
405.12  minimum or maximum farm acreage. 
405.13     (e) The term "agricultural products" as used in this 
405.14  subdivision includes production for sale of:  
405.15     (1) livestock, dairy animals, dairy products, poultry and 
405.16  poultry products, fur-bearing animals, horticultural and nursery 
405.17  stock described in sections 18.44 to 18.61, fruit of all kinds, 
405.18  vegetables, forage, grains, bees, and apiary products by the 
405.19  owner; 
405.20     (2) fish bred for sale and consumption if the fish breeding 
405.21  occurs on land zoned for agricultural use; 
405.22     (3) the commercial boarding of horses if the boarding is 
405.23  done in conjunction with raising or cultivating agricultural 
405.24  products as defined in clause (1); 
405.25     (4) property which is owned and operated by nonprofit 
405.26  organizations used for equestrian activities, excluding racing; 
405.27     (5) game birds and waterfowl bred and raised for use on a 
405.28  shooting preserve licensed under section 97A.115; 
405.29     (6) insects primarily bred to be used as food for animals; 
405.30     (7) trees, grown for sale as a crop, and not sold for 
405.31  timber, lumber, wood, or wood products; and 
405.32     (8) maple syrup taken from trees grown by a person licensed 
405.33  by the Minnesota department of agriculture under chapter 28A as 
405.34  a food processor. 
405.35     (f) If a parcel used for agricultural purposes is also used 
405.36  for commercial or industrial purposes, including but not limited 
406.1   to:  
406.2      (1) wholesale and retail sales; 
406.3      (2) processing of raw agricultural products or other goods; 
406.4      (3) warehousing or storage of processed goods; and 
406.5      (4) office facilities for the support of the activities 
406.6   enumerated in clauses (1), (2), and (3), 
406.7   the assessor shall classify the part of the parcel used for 
406.8   agricultural purposes as class 1b, 2a, or 2b, whichever is 
406.9   appropriate, and the remainder in the class appropriate to its 
406.10  use.  The grading, sorting, and packaging of raw agricultural 
406.11  products for first sale is considered an agricultural purpose.  
406.12  A greenhouse or other building where horticultural or nursery 
406.13  products are grown that is also used for the conduct of retail 
406.14  sales must be classified as agricultural if it is primarily used 
406.15  for the growing of horticultural or nursery products from seed, 
406.16  cuttings, or roots and occasionally as a showroom for the retail 
406.17  sale of those products.  Use of a greenhouse or building only 
406.18  for the display of already grown horticultural or nursery 
406.19  products does not qualify as an agricultural purpose.  
406.20     The assessor shall determine and list separately on the 
406.21  records the market value of the homestead dwelling and the one 
406.22  acre of land on which that dwelling is located.  If any farm 
406.23  buildings or structures are located on this homesteaded acre of 
406.24  land, their market value shall not be included in this separate 
406.25  determination.  
406.26     (g) To qualify for classification under paragraph (b), 
406.27  clause (4), a privately owned public use airport must be 
406.28  licensed as a public airport under section 360.018.  For 
406.29  purposes of paragraph (b), clause (4), "landing area" means that 
406.30  part of a privately owned public use airport properly cleared, 
406.31  regularly maintained, and made available to the public for use 
406.32  by aircraft and includes runways, taxiways, aprons, and sites 
406.33  upon which are situated landing or navigational aids.  A landing 
406.34  area also includes land underlying both the primary surface and 
406.35  the approach surfaces that comply with all of the following:  
406.36     (i) the land is properly cleared and regularly maintained 
407.1   for the primary purposes of the landing, taking off, and taxiing 
407.2   of aircraft; but that portion of the land that contains 
407.3   facilities for servicing, repair, or maintenance of aircraft is 
407.4   not included as a landing area; 
407.5      (ii) the land is part of the airport property; and 
407.6      (iii) the land is not used for commercial or residential 
407.7   purposes. 
407.8   The land contained in a landing area under paragraph (b), clause 
407.9   (4), must be described and certified by the commissioner of 
407.10  transportation.  The certification is effective until it is 
407.11  modified, or until the airport or landing area no longer meets 
407.12  the requirements of paragraph (b), clause (4).  For purposes of 
407.13  paragraph (b), clause (4), "public access area" means property 
407.14  used as an aircraft parking ramp, apron, or storage hangar, or 
407.15  an arrival and departure building in connection with the airport.
407.16     (h) Class 2c property consists of any parcel or contiguous 
407.17  parcels of unimproved real estate, excluding agricultural land 
407.18  classified under this subdivision, that meets all the criteria 
407.19  in clauses (1) to (5): 
407.20     (1) the property consists of at least 200 contiguous feet 
407.21  of unimproved real estate that borders a meandered lake as 
407.22  defined in section 103G.005, subdivision 15, paragraph (a), 
407.23  clause (3); 
407.24     (2) the unimproved real estate is located within 400 feet 
407.25  from the ordinary high water elevation of the public waters.  
407.26  For purposes of this clause, "unimproved" means that the 
407.27  property, or that portion of the property qualifying under this 
407.28  paragraph, contains no structures, that there are no docks or 
407.29  landings on its shoreline, and that the natural terrain and 
407.30  vegetation has not been disturbed, or has been restored to 
407.31  native vegetation; 
407.32     (3) the property is either (i) the homestead of the owner, 
407.33  the owner's spouse, or the owner or spouse's son or daughter, or 
407.34  (ii) has been in possession of the owner, the owner's spouse, or 
407.35  the owner's or spouse's son or daughter for a period of at least 
407.36  seven years prior to application for benefits under this 
408.1   section; 
408.2      (4) the owner files an application with the county assessor 
408.3   by July 1 for classification under this paragraph for the 
408.4   subsequent assessment year; and 
408.5      (5) the owner of the property signs a covenant agreement 
408.6   and files the covenant with the county assessor in the county 
408.7   where the property is located.  The covenant agreement must 
408.8   include all of the following: 
408.9      (i) legal description of the area to which the covenant 
408.10  applies; 
408.11     (ii) name and address of the owner; 
408.12     (iii) a statement that the land described in the covenant 
408.13  must be kept as undeveloped land for the duration of the 
408.14  covenant; 
408.15     (iv) a statement that the landowner may initiate expiration 
408.16  of the covenant agreement by notifying the county assessor, in 
408.17  writing, with the date of expiration which must be at least 
408.18  eight years from the date of the expiration notice; 
408.19     (v) a statement that the covenant is binding on the owner 
408.20  or owner's successor or assignee and runs with the land; and 
408.21     (vi) a witnessed signature of the owner covenanting to keep 
408.22  the land in its undeveloped state as it existed on the date the 
408.23  covenant was signed. 
408.24     Upon expiration of a covenant agreement in clause (5), the 
408.25  property which is sold is subject to additional taxes.  The 
408.26  amount of additional taxes due on the property equals the 
408.27  difference between the taxes actually levied and the taxes that 
408.28  would have been imposed if the property had been valued and 
408.29  classified as if class 2c did not apply.  The additional taxes 
408.30  must be extended against the property on the tax list for the 
408.31  current year.  No interest or penalties may be levied on the 
408.32  additional taxes if timely paid, and the additional taxes must 
408.33  be levied only with respect to the last seven years that the 
408.34  property was valued and assessed under this paragraph.  For 
408.35  purposes of this paragraph, "timely paid" means paid (A) within 
408.36  60 days after notification from the county that the property no 
409.1   longer qualifies, or (B) prior to the recording of the 
409.2   conveyance of the property, whichever is earlier. 
409.3      The tax imposed under this paragraph is a lien on the 
409.4   property assessed to the same extent and for the same duration 
409.5   as other real property taxes.  The tax must be extended by the 
409.6   county auditor and, when payable, be collected and distributed 
409.7   in the same manner provided by law for the collection and 
409.8   distribution of other property taxes. 
409.9      Class 2c has a class rate of 0.8 percent of market value. 
409.10     <b>[EFFECTIVE DATE.]</b> This section is effective for the 2004 
409.11  assessment and thereafter, for taxes payable in 2005 and 
409.12  thereafter. 
409.13                             ARTICLE 19 
409.14                           MISCELLANEOUS  
409.15     Section 1.  Minnesota Statutes 2002, section 3.842, 
409.16  subdivision 4a, is amended to read: 
409.17     Subd. 4a.  [OBJECTIONS TO RULES.] (a) For purposes of this 
409.18  subdivision, "committee" means the house of representatives 
409.19  policy committee or senate policy committee with primary 
409.20  jurisdiction over state governmental operations.  The 
409.21  commission, the legislative commission on unnecessary mandates, 
409.22  or a committee may object to a rule as provided in this 
409.23  subdivision.  If the commission, the legislative commission on 
409.24  unnecessary mandates, or a committee objects to all or some 
409.25  portion of a rule because the commission, the legislative 
409.26  commission on unnecessary mandates, or a committee considers it 
409.27  to be beyond the procedural or substantive authority delegated 
409.28  to the agency, including a proposed rule submitted under section 
409.29  14.15, subdivision 4, or 14.26, subdivision 3, paragraph (c), 
409.30  the commission, the legislative commission on unnecessary 
409.31  mandates, or a committee may file that objection in the office 
409.32  of the secretary of state.  The filed objection must contain a 
409.33  concise statement of the commission's, the legislative 
409.34  commission on unnecessary mandates', or a committee's reasons 
409.35  for its action.  An objection to a proposed rule submitted by 
409.36  the commission, the legislative commission on unnecessary 
410.1   mandates, or a committee under section 14.15, subdivision 4, or 
410.2   14.26, subdivision 3, paragraph (c), may not be filed before the 
410.3   rule is adopted. 
410.4      (b) The secretary of state shall affix to each objection a 
410.5   certification of the date and time of its filing and as soon 
410.6   after the objection is filed as practicable shall transmit a 
410.7   certified copy of it to the agency issuing the rule in question 
410.8   and to the revisor of statutes.  The secretary of state shall 
410.9   also maintain a permanent register open to public inspection of 
410.10  all objections by the commission, the legislative commission on 
410.11  unnecessary mandates, or a committee.  
410.12     (c) The commission, the legislative commission on 
410.13  unnecessary mandates, or a committee shall publish and index an 
410.14  objection filed under this section in the next issue of the 
410.15  State Register.  The revisor of statutes shall indicate the 
410.16  existence of the objection adjacent to the rule in question when 
410.17  that rule is published in Minnesota Rules. 
410.18     (d) Within 14 days after the filing of an objection by the 
410.19  commission, the legislative commission on unnecessary mandates, 
410.20  or a committee to a rule, the issuing agency shall respond in 
410.21  writing to the objecting entity.  After receipt of the response, 
410.22  the commission, the legislative commission on unnecessary 
410.23  mandates, or a committee may withdraw or modify its objection.  
410.24     (e) After the filing of an objection by the commission, the 
410.25  legislative commission on unnecessary mandates, or a committee 
410.26  that is not subsequently withdrawn, the burden is upon the 
410.27  agency in any proceeding for judicial review or for enforcement 
410.28  of the rule to establish that the whole or portion of the rule 
410.29  objected to is valid.  
410.30     (f) The failure of the commission, the legislative 
410.31  commission on unnecessary mandates, or a committee to object to 
410.32  a rule is not an implied legislative authorization of its 
410.33  validity. 
410.34     (g) In accordance with sections 14.44 and 14.45, the 
410.35  commission, the legislative commission on unnecessary mandates, 
410.36  or a committee may petition for a declaratory judgment to 
411.1   determine the validity of a rule objected to by the commission, 
411.2   the legislative commission on unnecessary mandates, or a 
411.3   committee.  The action must be started within two years after an 
411.4   objection is filed in the office of the secretary of state.  
411.5      (h) The commission, the legislative commission on 
411.6   unnecessary mandates, or a committee may intervene in litigation 
411.7   arising from agency action.  For purposes of this paragraph, 
411.8   agency action means the whole or part of a rule, or the failure 
411.9   to issue a rule. 
411.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
411.11  following final enactment.  
411.12     Sec. 2.  Minnesota Statutes 2002, section 3.843, is amended 
411.13  to read: 
411.14     3.843 [PUBLIC HEARINGS BY STATE AGENCIES.] 
411.15     By a vote of a majority of its members, the commission or 
411.16  the legislative commission on unnecessary mandates may request 
411.17  any agency issuing rules to hold a public hearing in respect to 
411.18  recommendations made under section 3.842, including 
411.19  recommendations made by the commission or the legislative 
411.20  commission on unnecessary mandates to promote adequate and 
411.21  proper rules by that agency and recommendations contained in the 
411.22  commission's biennial report.  The agency shall give notice as 
411.23  provided in section 14.14, subdivision 1, of a hearing under 
411.24  this section, to be conducted in accordance with sections 14.05 
411.25  to 14.28.  The hearing must be held not more than 60 days after 
411.26  receipt of the request or within any other longer time period 
411.27  specified by the commission or the legislative commission on 
411.28  unnecessary mandates in the request. 
411.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
411.30  following final enactment. 
411.31     Sec. 3.  Minnesota Statutes 2002, section 3.986, 
411.32  subdivision 4, is amended to read: 
411.33     Subd. 4.  [POLITICAL SUBDIVISION.] A "political 
411.34  subdivision" is a school district, county, or home rule charter 
411.35  or statutory city. 
411.36     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
412.1      Sec. 4.  Minnesota Statutes 2002, section 3.987, 
412.2   subdivision 1, is amended to read: 
412.3      Subdivision 1.  [LOCAL IMPACT NOTES.] The commissioner of 
412.4   finance shall coordinate the development of a local impact note 
412.5   for any proposed legislation introduced after June 30, 1997, or 
412.6   any rule proposed after December 31, 1999, upon request of the 
412.7   chair or the ranking minority member of either legislative tax 
412.8   committee, the chair or the ranking minority member of the house 
412.9   ways and means committee, or the chair or the ranking minority 
412.10  member of the senate finance committee.  Upon receipt of a 
412.11  request to prepare a local impact note, the commissioner must 
412.12  notify the authors of the proposed legislation or, for an 
412.13  administrative rule, the head of the relevant executive agency 
412.14  or department, that the request has been made.  The local impact 
412.15  note must be made available to the public upon request.  If the 
412.16  action is among the exceptions listed in section 3.988, a local 
412.17  impact note need not be requested nor prepared.  The 
412.18  commissioner shall make a reasonable and timely estimate of the 
412.19  local fiscal impact on each type of political subdivision that 
412.20  would result from the proposed legislation.  The commissioner of 
412.21  finance may require any political subdivision or the 
412.22  commissioner of an administrative agency of the state to supply 
412.23  in a timely manner any information determined to be necessary to 
412.24  determine local fiscal impact.  The political subdivision, its 
412.25  representative association, or commissioner shall convey the 
412.26  requested information to the commissioner of finance with a 
412.27  signed statement to the effect that the information is accurate 
412.28  and complete to the best of its ability.  The political 
412.29  subdivision, its representative association, or commissioner, 
412.30  when requested, shall update its determination of local fiscal 
412.31  impact based on actual cost or revenue figures, improved 
412.32  estimates, or both.  Upon completion of the note, the 
412.33  commissioner must provide a copy to the authors of the proposed 
412.34  legislation or, for an administrative rule, to the head of the 
412.35  relevant executive agency or department. 
412.36     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
413.1      Sec. 5.  [3.99] [LEGISLATIVE COMMISSION ON UNNECESSARY 
413.2   MANDATES; ESTABLISHED.] 
413.3      Subdivision 1.  [ESTABLISHED.] The legislative commission 
413.4   on unnecessary mandates for local governments is established as 
413.5   provided in this section, with the powers and duties given it in 
413.6   sections 3.842, subdivision 4a; 3.843; and 3.99 to 3.993. 
413.7      Subd. 2.  [MEMBERSHIP.] The commission consists of four 
413.8   senators appointed by the senate subcommittee on committees of 
413.9   the committee on rules and administration, three senators 
413.10  appointed by the senate minority leader, four state 
413.11  representatives appointed by the speaker of the house, and three 
413.12  state representatives appointed by the house minority leader.  
413.13  The appointing authorities must ensure balanced geographic 
413.14  representation and consider the background and knowledge of the 
413.15  appointees to provide for a range of expertise in the mandate 
413.16  areas that may be reviewed.  Each appointing authority must make 
413.17  appointments as soon as possible after the opening of the next 
413.18  regular session of the legislature in each odd-numbered year. 
413.19     Subd. 3.  [TERMS; VACANCIES.] Members of the commission 
413.20  serve for a two-year term beginning upon appointment and 
413.21  expiring upon appointment of a successor after the opening of 
413.22  the next regular session of the legislature in the odd-numbered 
413.23  year.  A vacancy in the membership of the commission must be 
413.24  filled for the unexpired term in a manner that will preserve the 
413.25  representation established by this section. 
413.26     Subd. 4.  [CHAIR.] The commission must meet as soon as 
413.27  practicable after members are appointed in each odd-numbered 
413.28  year to elect its chair and other officers as it may determine 
413.29  necessary.  A chair serves a two-year term, expiring in the 
413.30  odd-numbered year after a successor is elected.  The chair must 
413.31  alternate biennially between the senate and the house. 
413.32     Subd. 5.  [COMPENSATION.] Members serve without 
413.33  compensation but may be reimbursed for their reasonable expenses 
413.34  as members of the legislature. 
413.35     Subd. 6.  [STAFF.] The legislative coordinating commission 
413.36  must provide administrative support to the commission, including 
414.1   secretarial services, record keeping, and grants administration. 
414.2      Subd. 7.  [MEETINGS; PROCEDURES; TIE VOTES.] The first 
414.3   meeting of the biennium must be convened by the member 
414.4   designated by the senate majority leader if a senator is to 
414.5   chair the commission for the biennium, or by the speaker of the 
414.6   house if a state representative is to chair the commission for 
414.7   the biennium.  The commission meets at the call of the chair.  
414.8   Commission action requires a positive vote of at least four 
414.9   house members and at least four senate members. 
414.10     Subd. 8.  [FUNDING.] The legislative coordinating 
414.11  commission shall annually bill the commissioner of revenue for 
414.12  costs incurred by the legislative coordinating commission in 
414.13  providing administrative support and to make the grants 
414.14  authorized by the legislative commission on unnecessary 
414.15  mandates, in an amount not to exceed $100,000 per year.  The 
414.16  commissioner of revenue shall deduct one-half of the certified 
414.17  costs from payments to counties under section 477A.0124, 
414.18  subdivision 1 or 4, and one-half of the certified costs from 
414.19  payments to cities under section 477A.03.  The amounts billed 
414.20  under this subdivision are appropriated to the legislative 
414.21  coordinating commission. 
414.22     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
414.23  following final enactment.  
414.24     Sec. 6.  [3.991] [LEGISLATIVE COMMISSION ON UNNECESSARY 
414.25  MANDATES; REVIEW AND RECOMMENDATIONS TO LEGISLATURE.] 
414.26     The legislative commission on unnecessary mandates for 
414.27  local governments must solicit from local governments 
414.28  information on state laws and rules that local governments 
414.29  consider to be unnecessary mandates.  Among other issues, the 
414.30  commission must review unnecessary mandates that affect local 
414.31  government property taxes.  The commission must review the 
414.32  mandates identified and consider why each mandate was enacted or 
414.33  adopted, whether the reason for it still exists, the costs to 
414.34  local governments to comply with the mandate, and whether repeal 
414.35  or modification of the mandate is appropriate.  Before the 
414.36  beginning of each legislative session, the commission must 
415.1   prepare for introduction a bill to repeal or modify those laws 
415.2   or rules the commission determines are unnecessary. 
415.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
415.4   following final enactment.  
415.5      Sec. 7.  [3.992] [LEGISLATIVE COMMISSION ON UNNECESSARY 
415.6   MANDATES; GRANTS.] 
415.7      Upon recommendation of the legislative commission on 
415.8   unnecessary mandates, the commissioner of revenue may make 
415.9   grants to the league of Minnesota cities, the association of 
415.10  Minnesota counties, other organizations representing local 
415.11  governments, the board of regents of the University of 
415.12  Minnesota, the board of trustees of Minnesota state colleges and 
415.13  universities, or other accredited postsecondary institutions to 
415.14  research and make recommendations on eliminating unnecessary 
415.15  mandates.  The commissioner must specify the work to be done, 
415.16  the completion date, and the maximum grant amount, and may 
415.17  specify any other conditions the commissioner deems necessary or 
415.18  useful.  
415.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
415.20  following final enactment.  
415.21     Sec. 8.  [3.993] [LEGISLATIVE COMMISSION ON UNNECESSARY 
415.22  MANDATES; TEMPORARY RULE SUSPENSION.] 
415.23     The legislative commission on unnecessary mandates may 
415.24  suspend any rule on which the commission received negative 
415.25  testimony at a public hearing.  If any rule is suspended, the 
415.26  commission must, as soon as possible, place before the 
415.27  legislature, at the next year's session, a bill to repeal the 
415.28  suspended rule.  If the bill is not enacted in that year's 
415.29  session, the rule is effective upon adjournment of the session 
415.30  unless the agency has repealed it.  If the bill is enacted, the 
415.31  rule is repealed. 
415.32     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
415.33  following final enactment.  
415.34     Sec. 9.  [3.994] [REPEALER.] 
415.35     Sections 3.99 to 3.993 are repealed June 30, 2007. 
415.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
416.1   following final enactment. 
416.2      Sec. 10.  Minnesota Statutes 2002, section 8.30, is amended 
416.3   to read: 
416.4      8.30 [COMPROMISE OF TAX AND FEE CLAIMS.] 
416.5      Notwithstanding any other provisions of law to the 
416.6   contrary, the attorney general shall have authority to 
416.7   compromise taxes, fees, surcharges, assessments, penalties, and 
416.8   interest in any case referred to the attorney general by the 
416.9   commissioner of revenue all cases, whether reduced to judgment 
416.10  or not, where the debt is being reduced by an amount exceeding 
416.11  $50,000 and, in the attorney general's opinion, it shall be in 
416.12  the best interests of the state to do so.  Such a compromise 
416.13  must be in a form prescribed by the attorney general and shall 
416.14  be in writing signed by the attorney general, the taxpayer or 
416.15  taxpayer's representative, and the commissioner of 
416.16  revenue.  Compromises of such debts in cases where the debt is 
416.17  being reduced by an amount of $50,000 or less are governed by 
416.18  section 16D.15.  
416.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
416.20  following final enactment. 
416.21     Sec. 11.  Minnesota Statutes 2002, section 16A.152, 
416.22  subdivision 1, is amended to read: 
416.23     Subdivision 1.  [CASH FLOW ACCOUNT ESTABLISHED.] (a) A cash 
416.24  flow account is created in the general fund in the state 
416.25  treasury.  Beginning July 1, 2003, the commissioner of finance 
416.26  shall restrict part or all of the balance before reserves in the 
416.27  general fund as may be necessary to fund the cash flow account, 
416.28  up to $350,000,000. 
416.29     (b) The Amounts restricted are transferred to in the cash 
416.30  flow account and shall remain in the account until drawn down 
416.31  and used to meet cash flow deficiencies resulting from uneven 
416.32  distribution of revenue collections and required expenditures 
416.33  during a fiscal year. 
416.34     Sec. 12.  Minnesota Statutes 2002, section 16A.152, 
416.35  subdivision 1b, is amended to read: 
416.36     Subd. 1b.  [BUDGET RESERVE INCREASE.] On June 30 July 1, 
417.1   2003, the commissioner of finance shall 
417.2   transfer $3,900,000 $300,000,000 to the budget reserve account 
417.3   in the general fund.  On June 30 July 1, 2004, the commissioner 
417.4   of finance shall transfer $12,300,000 $230,000,000 to the budget 
417.5   reserve account in the general fund.  On June 30, 2005, the 
417.6   commissioner of finance shall transfer $12,000,000 to the budget 
417.7   reserve account in the general fund.  The amounts necessary for 
417.8   this purpose are appropriated from the general fund. 
417.9      Sec. 13.  Minnesota Statutes 2002, section 16A.152, 
417.10  subdivision 2, is amended to read: 
417.11     Subd. 2.  [ADDITIONAL REVENUES; PRIORITY.] If on the basis 
417.12  of a forecast of general fund revenues and expenditures, the 
417.13  commissioner of finance determines that there will be a positive 
417.14  unrestricted budgetary general fund balance at the close of the 
417.15  biennium, the commissioner of finance must allocate money to the 
417.16  budget reserve until the total amount in the account equals 
417.17  $653,000,000 the following accounts and purposes in priority 
417.18  order: 
417.19     (1) the cash flow account established in subdivision 1 
417.20  until that account reaches $350,000,000; and 
417.21     (2) the budget reserve account established in subdivision 
417.22  1a until that account reaches five percent of the forecasted 
417.23  expenditures in the odd-numbered fiscal year of the most 
417.24  recently enacted biennial budget. 
417.25     The amounts necessary to meet the requirements of this 
417.26  section are appropriated from the general fund within two weeks 
417.27  after the forecast is released. 
417.28     Sec. 14.  Minnesota Statutes 2002, section 16A.152, 
417.29  subdivision 7, is amended to read: 
417.30     Subd. 7.  [DELAY; REDUCTION.] The commissioner may delay 
417.31  paying up to 15 percent of an appropriation to a statutory or 
417.32  home rule charter city, county, special taxing district, or a 
417.33  system of higher education in that entity's fiscal year for up 
417.34  to 60 days after the start of its next fiscal year.  The delayed 
417.35  amount is subject to allotment reduction under subdivision 4. 
417.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
418.1   following final enactment. 
418.2      Sec. 15.  Minnesota Statutes 2002, section 62J.694, 
418.3   subdivision 4, is amended to read: 
418.4      Subd. 4.  [SUNSET.] The medical education endowment fund 
418.5   expires June 30, 2015 July 1, 2003.  Upon expiration, the 
418.6   commissioner of finance shall transfer the principal and any 
418.7   remaining interest to the general fund. 
418.8      Sec. 16.  Minnesota Statutes 2002, section 144.395, 
418.9   subdivision 3, is amended to read: 
418.10     Subd. 3.  [SUNSET.] The tobacco use prevention and local 
418.11  public health endowment fund expires June 30, 2015 July 1, 2003. 
418.12  Upon expiration, the commissioner of finance shall transfer the 
418.13  principal and any remaining interest to the general fund.  
418.14     Sec. 17.  Minnesota Statutes 2002, section 270.67, 
418.15  subdivision 4, is amended to read: 
418.16     Subd. 4.  [OFFER-IN-COMPROMISE AND INSTALLMENT PAYMENT 
418.17  PROGRAM.] (a) In implementing the authority provided in 
418.18  subdivision 2 or in section sections 8.30 and 16D.15 to accept 
418.19  offers of installment payments or offers-in-compromise of tax 
418.20  liabilities, the commissioner of revenue shall prescribe 
418.21  guidelines for employees of the department of revenue to 
418.22  determine whether an offer-in-compromise or an offer to make 
418.23  installment payments is adequate and should be accepted to 
418.24  resolve a dispute.  In prescribing the guidelines, the 
418.25  commissioner shall develop and publish schedules of national and 
418.26  local allowances designed to provide that taxpayers entering 
418.27  into a compromise or payment agreement have an adequate means to 
418.28  provide for basic living expenses.  The guidelines must provide 
418.29  that the taxpayer's ownership interest in a motor vehicle, to 
418.30  the extent of the value allowed in section 550.37, will not be 
418.31  considered as an asset; in the case of an offer related to a 
418.32  joint tax liability of spouses, that value of two motor vehicles 
418.33  must be excluded.  The guidelines must provide that employees of 
418.34  the department shall determine, on the basis of the facts and 
418.35  circumstances of each taxpayer, whether the use of the schedules 
418.36  is appropriate and that employees must not use the schedules to 
419.1   the extent the use would result in the taxpayer not having 
419.2   adequate means to provide for basic living expenses.  The 
419.3   guidelines must provide that: 
419.4      (1) an employee of the department shall not reject an 
419.5   offer-in-compromise or an offer to make installment payments 
419.6   from a low-income taxpayer solely on the basis of the amount of 
419.7   the offer; and 
419.8      (2) in the case of an offer-in-compromise which relates 
419.9   only to issues of liability of the taxpayer: 
419.10     (i) the offer must not be rejected solely because the 
419.11  commissioner is unable to locate the taxpayer's return or return 
419.12  information for verification of the liability; and 
419.13     (ii) the taxpayer shall not be required to provide an 
419.14  audited, reviewed, or compiled financial statement. 
419.15     (b) The commissioner shall establish procedures: 
419.16     (1) that require presentation of a counteroffer or a 
419.17  written rejection of the offer by the commissioner if the amount 
419.18  offered by the taxpayer in an offer-in-compromise or an offer to 
419.19  make installment payments is not accepted by the commissioner; 
419.20     (2) for an administrative review of any written rejection 
419.21  of a proposed offer-in-compromise or installment agreement made 
419.22  by a taxpayer under this section before the rejection is 
419.23  communicated to the taxpayer; 
419.24     (3) that allow a taxpayer to request reconsideration of any 
419.25  written rejection of the offer or agreement to the commissioner 
419.26  of revenue to determine whether the rejection is reasonable and 
419.27  appropriate under the circumstances; and 
419.28     (4) that provide for notification to the taxpayer when an 
419.29  offer-in-compromise has been accepted, and issuance of 
419.30  certificates of release of any liens imposed under section 
419.31  270.69 related to the liability which is the subject of the 
419.32  compromise. 
419.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
419.34  following final enactment. 
419.35     Sec. 18.  Laws 2002, chapter 377, article 12, section 17, 
419.36  is amended to read: 
420.1      Sec. 17.  [APPROPRIATION.] 
420.2      (a) $585,000 in fiscal year 2002 and $7,015,000 in fiscal 
420.3   year 2003 are appropriated to the commissioner of revenue from 
420.4   the general fund for tax compliance activities, including 
420.5   identification and collection of tax liabilities from 
420.6   individuals and businesses that currently do not pay all taxes 
420.7   owed, and audit and collection activity in the income tax, sales 
420.8   tax, lawful gambling, insurance, and corporate areas.  The base 
420.9   funding for these activities in fiscal years 2004 and 2005 is 
420.10  increased by $4,750,000 each year. 
420.11     (b) The commissioner must include these tax compliance 
420.12  activities in the report required by Laws 2001, First Special 
420.13  Session chapter 10, article 1, section 16, subdivision 2, 
420.14  paragraph (c). 
420.15     (c) Laws 2002, chapter 220, article 10, section 38, does 
420.16  not apply to the positions necessary to carry out the compliance 
420.17  activities identified in this section. 
420.18     (d) If the legislative auditor determines that: 
420.19     (1) actual revenue collections generated from tax 
420.20  compliance activities funded by Laws 2001, First Special Session 
420.21  chapter 10, article 1, section 16, subdivision 2, paragraphs (a) 
420.22  and (b), will not generate at least $52,000,000 in additional 
420.23  general fund revenue for the biennium ending June 30, 2003; or 
420.24     (2) actual revenue collections generated from new tax 
420.25  compliance activities funded by the appropriation in this 
420.26  section will not generate at least $7,600,000 in additional 
420.27  general fund revenue for the biennium ending June 30, 2003; 
420.28  then the commissioner of finance must cancel from the budget 
420.29  reserve account to the general fund the difference between the 
420.30  $52,000,000 or the $7,600,000 and the actual additional general 
420.31  fund revenue.  The legislative auditor's determination under 
420.32  this paragraph must be made in the February 1, 2003, report to 
420.33  the legislature required by Laws 2001, First Special Session 
420.34  chapter 10, article 1, section 16. 
420.35     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
420.36  following final enactment. 
421.1      Sec. 19.  [ADVANCE COLLECTION PROGRAM.] 
421.2      Subdivision 1.  [PROGRAM ESTABLISHED.] The commissioner of 
421.3   revenue shall establish an advance collection program to collect 
421.4   tax, interest, and penalty obligations that otherwise would not 
421.5   be collected. 
421.6      Subd. 2.  [POLICIES.] The commissioner of revenue shall 
421.7   implement and operate the program in a manner that: 
421.8      (1) minimizes the impact of the program on the incentive 
421.9   for taxpayers to comply with Minnesota taxes; and 
421.10     (2) emphasizes collecting as large a portion of the 
421.11  department's account receivables that are unlikely otherwise to 
421.12  be collected. 
421.13     Subd. 3.  [AUTHORITY.] (a) The authority under this section 
421.14  applies only to obligations on the department of revenue's 
421.15  accounts receivable system for which the original debt was more 
421.16  than two years old on the date of enactment of this section.  
421.17  The commissioner of revenue shall select the debts on the 
421.18  accounts receivable system to which this program applies and may 
421.19  exclude any debt or debts as the commissioner deems appropriate, 
421.20  because inclusion, in the sole opinion of the commissioner, may: 
421.21     (1) adversely affect tax compliance; 
421.22     (2) reduce the amount the state likely will collect in the 
421.23  future; 
421.24     (3) delay resolution of an issue of the meaning or 
421.25  application of the tax or other law; 
421.26     (4) be inconsistent with tax administration and collection 
421.27  policies; 
421.28     (5) not be justified because of the taxpayer's conduct or 
421.29  past actions; or 
421.30     (6) not be in the interest of the state for any reason the 
421.31  commissioner solely determines. 
421.32     (b) To implement this program, the commissioner shall 
421.33  exercise authority under Minnesota Statutes, section 270.67, to 
421.34  accept as a partial or discounted payment of the obligation as 
421.35  full payment.  The commissioner shall set the discount rate for 
421.36  each debt at the level the commissioner determines appropriate, 
422.1   given the provisions of this section.  For obligations that are 
422.2   four or more years old on the date of enactment, the 
422.3   commissioner may offer a reduction or discount of up to 50 
422.4   percent; for obligations that are more than two years old upon 
422.5   the date of enactment, the commissioner may offer a reduction or 
422.6   discount of up to 35 percent.  The commissioner may apply the 
422.7   appropriate discount to all or part of an obligation, regardless 
422.8   of the age of the obligation, if the taxpayer has an obligation 
422.9   that meets the minimum age requirement on the date of 
422.10  enactment.  The commissioner shall notify taxpayers or other 
422.11  debtors qualifying under the program established under this 
422.12  section in any way the commissioner determines appropriate. 
422.13     (c) This section does not limit the commissioner's 
422.14  authority under Minnesota Statutes, section 270.67. 
422.15     Sec. 20.  [FIRST MEETING OF LEGISLATIVE COMMISSION ON 
422.16  UNNECESSARY MANDATES.] 
422.17     The first meeting of the legislative commission on 
422.18  unnecessary mandates must be held as soon as practicable after 
422.19  all appointments are made.  The speaker of the house must 
422.20  designate a commission member to convene the first meeting.  The 
422.21  first commission serves until a new commission is appointed at 
422.22  the beginning of the next biennium. 
422.23     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
422.24  following final enactment.  
422.25     Sec. 21.  [MANDATED PROGRAMS; FUNDING ADJUSTMENT.] 
422.26     Notwithstanding any other law to the contrary, if state 
422.27  funding is reduced or terminated to a county for a program 
422.28  mandated by state law, rule, or bulletin, or for which a 
422.29  maintenance of effort or county payment share is added or 
422.30  increased, then the county, at its option, after a public 
422.31  hearing, may adjust the mandated service or program to reflect 
422.32  the level of state funds appropriated.  This provision expires 
422.33  on June 30, 2005. 
422.34     Sec. 22.  [REPEALER.] 
422.35     Laws 2002, chapter 390, sections 36, 37, and 38, are 
422.36  repealed. 
423.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
423.2   following final enactment and is retroactive from January 1, 
423.3   2003. 
423.4      Sec. 23.  [APPROPRIATIONS.] 
423.5      (a) $1,785,000 in fiscal year 2004 and $3,535,000 in fiscal 
423.6   year 2005 is appropriated to the commissioner of revenue from 
423.7   the general fund for additional activities to identify and 
423.8   collect tax liabilities from individuals and businesses that 
423.9   currently do not pay all taxes owed.  This initiative is 
423.10  expected to result in new general fund revenue of $19,665,000 
423.11  for the biennium ending June 30, 2005.  This initiative is a 
423.12  supplement to and part of the initiative funded in a bill styled 
423.13  as H.F. No. 749 and is subject to the reporting requirements in 
423.14  that bill, if it is enacted into law.  This is a permanent 
423.15  appropriation to be added to the budget base. 
423.16     (b) $20,000 in fiscal year 2004 is appropriated to the 
423.17  commissioner of revenue from the general fund to make grants 
423.18  under section 3.992 during fiscal years 2004 and 2005.