1.1                          A bill for an act 
  1.2             relating to taxation; clarifying the production tax 
  1.3             rate of certain direct reduced ore; amending Minnesota 
  1.4             Statutes 2002, section 298.24, subdivision 1. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  Minnesota Statutes 2002, section 298.24, 
  1.7   subdivision 1, is amended to read: 
  1.8      Subdivision 1.  (a) For concentrate produced in 2001, 2002, 
  1.9   and 2003, there is imposed upon taconite and iron sulphides, and 
  1.10  upon the mining and quarrying thereof, and upon the production 
  1.11  of iron ore concentrate therefrom, and upon the concentrate so 
  1.12  produced, a tax of $2.103 per gross ton of merchantable iron ore 
  1.13  concentrate produced therefrom.  
  1.14     (b) For concentrates produced in 2004 and subsequent years, 
  1.15  the tax rate shall be equal to the preceding year's tax rate 
  1.16  plus an amount equal to the preceding year's tax rate multiplied 
  1.17  by the percentage increase in the implicit price deflator from 
  1.18  the fourth quarter of the second preceding year to the fourth 
  1.19  quarter of the preceding year.  "Implicit price deflator" means 
  1.20  the implicit price deflator for the gross domestic product 
  1.21  prepared by the Bureau of Economic Analysis of the United States 
  1.22  Department of Commerce.  
  1.23     (c) On concentrates produced in 1997 and thereafter, an 
  1.24  additional tax is imposed equal to three cents per gross ton of 
  1.25  merchantable iron ore concentrate for each one percent that the 
  2.1   iron content of the product exceeds 72 percent, when dried at 
  2.2   212 degrees Fahrenheit. 
  2.3      (d) The tax shall be imposed on the average of the 
  2.4   production for the current year and the previous two years.  The 
  2.5   rate of the tax imposed will be the current year's tax rate.  
  2.6   This clause shall not apply in the case of the closing of a 
  2.7   taconite facility if the property taxes on the facility would be 
  2.8   higher if this clause and section 298.25 were not applicable.  
  2.9      (e) If the tax or any part of the tax imposed by this 
  2.10  subdivision is held to be unconstitutional, a tax of $2.103 per 
  2.11  gross ton of merchantable iron ore concentrate produced shall be 
  2.12  imposed.  
  2.13     (f) Consistent with the intent of this subdivision to 
  2.14  impose a tax based upon the weight of merchantable iron ore 
  2.15  concentrate, the commissioner of revenue may indirectly 
  2.16  determine the weight of merchantable iron ore concentrate 
  2.17  included in fluxed pellets by subtracting the weight of the 
  2.18  limestone, dolomite, or olivine derivatives or other basic flux 
  2.19  additives included in the pellets from the weight of the 
  2.20  pellets.  For purposes of this paragraph, "fluxed pellets" are 
  2.21  pellets produced in a process in which limestone, dolomite, 
  2.22  olivine, or other basic flux additives are combined with 
  2.23  merchantable iron ore concentrate.  No subtraction from the 
  2.24  weight of the pellets shall be allowed for binders, mineral and 
  2.25  chemical additives other than basic flux additives, or moisture. 
  2.26     (g)(1) Notwithstanding any other provision of this 
  2.27  subdivision, for the first two years of a plant's commercial 
  2.28  production of direct reduced ore, no tax is imposed under this 
  2.29  section.  As used in this paragraph, "commercial production" is 
  2.30  production of more than 50,000 tons of direct reduced ore in the 
  2.31  current year or in any prior year, and "direct reduced ore" is 
  2.32  ore that results in a product that has an iron content of at 
  2.33  least 75 percent.  For the third year of a plant's commercial 
  2.34  production of direct reduced ore, the rate to be applied to 
  2.35  direct reduced ore is 25 percent of the rate otherwise 
  2.36  determined under this subdivision.  For the fourth 
  3.1   such commercial production year, the rate is 50 percent of the 
  3.2   rate otherwise determined under this subdivision; for the 
  3.3   fifth such commercial production year, the rate is 75 percent of 
  3.4   the rate otherwise determined under this subdivision; and for 
  3.5   all subsequent commercial production years, the full rate is 
  3.6   imposed. 
  3.7      (2) Subject to clause (1), production of direct reduced ore 
  3.8   in this state is subject to the tax imposed by this section, but 
  3.9   if that production is not produced by a producer of taconite or 
  3.10  iron sulfides, the production of taconite or iron sulfides 
  3.11  consumed in the production of direct reduced iron in this state 
  3.12  is not subject to the tax imposed by this section on taconite or 
  3.13  iron sulfides. 
  3.14     (3) Notwithstanding any other provision of this 
  3.15  subdivision, no tax is imposed under this section during the 
  3.16  facility's noncommercial production of direct reduced ore. 
  3.17     <b>[EFFECTIVE DATE.]</b> This section is effective for direct 
  3.18  reduced ore produced after the date of final enactment.