1.1 	A bill for an act
1.2 	relating to taxation; property; disallowing certain
1.3 	property to continue to receive property tax deferment
1.4 	benefits in the agricultural property tax program
1.5 	located in nonmetropolitan counties; authorizing
1.6 	cities to establish programs for reclassification of
1.7 	vacant commercial and industrial properties created in
1.8 	nonmetropolitan counties; amending Minnesota Statutes
1.9 	2004, sections 273.111, subdivisions 3, 9, 11, by
1.10 	adding a subdivision; 273.13, subdivision 31;
1.11 	proposing coding for new law in Minnesota Statutes,
1.12 	chapter 273.
1.13 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.14 	Section 1. Minnesota Statutes 2004, section 273.111,
1.15 	subdivision 3, is amended to read:
1.16 		Subd. 3.Requirements.  (a) Real estate consisting of ten
1.17 	acres or more or a nursery or greenhouse, and qualifying for
1.18 	classification as class 1b, 2a, or 2b under section 273.13,
1.19 	subdivision 23, paragraph (d), shall be entitled to valuation
1.20 	and tax deferment under this section only if it is primarily
1.21 	devoted to agricultural use, and meets the qualifications in
1.22 	subdivision 6, and is not disqualified under subdivision 6a,and
1.23 	either:
1.24 	(1) is the homestead of the owner, or of a surviving
1.25 	spouse, child, or sibling of the owner or is real estate which
1.26 	is farmed with the real estate which contains the homestead
1.27 	property; or
1.28 	(2) has been in possession of the applicant, the
1.29 	applicant's spouse, parent, or sibling, or any combination
2.1 	thereof, for a period of at least seven years prior to
2.2 	application for benefits under the provisions of this section,
2.3 	or is real estate which is farmed with the real estate which
2.4 	qualifies under this clause and is within four townships or
2.5 	cities or combination thereof from the qualifying real estate;
2.6 	or
2.7 	(3) is the homestead of a shareholder in a family farm
2.8 	corporation as defined in section 500.24, notwithstanding the
2.9 	fact that legal title to the real estate may be held in the name
2.10 	of the family farm corporation; or
2.11 	(4) is in the possession of a nursery or greenhouse or an
2.12 	entity owned by a proprietor, partnership, or corporation which
2.13 	also owns the nursery or greenhouse operations on the parcel or
2.14 	parcels.
2.15 	(b) Valuation of real estate under this section is limited
2.16 	to parcels the ownership of which is in noncorporate entities
2.17 	except for:
2.18 	(1) family farm corporations organized pursuant to section
2.19 	500.24; and
2.20 	(2) corporations that derive 80 percent or more of their
2.21 	gross receipts from the wholesale or retail sale of
2.22 	horticultural or nursery stock.
2.23 	Corporate entities who previously qualified for tax
2.24 	deferment pursuant to this section and who continue to otherwise
2.25 	qualify under subdivisions 3 and ,6, and 6a for a period of at
2.26 	least three years following the effective date of Laws 1983,
2.27 	chapter 222, section 8, will not be required to make payment of
2.28 	the previously deferred taxes, notwithstanding the provisions of
2.29 	subdivision 9.  Special assessments are payable at the end of
2.30 	the three-year period or at time of sale, whichever comes first.
2.31 	(c) Land that previously qualified for tax deferment under
2.32 	this section and no longer qualifies because it is not primarily
2.33 	used for agricultural purposes but would otherwise qualify under
2.34 	subdivisions 3 and 6 for a period of at least three years will
2.35 	not be required to make payment of the previously deferred
2.36 	taxes, notwithstanding the provisions of subdivision 9.  Sale of
3.1 	the land prior to the expiration of the three-year period
3.2 	requires payment of deferred taxes as follows:  sale in the year
3.3 	the land no longer qualifies requires payment of the current
3.4 	year's deferred taxes plus payment of deferred taxes for the two
3.5 	prior years; sale during the second year the land no longer
3.6 	qualifies requires payment of the current year's deferred taxes
3.7 	plus payment of the deferred taxes for the prior year; and sale
3.8 	during the third year the land no longer qualifies requires
3.9 	payment of the current year's deferred taxes.  Deferred taxes
3.10 	shall be paid even if the land qualifies pursuant to subdivision
3.11 	11a.  When such property is sold or no longer qualifies under
3.12 	this paragraph, or at the end of the three-year period,
3.13 	whichever comes first, all deferred special assessments plus
3.14 	interest are payable in equal installments spread over the time
3.15 	remaining until the last maturity date of the bonds issued to
3.16 	finance the improvement for which the assessments were levied.
3.17 	If the bonds have matured, the deferred special assessments plus
3.18 	interest are payable within 90 days.  The provisions of section
3.19 	429.061, subdivision 2, apply to the collection of these
3.20 	installments.  Penalties are not imposed on any such special
3.21 	assessments if timely paid.
3.22 	
EFFECTIVE DATE. This section is effective for assessment
3.23 	year 2005 and thereafter, for taxes payable in 2006 and
3.24 	thereafter.

3.25 	Sec. 2. Minnesota Statutes 2004, section 273.111, is
3.26 	amended by adding a subdivision to read:
3.27 		Subd. 6a.Certain urban property; nonmetropolitan
3.28 	counties. Notwithstanding subdivisions 3 and 6, property
3.29 	located outside the metropolitan area, as defined under section
3.30 	473.121, subdivision 2, does not qualify for tax deferment under
3.31 	this section if:
3.32 	(1) the property has on each side (i) platted property some
3.33 	of which is improved with structures, or (ii) a street or
3.34 	highway segment that abuts other platted property, some of which
3.35 	is improved with structures; and 
3.36 	(2) the property is generally served by infrastructure,
4.1 	including streets, curb, gutter, public sewer, and water.
4.2 	This exclusion does not apply to property that contains an
4.3 	intensive agricultural use including, but not limited to,
4.4 	orchards, horticulture and nursery stock, fruit, vegetables, and
4.5 	apiary.
4.6 	
EFFECTIVE DATE. This section is effective for assessment
4.7 	year 2005 and thereafter, for taxes payable in 2006 and
4.8 	thereafter.

4.9 	Sec. 3. Minnesota Statutes 2004, section 273.111,
4.10 	subdivision 9, is amended to read:
4.11 		Subd. 9.Additional taxes. (a) When real property which
4.12 	is being, or has been valued and assessed under this section no
4.13 	longer qualifies under subdivisions 3 and ,6, and 6a, the
4.14 	portion no longer qualifying shall be subject to additional
4.15 	taxes, in the amount equal to the difference between the taxes
4.16 	determined in accordance with subdivision 4, and the amount
4.17 	determined under subdivision 5, provided, however, that the
4.18 	amount determined under subdivision 5 shall not be greater than
4.19 	it would have been had the actual bona fide sale price of the
4.20 	real property at an arm's-length transaction been used in lieu
4.21 	of the market value determined under subdivision 5.
4.22 	(b) Such For property no longer qualifying under
4.23 	subdivisions 3 and 6, the additional taxes as determined under
4.24 	paragraph (a) shall be extended against the property on the tax
4.25 	list for the current year, provided, however, that no interest
4.26 	or penalties shall be levied on such the additional taxes if
4.27 	timely paid, and provided further, that such the additional
4.28 	taxes shall only be levied with respect to the last three years
4.29 	that the said property has been valued and assessed under this
4.30 	section.
4.31 	(c) For property no longer qualifying under subdivision 6a,
4.32 	the additional taxes as determined under paragraph (a) shall be
4.33 	extended against the property on the tax lists only for the
4.34 	current year, provided, however, that no interest or penalties
4.35 	shall be levied on the additional taxes if timely paid.
4.36 	(d) For purposes of this section, "timely paid" means paid
5.1 	within 30 days after notification from the county that the
5.2 	property no longer qualifies, or paid prior to the recording of
5.3 	the conveyance of the property, whichever is earlier.
5.4 	
EFFECTIVE DATE. This section is effective for assessment
5.5 	year 2005 and thereafter, for taxes payable in 2006 and
5.6 	thereafter.

5.7 	Sec. 4. Minnesota Statutes 2004, section 273.111,
5.8 	subdivision 11, is amended to read:
5.9 		Subd. 11.Special local assessments.  The payment of
5.10 	special local assessments levied after June 1, 1967, for
5.11 	improvements made to any real property described in subdivision
5.12 	3 together with the interest thereon shall, on timely
5.13 	application as provided in subdivision 8, be deferred as long as
5.14 	such property meets the conditions contained in subdivisions
5.15 	3 and ,6, and 6a or is transferred to an agricultural preserve
5.16 	under sections 473H.02 to 473H.17.  If special assessments
5.17 	against the property have been deferred pursuant to this
5.18 	subdivision, the governmental unit shall file with the county
5.19 	recorder in the county in which the property is located a
5.20 	certificate containing the legal description of the affected
5.21 	property and of the amount deferred.  When such property no
5.22 	longer qualifies under subdivisions 3 and ,6, and 6a, all
5.23 	deferred special assessments plus interest shall be payable in
5.24 	equal installments spread over the time remaining until the last
5.25 	maturity date of the bonds issued to finance the improvement for
5.26 	which the assessments were levied.  If the bonds have matured,
5.27 	the deferred special assessments plus interest shall be payable
5.28 	within 90 days.  The provisions of section 429.061, subdivision
5.29 	2, apply to the collection of these installments.  Penalty shall
5.30 	not be levied on any such special assessments if timely paid.
5.31 	
EFFECTIVE DATE. This section is effective for assessment
5.32 	year 2005 and thereafter, for taxes payable in 2006 and
5.33 	thereafter.

5.34 	Sec. 5. Minnesota Statutes 2004, section 273.13,
5.35 	subdivision 31, is amended to read:
5.36 		Subd. 31.Class 5.  Class 5 property includes:
6.1 	(1) unmined iron ore and low-grade iron-bearing formations
6.2 	as defined in section 273.14; and 
6.3 	(2) properties classified under a program established under
6.4 	section 273.1321; and 
6.5 	(3) all other property not otherwise classified.
6.6 	Class 5 property has a class rate of 2.0 percent of market
6.7 	value.
6.8 	
EFFECTIVE DATE. This section is effective for assessment
6.9 	year 2005 and thereafter, for taxes payable in 2006 and
6.10 	thereafter.

6.11 	Sec. 6. [273.1321] VACANT COMMERCIAL INDUSTRIAL
6.12 	PROPERTIES.
6.13 		Subdivision 1.Authority. A city may establish, by
6.14 	ordinance, a program for the reclassification of class 3
6.15 	properties under section 273.13, subdivision 24, as class 5
6.16 	properties under section 273.13, subdivision 31, to encourage
6.17 	redevelopment, better utilization of property, and elimination
6.18 	of blighting influences.  The program may provide for
6.19 	reclassification of a property only if:
6.20 	(1) the property has been vacant, as defined in subdivision
6.21 	3, clause (1), (2), or (3), for three or more consecutive years
6.22 	prior to the current assessment year;
6.23 	(2) the property has been vacant as defined under
6.24 	subdivision 3, clause (4), for five or more consecutive years
6.25 	prior to the current assessment year; or 
6.26 	(3) the property has exhibited more than 66 percent
6.27 	depreciation for the current assessment year.  Depreciation can
6.28 	be caused by either physical deterioration or by obsolescence.
6.29 	For purposes of this section, obsolescence is defined as the
6.30 	impairment in the desirability and usefulness caused by new
6.31 	inventions, changes in design, improved processes for
6.32 	production, or external factors that make a property less
6.33 	desirable and valuable for a continued use.  Obsolescence may be
6.34 	either functional or external.
6.35 		Subd. 2.Minimum program requirements. The program must
6.36 	provide:
7.1 	(1) standards for determining whether a property is vacant;
7.2 	(2) written assessment notice by the city or county to the
7.3 	property owner informing the owner that the property will be
7.4 	reclassified;
7.5 	(3) opportunity for the property owner to appeal the
7.6 	reclassification at the board of equalization;
7.7 	(4) timely notice to the county assessor of the
7.8 	reclassification of the property, if the city has a city
7.9 	assessor and the city assessor has reclassified the property;
7.10 	and 
7.11 	(5) any other provisions the city determines are necessary
7.12 	or appropriate to the operation of the program to achieve its
7.13 	purposes.
7.14 		Subd. 3.Definition of vacant. A program established
7.15 	under this section may provide that a property is vacant if the
7.16 	property is:
7.17 	(1) condemned, dangerous, or having multiple building code
7.18 	violations;
7.19 	(2) condemned and illegally occupied;
7.20 	(3) either occupied or unoccupied, during which time the
7.21 	enforcement officer for the municipality has issued multiple
7.22 	orders to correct nuisance conditions; or 
7.23 	(4) unoccupied and not utilized for a commercial or
7.24 	industrial purpose.
7.25 		Subd. 4.Notice to property owner. The municipality
7.26 	shall give notice to the property owner requiring:  (1) the
7.27 	property to be occupied, the conditions in subdivision 3,
7.28 	clauses (1) to (3), be remedied, and the property must be used
7.29 	for a commercial or industrial purpose for at least 180 days
7.30 	during the next 12-month period; or (2) the property may be
7.31 	reclassified as class 5 property.
7.32 		Subd. 5.Application outside of metropolitan area. This
7.33 	section applies only to cities located outside of the
7.34 	metropolitan area, as defined in section 473.121, subdivision 2.
7.35 	
EFFECTIVE DATE. This section is effective for assessment
7.36 	year 2005 and thereafter, for taxes payable in 2006 and
8.1 	thereafter.