1.1                          A bill for an act 
  1.2             relating to financing and operation of government in 
  1.3             this state; modifying truth in taxation provisions and 
  1.4             adding a taxpayer satisfaction survey; changing 
  1.5             income, corporate franchise, withholding, estate, 
  1.6             property, sales and use, mortgage registry, health 
  1.7             care gross revenues, motor fuels, gambling, cigarette 
  1.8             and tobacco products, occupation, net proceeds, 
  1.9             production, liquor, insurance, and other taxes and 
  1.10            tax-related provisions; making technical, clarifying, 
  1.11            collection, enforcement, refund, and administrative 
  1.12            changes to certain taxes and tax-related provisions, 
  1.13            tax-forfeited lands, revenue recapture, unfair 
  1.14            cigarette sales, state debt collection, sustainable 
  1.15            forest incentive programs, and payments in lieu of 
  1.16            taxes; changing local government aids and credits; 
  1.17            providing for determination of population for certain 
  1.18            purposes; updating references to the Internal Revenue 
  1.19            Code, changing property tax exemptions, assessment, 
  1.20            valuation, classification, class rates, levies, 
  1.21            deferral, review and equalization, appeals, notices 
  1.22            and statements, and distribution provisions; changing 
  1.23            rent constituting property taxes and property tax 
  1.24            refunds; authorizing special taxing districts; 
  1.25            requiring state contracts be with vendors registered 
  1.26            to collect use taxes; abolishing the political 
  1.27            contribution refund; authorizing certain local sales 
  1.28            taxes; providing for compliance with streamlined sales 
  1.29            tax agreement; changing the taxation of liquor and 
  1.30            cigarettes; authorizing income tax checkoffs; 
  1.31            requiring registration of tax shelters and providing 
  1.32            for a voluntary compliance initiative; changing job 
  1.33            opportunity building zones, border city development 
  1.34            zones, biotechnology and health sciences industry zone 
  1.35            provisions; limiting sales tax construction exemption 
  1.36            in job zones to businesses paying prevailing wage; 
  1.37            requiring a referendum for certain subsidies to 
  1.38            gambling enterprises; authorizing charges for certain 
  1.39            emergency services; imposing a franchise fee on card 
  1.40            clubs; defining the term "tax"; regulating tax 
  1.41            preparers; suspending appropriations or aids to public 
  1.42            employers who prohibit certain employees from wearing 
  1.43            a flag on a uniform; providing for training and 
  1.44            conduct of assessors; prohibiting purchases of 
  1.45            tax-forfeited lands by certain local officials; 
  1.46            providing for data classification and exchange of 
  2.1             data; establishing a tax reform commission; providing 
  2.2             and imposing powers and duties on the commissioner of 
  2.3             revenue and other state agencies and departments and 
  2.4             on certain political subdivisions and certain 
  2.5             officials; changing and imposing penalties; requiring 
  2.6             reports; transferring funds; appropriating money; 
  2.7             amending Minnesota Statutes 2004, sections 4A.02; 
  2.8             16C.03, by adding a subdivision; 16D.10; 168A.05, 
  2.9             subdivision 1a; 190.09, subdivision 2; 240.30, by 
  2.10            adding a subdivision; 270.02, subdivision 3; 270.11, 
  2.11            subdivision 2; 270.16, subdivision 2; 270.30, 
  2.12            subdivisions 1, 5, 6, 8, by adding subdivisions; 
  2.13            270.65; 270.67, subdivision 4; 270.69, subdivision 4; 
  2.14            270A.03, subdivisions 5, 7; 272.01, subdivision 2; 
  2.15            272.02, subdivisions 1a, 7, 47, 53, 64, by adding 
  2.16            subdivisions; 272.0211, subdivisions 1, 2; 272.0212, 
  2.17            subdivisions 1, 2; 272.029, subdivisions 4, 6; 
  2.18            273.055; 273.0755; 273.11, subdivisions 1a, 8, by 
  2.19            adding a subdivision; 273.111, by adding a 
  2.20            subdivision; 273.123, subdivision 7; 273.124, 
  2.21            subdivisions 3, 6, 8, 21; 273.125, subdivision 8; 
  2.22            273.13, subdivisions 22, 23, 25, by adding a 
  2.23            subdivision; 273.1315; 273.1384, subdivision 1; 
  2.24            273.19, subdivision 1a; 273.372; 274.01, subdivision 
  2.25            1; 274.014, subdivisions 2, 3; 274.14; 275.025, 
  2.26            subdivision 4; 275.065, subdivisions 1c, 3, 4, 7, by 
  2.27            adding subdivisions; 275.07, subdivisions 1, 4; 
  2.28            276.04, subdivision 2; 276.112; 276A.01, subdivision 
  2.29            7; 282.016; 282.08; 282.15; 282.21; 282.224; 282.301; 
  2.30            287.04; 289A.02, subdivision 7; 289A.08, subdivisions 
  2.31            1, 3, 7, 13, 16; 289A.18, subdivision 1; 289A.19, 
  2.32            subdivision 4; 289A.20, subdivision 2; 289A.31, 
  2.33            subdivision 2; 289A.37, subdivision 5; 289A.38, 
  2.34            subdivisions 6, 7, by adding subdivisions; 289A.40, 
  2.35            subdivision 2, by adding subdivisions; 289A.50, 
  2.36            subdivisions 1, 1a; 289A.56, by adding a subdivision; 
  2.37            289A.60, subdivisions 2a, 4, 6, 7, 11, 13, 20, by 
  2.38            adding subdivisions; 290.01, subdivisions 6, 7, 7b, 
  2.39            19, as amended, 19a, 19b, 19c, 19d, 31; 290.032, 
  2.40            subdivisions 1, 2; 290.06, subdivisions 2c, 22, by 
  2.41            adding a subdivision; 290.067, subdivisions 1, 2a; 
  2.42            290.0671, subdivisions 1, 1a; 290.0672, subdivisions 
  2.43            1, 2; 290.0674, subdivisions 1, 2; 290.0675, 
  2.44            subdivision 1; 290.091, subdivisions 2, 3; 290.0922, 
  2.45            subdivision 2; 290.191, subdivisions 2, 3; 290.92, 
  2.46            subdivisions 1, 4b; 290A.03, subdivisions 3, 11, 13, 
  2.47            15, by adding subdivisions; 290A.07, by adding a 
  2.48            subdivision; 290A.19; 290B.05, subdivision 3; 290C.05; 
  2.49            290C.10; 291.005, subdivision 1; 291.03, subdivision 
  2.50            1; 295.52, subdivision 4; 295.53, subdivision 1; 
  2.51            295.582; 295.60, subdivision 3; 296A.22, by adding a 
  2.52            subdivision; 297A.61, subdivisions 3, 4, by adding a 
  2.53            subdivision; 297A.64, subdivision 4; 297A.668, 
  2.54            subdivisions 1, 5; 297A.67, subdivisions 2, 7, 9, 29, 
  2.55            by adding a subdivision; 297A.68, subdivisions 2, 5, 
  2.56            28, 35, 37, 38, 39, by adding subdivisions; 297A.70, 
  2.57            subdivision 10; 297A.71, subdivision 12, by adding a 
  2.58            subdivision; 297A.72, by adding a subdivision; 
  2.59            297A.75, subdivision 1; 297A.87, subdivisions 2, 3; 
  2.60            297A.99, subdivisions 1, 4, 9, by adding a 
  2.61            subdivision; 297E.01, subdivisions 5, 7, by adding 
  2.62            subdivisions; 297E.06, subdivision 2; 297E.07; 
  2.63            297F.08, subdivision 12, by adding a subdivision; 
  2.64            297F.09, subdivisions 1, 2; 297F.14, subdivision 4; 
  2.65            297G.09, by adding a subdivision; 297I.01, by adding 
  2.66            subdivisions; 297I.05, subdivisions 4, 5, by adding a 
  2.67            subdivision; 298.01, subdivisions 3, 4; 298.24, 
  2.68            subdivision 1; 298.75, by adding a subdivision; 
  2.69            325D.33, subdivision 6; 365.43, subdivision 1; 
  2.70            365.431; 366.011; 366.012; 373.45, subdivision 7; 
  2.71            469.169, by adding a subdivision; 469.1735, 
  3.1             subdivision 3; 469.176, subdivisions 4l, 7; 469.310, 
  3.2             subdivision 11, by adding a subdivision; 469.315; 
  3.3             469.316; 469.317; 469.319, subdivision 1, by adding a 
  3.4             subdivision; 469.320, subdivision 3; 469.330, 
  3.5             subdivision 11; 469.335; 469.337; 469.340, subdivision 
  3.6             1; 473.843, subdivision 5; 473F.02, subdivisions 2, 7; 
  3.7             477A.011, subdivisions 3, 34, 35, 36, 38; 477A.0124, 
  3.8             subdivisions 2, 4; 477A.013, subdivisions 8, 9, by 
  3.9             adding a subdivision; 477A.016; 477A.03, subdivisions 
  3.10            2a, 2b; 477A.11, subdivision 4, by adding a 
  3.11            subdivision; 477A.12, subdivisions 1, 2; 477A.14, 
  3.12            subdivision 1; 645.44, by adding a subdivision; Laws 
  3.13            1998, chapter 389, article 3, section 42, subdivision 
  3.14            2, as amended; Laws 1998, chapter 389, article 8, 
  3.15            section 43, subdivision 3; Laws 2001, First Special 
  3.16            Session chapter 5, article 3, section 8; Laws 2001, 
  3.17            First Special Session chapter 5, article 12, section 
  3.18            95, as amended; Laws 2002, chapter 377, article 3, 
  3.19            section 4; Laws 2003, chapter 127, article 5, section 
  3.20            27; Laws 2003, chapter 127, article 5, section 28; 
  3.21            Laws 2003, First Special Session chapter 21, article 
  3.22            5, section 13; Laws 2003, First Special Session 
  3.23            chapter 21, article 6, section 9; Laws 2005, chapter 
  3.24            43, section 1; proposing coding for new law in 
  3.25            Minnesota Statutes, chapters 15; 270; 272; 273; 275; 
  3.26            280; 289A; 290; 290C; 295; 297A; 297F; 373; 459; 473; 
  3.27            repealing Minnesota Statutes 2004, sections 10A.322, 
  3.28            subdivision 4; 16A.1522, subdivision 4; 270.85; 
  3.29            270.88; 272.02, subdivision 65; 273.19, subdivision 5; 
  3.30            273.37, subdivision 3; 274.05; 275.065, subdivisions 
  3.31            5a, 6, 6b, 8; 275.15; 275.61, subdivision 2; 283.07; 
  3.32            290.06, subdivision 23; 297E.12, subdivision 10; 
  3.33            469.1794, subdivision 6; 477A.08; Laws 1975, chapter 
  3.34            287, section 5; Laws 1998, chapter 389, article 3, 
  3.35            section 41; Laws 2003, chapter 127, article 9, section 
  3.36            9, subdivision 4; Minnesota Rules, parts 8093.2000; 
  3.37            8093.3000; 8130.0110, subpart 4; 8130.0200, subparts 
  3.38            5, 6; 8130.0400, subpart 9; 8130.1200, subparts 5, 6; 
  3.39            8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 
  3.40            1, 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 
  3.41            8130.5200; 8130.5600, subpart 3; 8130.5800, subpart 5; 
  3.42            8130.7300, subpart 5; 8130.8800, subpart 4. 
  3.43  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  3.44                             ARTICLE 1 
  3.45                    TAXPAYER SATISFACTION SURVEY 
  3.46     Section 1.  [275.063] [PROPOSED PROPERTY TAXES; TAXPAYER 
  3.47  SATISFACTION SURVEY; DEFINITIONS.] 
  3.48     Subdivision 1.  [DEFINITIONS.] For the purposes of this 
  3.49  section and section 275.065, the following definitions apply. 
  3.50     Subd. 2.  [BUDGET; COUNTIES.] For counties, "budget" means 
  3.51  total government fund expenditures, as defined by the state 
  3.52  auditor under section 375.169, less any expenditures for direct 
  3.53  payments to recipients or providers for the human service aids 
  3.54  listed below: 
  3.55     (1) Minnesota family investment program under chapters 256J 
  3.56  and 256K; 
  4.1      (2) medical assistance under sections 256B.041, subdivision 
  4.2   5, and 256B.19, subdivision 1; 
  4.3      (3) general assistance medical care under section 256D.03, 
  4.4   subdivision 6; 
  4.5      (4) general assistance under section 256D.03, subdivision 
  4.6   2; 
  4.7      (5) Minnesota supplemental aid under section 256D.36, 
  4.8   subdivision 1; 
  4.9      (6) preadmission screening under section 256B.0911, and 
  4.10  alternative care grants under section 256B.0913; 
  4.11     (7) general assistance medical care claims processing, 
  4.12  medical transportation, and related costs under section 256D.03, 
  4.13  subdivision 4; 
  4.14     (8) medical transportation and related costs under section 
  4.15  256B.0625, subdivisions 17 to 18a; 
  4.16     (9) group residential housing under section 256I.05, 
  4.17  subdivision 8, transferred from programs in clauses (4) and (5); 
  4.18  or 
  4.19     (10) any successor programs to those listed in clauses (1) 
  4.20  to (9). 
  4.21     Subd. 3.  [BUDGET; CITIES.] For cities, "budget" means 
  4.22  total government fund expenditures, as defined by the state 
  4.23  auditor under section 471.6965, less any expenditures for 
  4.24  improvements or services that are specially assessed or charged 
  4.25  under chapter 429, 430, 435, or the provisions of any other law 
  4.26  or charter. 
  4.27     Subd. 4.  [POPULATION.] "Population" of a city means the 
  4.28  most recent population as determined by the state demographer 
  4.29  under section 4A.02 or by the Metropolitan Council under section 
  4.30  477A.011, subdivision 3. 
  4.31     Subd. 5.  [PROPERTY TAX LEVY SUBJECT TO APPROVAL; COUNTIES 
  4.32  AND CITIES.] For a county or a city, "property tax levy subject 
  4.33  to approval" means the jurisdiction's levy excluding any debt 
  4.34  levy and any levy previously approved by the voters. 
  4.35     Subd. 6.  [DEBT LEVY.] "Debt levy" means a levy to: 
  4.36     (1) pay the costs of principal and interest on bonded 
  5.1   indebtedness; 
  5.2      (2) pay the costs of principal and interest on certificates 
  5.3   of indebtedness issued for any corporate purpose except: 
  5.4      (i) tax anticipation or aid anticipation certificates of 
  5.5   indebtedness; 
  5.6      (ii) certificates of indebtedness issued under sections 
  5.7   298.28 and 298.282; 
  5.8      (iii) certificates of indebtedness used to fund current 
  5.9   expenses; or 
  5.10     (iv) certificates of indebtedness used to fund an 
  5.11  insufficiency in tax receipts or an insufficiency in other 
  5.12  revenue sources. 
  5.13     (3) pay another city, town, county, or school district for 
  5.14  principal and interest on general obligation debt; or 
  5.15     (4) fund payments made to the Minnesota State Armory 
  5.16  Building Commission under section 193.145, subdivision 2, to 
  5.17  retire the principal and interest on armory construction bonds. 
  5.18     Subd. 7.  [STATE PROPERTY TAX CREDITS.] "State property tax 
  5.19  credits" means any credits received under sections 273.119; 
  5.20  273.123; 273.135; 273.1384; 273.1391; 273.1398, subdivision 4; 
  5.21  469.171; and 473H.10. 
  5.22     Subd. 8.  [JURISDICTION SUBJECT TO TAXPAYER SATISFACTION 
  5.23  SURVEY.] A "jurisdiction subject to the taxpayer satisfaction 
  5.24  survey" means any county or any city with a population of 500 or 
  5.25  greater. 
  5.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
  5.27  payable in 2006 and subsequent years. 
  5.28     Sec. 2.  Minnesota Statutes 2004, section 275.065, 
  5.29  subdivision 1c, is amended to read: 
  5.30     Subd. 1c.  [LEVY; SHARED, MERGED, CONSOLIDATED SERVICES.] 
  5.31  If two or more taxing authorities are in the process of 
  5.32  negotiating an agreement for sharing, merging, or consolidating 
  5.33  services between those taxing authorities at the time the 
  5.34  proposed levy is to be certified under subdivision 1, each 
  5.35  taxing authority involved in the negotiation shall certify its 
  5.36  total proposed levy as provided in that subdivision, including a 
  6.1   notification to the county auditor of the specific service 
  6.2   involved in the agreement which is not yet finalized.  The 
  6.3   affected taxing authorities may amend their proposed levies 
  6.4   under subdivision 1 until October 10 1 for levy amounts relating 
  6.5   only to the specific service involved. 
  6.6      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
  6.7   payable in 2006 and subsequent years. 
  6.8      Sec. 3.  Minnesota Statutes 2004, section 275.065, 
  6.9   subdivision 3, is amended to read: 
  6.10     Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
  6.11  county auditor shall prepare and the county treasurer shall 
  6.12  deliver after November 10 8 and on or before November 24 19 each 
  6.13  year, by first class mail to each taxpayer at the address listed 
  6.14  on the county's current year's assessment roll, a notice of 
  6.15  proposed property taxes.  
  6.16     (b) The commissioner of revenue shall prescribe the form of 
  6.17  the notice.  The form must be in the form prescribed by the 
  6.18  commissioner. 
  6.19     (c) The notice must inform taxpayers that it contains the 
  6.20  amount of property taxes each taxing authority proposes to 
  6.21  collect for taxes payable the following year.  In the case of a 
  6.22  town, or in the case of the state general tax, the final tax 
  6.23  amount will be its proposed tax unless the town changes its levy 
  6.24  at a special town meeting under section 365.52.  In the case of 
  6.25  taxing authorities required to hold a public meeting under 
  6.26  subdivision 6, the notice must clearly state that each taxing 
  6.27  authority, including regional library districts established 
  6.28  under section 134.201, and including the metropolitan taxing 
  6.29  districts as defined in paragraph (i), but excluding all other 
  6.30  special taxing districts and towns, will hold a public meeting 
  6.31  to receive public testimony on the proposed budget and proposed 
  6.32  or final property tax levy, or, in case of a school district, on 
  6.33  the current budget and proposed property tax levy.  It must 
  6.34  clearly state the time and place of each taxing authority's 
  6.35  meeting, a telephone number for the taxing authority that 
  6.36  taxpayers may call if they have questions related to the notice, 
  7.1   and an address where comments will be received by mail.  
  7.2      (d) The notice must state for each parcel: 
  7.3      (1) the market value of the property as determined under 
  7.4   section 273.11, and used for computing property taxes payable in 
  7.5   the following year and for taxes payable in the current year as 
  7.6   each appears in the records of the county assessor on November 1 
  7.7   of the current year; and, in the case of residential property, 
  7.8   whether the property is classified as homestead or 
  7.9   nonhomestead.  The notice must clearly inform taxpayers of the 
  7.10  years to which the market values apply and that the values are 
  7.11  final values;. 
  7.12     (2) (e) The items listed below, shown separately by notice 
  7.13  must state for each parcel, for both taxes payable in the 
  7.14  current year and the proposed taxes payable in the following 
  7.15  year each of the following tax amounts, net of state property 
  7.16  tax credits:  county tax, city or town tax, and state general 
  7.17  tax, net of the residential and agricultural homestead credit 
  7.18  under section 273.1384, voter approved school levy tax, 
  7.19  other local school levy tax, and the sum of the tax amounts 
  7.20  for all special taxing districts, the sum of the tax increment 
  7.21  tax on captured tax capacity, if applicable, and the fiscal 
  7.22  disparities areawide tax under chapter 276A or 473F, if 
  7.23  applicable, and as a the total of tax amount for all taxing 
  7.24  authorities:  
  7.25     (i) the actual tax for taxes payable in the current year; 
  7.26  and 
  7.27     (ii) the proposed tax amount. 
  7.28     If the county levy under clause (2) includes an amount for 
  7.29  a lake improvement district as defined under sections 103B.501 
  7.30  to 103B.581, the amount attributable for that purpose must be 
  7.31  separately stated from the remaining county levy amount.  
  7.32     In the case of a town or the state general tax, the final 
  7.33  tax shall also be its proposed tax unless the town changes its 
  7.34  levy at a special town meeting under section 365.52.  If a 
  7.35  school district has certified under section 126C.17, subdivision 
  7.36  9, that a referendum will be held in the school district at the 
  8.1   November general election, the county auditor must note next to 
  8.2   the school district's proposed amount that a referendum is 
  8.3   pending and that, if approved by the voters, the tax amount may 
  8.4   be higher than shown on the notice.  In the case of the city of 
  8.5   Minneapolis, the levy for the Minneapolis Library Board and the 
  8.6   levy for Minneapolis Park and Recreation shall be listed 
  8.7   separately from the remaining amount of the city's levy.  In the 
  8.8   case of the city of St. Paul, the levy for the St. Paul Library 
  8.9   Agency must be listed separately from the remaining amount of 
  8.10  the city's levy.  In the case of a parcel where tax increment or 
  8.11  the fiscal disparities areawide tax under chapter 276A or 473F 
  8.12  applies, the proposed tax levy on the captured value or the 
  8.13  proposed tax levy on the tax capacity subject to the areawide 
  8.14  tax must each be stated separately and not included in the sum 
  8.15  of the special taxing districts; and 
  8.16     (3) the increase or decrease between the total taxes 
  8.17  payable in the current year and the total proposed taxes, 
  8.18  expressed as a percentage. 
  8.19     (f) The notice must state for each parcel the increase or 
  8.20  decrease between the total taxes payable in the current year and 
  8.21  the total proposed taxes, expressed as a percentage. 
  8.22     (g) The notice must state for each parcel an estimate of 
  8.23  any additional tax that would apply to the property under any 
  8.24  referenda pending at the November general election.  Any amount 
  8.25  shown under this item should be indicated as pending the results 
  8.26  of referendum elections, and shall not be reflected in the total 
  8.27  proposed net tax amount. 
  8.28     (h) For purposes of this section, the amount of the tax on 
  8.29  homesteads qualifying under the senior citizens' property tax 
  8.30  deferral program under chapter 290B is the total amount of 
  8.31  property tax before subtraction of the deferred property tax 
  8.32  amount. 
  8.33     (e) (i) The notice must clearly state that the proposed or 
  8.34  final taxes do not include the following: 
  8.35     (1) special assessments; 
  8.36     (2) levies approved by the voters after the date of the 
  9.1   proposed taxes are certified, including bond referenda and 
  9.2   school district levy referenda November general election; 
  9.3      (3) a levy limit increase approved by the voters by the 
  9.4   first Tuesday after the first Monday in November of the levy 
  9.5   year as provided under section 275.73; 
  9.6      (4) amounts necessary to pay cleanup or other costs due to 
  9.7   a natural disaster occurring after the date the proposed taxes 
  9.8   are certified; 
  9.9      (5) (4) amounts necessary to pay tort judgments against the 
  9.10  taxing authority that become final after the date the proposed 
  9.11  taxes are certified; and 
  9.12     (6) (5) the contamination tax imposed on properties which 
  9.13  received market value reductions for contamination. 
  9.14     (f) (j) Except as provided in subdivision 7, failure of the 
  9.15  county auditor to prepare or the county treasurer to deliver the 
  9.16  notice as required in this section does not invalidate the 
  9.17  proposed or final tax levy or the taxes payable pursuant to the 
  9.18  tax levy. 
  9.19     (g) If the notice the taxpayer receives under this section 
  9.20  lists the property as nonhomestead, and satisfactory 
  9.21  documentation is provided to the county assessor by the 
  9.22  applicable deadline, and the property qualifies for the 
  9.23  homestead classification in that assessment year, the assessor 
  9.24  shall reclassify the property to homestead for taxes payable in 
  9.25  the following year. 
  9.26     (h) (k) In the case of class 4 residential property used as 
  9.27  a residence for lease or rental periods of 30 days or more, the 
  9.28  taxpayer must either: (1) mail or deliver a copy of the notice 
  9.29  of proposed property taxes and the taxpayer satisfaction survey 
  9.30  to each tenant, renter, or lessee; or.  
  9.31     (2) post a copy of the notice in a conspicuous place on the 
  9.32  premises of the property.  
  9.33     The copy of the notice must be mailed or posted by the 
  9.34  taxpayer by November 27 22 or within three days of receipt of 
  9.35  the notice, whichever is later.  A taxpayer may notify the 
  9.36  county treasurer of the address of the taxpayer, agent, 
 10.1   caretaker, or manager of the premises to which the notice must 
 10.2   be mailed in order to fulfill the requirements of this paragraph.
 10.3      (i) (l) For purposes of this subdivision, subdivisions 5a 
 10.4   and 6 section 276.04, "metropolitan special taxing districts" 
 10.5   means the following taxing districts in the seven-county 
 10.6   metropolitan area that levy a property tax for any of the 
 10.7   specified purposes listed below: 
 10.8      (1) Metropolitan Council under section 473.132, 473.167, 
 10.9   473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
 10.10     (2) Metropolitan Airports Commission under section 473.667, 
 10.11  473.671, or 473.672; and 
 10.12     (3) Metropolitan Mosquito Control Commission under section 
 10.13  473.711. 
 10.14     (m) For purposes of this section, any levies made by the 
 10.15  regional rail authorities in the county of Anoka, Carver, 
 10.16  Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
 10.17  398A shall be included with the appropriate county's levy and 
 10.18  shall be discussed at one of that county's public 
 10.19  hearing regularly scheduled board meetings. 
 10.20     (n) The governing body of a county, city, or school 
 10.21  district may, with the county auditor's consent, include 
 10.22  supplemental information with the statement of proposed property 
 10.23  taxes about the impact of state aid increases or decreases on 
 10.24  property tax increases or decreases and on the level of services 
 10.25  provided in the affected jurisdiction.  This supplemental 
 10.26  information may include information for the following year, the 
 10.27  current year, and for as many consecutive preceding years as 
 10.28  deemed appropriate by the governing body of the county, city, or 
 10.29  school district.  It may include only information regarding: 
 10.30     (1) the impact of inflation as measured by the implicit 
 10.31  price deflator for state and local government purchases; 
 10.32     (2) population growth and decline; 
 10.33     (3) state or federal government action; and 
 10.34     (4) other financial factors that affect the level of 
 10.35  property taxation and local services that the governing body of 
 10.36  the county, city, or school district may deem appropriate to 
 11.1   include. 
 11.2      The information may be presented using tables, written 
 11.3   narrative, and graphic representations and may contain 
 11.4   instruction toward further sources of information or opportunity 
 11.5   for comment. 
 11.6      The supplemental information for each jurisdiction must not 
 11.7   exceed one side of an 8.5 inch by 11 inch sheet of paper. 
 11.8      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 11.9   payable in 2006 and subsequent years. 
 11.10     Sec. 4.  Minnesota Statutes 2004, section 275.065, is 
 11.11  amended by adding a subdivision to read: 
 11.12     Subd. 3b.  [TAXPAYER SATISFACTION SURVEY.] (a) A taxpayer 
 11.13  satisfaction survey form must be attached to or enclosed with 
 11.14  each proposed property tax notice under subdivision 3.  The form 
 11.15  must include a property description or a code number that allows 
 11.16  the property to be uniquely identified. 
 11.17     (b) The taxpayer satisfaction survey form shall present the 
 11.18  following question for each jurisdiction subject to the taxpayer 
 11.19  satisfaction survey:  "Are you satisfied with the proposed 
 11.20  property tax levy for (name of jurisdiction)?"  A space will be 
 11.21  provided for the respondent to answer "Yes" or "No" for each 
 11.22  jurisdiction.  The form must also inform the taxpayer that if 
 11.23  the number of responses marked "No" exceeds the criteria 
 11.24  specified in subdivision 3e, a referendum will be held on the 
 11.25  question of the increase in the property tax levy subject to 
 11.26  approval unless a recertification is made under subdivision 9 
 11.27  reducing the levy. 
 11.28     (c) The mailing shall include a non-postage-paid envelope 
 11.29  preaddressed to the agency designated to process survey 
 11.30  results.  A taxpayer, including a tenant, renter, or lessee who 
 11.31  is entitled to receive a copy of the notice and survey form 
 11.32  under subdivision 3, paragraph (k), may respond to the survey by 
 11.33  returning the completed survey form to the designated agency by 
 11.34  December 1.  The responding taxpayer is responsible for the 
 11.35  postage. 
 11.36     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 12.1   payable in 2006 and subsequent years, except that two provisions 
 12.2   are first effective for taxes payable in 2007:  the requirement 
 12.3   that the survey form include a property description or code 
 12.4   number, and the requirement that the form notify taxpayers that 
 12.5   the results of the survey could cause a referendum election to 
 12.6   be held. 
 12.7      Sec. 5.  Minnesota Statutes 2004, section 275.065, is 
 12.8   amended by adding a subdivision to read: 
 12.9      Subd. 3c.  [TAXPAYER SATISFACTION SURVEY ADDITIONAL 
 12.10  INFORMATION.] The taxpayer satisfaction survey form must include 
 12.11  the following information for the current year and for the 
 12.12  proposed year, and show the percentage change between the years: 
 12.13     (1) the county government's (i) budget and (ii) property 
 12.14  tax levy subject to approval; and 
 12.15     (2) if the property is located in a city which is a 
 12.16  jurisdiction subject to the taxpayer satisfaction survey, the 
 12.17  city government's (i) budget and (ii) property tax levy subject 
 12.18  to approval. 
 12.19     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 12.20  payable in 2006 and subsequent years. 
 12.21     Sec. 6.  Minnesota Statutes 2004, section 275.065, is 
 12.22  amended by adding a subdivision to read: 
 12.23     Subd. 3d.  [FORMAT OF TAXPAYER SATISFACTION SURVEY.] The 
 12.24  commissioner of revenue shall prescribe the format of the survey 
 12.25  form required under subdivisions 3b to 3f and present the form 
 12.26  to the chairs of the house and senate tax committees for 
 12.27  review.  The form must be in the format prescribed by the 
 12.28  commissioner. 
 12.29     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 12.30  payable in 2006 and subsequent years. 
 12.31     Sec. 7.  Minnesota Statutes 2004, section 275.065, is 
 12.32  amended by adding a subdivision to read: 
 12.33     Subd. 3e.  [RESULTS OF TAXPAYER SATISFACTION SURVEY.] (a) 
 12.34  Each agency designated to receive taxpayer satisfaction surveys 
 12.35  shall verify the authenticity of each form received, to the 
 12.36  extent possible, and tabulate the results of the survey for each 
 13.1   taxing jurisdiction.  If the number of survey responses 
 13.2   indicating dissatisfaction with the jurisdiction's proposed levy 
 13.3   exceeds 20 percent of the total number of proposed tax notices 
 13.4   distributed in the jurisdiction, and the proposed property tax 
 13.5   levy subject to approval exceeds the property tax levy subject 
 13.6   to approval for taxes payable in the current year, a referendum 
 13.7   must be held on the last Tuesday in January.  By December 8, the 
 13.8   agency must announce the results of the survey for each taxing 
 13.9   jurisdiction, including both the number of responses indicating 
 13.10  that they are satisfied with the proposed levy and the number 
 13.11  indicating that they are not satisfied. 
 13.12     (b) If the county auditor determines that a single person 
 13.13  or entity owns more than ten percent of the parcels of property 
 13.14  within a jurisdiction subject to taxpayer satisfaction survey, 
 13.15  then the number of responses indicating dissatisfaction with the 
 13.16  proposed levy must exceed the percentage owed by the single 
 13.17  person or entity plus 20 percent of the total number of proposed 
 13.18  tax notices distributed in the jurisdiction in order to initiate 
 13.19  the referendum process described in paragraph (a). 
 13.20     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 13.21  payable in 2006 and subsequent years, except that the 
 13.22  requirement of an automatic referendum election is effective 
 13.23  beginning with taxes payable in 2007 and subsequent years. 
 13.24     Sec. 8.  Minnesota Statutes 2004, section 275.065, is 
 13.25  amended by adding a subdivision to read: 
 13.26     Subd. 3f.  [DESIGNATED AGENCY.] For taxpayer satisfaction 
 13.27  surveys pertaining to taxes payable in 2006, the designated 
 13.28  agency is the county.  For taxing jurisdictions located in more 
 13.29  than one county, each county shall tabulate the results of the 
 13.30  survey for the portion of the jurisdiction in the county, and 
 13.31  forward the results to the jurisdiction's home county by 
 13.32  December 7.  The home county shall make available the survey 
 13.33  results for the total jurisdiction. 
 13.34     By January 1, 2006, and each year thereafter, the 
 13.35  commissioner of revenue shall designate the agency or agencies 
 13.36  to receive and process taxpayer satisfaction surveys for taxes 
 14.1   payable in the following year. 
 14.2      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 14.3   payable in 2006 and subsequent years. 
 14.4      Sec. 9.  Minnesota Statutes 2004, section 275.065, 
 14.5   subdivision 4, is amended to read: 
 14.6      Subd. 4.  [COSTS.] If the reasonable cost of The county may 
 14.7   apportion the cost of the county auditor's services and the cost 
 14.8   of preparing and mailing the notice and survey required in this 
 14.9   section exceed the amount distributed to the county by the 
 14.10  commissioner of revenue to administer this section, the taxing 
 14.11  authority must reimburse the county for the excess cost.  The 
 14.12  excess cost must be apportioned between taxing jurisdictions as 
 14.13  follows:  
 14.14     (1) one-third is allocated to the county; 
 14.15     (2) one-third is allocated to cities and towns within the 
 14.16  county; and 
 14.17     (3) one-third is allocated to school districts within the 
 14.18  county.  
 14.19     The amounts in clause (2) must be further apportioned among 
 14.20  the cities and towns in the proportion that the number of 
 14.21  parcels in the city and town bears to the number of parcels in 
 14.22  all the cities and towns within the county.  The amount in 
 14.23  clause (3) must be further apportioned among the school 
 14.24  districts in the proportion that the number of parcels in the 
 14.25  school district bears to the number of parcels in all school 
 14.26  districts within the county. 
 14.27     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 14.28  payable in 2006 and subsequent years. 
 14.29     Sec. 10.  Minnesota Statutes 2004, section 275.065, 
 14.30  subdivision 7, is amended to read: 
 14.31     Subd. 7.  [CERTIFICATION OF COMPLIANCE.] At the time the 
 14.32  taxing authority certifies its tax levy under section 275.07, it 
 14.33  shall certify to the commissioner of revenue its compliance with 
 14.34  this section.  The certification must contain the information 
 14.35  required by the commissioner of revenue to determine compliance 
 14.36  with this section.  If the commissioner determines that the 
 15.1   taxing authority has failed to substantially comply with the 
 15.2   requirements of this section, the commissioner of revenue shall 
 15.3   notify the county auditor.  The decision of the commissioner is 
 15.4   final.  When fixing rates under section 275.08 for a taxing 
 15.5   authority that has not complied with this section, the county 
 15.6   auditor must use the taxing authority's previous year's levy, 
 15.7   plus any additional amounts necessary to pay principal and 
 15.8   interest on general obligation bonds of the taxing authority for 
 15.9   which its taxing powers have been pledged if the bonds were 
 15.10  issued before 1989 fund an increase in the authority's debt levy 
 15.11  for taxes payable in the following year.  
 15.12     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 15.13  payable in 2006 and subsequent years. 
 15.14     Sec. 11.  Minnesota Statutes 2004, section 275.065, is 
 15.15  amended by adding a subdivision to read: 
 15.16     Subd. 9.  [RECERTIFICATION OF PROPOSED LEVY.] By December 
 15.17  15, a jurisdiction subject to taxpayer satisfaction survey, that 
 15.18  has been notified under subdivision 3e that the criteria for a 
 15.19  referendum have been met, may elect to recertify its proposed 
 15.20  levy so that the proposed property tax levy subject to approval 
 15.21  is equal to the property tax levy subject to approval for taxes 
 15.22  payable in the current year.  If the jurisdiction recertifies 
 15.23  its proposed levy to the county auditor according to the 
 15.24  provisions of this subdivision, the auditor must cancel the 
 15.25  referendum for that jurisdiction. 
 15.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 15.27  payable in 2007 and subsequent years. 
 15.28     Sec. 12.  Minnesota Statutes 2004, section 275.065, is 
 15.29  amended by adding a subdivision to read: 
 15.30     Subd. 10.  [LEVY APPROVAL; REFERENDUM.] (a) If the 
 15.31  designated agency has determined under subdivision 3e that a 
 15.32  referendum is required, the increase in the property tax levy 
 15.33  subject to approval shall not be effective until it has been 
 15.34  submitted to the voters at a special election to be held on the 
 15.35  last Tuesday in January, and a majority of votes cast on the 
 15.36  question of approving the levy increase are in the affirmative.  
 16.1   The commissioner of revenue shall prepare the form of the 
 16.2   question to be presented at the referendum, which must reference 
 16.3   only the amount of increase in the property tax levy subject to 
 16.4   approval. 
 16.5      (b) If the majority of the votes cast on the question are 
 16.6   in the affirmative, the proposed levy shall be certified as the 
 16.7   final levy.  If the majority of the votes cast on the question 
 16.8   are in the negative, the levy shall be the property tax levy 
 16.9   amount subject to approval for the previous year, plus the 
 16.10  portion of the proposed levy that was not subject to referendum. 
 16.11     (c) A levy approved under this subdivision must be levied 
 16.12  against the net tax capacity of the jurisdiction. 
 16.13     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 16.14  payable in 2007 and subsequent years. 
 16.15     Sec. 13.  Minnesota Statutes 2004, section 275.07, 
 16.16  subdivision 1, is amended to read: 
 16.17     Subdivision 1.  [CERTIFICATION OF LEVY.] (a) Except as 
 16.18  provided under paragraph (b), the taxes voted by cities, 
 16.19  counties, school districts, and special districts shall be 
 16.20  certified by the proper authorities to the county auditor on or 
 16.21  before five working days after December 20 28 in each year.  A 
 16.22  jurisdiction whose levy is subject to a referendum under section 
 16.23  275.065, subdivision 10, shall at that time certify two levy 
 16.24  amounts, one if the referendum is successful, and another if the 
 16.25  referendum is not successful.  A jurisdiction whose levy is 
 16.26  subject to a referendum must recertify its final levy the day 
 16.27  immediately following the election.  A town must certify the 
 16.28  levy adopted by the town board to the county auditor by 
 16.29  September 15 each year.  If the town board modifies the levy at 
 16.30  a special town meeting after September 15, the town board must 
 16.31  recertify its levy to the county auditor on or before five 
 16.32  working days after December 20 28.  The taxes certified shall be 
 16.33  reduced by the county auditor by the aid received under section 
 16.34  273.1398, subdivision 3.  If a city, town, county, school 
 16.35  district, or special district fails to certify its levy by that 
 16.36  date, its levy shall be the amount levied by it for the 
 17.1   preceding year. 
 17.2      (b)(i) The taxes voted by counties under sections 103B.241, 
 17.3   103B.245, and 103B.251 shall be separately certified by the 
 17.4   county to the county auditor on or before five working days 
 17.5   after December 20 28 in each year.  The taxes certified shall 
 17.6   not be reduced by the county auditor by the aid received under 
 17.7   section 273.1398, subdivision 3.  If a county fails to certify 
 17.8   its levy by that date, its levy shall be the amount levied by it 
 17.9   for the preceding year.  
 17.10     (ii) For purposes of the proposed property tax notice under 
 17.11  section 275.065 and the property tax statement under section 
 17.12  276.04, for the first year in which the county implements the 
 17.13  provisions of this paragraph, the county auditor shall reduce 
 17.14  the county's levy for the preceding year to reflect any amount 
 17.15  levied for water management purposes under clause (i) included 
 17.16  in the county's levy. 
 17.17     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 17.18  payable in 2007 and subsequent years. 
 17.19     Sec. 14.  [REPEALER.] 
 17.20     Minnesota Statutes 2004, section 275.065, subdivisions 5a, 
 17.21  6, 6b, and 8, are repealed. 
 17.22     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 17.23  payable in 2006 and subsequent years. 
 17.24                             ARTICLE 2 
 17.25                           PROPERTY TAXES 
 17.26     Section 1.  Minnesota Statutes 2004, section 272.02, 
 17.27  subdivision 47, is amended to read: 
 17.28     Subd. 47.  [POULTRY LITTER BIOMASS GENERATION FACILITY; 
 17.29  PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 
 17.30  attached machinery and other personal property which is part of 
 17.31  an electrical generating facility that meets the requirements of 
 17.32  this subdivision is exempt.  At the time of construction, the 
 17.33  facility must: 
 17.34     (1) be designed to utilize poultry litter as a primary fuel 
 17.35  source; and 
 17.36     (2) be constructed for the purpose of generating power at 
 18.1   the facility that will be sold pursuant to a contract approved 
 18.2   by the Public Utilities Commission in accordance with the 
 18.3   biomass mandate imposed under section 216B.2424. 
 18.4      Construction of the facility must be commenced after 
 18.5   January 1, 2003, and before December 31, 2003 2005.  Property 
 18.6   eligible for this exemption does not include electric 
 18.7   transmission lines and interconnections or gas pipelines and 
 18.8   interconnections appurtenant to the property or the facility. 
 18.9      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 18.10  levied in 2005, payable in 2006, and thereafter. 
 18.11     Sec. 2.  Minnesota Statutes 2004, section 272.02, 
 18.12  subdivision 53, is amended to read: 
 18.13     Subd. 53.  [ELECTRIC GENERATION FACILITY; PERSONAL 
 18.14  PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
 18.15  machinery and other personal property which is part of a 3.2 
 18.16  megawatt run-of-the-river hydroelectric generation facility and 
 18.17  that meets the requirements of this subdivision is exempt.  At 
 18.18  the time of construction, the facility must: 
 18.19     (1) utilize two turbine generators at a dam site existing 
 18.20  on March 31, 1994; 
 18.21     (2) be located on publicly owned land and within 1,500 feet 
 18.22  of a 13.8 kilovolt distribution substation; and 
 18.23     (3) be eligible to receive a renewable energy production 
 18.24  incentive payment under section 216C.41. 
 18.25     Construction of the facility must be commenced after 
 18.26  January 1, 2002 December 31, 2004, and before January 1, 2005 
 18.27  2007.  Property eligible for this exemption does not include 
 18.28  electric transmission lines and interconnections or gas 
 18.29  pipelines and interconnections appurtenant to the property or 
 18.30  the facility. 
 18.31     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 18.32  levied in 2005, payable in 2006 and thereafter.  
 18.33     Sec. 3.  Minnesota Statutes 2004, section 272.02, is 
 18.34  amended by adding a subdivision to read: 
 18.35     Subd. 68.  [ELECTRIC GENERATION FACILITY PERSONAL 
 18.36  PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), and 
 19.1   section 453.54, subdivision 20, attached machinery and other 
 19.2   personal property which is part of an electric generation 
 19.3   facility that exceeds 150 megawatts of installed capacity and 
 19.4   meets the requirements of this subdivision is exempt.  At the 
 19.5   time of construction, the facility must: 
 19.6      (1) be designed to utilize natural gas as a primary fuel; 
 19.7      (2) be owned and operated by a municipal power agency as 
 19.8   defined in section 453.52, subdivision 8; 
 19.9      (3) have received the certificate of need under section 
 19.10  216B.243; 
 19.11     (4) be located outside the metropolitan area as defined 
 19.12  under section 473.121, subdivision 2; and 
 19.13     (5) be designed to be a combined-cycle facility, although 
 19.14  initially the facility will be operated as a simple-cycle 
 19.15  combustion turbine. 
 19.16     (b) To qualify under this subdivision, an agreement must be 
 19.17  negotiated between the municipal power agency and the host city, 
 19.18  for a payment in lieu of property taxes to the host city. 
 19.19     (c) Construction of the facility must be commenced after 
 19.20  January 1, 2004, and before January 1, 2006.  Property eligible 
 19.21  for this exemption does not include electric transmission lines 
 19.22  and interconnections or gas pipelines and interconnections 
 19.23  appurtenant to the property or the facility. 
 19.24     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
 19.25  year 2005, taxes payable in 2006, and thereafter. 
 19.26     Sec. 4.  Minnesota Statutes 2004, section 272.02, is 
 19.27  amended by adding a subdivision to read: 
 19.28     Subd. 69.  [ELECTRIC GENERATION FACILITY; PERSONAL 
 19.29  PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
 19.30  attached machinery and other personal property which is part of 
 19.31  a simple-cycle combustion-turbine electric generation facility 
 19.32  that exceeds 290 megawatts of installed capacity and that meets 
 19.33  the requirements of this subdivision is exempt.  At the time of 
 19.34  construction, the facility must: 
 19.35     (1) be designed to utilize natural gas as a primary fuel; 
 19.36     (2) not be owned by a public utility as defined in section 
 20.1   216B.02, subdivision 4; 
 20.2      (3) be located within 15 miles of the mainline existing 
 20.3   interstate natural gas pipeline and within five miles of an 
 20.4   existing electrical transmission substation; 
 20.5      (4) be located outside the metropolitan area as defined 
 20.6   under section 473.121, subdivision 2; and 
 20.7      (5) be designed to provide peaking capacity energy and 
 20.8   ancillary services and have satisfied all of the requirements 
 20.9   under section 216B.243. 
 20.10     (b) Construction of the facility must be commenced after 
 20.11  January 1, 2005, and before January 1, 2009.  Property eligible 
 20.12  for this exemption does not include electric transmission lines 
 20.13  and interconnections or gas pipelines and interconnections 
 20.14  appurtenant to the property or the facility. 
 20.15     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
 20.16  year 2006, taxes payable in 2007, and thereafter. 
 20.17     Sec. 5.  Minnesota Statutes 2004, section 272.02, is 
 20.18  amended by adding a subdivision to read: 
 20.19     Subd. 70.  [ELECTRIC GENERATION FACILITY; PERSONAL 
 20.20  PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
 20.21  machinery and other personal property which is part of an 
 20.22  existing simple-cycle, combustion-turbine electric generation 
 20.23  facility that exceeds 300 megawatts of installed capacity and 
 20.24  that meets the requirements of this subdivision is exempt.  At 
 20.25  the time of the construction, the facility must: 
 20.26     (1) be designed to utilize natural gas as a primary fuel; 
 20.27     (2) be owned by a public utility as defined in section 
 20.28  216B.02, subdivision 4, and be located at or interconnected with 
 20.29  an existing generating plant of the utility; 
 20.30     (3) be designed to provide peaking, emergency backup, or 
 20.31  contingency services; 
 20.32     (4) satisfy a resource need identified in an approved 
 20.33  integrated resource plan filed under section 216B.2422; and 
 20.34     (5) have received, by resolution, the approval from the 
 20.35  governing body of the county and the city for the exemption of 
 20.36  personal property under this subdivision. 
 21.1      Construction of the facility expansion must be commenced 
 21.2   after January 1, 2004, and before January 1, 2005.  Property 
 21.3   eligible for this exemption does not include electric 
 21.4   transmission lines and interconnections or gas pipelines and 
 21.5   interconnections appurtenant to the property or the facility. 
 21.6      <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 21.7   assessment year 2005, for taxes payable in 2006 and thereafter. 
 21.8      Sec. 6.  Minnesota Statutes 2004, section 272.02, is 
 21.9   amended by adding a subdivision to read: 
 21.10     Subd. 71.  [ELECTRIC GENERATION FACILITY; PERSONAL 
 21.11  PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
 21.12  attached machinery and other personal property which is part of 
 21.13  a simple-cycle combustion-turbine electric generation facility 
 21.14  that exceeds 150 megawatts of installed capacity and that meets 
 21.15  the requirements of this subdivision is exempt.  At the time of 
 21.16  construction, the facility must: 
 21.17     (1) utilize natural gas as a primary fuel; 
 21.18     (2) be owned by an electric generation and transmission 
 21.19  cooperative; 
 21.20     (3) be located within five miles of parallel existing 
 21.21  12-inch and 16-inch natural gas pipelines and a 69-kilovolt 
 21.22  high-voltage electric transmission line; 
 21.23     (4) be designed to provide peaking, emergency backup, or 
 21.24  contingency services; 
 21.25     (5) have received a certificate of need under section 
 21.26  216B.243 demonstrating demand for its capacity; and 
 21.27     (6) have received by resolution the approval from the 
 21.28  governing body of the county and township in which the proposed 
 21.29  facility is to be located for the exemption of personal property 
 21.30  under this subdivision. 
 21.31     (b) Construction of the facility must be commenced after 
 21.32  July 1, 2005, and before January 1, 2009.  Property eligible for 
 21.33  this exemption does not include electric transmission lines and 
 21.34  interconnections or gas pipelines and interconnections 
 21.35  appurtenant to the property or the facility. 
 21.36     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
 22.1   year 2006 and thereafter, for taxes payable in 2007 and 
 22.2   thereafter. 
 22.3      Sec. 7.  Minnesota Statutes 2004, section 272.02, is 
 22.4   amended by adding a subdivision to read: 
 22.5      Subd. 72.  [ELECTRIC GENERATION FACILITY PERSONAL 
 22.6   PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
 22.7   attached machinery and other personal property which is part of 
 22.8   either a simple-cycle, combustion-turbine electric generation 
 22.9   facility, or a combined-cycle, combustion-turbine electric 
 22.10  generation facility that does not exceed 325 megawatts of 
 22.11  installed capacity and that meets the requirements of this 
 22.12  subdivision is exempt.  At the time of construction, the 
 22.13  facility must: 
 22.14     (1) utilize either a simple-cycle or a combined-cycle 
 22.15  combustion-turbine generator fueled by natural gas; 
 22.16     (2) be connected to an existing 115-kilovolt high-voltage 
 22.17  electric transmission line that is within two miles of the 
 22.18  facility; 
 22.19     (3) be located on an underground natural gas storage 
 22.20  aquifer; 
 22.21     (4) be designed as either a peaking or intermediate load 
 22.22  facility; and 
 22.23     (5) have received, by resolution, the approval from the 
 22.24  governing body of the county for the exemption of personal 
 22.25  property under this subdivision. 
 22.26     (b) Construction of the facility must be commenced after 
 22.27  January 1, 2006, and before January 1, 2008.  Property eligible 
 22.28  for this exemption does not include electric transmission lines 
 22.29  and interconnections or gas pipelines and interconnections 
 22.30  appurtenant to the property or the facility. 
 22.31     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
 22.32  year 2005, taxes payable in 2006, and thereafter. 
 22.33     Sec. 8.  Minnesota Statutes 2004, section 272.0211, 
 22.34  subdivision 1, is amended to read: 
 22.35     Subdivision 1.  [EFFICIENCY DETERMINATION AND 
 22.36  CERTIFICATION.] An owner or operator of a new or existing 
 23.1   electric power generation facility, excluding wind energy 
 23.2   conversion systems, may apply to the commissioner of revenue for 
 23.3   a market value exclusion on the property as provided for in this 
 23.4   section.  This exclusion shall apply only to the market value of 
 23.5   the equipment of the facility, and shall not apply to the 
 23.6   structures and the land upon which the facility is located.  The 
 23.7   commissioner of revenue shall prescribe the forms and procedures 
 23.8   for this application.  Upon receiving the application, the 
 23.9   commissioner of revenue shall request the commissioner of 
 23.10  commerce to make a determination of the efficiency of the 
 23.11  applicant's electric power generation facility.  In calculating 
 23.12  the efficiency of a facility, The commissioner of commerce shall 
 23.13  use a definition of calculate efficiency which calculates 
 23.14  efficiency as the sum of: 
 23.15     (1) the useful electrical power output; plus 
 23.16     (2) the useful thermal energy output; plus 
 23.17     (3) the fuel energy of the useful chemical products, 
 23.18  all divided by the total energy input to the facility, expressed 
 23.19  as a percentage as the ratio of useful energy outputs to energy 
 23.20  inputs, expressed as a percentage, based on the performance of 
 23.21  the facility's equipment during normal full load operation.  The 
 23.22  commissioner must include in this formula the energy used in any 
 23.23  on-site preparation of materials necessary to convert the 
 23.24  materials into the fuel used to generate electricity, such as a 
 23.25  process to gasify petroleum coke.  The commissioner shall use 
 23.26  the high Higher Heating Value (HHV) for all substances in the 
 23.27  commissioner's efficiency calculations, except for wood for fuel 
 23.28  in a biomass-eligible project under section 216B.2424; for these 
 23.29  instances, the commissioner shall adjust the heating value to 
 23.30  allow for energy consumed for evaporation of the moisture in the 
 23.31  wood.  The applicant shall provide the commissioner of commerce 
 23.32  with whatever information the commissioner deems necessary to 
 23.33  make the determination.  Within 30 days of the receipt of the 
 23.34  necessary information, the commissioner of commerce shall 
 23.35  certify the findings of the efficiency determination to the 
 23.36  commissioner of revenue and to the applicant.  The commissioner 
 24.1   of commerce shall determine the efficiency of the facility and 
 24.2   certify the findings of that determination to the commissioner 
 24.3   of revenue every two years thereafter from the date of the 
 24.4   original certification. 
 24.5      <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
 24.6   year 2005 and thereafter, for taxes payable in 2006 and 
 24.7   thereafter. 
 24.8      Sec. 9.  Minnesota Statutes 2004, section 272.0211, 
 24.9   subdivision 2, is amended to read: 
 24.10     Subd. 2.  [SLIDING SCALE EXCLUSION.] Based upon the 
 24.11  efficiency determination provided by the commissioner of 
 24.12  commerce as described in subdivision 1, the commissioner of 
 24.13  revenue shall subtract five eight percent of the taxable market 
 24.14  value of the qualifying property for each percentage point that 
 24.15  the efficiency of the specific facility, as determined by the 
 24.16  commissioner of commerce, is above 35 40 percent.  The reduction 
 24.17  in taxable market value shall be reflected in the taxable market 
 24.18  value of the facility beginning with the assessment year 
 24.19  immediately following the determination.  For a facility that is 
 24.20  assessed by the county in which the facility is located, the 
 24.21  commissioner of revenue shall certify to the assessor of that 
 24.22  county the percentage of the taxable market value of the 
 24.23  facility to be excluded. 
 24.24     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
 24.25  year 2005 and thereafter, for taxes payable in 2006 and 
 24.26  thereafter. 
 24.27     Sec. 10.  [272.0275] [PERSONAL PROPERTY USED TO GENERATE 
 24.28  ELECTRICITY; EXEMPTION.] 
 24.29     Subdivision 1.  [NEW PLANT CONSTRUCTION AFTER JANUARY 1, 
 24.30  2005.] For a new generating plant built and placed in service 
 24.31  after January 1, 2005, its personal property used to generate 
 24.32  electric power is exempt from property taxation, including under 
 24.33  section 453.54, subdivision 20, if an exemption of generation 
 24.34  personal property form, with an attached siting agreement, is 
 24.35  filed with the Department of Revenue.  The form must be signed 
 24.36  by the utility, and the county and city or town where the 
 25.1   facility is proposed to be located. 
 25.2      Subd. 2.  [EXISTING PLANT; INCREASE IN NAMEPLATE CAPACITY.] 
 25.3   For a plant existing or under construction on the day of final 
 25.4   enactment of this act, a partial exemption applies if the 
 25.5   nameplate capacity of the plant is increased from that existing 
 25.6   on the day of final enactment of this act, and if an exemption 
 25.7   of generation personal property form, with an attached siting 
 25.8   agreement is filed with the Department of Revenue.  The form 
 25.9   must be signed by the utility, and the county and city or town 
 25.10  where the facility expansion is located.  This partial exemption 
 25.11  must be computed by taking the increase in megawatts over the 
 25.12  total megawatt nameplate capacity after construction is 
 25.13  complete, multiplied by the market value of all taxable tools, 
 25.14  implements, and machinery of the generating plant as determined 
 25.15  by the commissioner of revenue.  The resulting exemption is 
 25.16  effective beginning in the next assessment year. 
 25.17     Subd. 3.  [IN-LIEU PAYMENT; LIMITATION.] If an in-lieu 
 25.18  payment or service fee is negotiated between a facility exempted 
 25.19  under this section and the county, city, or town where the 
 25.20  facility is located, the payment or fee in any year may not 
 25.21  exceed the property tax revenue that the jurisdiction would 
 25.22  receive from the facility if it were not exempt. 
 25.23     Subd. 4.  [DEFINITION; APPLICABILITY.] For purposes of this 
 25.24  section, "personal property" means tools, implements, and 
 25.25  machinery of the generating plant.  The exemption under this 
 25.26  section does not apply to transformers, transmission lines, 
 25.27  distribution lines, or any other tools, implements, and 
 25.28  machinery that are part of an electric substation, wherever 
 25.29  located. 
 25.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 25.31  following final enactment. 
 25.32     Sec. 11.  Minnesota Statutes 2004, section 273.055, is 
 25.33  amended to read: 
 25.34     273.055 [RESOLUTION TO APPOINT ASSESSOR; TERMINATION OF 
 25.35  LOCAL ASSESSOR'S OFFICE.] 
 25.36     The election to provide for the assessment of property by 
 26.1   the county assessor as provided in section 273.052 shall be made 
 26.2   by the board of county commissioners by resolution with at least 
 26.3   a two-thirds majority vote.  Such resolution shall be effective 
 26.4   at the second assessment date following the adoption of the 
 26.5   resolution.  Notwithstanding any other provisions contained in 
 26.6   any other section of law or charter, the office of all township 
 26.7   and city assessors in such county shall be terminated 90 days 
 26.8   before the assessment date at which the election becomes 
 26.9   effective, except that if part of such taxing district is 
 26.10  located in a county not electing to have the county assessor 
 26.11  assess all property as provided in section 273.052, the office 
 26.12  will continue but shall apply only to such property in a 
 26.13  nonelecting county. 
 26.14     No township or city assessor in another county shall assess 
 26.15  any property in an electing county, but shall turn over all tax 
 26.16  records relating to property to the county assessor 90 days 
 26.17  before the assessment date at which the county's election 
 26.18  becomes effective.  
 26.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 26.20  following final enactment. 
 26.21     Sec. 12.  Minnesota Statutes 2004, section 273.0755, is 
 26.22  amended to read: 
 26.23     273.0755 [TRAINING AND EDUCATION OF PROPERTY TAX 
 26.24  PERSONNEL.] 
 26.25     (a) Beginning with the four-year period starting on July 1, 
 26.26  2000, every person licensed by the state Board of Assessors at 
 26.27  the Accredited Minnesota Assessor level or higher, shall 
 26.28  successfully complete a week-long Minnesota laws course 
 26.29  sponsored by the Department of Revenue at least once in every 
 26.30  four-year period.  An assessor need not attend the course if 
 26.31  they successfully pass the test for the course. 
 26.32     (b) The commissioner of revenue may require that each 
 26.33  county, and each city for which the city assessor performs the 
 26.34  duties of county assessor, have (i) a person on the assessor's 
 26.35  staff who is certified by the Department of Revenue in sales 
 26.36  ratio calculations, (ii) an officer or employee who is certified 
 27.1   by the Department of Revenue in tax calculations, and (iii) an 
 27.2   officer or employee who is certified by the Department of 
 27.3   Revenue in the proper preparation of abstracts of assessment.  
 27.4   The commissioner of revenue may require that each county have an 
 27.5   officer or employee who is certified by the Department of 
 27.6   Revenue in the proper preparation of abstracts of tax lists. 
 27.7      (c) Beginning with the four-year educational licensing 
 27.8   period starting on July 1, 2004, every Minnesota assessor 
 27.9   licensed by the State Board of Assessors must attend and 
 27.10  participate in a seminar that focuses on ethics, professional 
 27.11  conduct and the need for standardized assessment practices 
 27.12  developed and presented by the commissioner of revenue.  This 
 27.13  requirement must be met at least once in every subsequent 
 27.14  four-year period.  This requirement applies to all assessors 
 27.15  licensed for one year or more in the four-year period. 
 27.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 27.17  following final enactment. 
 27.18     Sec. 13.  Minnesota Statutes 2004, section 273.11, 
 27.19  subdivision 1a, is amended to read: 
 27.20     Subd. 1a.  [LIMITED MARKET VALUE.] In the case of all real 
 27.21  property classified as agricultural homestead or nonhomestead, 
 27.22  residential homestead or nonhomestead, timber, or noncommercial 
 27.23  seasonal residential recreational, the assessor shall compare 
 27.24  the value with the taxable portion of the value determined in 
 27.25  the preceding assessment, except that for class 1c resort 
 27.26  property for assessment year 2005, the assessor shall determine 
 27.27  the limited market value as provided in subdivision 1b.  
 27.28     For assessment year 2002, the amount of the increase shall 
 27.29  not exceed the greater of (1) ten percent of the value in the 
 27.30  preceding assessment, or (2) 15 percent of the difference 
 27.31  between the current assessment and the preceding assessment. 
 27.32     For assessment year 2003, the amount of the increase shall 
 27.33  not exceed the greater of (1) 12 percent of the value in the 
 27.34  preceding assessment, or (2) 20 percent of the difference 
 27.35  between the current assessment and the preceding assessment. 
 27.36     For assessment year years 2004, 2005, and 2006, the amount 
 28.1   of the increase shall not exceed the greater of (1) 15 percent 
 28.2   of the value in the preceding assessment, or (2) 25 percent of 
 28.3   the difference between the current assessment and the preceding 
 28.4   assessment. 
 28.5      For assessment year 2005 2007, the amount of the increase 
 28.6   shall not exceed the greater of (1) 15 percent of the value in 
 28.7   the preceding assessment, or (2) 33 percent of the difference 
 28.8   between the current assessment and the preceding assessment.  
 28.9      For assessment year 2006 2008, the amount of the increase 
 28.10  shall not exceed the greater of (1) 15 percent of the value in 
 28.11  the preceding assessment, or (2) 50 percent of the difference 
 28.12  between the current assessment and the preceding assessment. 
 28.13     This limitation shall not apply to increases in value due 
 28.14  to improvements.  For purposes of this subdivision, the term 
 28.15  "assessment" means the value prior to any exclusion under 
 28.16  subdivision 16. 
 28.17     The provisions of this subdivision shall be in effect 
 28.18  through assessment year 2006 2008 as provided in this 
 28.19  subdivision. 
 28.20     For purposes of the assessment/sales ratio study conducted 
 28.21  under section 127A.48, and the computation of state aids paid 
 28.22  under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 
 28.23  477A, market values and net tax capacities determined under this 
 28.24  subdivision and subdivision 16, shall be used. 
 28.25     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
 28.26  years 2005 through 2008, for taxes payable in 2006 through 2009. 
 28.27     Sec. 14.  Minnesota Statutes 2004, section 273.11, is 
 28.28  amended by adding a subdivision to read: 
 28.29     Subd. 1b.  [CLASS 1C RESORTS; 2005 ASSESSMENT ONLY.] For 
 28.30  assessment year 2005, the valuation on class 1c resort property 
 28.31  shall not exceed the greater of (1) 130 percent of the value of 
 28.32  its 2003 assessment, or (2) its value for the 2003 assessment 
 28.33  year plus 40 percent of the difference in value between its 2005 
 28.34  assessment and its 2003 assessment.  The valuation increase on 
 28.35  class 1c resort property for assessment years 2006 and 
 28.36  thereafter shall be determined as provided under subdivision 1a. 
 29.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 29.2   following final enactment. 
 29.3      Sec. 15.  Minnesota Statutes 2004, section 273.111, is 
 29.4   amended by adding a subdivision to read: 
 29.5      Subd. 86.  [APPLICATIONS; DENIED BY COUNTY.] Beginning with 
 29.6   applications filed for the 2005 assessment year, all 
 29.7   applications for deferment of taxes and assessment under this 
 29.8   section that have been denied by the county shall be forwarded 
 29.9   to the commissioner of revenue by the county assessor within 30 
 29.10  days of denial.  For the purpose of monitoring compliance with 
 29.11  this section, the commissioner of revenue shall compile a report 
 29.12  identifying all denied applications, the reason for the denial 
 29.13  and any commissioner action or recommendation.  This report will 
 29.14  be annually submitted to the chairs of the house and senate tax 
 29.15  committees on or before February 1. 
 29.16     <b>[EFFECTIVE DATE.]</b> This section is effective for 
 29.17  applications filed after the day following final enactment. 
 29.18     Sec. 16.  Minnesota Statutes 2004, section 273.123, 
 29.19  subdivision 7, is amended to read: 
 29.20     Subd. 7.  [LOCAL OPTION; OTHER PROPERTY.] The owner of 
 29.21  homestead property not qualifying for an adjustment in valuation 
 29.22  pursuant to subdivisions 1 to 5 or of nonhomestead property may 
 29.23  receive a reduction in the amount of taxes payable on the 
 29.24  property for the year in which the destruction occurs and in the 
 29.25  following year if:  
 29.26     (a) 50 percent or more of the homestead dwelling or other 
 29.27  structure, as established by the county assessor, is 
 29.28  unintentionally or accidentally destroyed or contaminated by 
 29.29  mold and the homestead is uninhabitable or the other structure 
 29.30  is not usable; 
 29.31     (b) the owner of the property makes written application to 
 29.32  the county assessor as soon as practical after the damage has 
 29.33  occurred; and 
 29.34     (c) the owner of the property makes written application to 
 29.35  the county board.  
 29.36     The county board may grant a reduction in the amount of 
 30.1   property tax which the owner must pay on the qualifying property 
 30.2   in the year of destruction and in the following year.  Any 
 30.3   reduction in the amount of tax payable which is authorized by 
 30.4   county board action shall be calculated based upon the number of 
 30.5   months that the home is uninhabitable or the other structure is 
 30.6   unusable.  The amount of net tax due from the taxpayer shall be 
 30.7   multiplied by a fraction, the numerator of which is the number 
 30.8   of months the dwelling was occupied by that taxpayer, or the 
 30.9   number of months the other structure was used by the taxpayer, 
 30.10  and the denominator of which is 12.  For purposes of this 
 30.11  subdivision, if a structure is occupied or used for a fraction 
 30.12  of a month, it is considered a month.  "Net tax" is defined as 
 30.13  the amount of tax after the subtraction of all of the state paid 
 30.14  property tax credits.  If application is made following payment 
 30.15  of all property taxes due for the year of destruction, the 
 30.16  amount of the reduction granted by the county board shall be 
 30.17  refunded to the taxpayer by the county treasurer as soon as 
 30.18  practical.  
 30.19     Any reductions or refunds approved by the county board 
 30.20  shall not be subject to approval by the commissioner of revenue. 
 30.21     The county board may levy in the following year the amount 
 30.22  of tax dollars lost to the county government as a result of the 
 30.23  reductions granted pursuant to this subdivision.  
 30.24     <b>[EFFECTIVE DATE.]</b> This section is effective for property 
 30.25  taxes payable in 2005 and thereafter. 
 30.26     Sec. 17.  Minnesota Statutes 2004, section 273.125, 
 30.27  subdivision 8, is amended to read: 
 30.28     Subd. 8.  [MANUFACTURED HOMES; SECTIONAL STRUCTURES.] (a) 
 30.29  In this section, "manufactured home" means a structure 
 30.30  transportable in one or more sections, which is built on a 
 30.31  permanent chassis, and designed to be used as a dwelling with or 
 30.32  without a permanent foundation when connected to the required 
 30.33  utilities, and contains the plumbing, heating, air conditioning, 
 30.34  and electrical systems in it.  Manufactured home includes any 
 30.35  accessory structure that is an addition or supplement to the 
 30.36  manufactured home and, when installed, becomes a part of the 
 31.1   manufactured home.  
 31.2      (b) Except as provided in paragraph (c), a manufactured 
 31.3   home that meets each of the following criteria must be valued 
 31.4   and assessed as an improvement to real property, the appropriate 
 31.5   real property classification applies, and the valuation is 
 31.6   subject to review and the taxes payable in the manner provided 
 31.7   for real property:  
 31.8      (1) the owner of the unit holds title to the land on which 
 31.9   it is situated; 
 31.10     (2) the unit is affixed to the land by a permanent 
 31.11  foundation or is installed at its location in accordance with 
 31.12  the Manufactured Home Building Code in sections 327.31 to 
 31.13  327.34, and rules adopted under those sections, or is affixed to 
 31.14  the land like other real property in the taxing district; and 
 31.15     (3) the unit is connected to public utilities, has a well 
 31.16  and septic tank system, or is serviced by water and sewer 
 31.17  facilities comparable to other real property in the taxing 
 31.18  district.  
 31.19     (c) A manufactured home that meets each of the following 
 31.20  criteria must be assessed at the rate provided by the 
 31.21  appropriate real property classification but must be treated as 
 31.22  personal property, and the valuation is subject to review and 
 31.23  the taxes payable in the manner provided in this section: 
 31.24     (1) the owner of the unit is a lessee of the land under the 
 31.25  terms of a lease, or the unit is located in a manufactured home 
 31.26  park, campground, or resort; 
 31.27     (2) the unit is affixed to the land by a permanent 
 31.28  foundation or is installed at its location in accordance with 
 31.29  the Manufactured Home Building Code contained in sections 327.31 
 31.30  to 327.34, and the rules adopted under those sections, or is 
 31.31  affixed to the land like other real property in the taxing 
 31.32  district; and 
 31.33     (3) the unit is connected to public utilities, has a well 
 31.34  and septic tank system, or is serviced by water and sewer 
 31.35  facilities comparable to other real property in the taxing 
 31.36  district.  
 32.1      (d) Sectional structures must be valued and assessed as an 
 32.2   improvement to real property if the owner of the structure holds 
 32.3   title to the land on which it is located or is a qualifying 
 32.4   lessee of the land under section 273.19.  In this paragraph 
 32.5   "sectional structure" means a building or structural unit that 
 32.6   has been in whole or substantial part manufactured or 
 32.7   constructed at an off-site location to be wholly or partially 
 32.8   assembled on-site alone or with other units and attached to a 
 32.9   permanent foundation.  
 32.10     (e) The commissioner of revenue may adopt rules under the 
 32.11  Administrative Procedure Act to establish additional criteria 
 32.12  for the classification of manufactured homes and sectional 
 32.13  structures under this subdivision. 
 32.14     (f) A storage shed, deck, or similar improvement 
 32.15  constructed on property that is leased or rented as a site for a 
 32.16  manufactured home, sectional structure, park trailer, or travel 
 32.17  trailer is taxable as provided in this section.  In the case of 
 32.18  property that is leased or rented as a site for a travel 
 32.19  trailer, a storage shed, deck, or similar improvement on the 
 32.20  site that is considered personal property under this paragraph 
 32.21  is taxable only if its total estimated market value is over 
 32.22  $500.  The property is taxable as personal property to the 
 32.23  lessee of the site if it is not owned by the owner of the site.  
 32.24  The property is taxable as real estate if it is owned by the 
 32.25  owner of the site.  As a condition of permitting the owner of 
 32.26  the manufactured home, sectional structure, park trailer, or 
 32.27  travel trailer to construct improvements on the leased or rented 
 32.28  site, the owner of the site must obtain the permanent home 
 32.29  address of the lessee or user of the site.  The site owner must 
 32.30  provide the name and address to the assessor upon request. 
 32.31     <b>[EFFECTIVE DATE.]</b> For purposes of Minnesota Statutes, 
 32.32  sections 272.12 and 272.121, this section is effective the day 
 32.33  following final enactment.  For all other purposes, this section 
 32.34  is effective beginning with taxes payable in 2006, except that 
 32.35  for any property treated as real property under this section for 
 32.36  the 2005 assessment that will be treated as personal property 
 33.1   under this section for the 2006 assessment, an adjustment must 
 33.2   be made to the 2005 assessment roll on or before July 1, 2005, 
 33.3   to reflect those changes.  
 33.4      Sec. 18.  [273.126] [CERTIFICATION OF LOW-INCOME RENTAL 
 33.5   PROPERTY.] 
 33.6      Subdivision 1.  [REQUIREMENT.] Low-income rental property 
 33.7   is entitled to classification as class 4d under section 273.13, 
 33.8   subdivision 25, paragraph (e), if at least 75 percent of the 
 33.9   units in the rental housing property meet any of the following 
 33.10  qualifications: 
 33.11     (1) the units are subject to a housing assistance payments 
 33.12  contract under Section 8 of the United States Housing Act of 
 33.13  1937, as amended; 
 33.14     (2) the units are rent-restricted and income-restricted 
 33.15  units of a qualified low-income housing project receiving tax 
 33.16  credits under section 42(g) of the Internal Revenue Code of 
 33.17  1986, as amended; or 
 33.18     (3) the units are financed by the Rural Housing Service of 
 33.19  the United States Department of Agriculture and receive payments 
 33.20  under the rental assistance program pursuant to Section 521(a) 
 33.21  of the Housing Act of 1949, as amended.  
 33.22     Subd. 2.  [APPLICATION.] (a) Application for certification 
 33.23  under this section must be filed by March 31 of the levy year, 
 33.24  or at a later date if the Housing Finance Agency deems 
 33.25  practicable.  The application must be filed with the Housing 
 33.26  Finance Agency, on a form prescribed by the agency, and must 
 33.27  contain the information required by the Housing Finance Agency. 
 33.28     (b) Each application must include: 
 33.29     (1) the property tax identification number; 
 33.30     (2) evidence that the property meets the requirements of 
 33.31  subdivision 1; and 
 33.32     (3) a true and correct copy of the financial statement 
 33.33  related to the property. 
 33.34     (c) The Housing Finance Agency may charge an application 
 33.35  fee approximately equal to the costs of processing and reviewing 
 33.36  the applications but not to exceed $10 per unit.  If imposed, 
 34.1   the applicant must pay the application fee to the Housing 
 34.2   Finance Agency.  The fee must be deposited in the housing 
 34.3   development fund. 
 34.4      Subd. 3.  [CERTIFICATION.] By June 1 of each levy year, the 
 34.5   Housing Finance Agency must certify to local assessors the 
 34.6   properties that are qualified under this section and the number 
 34.7   of units in the building that qualify.  In making the 
 34.8   certification, the Housing Finance Agency may rely on the 
 34.9   application and any other supporting information that the agency 
 34.10  deems necessary from the property owner. 
 34.11     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 34.12  payable in 2006 and subsequent years. 
 34.13     Sec. 19.  Minnesota Statutes 2004, section 273.13, 
 34.14  subdivision 22, is amended to read: 
 34.15     Subd. 22.  [CLASS 1.] (a) Except as provided in subdivision 
 34.16  23 and in paragraphs (b) and (c), real estate which is 
 34.17  residential and used for homestead purposes is class 1a.  In the 
 34.18  case of a duplex or triplex in which one of the units is used 
 34.19  for homestead purposes, the entire property is deemed to be used 
 34.20  for homestead purposes.  The market value of class 1a property 
 34.21  must be determined based upon the value of the house, garage, 
 34.22  and land.  
 34.23     The first $500,000 of market value of class 1a property has 
 34.24  a net class rate of one percent of its market value; and the 
 34.25  market value of class 1a property that exceeds $500,000 has a 
 34.26  class rate of 1.25 percent of its market value. 
 34.27     (b) Class 1b property includes homestead real estate or 
 34.28  homestead manufactured homes used for the purposes of a 
 34.29  homestead by 
 34.30     (1) any person who is blind as defined in section 256D.35, 
 34.31  or the blind person and the blind person's spouse; or 
 34.32     (2) any person, hereinafter referred to as "veteran," who: 
 34.33     (i) served in the active military or naval service of the 
 34.34  United States; and 
 34.35     (ii) is entitled to compensation under the laws and 
 34.36  regulations of the United States for permanent and total 
 35.1   service-connected disability due to the loss, or loss of use, by 
 35.2   reason of amputation, ankylosis, progressive muscular 
 35.3   dystrophies, or paralysis, of both lower extremities, such as to 
 35.4   preclude motion without the aid of braces, crutches, canes, or a 
 35.5   wheelchair; and 
 35.6      (iii) has acquired a special housing unit with special 
 35.7   fixtures or movable facilities made necessary by the nature of 
 35.8   the veteran's disability, or the surviving spouse of the 
 35.9   deceased veteran for as long as the surviving spouse retains the 
 35.10  special housing unit as a homestead; or 
 35.11     (3) any person who is permanently and totally disabled. 
 35.12     Property is classified and assessed under clause (3) only 
 35.13  if the government agency or income-providing source certifies, 
 35.14  upon the request of the homestead occupant, that the homestead 
 35.15  occupant satisfies the disability requirements of this paragraph.
 35.16     Property is classified and assessed pursuant to clause (1) 
 35.17  only if the commissioner of revenue certifies to the assessor 
 35.18  that the homestead occupant satisfies the requirements of this 
 35.19  paragraph.  
 35.20     Permanently and totally disabled for the purpose of this 
 35.21  subdivision means a condition which is permanent in nature and 
 35.22  totally incapacitates the person from working at an occupation 
 35.23  which brings the person an income.  The first $32,000 $50,000 
 35.24  market value of class 1b property has a net class rate of .45 
 35.25  percent of its market value.  The remaining market value of 
 35.26  class 1b property has a class rate using the rates for class 1a 
 35.27  or class 2a property, whichever is appropriate, of similar 
 35.28  market value.  
 35.29     (c) Class 1c property is commercial use real property that 
 35.30  abuts a lakeshore line and is devoted to temporary and seasonal 
 35.31  residential occupancy for recreational purposes but not devoted 
 35.32  to commercial purposes for more than 250 days in the year 
 35.33  preceding the year of assessment, and that includes a portion 
 35.34  used as a homestead by the owner, which includes a dwelling 
 35.35  occupied as a homestead by a shareholder of a corporation that 
 35.36  owns the resort, a partner in a partnership that owns the 
 36.1   resort, or a member of a limited liability company that owns the 
 36.2   resort even if the title to the homestead is held by the 
 36.3   corporation, partnership, or limited liability company.  For 
 36.4   purposes of this clause, property is devoted to a commercial 
 36.5   purpose on a specific day if any portion of the property, 
 36.6   excluding the portion used exclusively as a homestead, is used 
 36.7   for residential occupancy and a fee is charged for residential 
 36.8   occupancy.  The first $500,000 $300,000 of market value of class 
 36.9   1c property has a class rate of one 0.55 percent, and the 
 36.10  remaining next $1,500,000 of market value of class 1c property 
 36.11  has a class rate of one percent, with the following limitation:  
 36.12  the area of the property must not exceed 100 feet of lakeshore 
 36.13  footage for each cabin or campsite located on the property up to 
 36.14  a total of 800 feet and 500 feet in depth, measured away from 
 36.15  the lakeshore.  Any remaining market value is class 4c 
 36.16  property.  If any portion of the class 1c resort property is 
 36.17  classified as class 4c under subdivision 25, the entire property 
 36.18  must meet the requirements of subdivision 25, paragraph (d), 
 36.19  clause (1), to qualify for class 1c treatment under this 
 36.20  paragraph. 
 36.21     (d) Class 1d property includes structures that meet all of 
 36.22  the following criteria: 
 36.23     (1) the structure is located on property that is classified 
 36.24  as agricultural property under section 273.13, subdivision 23; 
 36.25     (2) the structure is occupied exclusively by seasonal farm 
 36.26  workers during the time when they work on that farm, and the 
 36.27  occupants are not charged rent for the privilege of occupying 
 36.28  the property, provided that use of the structure for storage of 
 36.29  farm equipment and produce does not disqualify the property from 
 36.30  classification under this paragraph; 
 36.31     (3) the structure meets all applicable health and safety 
 36.32  requirements for the appropriate season; and 
 36.33     (4) the structure is not salable as residential property 
 36.34  because it does not comply with local ordinances relating to 
 36.35  location in relation to streets or roads. 
 36.36     The market value of class 1d property has the same class 
 37.1   rates as class 1a property under paragraph (a). 
 37.2      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 37.3   levied in 2005, payable in 2006, and thereafter. 
 37.4      Sec. 20.  Minnesota Statutes 2004, section 273.13, 
 37.5   subdivision 23, is amended to read: 
 37.6      Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
 37.7   land including any improvements that is homesteaded.  The market 
 37.8   value of the house and garage and immediately surrounding one 
 37.9   acre of land has the same class rates as class 1a property under 
 37.10  subdivision 22.  The value of the remaining land including 
 37.11  improvements up to and including $600,000 market value $750,000 
 37.12  has a net class rate of 0.55 percent of market value.  The 
 37.13  remaining property value over $600,000 market value $750,000 has 
 37.14  a class rate of one percent of market value. 
 37.15     (b) Class 2b property is (1) real estate, rural in 
 37.16  character and used exclusively for growing trees for timber, 
 37.17  lumber, and wood and wood products; (2) real estate that is not 
 37.18  improved with a structure and is used exclusively for growing 
 37.19  trees for timber, lumber, and wood and wood products, if the 
 37.20  owner has participated or is participating in a cost-sharing 
 37.21  program for afforestation, reforestation, or timber stand 
 37.22  improvement on that particular property, administered or 
 37.23  coordinated by the commissioner of natural resources; (3) real 
 37.24  estate that is nonhomestead agricultural land; or (4) a landing 
 37.25  area or public access area of a privately owned public use 
 37.26  airport.  Class 2b property has a net class rate of one percent 
 37.27  of market value. 
 37.28     (c) Agricultural land as used in this section means 
 37.29  contiguous acreage of ten acres or more, used during the 
 37.30  preceding year for agricultural purposes.  "Agricultural 
 37.31  purposes" as used in this section means the raising or 
 37.32  cultivation of agricultural products.  "Agricultural purposes" 
 37.33  also includes enrollment in the Reinvest in Minnesota program 
 37.34  under sections 103F.501 to 103F.535 or the federal Conservation 
 37.35  Reserve Program as contained in Public Law 99-198 if the 
 37.36  property was classified as agricultural (i) under this 
 38.1   subdivision for the assessment year 2002 or (ii) in the year 
 38.2   prior to its enrollment.  Contiguous acreage on the same parcel, 
 38.3   or contiguous acreage on an immediately adjacent parcel under 
 38.4   the same ownership, may also qualify as agricultural land, but 
 38.5   only if it is pasture, timber, waste, unusable wild land, or 
 38.6   land included in state or federal farm programs.  Agricultural 
 38.7   classification for property shall be determined excluding the 
 38.8   house, garage, and immediately surrounding one acre of land, and 
 38.9   shall not be based upon the market value of any residential 
 38.10  structures on the parcel or contiguous parcels under the same 
 38.11  ownership. 
 38.12     (d) Real estate, excluding the house, garage, and 
 38.13  immediately surrounding one acre of land, of less than ten acres 
 38.14  which is exclusively and intensively used for raising or 
 38.15  cultivating agricultural products, shall be considered as 
 38.16  agricultural land.  
 38.17     Land shall be classified as agricultural even if all or a 
 38.18  portion of the agricultural use of that property is the leasing 
 38.19  to, or use by another person for agricultural purposes. 
 38.20     Classification under this subdivision is not determinative 
 38.21  for qualifying under section 273.111. 
 38.22     The property classification under this section supersedes, 
 38.23  for property tax purposes only, any locally administered 
 38.24  agricultural policies or land use restrictions that define 
 38.25  minimum or maximum farm acreage. 
 38.26     (e) The term "agricultural products" as used in this 
 38.27  subdivision includes production for sale of:  
 38.28     (1) livestock, dairy animals, dairy products, poultry and 
 38.29  poultry products, fur-bearing animals, horticultural and nursery 
 38.30  stock, fruit of all kinds, vegetables, forage, grains, bees, and 
 38.31  apiary products by the owner; 
 38.32     (2) fish bred for sale and consumption if the fish breeding 
 38.33  occurs on land zoned for agricultural use; 
 38.34     (3) the commercial boarding of horses if the boarding is 
 38.35  done in conjunction with raising or cultivating agricultural 
 38.36  products as defined in clause (1); 
 39.1      (4) property which is owned and operated by nonprofit 
 39.2   organizations used for equestrian activities, excluding racing; 
 39.3      (5) game birds and waterfowl bred and raised for use on a 
 39.4   shooting preserve licensed under section 97A.115; 
 39.5      (6) insects primarily bred to be used as food for animals; 
 39.6      (7) trees, grown for sale as a crop, and not sold for 
 39.7   timber, lumber, wood, or wood products; and 
 39.8      (8) maple syrup taken from trees grown by a person licensed 
 39.9   by the Minnesota Department of Agriculture under chapter 28A as 
 39.10  a food processor. 
 39.11     (f) If a parcel used for agricultural purposes is also used 
 39.12  for commercial or industrial purposes, including but not limited 
 39.13  to:  
 39.14     (1) wholesale and retail sales; 
 39.15     (2) processing of raw agricultural products or other goods; 
 39.16     (3) warehousing or storage of processed goods; and 
 39.17     (4) office facilities for the support of the activities 
 39.18  enumerated in clauses (1), (2), and (3), 
 39.19  the assessor shall classify the part of the parcel used for 
 39.20  agricultural purposes as class 1b, 2a, or 2b, whichever is 
 39.21  appropriate, and the remainder in the class appropriate to its 
 39.22  use.  The grading, sorting, and packaging of raw agricultural 
 39.23  products for first sale is considered an agricultural purpose.  
 39.24  A greenhouse or other building where horticultural or nursery 
 39.25  products are grown that is also used for the conduct of retail 
 39.26  sales must be classified as agricultural if it is primarily used 
 39.27  for the growing of horticultural or nursery products from seed, 
 39.28  cuttings, or roots and occasionally as a showroom for the retail 
 39.29  sale of those products.  Use of a greenhouse or building only 
 39.30  for the display of already grown horticultural or nursery 
 39.31  products does not qualify as an agricultural purpose.  
 39.32     The assessor shall determine and list separately on the 
 39.33  records the market value of the homestead dwelling and the one 
 39.34  acre of land on which that dwelling is located.  If any farm 
 39.35  buildings or structures are located on this homesteaded acre of 
 39.36  land, their market value shall not be included in this separate 
 40.1   determination.  
 40.2      (g) To qualify for classification under paragraph (b), 
 40.3   clause (4), a privately owned public use airport must be 
 40.4   licensed as a public airport under section 360.018.  For 
 40.5   purposes of paragraph (b), clause (4), "landing area" means that 
 40.6   part of a privately owned public use airport properly cleared, 
 40.7   regularly maintained, and made available to the public for use 
 40.8   by aircraft and includes runways, taxiways, aprons, and sites 
 40.9   upon which are situated landing or navigational aids.  A landing 
 40.10  area also includes land underlying both the primary surface and 
 40.11  the approach surfaces that comply with all of the following:  
 40.12     (i) the land is properly cleared and regularly maintained 
 40.13  for the primary purposes of the landing, taking off, and taxiing 
 40.14  of aircraft; but that portion of the land that contains 
 40.15  facilities for servicing, repair, or maintenance of aircraft is 
 40.16  not included as a landing area; 
 40.17     (ii) the land is part of the airport property; and 
 40.18     (iii) the land is not used for commercial or residential 
 40.19  purposes. 
 40.20  The land contained in a landing area under paragraph (b), clause 
 40.21  (4), must be described and certified by the commissioner of 
 40.22  transportation.  The certification is effective until it is 
 40.23  modified, or until the airport or landing area no longer meets 
 40.24  the requirements of paragraph (b), clause (4).  For purposes of 
 40.25  paragraph (b), clause (4), "public access area" means property 
 40.26  used as an aircraft parking ramp, apron, or storage hangar, or 
 40.27  an arrival and departure building in connection with the airport.
 40.28     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 40.29  payable in 2006 and thereafter. 
 40.30     Sec. 21.  Minnesota Statutes 2004, section 273.13, 
 40.31  subdivision 25, is amended to read: 
 40.32     Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
 40.33  estate containing four or more units and used or held for use by 
 40.34  the owner or by the tenants or lessees of the owner as a 
 40.35  residence for rental periods of 30 days or more, excluding 
 40.36  property qualifying for class 4d.  Class 4a also includes 
 41.1   hospitals licensed under sections 144.50 to 144.56, other than 
 41.2   hospitals exempt under section 272.02, and contiguous property 
 41.3   used for hospital purposes, without regard to whether the 
 41.4   property has been platted or subdivided.  The market value of 
 41.5   class 4a property has a class rate of 1.8 percent for taxes 
 41.6   payable in 2002, 1.5 percent for taxes payable in 2003, and 1.25 
 41.7   percent for taxes payable in 2004 and thereafter, except that 
 41.8   class 4a property consisting of a structure for which 
 41.9   construction commenced after June 30, 2001, has a class rate of 
 41.10  1.25 percent of market value for taxes payable in 2003 and 
 41.11  subsequent years. 
 41.12     (b) Class 4b includes: 
 41.13     (1) residential real estate containing less than four units 
 41.14  that does not qualify as class 4bb, other than seasonal 
 41.15  residential recreational property; 
 41.16     (2) manufactured homes not classified under any other 
 41.17  provision; 
 41.18     (3) a dwelling, garage, and surrounding one acre of 
 41.19  property on a nonhomestead farm classified under subdivision 23, 
 41.20  paragraph (b) containing two or three units; and 
 41.21     (4) unimproved property that is classified residential as 
 41.22  determined under subdivision 33.  
 41.23     The market value of class 4b property has a class rate of 
 41.24  1.5 percent for taxes payable in 2002, and 1.25 percent for 
 41.25  taxes payable in 2003 and thereafter. 
 41.26     (c) Class 4bb includes: 
 41.27     (1) nonhomestead residential real estate containing one 
 41.28  unit, other than seasonal residential recreational property; and 
 41.29     (2) a single family dwelling, garage, and surrounding one 
 41.30  acre of property on a nonhomestead farm classified under 
 41.31  subdivision 23, paragraph (b). 
 41.32     Class 4bb property has the same class rates as class 1a 
 41.33  property under subdivision 22. 
 41.34     Property that has been classified as seasonal residential 
 41.35  recreational property at any time during which it has been owned 
 41.36  by the current owner or spouse of the current owner does not 
 42.1   qualify for class 4bb. 
 42.2      (d) Class 4c property includes: 
 42.3      (1) except as provided in subdivision 22, paragraph (c), 
 42.4   real property devoted to temporary and seasonal residential 
 42.5   occupancy for recreation purposes, including real property 
 42.6   devoted to temporary and seasonal residential occupancy for 
 42.7   recreation purposes and not devoted to commercial purposes for 
 42.8   more than 250 days in the year preceding the year of 
 42.9   assessment.  For purposes of this clause, property is devoted to 
 42.10  a commercial purpose on a specific day if any portion of the 
 42.11  property is used for residential occupancy, and a fee is charged 
 42.12  for residential occupancy.  In order for a property to be 
 42.13  classified as class 4c, seasonal residential recreational for 
 42.14  commercial purposes, at least 40 percent of the annual gross 
 42.15  lodging receipts related to the property must be from business 
 42.16  conducted during 90 consecutive days and either (i) at least 60 
 42.17  percent of all paid bookings by lodging guests during the year 
 42.18  must be for periods of at least two consecutive nights; or (ii) 
 42.19  at least 20 percent of the annual gross receipts must be from 
 42.20  charges for rental of fish houses, boats and motors, 
 42.21  snowmobiles, downhill or cross-country ski equipment, or charges 
 42.22  for marina services, launch services, and guide services, or the 
 42.23  sale of bait and fishing tackle.  For purposes of this 
 42.24  determination, a paid booking of five or more nights shall be 
 42.25  counted as two bookings.  Class 4c also includes commercial use 
 42.26  real property used exclusively for recreational purposes in 
 42.27  conjunction with class 4c property devoted to temporary and 
 42.28  seasonal residential occupancy for recreational purposes, up to 
 42.29  a total of two acres, provided the property is not devoted to 
 42.30  commercial recreational use for more than 250 days in the year 
 42.31  preceding the year of assessment and is located within two miles 
 42.32  of the class 4c property with which it is used.  Class 4c 
 42.33  property classified in this clause also includes the remainder 
 42.34  of class 1c resorts provided that the entire property including 
 42.35  that portion of the property classified as class 1c also meets 
 42.36  the requirements for class 4c under this clause; otherwise the 
 43.1   entire property is classified as class 3.  Owners of real 
 43.2   property devoted to temporary and seasonal residential occupancy 
 43.3   for recreation purposes and all or a portion of which was 
 43.4   devoted to commercial purposes for not more than 250 days in the 
 43.5   year preceding the year of assessment desiring classification as 
 43.6   class 1c or 4c, must submit a declaration to the assessor 
 43.7   designating the cabins or units occupied for 250 days or less in 
 43.8   the year preceding the year of assessment by January 15 of the 
 43.9   assessment year.  Those cabins or units and a proportionate 
 43.10  share of the land on which they are located will be designated 
 43.11  class 1c or 4c as otherwise provided.  The remainder of the 
 43.12  cabins or units and a proportionate share of the land on which 
 43.13  they are located will be designated as class 3a.  The owner of 
 43.14  property desiring designation as class 1c or 4c property must 
 43.15  provide guest registers or other records demonstrating that the 
 43.16  units for which class 1c or 4c designation is sought were not 
 43.17  occupied for more than 250 days in the year preceding the 
 43.18  assessment if so requested.  The portion of a property operated 
 43.19  as a (1) restaurant, (2) bar, (3) gift shop, and (4) other 
 43.20  nonresidential facility operated on a commercial basis not 
 43.21  directly related to temporary and seasonal residential occupancy 
 43.22  for recreation purposes shall not qualify for class 1c or 4c; 
 43.23     (2) qualified property used as a golf course if: 
 43.24     (i) it is open to the public on a daily fee basis.  It may 
 43.25  charge membership fees or dues, but a membership fee may not be 
 43.26  required in order to use the property for golfing, and its green 
 43.27  fees for golfing must be comparable to green fees typically 
 43.28  charged by municipal courses; and 
 43.29     (ii) it meets the requirements of section 273.112, 
 43.30  subdivision 3, paragraph (d). 
 43.31     A structure used as a clubhouse, restaurant, or place of 
 43.32  refreshment in conjunction with the golf course is classified as 
 43.33  class 3a property; 
 43.34     (3) real property up to a maximum of one acre of land owned 
 43.35  by a nonprofit community service oriented organization; provided 
 43.36  that the property is not used for a revenue-producing activity 
 44.1   for more than six days in the calendar year preceding the year 
 44.2   of assessment and the property is not used for residential 
 44.3   purposes on either a temporary or permanent basis.  For purposes 
 44.4   of this clause, a "nonprofit community service oriented 
 44.5   organization" means any corporation, society, association, 
 44.6   foundation, or institution organized and operated exclusively 
 44.7   for charitable, religious, fraternal, civic, or educational 
 44.8   purposes, and which is exempt from federal income taxation 
 44.9   pursuant to section 501(c)(3), (10), or (19) of the Internal 
 44.10  Revenue Code of 1986, as amended through December 31, 1990.  For 
 44.11  purposes of this clause, "revenue-producing activities" shall 
 44.12  include but not be limited to property or that portion of the 
 44.13  property that is used as an on-sale intoxicating liquor or 3.2 
 44.14  percent malt liquor establishment licensed under chapter 340A, a 
 44.15  restaurant open to the public, bowling alley, a retail store, 
 44.16  gambling conducted by organizations licensed under chapter 349, 
 44.17  an insurance business, or office or other space leased or rented 
 44.18  to a lessee who conducts a for-profit enterprise on the 
 44.19  premises.  Any portion of the property which is used for 
 44.20  revenue-producing activities for more than six days in the 
 44.21  calendar year preceding the year of assessment shall be assessed 
 44.22  as class 3a.  The use of the property for social events open 
 44.23  exclusively to members and their guests for periods of less than 
 44.24  24 hours, when an admission is not charged nor any revenues are 
 44.25  received by the organization shall not be considered a 
 44.26  revenue-producing activity; 
 44.27     (4) postsecondary student housing of not more than one acre 
 44.28  of land that is owned by a nonprofit corporation organized under 
 44.29  chapter 317A and is used exclusively by a student cooperative, 
 44.30  sorority, or fraternity for on-campus housing or housing located 
 44.31  within two miles of the border of a college campus; 
 44.32     (5) manufactured home parks as defined in section 327.14, 
 44.33  subdivision 3; 
 44.34     (6) real property that is actively and exclusively devoted 
 44.35  to indoor fitness, health, social, recreational, and related 
 44.36  uses, is owned and operated by a not-for-profit corporation, and 
 45.1   is located within the metropolitan area as defined in section 
 45.2   473.121, subdivision 2; 
 45.3      (7) a leased or privately owned noncommercial aircraft 
 45.4   storage hangar not exempt under section 272.01, subdivision 2, 
 45.5   and the land on which it is located, provided that: 
 45.6      (i) the land is on an airport owned or operated by a city, 
 45.7   town, county, Metropolitan Airports Commission, or group 
 45.8   thereof; and 
 45.9      (ii) the land lease, or any ordinance or signed agreement 
 45.10  restricting the use of the leased premise, prohibits commercial 
 45.11  activity performed at the hangar. 
 45.12     If a hangar classified under this clause is sold after June 
 45.13  30, 2000, a bill of sale must be filed by the new owner with the 
 45.14  assessor of the county where the property is located within 60 
 45.15  days of the sale; and 
 45.16     (8) a privately owned noncommercial aircraft storage hangar 
 45.17  not exempt under section 272.01, subdivision 2, and the land on 
 45.18  which it is located, provided that: 
 45.19     (i) the land abuts a public airport; and 
 45.20     (ii) the owner of the aircraft storage hangar provides the 
 45.21  assessor with a signed agreement restricting the use of the 
 45.22  premises, prohibiting commercial use or activity performed at 
 45.23  the hangar; and 
 45.24     (9) residential real estate, a portion of which is used by 
 45.25  the owner for homestead purposes, and that is also a place of 
 45.26  lodging, if all of the following criteria are met: 
 45.27     (i) rooms are provided for rent to transient guests that 
 45.28  generally stay for periods of 14 or fewer days; 
 45.29     (ii) meals are provided to persons who rent rooms, the cost 
 45.30  of which is incorporated in the basic room rate; 
 45.31     (iii) meals are not provided to the general public except 
 45.32  for special events on fewer than seven days in the calendar year 
 45.33  preceding the year of the assessment; and 
 45.34     (iv) the owner is the operator of the property. 
 45.35  The market value subject to the 4c classification under this 
 45.36  clause is limited to five rental units.  Any rental units on the 
 46.1   property in excess of five, must be valued and assessed as class 
 46.2   3a.  The portion of the property used for purposes of a 
 46.3   homestead by the owner must be classified as class 1a property 
 46.4   under subdivision 22. 
 46.5      Class 4c property has a class rate of 1.5 percent of market 
 46.6   value, except that (i) each parcel of seasonal residential 
 46.7   recreational property not used for commercial purposes has the 
 46.8   same class rates as class 4bb property, (ii) manufactured home 
 46.9   parks assessed under clause (5) have the same class rate as 
 46.10  class 4b property, (iii) commercial-use seasonal residential 
 46.11  recreational property has a class rate of one percent for the 
 46.12  first $500,000 of market value, which includes any market value 
 46.13  receiving the one percent rate under subdivision 22, and 1.25 
 46.14  percent for the remaining market value, (iv) the market value of 
 46.15  property described in clause (4) has a class rate of one 
 46.16  percent, (v) the market value of property described in clauses 
 46.17  (2) and (6) has a class rate of 1.25 percent, and (vi) that 
 46.18  portion of the market value of property in clause (8) qualifying 
 46.19  for class 4c property has a class rate of 1.25 percent.  
 46.20     (e) Class 4d property is qualifying low-income rental 
 46.21  housing certified to the assessor by the Housing Finance Agency 
 46.22  under section 273.126, subdivision 3.  If only a portion of the 
 46.23  units in the building qualify as low-income rental housing units 
 46.24  as certified under section 273.126, subdivision 3, only the 
 46.25  proportion of qualifying units to the total number of units in 
 46.26  the building qualify for class 4d.  The remaining portion of the 
 46.27  building shall be classified by the assessor based upon its 
 46.28  use.  Class 4d also includes the same proportion of land as the 
 46.29  qualifying low-income rental housing units are to the total 
 46.30  units in the building.  For all properties qualifying as class 
 46.31  4d, the market value determined by the assessor must be based on 
 46.32  the normal approach to value using normal unrestricted rents. 
 46.33     Class 4d property has a class rate of 1.0 percent. 
 46.34     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 46.35  payable in 2006 and subsequent years. 
 46.36     Sec. 22.  Minnesota Statutes 2004, section 273.13, is 
 47.1   amended by adding a subdivision to read: 
 47.2      Subd. 34.  [HOMESTEAD OF DISABLED VETERAN OR SURVIVING 
 47.3   SPOUSE.] (a) The first $200,000 of market value of property 
 47.4   qualifying for homestead classification under subdivision 22 or 
 47.5   23 is excluded in determining the property's taxable market 
 47.6   value if it serves as the homestead of a military veteran, as 
 47.7   defined in section 197.447, who has a total and permanent 
 47.8   service-connected disability.  To qualify for exclusion under 
 47.9   this subdivision, the veteran must have been honorably 
 47.10  discharged from the United States armed forces, as indicated by 
 47.11  United States Government Form DD214 or other official military 
 47.12  discharge papers, and must be certified by the United States 
 47.13  Veterans Administration as having a total (100 percent) and 
 47.14  permanent service-connected disability. 
 47.15     (b) If a disabled veteran qualifying for a valuation 
 47.16  exclusion under paragraph (a) predeceases the veteran's spouse, 
 47.17  and if upon the death of the veteran the spouse holds the legal 
 47.18  or beneficial title to the homestead and permanently resides 
 47.19  there, the exclusion shall carry over to the benefit of the 
 47.20  veteran's spouse until such time as the spouse remarries or 
 47.21  sells or otherwise disposes of the property. 
 47.22     (c) In the case of an agricultural homestead, only the 
 47.23  portion of the property consisting of the house and garage and 
 47.24  immediately surrounding one acre of land qualifies for the 
 47.25  valuation exclusion under this subdivision. 
 47.26     (d) A property owner attempting to first qualify for a 
 47.27  valuation exclusion under this subdivision must apply to the 
 47.28  assessor by July 1 of the assessment year, except that for 
 47.29  assessment year 2005 application may be made until September 1, 
 47.30  2005.  The application must be accompanied by supporting 
 47.31  documentation as required by the assessor.  Once a property has 
 47.32  been accepted for a valuation exclusion under this subdivision, 
 47.33  the property continues to qualify until there is a change in 
 47.34  ownership of the property. 
 47.35     (e) The value of any qualifying property in excess of 
 47.36  $200,000 must be treated exactly the same as if the first 
 48.1   $200,000 in value had not been excluded, for purposes of 
 48.2   determining the appropriate class rate.  A property qualifying 
 48.3   for exclusion under this subdivision shall not be eligible for 
 48.4   the credit under section 273.1384, subdivision 1.  
 48.5      <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
 48.6   year 2005 and thereafter, for taxes payable in 2006 and 
 48.7   thereafter. 
 48.8      Sec. 23.  Minnesota Statutes 2004, section 274.01, 
 48.9   subdivision 1, is amended to read: 
 48.10     Subdivision 1.  [ORDINARY BOARD; MEETINGS, DEADLINES, 
 48.11  GRIEVANCES.] (a) The town board of a town, or the council or 
 48.12  other governing body of a city, is the board of appeal and 
 48.13  equalization except (1) in cities whose charters provide for a 
 48.14  board of equalization or (2) in any city or town that has 
 48.15  transferred its local board of review power and duties to the 
 48.16  county board as provided in subdivision 3.  The county assessor 
 48.17  shall fix a day and time when the board or the board of 
 48.18  equalization shall meet in the assessment districts of the 
 48.19  county.  Notwithstanding any law or city charter to the 
 48.20  contrary, a city board of equalization shall be referred to as a 
 48.21  board of appeal and equalization.  On or before February 15 of 
 48.22  each year the assessor shall give written notice of the time to 
 48.23  the city or town clerk.  Notwithstanding the provisions of any 
 48.24  charter to the contrary, the meetings must be held between April 
 48.25  1 and May 31 each year.  The clerk shall give published and 
 48.26  posted notice of the meeting at least ten days before the date 
 48.27  of the meeting.  
 48.28     The board shall meet at the office of the clerk to review 
 48.29  the assessment and classification of property in the town or 
 48.30  city.  No changes in valuation or classification which are 
 48.31  intended to correct errors in judgment by the county assessor 
 48.32  may be made by the county assessor after the board has adjourned 
 48.33  in those cities or towns that hold a local board of review; 
 48.34  however, corrections of errors that are merely clerical in 
 48.35  nature or changes that extend homestead treatment to property 
 48.36  are permitted after adjournment until the tax extension date for 
 49.1   that assessment year.  The changes must be fully documented and 
 49.2   maintained in the assessor's office and must be available for 
 49.3   review by any person.  A copy of the changes made during this 
 49.4   period in those cities or towns that hold a local board of 
 49.5   review must be sent to the county board no later than December 
 49.6   31 of the assessment year.  
 49.7      (b) The board shall determine whether the taxable property 
 49.8   in the town or city has been properly placed on the list and 
 49.9   properly valued by the assessor.  If real or personal property 
 49.10  has been omitted, the board shall place it on the list with its 
 49.11  market value, and correct the assessment so that each tract or 
 49.12  lot of real property, and each article, parcel, or class of 
 49.13  personal property, is entered on the assessment list at its 
 49.14  market value.  No assessment of the property of any person may 
 49.15  be raised unless the person has been duly notified of the intent 
 49.16  of the board to do so.  On application of any person feeling 
 49.17  aggrieved, the board shall review the assessment or 
 49.18  classification, or both, and correct it as appears just.  The 
 49.19  board may not make an individual market value adjustment or 
 49.20  classification change that would benefit the property in cases 
 49.21  where the owner or other person having control over the property 
 49.22  will not permit the assessor to inspect the property and the 
 49.23  interior of any buildings or structures.  
 49.24     (c) A local board may reduce assessments upon petition of 
 49.25  the taxpayer but the total reductions must not reduce the 
 49.26  aggregate assessment made by the county assessor by more than 
 49.27  one percent.  If the total reductions would lower the aggregate 
 49.28  assessments made by the county assessor by more than one 
 49.29  percent, none of the adjustments may be made.  The assessor 
 49.30  shall correct any clerical errors or double assessments 
 49.31  discovered by the board without regard to the one percent 
 49.32  limitation.  
 49.33     (d) A local board does not have authority to grant an 
 49.34  exemption or to order property removed from the tax rolls. 
 49.35     (e) A majority of the members may act at the meeting, and 
 49.36  adjourn from day to day until they finish hearing the cases 
 50.1   presented.  The assessor shall attend, with the assessment books 
 50.2   and papers, and take part in the proceedings, but must not 
 50.3   vote.  The county assessor, or an assistant delegated by the 
 50.4   county assessor shall attend the meetings.  The board shall list 
 50.5   separately, on a form appended to the assessment book, all 
 50.6   omitted property added to the list by the board and all items of 
 50.7   property increased or decreased, with the market value of each 
 50.8   item of property, added or changed by the board, placed opposite 
 50.9   the item.  The county assessor shall enter all changes made by 
 50.10  the board in the assessment book.  
 50.11     (f) Except as provided in subdivision 3, if a person fails 
 50.12  to appear in person, by counsel, or by written communication 
 50.13  before the board after being duly notified of the board's intent 
 50.14  to raise the assessment of the property, or if a person feeling 
 50.15  aggrieved by an assessment or classification fails to apply for 
 50.16  a review of the assessment or classification, the person may not 
 50.17  appear before the county board of appeal and equalization for a 
 50.18  review of the assessment or classification.  This paragraph does 
 50.19  not apply if an assessment was made after the local board 
 50.20  meeting, as provided in section 273.01, or if the person can 
 50.21  establish not having received notice of market value at least 
 50.22  five days before the local board meeting.  
 50.23     (g) The local board must complete its work and adjourn 
 50.24  within 20 days from the time of convening stated in the notice 
 50.25  of the clerk, unless a longer period is approved by the 
 50.26  commissioner of revenue.  No action taken after that date is 
 50.27  valid.  All complaints about an assessment or classification 
 50.28  made after the meeting of the board must be heard and determined 
 50.29  by the county board of equalization.  A nonresident may, at any 
 50.30  time, before the meeting of the board file written objections to 
 50.31  an assessment or classification with the county assessor.  The 
 50.32  objections must be presented to the board at its meeting by the 
 50.33  county assessor for its consideration. 
 50.34     Sec. 24.  Minnesota Statutes 2004, section 275.025, 
 50.35  subdivision 4, is amended to read: 
 50.36     Subd. 4.  [APPORTIONMENT AND LEVY OF STATE GENERAL TAX.] 
 51.1   Ninety-five percent of the state general tax must be distributed 
 51.2   among the counties levied by applying a uniform rate to each 
 51.3   county's all commercial-industrial tax capacity and its five 
 51.4   percent of the state general tax must be levied by applying a 
 51.5   uniform rate to all seasonal residential recreational tax 
 51.6   capacity.  Within each county, the tax must be levied by 
 51.7   applying a uniform rate against commercial-industrial tax 
 51.8   capacity and seasonal residential recreational tax capacity.  On 
 51.9   or before October 1 each year, the commissioner of revenue shall 
 51.10  certify a the preliminary state general levy rate rates to each 
 51.11  county auditor that must be used to prepare the notices of 
 51.12  proposed property taxes for taxes payable in the following 
 51.13  year.  By January 1 of each year, the commissioner shall certify 
 51.14  the final state general levy rate to each county auditor that 
 51.15  shall be used in spreading taxes.  
 51.16     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 51.17  payable in 2006 and thereafter. 
 51.18     Sec. 25.  Minnesota Statutes 2004, section 276.04, 
 51.19  subdivision 2, is amended to read: 
 51.20     Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
 51.21  shall provide for the printing of the tax statements.  The 
 51.22  commissioner of revenue shall prescribe the form of the property 
 51.23  tax statement and its contents.  The statement must contain a 
 51.24  tabulated statement of the dollar amount due to each taxing 
 51.25  authority and the amount of the state tax from the parcel of 
 51.26  real property for which a particular tax statement is prepared.  
 51.27  The dollar amounts attributable to the county, the state tax, 
 51.28  the voter approved school tax, the other local school tax, the 
 51.29  township or municipality, and the total of the metropolitan 
 51.30  special taxing districts as defined in section 275.065, 
 51.31  subdivision 3, paragraph (i), must be separately stated.  The 
 51.32  amounts due all other special taxing districts, if any, may be 
 51.33  aggregated except that any levies made by the regional rail 
 51.34  authorities in the county of Anoka, Carver, Dakota, Hennepin, 
 51.35  Ramsey, Scott, or Washington under chapter 398A shall be listed 
 51.36  on a separate line directly under the appropriate county's 
 52.1   levy.  If the county levy under this paragraph includes an 
 52.2   amount for a lake improvement district as defined under sections 
 52.3   103B.501 to 103B.581, the amount attributable for that purpose 
 52.4   must be separately stated from the remaining county levy 
 52.5   amount.  In the case of Ramsey County, if the county levy under 
 52.6   this paragraph includes an amount for public library service 
 52.7   under section 134.07, the amount attributable for that purpose 
 52.8   may be separated from the remaining county levy amount.  The 
 52.9   amount of the tax on homesteads qualifying under the senior 
 52.10  citizens' property tax deferral program under chapter 290B is 
 52.11  the total amount of property tax before subtraction of the 
 52.12  deferred property tax amount.  The amount of the tax on 
 52.13  contamination value imposed under sections 270.91 to 270.98, if 
 52.14  any, must also be separately stated.  The dollar amounts, 
 52.15  including the dollar amount of any special assessments, may be 
 52.16  rounded to the nearest even whole dollar.  For purposes of this 
 52.17  section whole odd-numbered dollars may be adjusted to the next 
 52.18  higher even-numbered dollar.  The amount of market value 
 52.19  excluded under section 273.11, subdivision 16, if any, must also 
 52.20  be listed on the tax statement. 
 52.21     (b) The property tax statements for manufactured homes and 
 52.22  sectional structures taxed as personal property shall contain 
 52.23  the same information that is required on the tax statements for 
 52.24  real property.  
 52.25     (c) Real and personal property tax statements must contain 
 52.26  the following information in the order given in this paragraph.  
 52.27  The information must contain the current year tax information in 
 52.28  the right column with the corresponding information for the 
 52.29  previous year in a column on the left: 
 52.30     (1) the property's estimated market value under section 
 52.31  273.11, subdivision 1; 
 52.32     (2) the property's taxable market value after reductions 
 52.33  under section 273.11, subdivisions 1a and 16; 
 52.34     (3) the property's gross tax, calculated by adding the 
 52.35  property's total property tax to the sum of the aids enumerated 
 52.36  in clause (4); 
 53.1      (4) a total of the following aids: 
 53.2      (i) education aids payable under chapters 122A, 123A, 123B, 
 53.3   124D, 125A, 126C, and 127A; 
 53.4      (ii) local government aids for cities, towns, and counties 
 53.5   under chapter 477A sections 477A.011 to 477A.04; and 
 53.6      (iii) disparity reduction aid under section 273.1398; 
 53.7      (5) for homestead residential and agricultural properties, 
 53.8   the credits under section 273.1384; 
 53.9      (6) any credits received under sections 273.119; 273.123; 
 53.10  273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 
 53.11  473H.10, except that the amount of credit received under section 
 53.12  273.135 must be separately stated and identified as "taconite 
 53.13  tax relief"; and 
 53.14     (7) the net tax payable in the manner required in paragraph 
 53.15  (a). 
 53.16     (d) If the county uses envelopes for mailing property tax 
 53.17  statements and if the county agrees, a taxing district may 
 53.18  include a notice with the property tax statement notifying 
 53.19  taxpayers when the taxing district will begin its budget 
 53.20  deliberations for the current year, and encouraging taxpayers to 
 53.21  attend the hearings.  If the county allows notices to be 
 53.22  included in the envelope containing the property tax statement, 
 53.23  and if more than one taxing district relative to a given 
 53.24  property decides to include a notice with the tax statement, the 
 53.25  county treasurer or auditor must coordinate the process and may 
 53.26  combine the information on a single announcement.  
 53.27     The commissioner of revenue shall certify to the county 
 53.28  auditor the actual or estimated aids enumerated in clause (4) 
 53.29  that local governments will receive in the following year.  The 
 53.30  commissioner must certify this amount by January 1 of each year. 
 53.31     <b>[EFFECTIVE DATE.]</b> This section is effective for property 
 53.32  tax statements for taxes payable in 2006 and thereafter. 
 53.33     Sec. 26.  [280.44] [NOTIFICATION TO HOMESTEAD PROPERTY 
 53.34  OWNERS; TAX DELINQUENCY.] 
 53.35     In addition to other notices required under this chapter, 
 53.36  the county auditor shall notify all taxpayers owning homestead 
 54.1   property within the county whose real property taxes on that 
 54.2   homestead are currently delinquent and also were delinquent in 
 54.3   the preceding calendar year.  The notification must be mailed 
 54.4   sometime between June 1 and August 1 in the year following the 
 54.5   second year that property taxes were not paid.  The notification 
 54.6   must contain a telephone number and an e-mail address for the 
 54.7   county auditor's office to aid the taxpayer in contacting the 
 54.8   county to discuss any questions relating to the tax 
 54.9   delinquency.  The notification must contain a list of the 
 54.10  various assistance programs and other options that might be 
 54.11  available to the taxpayer to pay the delinquent taxes including, 
 54.12  but not limited to, the senior citizens' property tax deferral 
 54.13  under chapter 290B, partial property tax payments, and a 
 54.14  confession of judgment under section 279.37.  The notice must 
 54.15  inform the taxpayer of the state-paid property tax refund and 
 54.16  the additional property tax refund under chapter 290A which may 
 54.17  be available to the taxpayer once the delinquent taxes have been 
 54.18  satisfied.  The notice must also state the number of years 
 54.19  before the property will forfeit if the taxes are not paid or 
 54.20  any installment plan initiated.  For purposes of this section, 
 54.21  "homestead" property means property classified under section 
 54.22  273.13, subdivision 22 or 23, paragraph (a). 
 54.23     <b>[EFFECTIVE DATE.]</b> This section is effective for property 
 54.24  tax delinquencies beginning January 1, 2006, provided that for 
 54.25  calendar year 2006, the county auditor shall notify the owners 
 54.26  of each homestead property in the county that has been 
 54.27  delinquent for two or more years. 
 54.28     Sec. 27.  Minnesota Statutes 2004, section 290A.03, 
 54.29  subdivision 11, is amended to read: 
 54.30     Subd. 11.  [RENT CONSTITUTING PROPERTY TAXES.] "Rent 
 54.31  constituting property taxes" means 19 percent of the gross rent 
 54.32  actually paid in cash, or its equivalent, or the portion of rent 
 54.33  the amount of gross rent actually paid in cash, or its 
 54.34  equivalent, which is attributable (1) to the property tax paid 
 54.35  on the unit or (2) to the amount paid in lieu of property taxes, 
 54.36  in any calendar year by a claimant for the right of occupancy of 
 55.1   the claimant's Minnesota homestead in the calendar year, and 
 55.2   which rent constitutes the basis, in the succeeding calendar 
 55.3   year of a claim for relief under this chapter by the 
 55.4   claimant.  The amount of rent attributable to property taxes 
 55.5   paid or payments in lieu made on the unit must be determined by 
 55.6   multiplying the gross rent paid by the claimant for the calendar 
 55.7   year for the unit by a fraction, the numerator of which is the 
 55.8   net tax on the property where the unit is located and the 
 55.9   denominator of which is the total scheduled rent.  In no case 
 55.10  may the rent constituting property taxes exceed 50 percent of 
 55.11  the gross rent paid by the claimant during that calendar year.  
 55.12  In the case of a claimant who resides in a unit for which (1) a 
 55.13  rent subsidy is paid to, or for, the claimant based on the 
 55.14  income of the claimant or the claimant's family, or (2) a 
 55.15  subsidy is paid to a public housing authority that owns or 
 55.16  operates the claimant's rental unit, pursuant to United States 
 55.17  Code, title 42, section 1437c, 20 percent of gross rent actually 
 55.18  paid in cash or its equivalent shall be the claimant's "rent 
 55.19  constituting property taxes paid."  For purposes of this 
 55.20  subdivision, "rent subsidy" does not include any housing 
 55.21  assistance received under the Minnesota family investment 
 55.22  program, general assistance, Minnesota supplemental assistance, 
 55.23  supplemental security income, or similar income maintenance 
 55.24  programs. 
 55.25     <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
 55.26  based on rent paid in 2005 and following years. 
 55.27     Sec. 28.  Minnesota Statutes 2004, section 290A.03, 
 55.28  subdivision 13, is amended to read: 
 55.29     Subd. 13.  [PROPERTY TAXES PAYABLE.] "Property taxes 
 55.30  payable" means the property tax exclusive of special 
 55.31  assessments, penalties, and interest payable on a claimant's 
 55.32  homestead after deductions made under sections 273.135, 
 55.33  273.1384, 273.1391, 273.42, subdivision 2, and any other state 
 55.34  paid property tax credits in any calendar year, and after any 
 55.35  refund claimed and allowable under section 290A.04, subdivision 
 55.36  2h, that is first payable in the year that the property tax is 
 56.1   payable.  In the case of a claimant who makes ground lease 
 56.2   payments, "property taxes payable" includes the amount of the 
 56.3   payments directly attributable to the property taxes assessed 
 56.4   against the parcel on which the house is located.  No 
 56.5   apportionment or reduction of the "property taxes payable" shall 
 56.6   be required for the use of a portion of the claimant's homestead 
 56.7   for a business purpose if the claimant does not deduct any 
 56.8   business depreciation expenses for the use of a portion of the 
 56.9   homestead in the determination of federal adjusted gross 
 56.10  income.  For homesteads which are manufactured homes as defined 
 56.11  in section 273.125, subdivision 8, and for homesteads which are 
 56.12  park trailers taxed as manufactured homes under section 168.012, 
 56.13  subdivision 9, "property taxes payable" shall also include 19 
 56.14  percent the amount of the gross rent paid in the preceding year 
 56.15  for the site on which the homestead is located, which is 
 56.16  attributable to the net tax paid on the site.  The amount 
 56.17  attributable to property taxes must be determined by multiplying 
 56.18  the net tax on the parcel by a fraction, the numerator of which 
 56.19  is the gross rent paid for the calendar year for the site and 
 56.20  the denominator of which is the gross rent paid for the calendar 
 56.21  year for the parcel.  When a homestead is owned by two or more 
 56.22  persons as joint tenants or tenants in common, such tenants 
 56.23  shall determine between them which tenant may claim the property 
 56.24  taxes payable on the homestead.  If they are unable to agree, 
 56.25  the matter shall be referred to the commissioner of revenue 
 56.26  whose decision shall be final.  Property taxes are considered 
 56.27  payable in the year prescribed by law for payment of the taxes. 
 56.28     In the case of a claim relating to "property taxes 
 56.29  payable," the claimant must have owned and occupied the 
 56.30  homestead on January 2 of the year in which the tax is payable 
 56.31  and (i) the property must have been classified as homestead 
 56.32  property pursuant to section 273.124, on or before December 15 
 56.33  of the assessment year to which the "property taxes payable" 
 56.34  relate; or (ii) the claimant must provide documentation from the 
 56.35  local assessor that application for homestead classification has 
 56.36  been made on or before December 15 of the year in which the 
 57.1   "property taxes payable" were payable and that the assessor has 
 57.2   approved the application. 
 57.3      <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
 57.4   based on rent paid in 2005 and following years. 
 57.5      Sec. 29.  Minnesota Statutes 2004, section 290A.03, is 
 57.6   amended by adding a subdivision to read: 
 57.7      Subd. 16.  [TOTAL SCHEDULED RENT.] "Total scheduled rent" 
 57.8   means the sum of the monthly rents assigned to the residential 
 57.9   rental units in the property multiplied by 12.  The rents must 
 57.10  be an arm's-length rental, including garage rents if any, but 
 57.11  not including charges for medical services furnished by the 
 57.12  landlord as a part of the rental agreement.  In determining 
 57.13  total scheduled rent, no deduction is allowed for vacant units, 
 57.14  uncollected rent, or reduced cash rents in units occupied by 
 57.15  employees or agents of the owner. 
 57.16     <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
 57.17  based on rent paid in 2005 and following years. 
 57.18     Sec. 30.  Minnesota Statutes 2004, section 290A.03, is 
 57.19  amended by adding a subdivision to read: 
 57.20     Subd. 17.  [NET TAX.] "Net tax" means: 
 57.21     (1) the property tax, exclusive of special assessments, 
 57.22  interest, and penalties, and after reduction for any state paid 
 57.23  property tax credits as required in subdivision 13 except for 
 57.24  the reduction under section 273.13, subdivisions 22 and 23; or 
 57.25     (2) the payments made in lieu of ad valorem taxes, 
 57.26  including payments of special assessments imposed in lieu of ad 
 57.27  valorem taxes, 
 57.28  for the calendar year in which the rent was paid.  If a portion 
 57.29  of the property is occupied as a homestead or is used for other 
 57.30  than rental purposes, the net tax is the amount of tax reduced 
 57.31  by the percentage that the nonrental use comprises of the total 
 57.32  square footage of the building.  If a portion of the property is 
 57.33  used for purposes other than for residential rental and none of 
 57.34  the property is occupied as a homestead, the net tax is the 
 57.35  amount of the tax of the parcel multiplied by a fraction, the 
 57.36  numerator of which is the total net tax capacity of the parcel.  
 58.1   If a portion of the property is used for other than rental 
 58.2   residential purposes, the county treasurer shall list on the 
 58.3   property tax statement the amount of net tax pertaining to the 
 58.4   rental residential portion of the property. 
 58.5      The amount of the net tax must not be reduced by an 
 58.6   abatement or a court-ordered reduction in the property tax on 
 58.7   the property made after the certificate of rent paid has been 
 58.8   provided to the renter. 
 58.9      <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
 58.10  based on rent paid in 2005 and following years. 
 58.11     Sec. 31.  Minnesota Statutes 2004, section 290A.07, is 
 58.12  amended by adding a subdivision to read: 
 58.13     Subd. 5.  [EARLY PAYMENT; E-FILE CLAIMS.] The commissioner 
 58.14  may pay a claim up to 30 days earlier than the first permitted 
 58.15  date under subdivision 2a or 3 if the claim is submitted by 
 58.16  electronic means. 
 58.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 58.18  following final enactment. 
 58.19     Sec. 32.  Minnesota Statutes 2004, section 290A.19, is 
 58.20  amended to read: 
 58.21     290A.19 [OWNER OR MANAGING AGENT TO FURNISH RENT 
 58.22  CERTIFICATE.] 
 58.23     (a) The owner or managing agent of any property for which 
 58.24  rent is paid for occupancy as a homestead must furnish a 
 58.25  certificate of rent paid to a person who is a renter on December 
 58.26  31, in the form prescribed by the commissioner.  If the renter 
 58.27  moves before December 31, the owner or managing agent may give 
 58.28  the certificate to the renter at the time of moving, or mail the 
 58.29  certificate to the forwarding address if an address has been 
 58.30  provided by the renter.  The certificate must be made available 
 58.31  to the renter before February 1 of the year following the year 
 58.32  in which the rent was paid.  The owner or managing agent must 
 58.33  retain a duplicate of each certificate or an equivalent record 
 58.34  showing the same information for a period of three years.  The 
 58.35  duplicate or other record must be made available to the 
 58.36  commissioner upon request.  For the purposes of this section, 
 59.1   "owner" includes a park owner as defined under section 327C.01, 
 59.2   subdivision 6, and "property" includes a lot as defined under 
 59.3   section 327C.01, subdivision 3. 
 59.4      (b) If the owner or managing agent fails to provide the 
 59.5   renter with a certificate of rent constituting property taxes, 
 59.6   the commissioner shall allocate the net tax on the building to 
 59.7   the unit on a square footage basis or other appropriate basis as 
 59.8   the commissioner determines.  The renter shall supply the 
 59.9   commissioner with a statement from the county treasurer that 
 59.10  gives the amount of property tax on the parcel, the address and 
 59.11  property tax parcel identification number of the property, and 
 59.12  the number of units in the building. 
 59.13     <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
 59.14  based on rent paid in 2005 and following years. 
 59.15     Sec. 33.  Minnesota Statutes 2004, section 365.43, 
 59.16  subdivision 1, is amended to read: 
 59.17     Subdivision 1.  [LEVIED AMOUNT IS SPENDING LIMIT TOTAL 
 59.18  REVENUE DEFINED.] A town must not contract debts or spend more 
 59.19  money in a year than the taxes levied for the year its total 
 59.20  revenue without a favorable vote of a majority of the town's 
 59.21  electors.  In this section, "total revenue" means property taxes 
 59.22  payable in that year as well as amounts received from all other 
 59.23  sources and amounts carried forward from the last year. 
 59.24     Sec. 34.  Minnesota Statutes 2004, section 365.431, is 
 59.25  amended to read: 
 59.26     365.431 [AMOUNT VOTED AT MEETING IS TAX LIMIT.] 
 59.27     Except as otherwise authorized by law, the tax for town 
 59.28  purposes must not be more than the amount voted to be raised at 
 59.29  the annual town meeting. 
 59.30     Sec. 35.  Minnesota Statutes 2004, section 366.011, is 
 59.31  amended to read: 
 59.32     366.011 [CHARGES FOR EMERGENCY SERVICES; COLLECTION.] 
 59.33     A town may impose a reasonable service charge for emergency 
 59.34  services, including fire, rescue, medical, and related services 
 59.35  provided by the town or contracted for by the town.  If the 
 59.36  service charge remains unpaid 30 days after a notice of 
 60.1   delinquency is sent to the recipient of the service or the 
 60.2   recipient's representative or estate, the town or its contractor 
 60.3   on behalf of the town may use any lawful means allowed to a 
 60.4   private party for the collection of an unsecured delinquent 
 60.5   debt.  The town may also use the authority of section 366.012 to 
 60.6   collect unpaid service charges of this kind from delinquent 
 60.7   recipients of services who are owners of taxable real property 
 60.8   in the town state. 
 60.9      The powers conferred by this section are in addition and 
 60.10  supplemental to the powers conferred by any other law for a town 
 60.11  to impose a service charge or assessment for a service provided 
 60.12  by the town or contracted for by the town. 
 60.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 60.14  following final enactment. 
 60.15     Sec. 36.  Minnesota Statutes 2004, section 366.012, is 
 60.16  amended to read: 
 60.17     366.012 [COLLECTION OF UNPAID SERVICE CHARGES.] 
 60.18     If a town is authorized to impose a service charge on the 
 60.19  owner, lessee, or occupant of property, or any of them, for a 
 60.20  governmental service provided by the town, the town board may 
 60.21  certify to the county auditor of the county in which the 
 60.22  recipient of the services owns real property, on or before 
 60.23  October 15 for each year, any unpaid service charges which shall 
 60.24  then be collected together with property taxes levied against 
 60.25  the property.  The county auditor shall remit to the town all 
 60.26  service charges collected by the auditor on behalf of the town.  
 60.27  A charge may be certified to the auditor only if, on or before 
 60.28  September 15, the town has given written notice to the property 
 60.29  owner of its intention to certify the charge to the auditor.  
 60.30  The service charges shall be subject to the same penalties, 
 60.31  interest, and other conditions provided for the collection of 
 60.32  property taxes.  This section is in addition to other law 
 60.33  authorizing the collection of unpaid costs and service charges. 
 60.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 60.35  following final enactment.  
 60.36     Sec. 37.  [373.251] [LEVY FOR NON-COUNTY-OWNED PUBLIC 
 61.1   NURSING HOMES.] 
 61.2      (a) If a county with a population of 150,000 or more, 
 61.3   according to the 2000 Federal Census, located outside the 
 61.4   metropolitan area as defined in section 473.121, subdivision 2, 
 61.5   owns a nursing home that is funded in whole or part with county 
 61.6   revenue, the county must levy an equal amount annually to be 
 61.7   distributed to all other nursing homes located within the county 
 61.8   that are owned by governmental units. 
 61.9      (b) The proceeds of the levy authorized by paragraph (a) 
 61.10  must be prorated among the government-owned nursing homes in the 
 61.11  proportion that the number of beds in each of the 
 61.12  government-owned nursing homes is to the total number of beds in 
 61.13  all of the government-owned nursing homes in the county.  
 61.14     (c) The levy authorized by paragraph (a) may be levied in 
 61.15  addition to all other county levies authorized by law.  
 61.16     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 61.17  levied in 2006, payable in 2007 and thereafter. 
 61.18     Sec. 38.  [473.450] [SPECIAL TAXING DISTRICT FOR LRT.] 
 61.19     Subdivision 1.  [CREATION.] The council shall establish a 
 61.20  special taxing district to pay for the cost of operating a light 
 61.21  rail transit line to the extent fare revenues are insufficient 
 61.22  to cover those costs. 
 61.23     Subd. 2.  [AREA OF DISTRICT.] The special taxing district 
 61.24  consists of the area comprised of any parcel of property 
 61.25  located, in whole or part, within 1,000 feet of the right-of-way 
 61.26  for the light rail transit line and classified as class 3 
 61.27  property or class 4 property. 
 61.28     Subd. 3.  [REVENUES.] (a) The revenues of the district are 
 61.29  the property tax increments attributable to the increase in the 
 61.30  net tax capacity of the district that occurs after its 
 61.31  certification.  The tax increments must be computed in the 
 61.32  manner provided in this subdivision. 
 61.33     (b) Upon the request of the council, the county auditor 
 61.34  shall certify the net tax capacity of all taxable property 
 61.35  within the area of the special taxing district.  Certification 
 61.36  of original net tax capacity, captured net tax capacity, and 
 62.1   computation of tax increment must be done following the 
 62.2   procedures and methods provided under section 469.177 with the 
 62.3   following exceptions: 
 62.4      (1) the current tax rate must be used, rather than the 
 62.5   original tax rate under section 469.177, subdivision 1a; 
 62.6      (2) computations of increment must be made using the option 
 62.7   under section 469.177, subdivision 3, paragraph (b); 
 62.8      (3) the county auditor shall annually adjust the original 
 62.9   tax capacity of the district by the average percentage change in 
 62.10  the tax capacity of class 3 property in the county over the 
 62.11  previous assessment year.  
 62.12     (c) The county auditor shall pay the tax increment to the 
 62.13  council.  Revenues may only be used for the operating costs of 
 62.14  light rail transit. 
 62.15     (d) The restrictions on or requirements for tax increment 
 62.16  financing districts under sections 469.174 to 469.178 do not 
 62.17  apply to a special taxing district, except as provided in 
 62.18  paragraph (b) and as follows: 
 62.19     (1) the county may deduct its cost of administration as 
 62.20  permitted under section 469.176, subdivision 4h, paragraph (a); 
 62.21  and 
 62.22     (2) to the extent that revenues under this section exceed 
 62.23  the projected cost of light rail transit operations that exceed 
 62.24  fare and other revenues, the excess must be distributed as 
 62.25  provided under section 469.176, subdivision 2, paragraph (c), 
 62.26  clause (4). 
 62.27     Subd. 4.  [TIF AND ABATEMENT.] (a) No tax increment 
 62.28  financing district may be created under sections 469.174 to 
 62.29  469.178 within the area of the special taxing district as 
 62.30  defined under subdivision 2.  No abatement of the incremental 
 62.31  tax under subdivision 3 may be made under sections 469.1812 to 
 62.32  469.1815. 
 62.33     (b) Upon decertification of parcels of a tax increment 
 62.34  financing district that was certified before the effective date 
 62.35  of this section and that are located within the area defined in 
 62.36  subdivision 2, the council shall request certification of the 
 63.1   parcels to be included in the special taxing district under this 
 63.2   section.  The auditor must certify the original net tax capacity 
 63.3   of the parcels based on their tax capacity for the current taxes 
 63.4   payable year. 
 63.5      <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
 63.6   property taxes payable in 2006.  Subdivision 4 applies to 
 63.7   requests for certification of tax increment financing districts 
 63.8   made after the day following final enactment. 
 63.9      Sec. 39.  Minnesota Statutes 2004, section 473F.02, 
 63.10  subdivision 2, is amended to read: 
 63.11     Subd. 2.  [AREA.] "Area" means the territory included 
 63.12  within the boundaries of Anoka, Carver, Dakota excluding the 
 63.13  city of Northfield, Hennepin, Ramsey, Scott excluding the city 
 63.14  of New Prague, and Washington Counties, excluding lands 
 63.15  constituting a major or an intermediate airport as defined under 
 63.16  section 473.625. 
 63.17     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 63.18  payable in 2006 and subsequent years.  
 63.19     Sec. 40.  Minnesota Statutes 2004, section 477A.11, 
 63.20  subdivision 4, is amended to read: 
 63.21     Subd. 4.  [OTHER NATURAL RESOURCES LAND.] "Other natural 
 63.22  resources land" means:  
 63.23     (1) any other land presently owned in fee title by the 
 63.24  state and administered by the commissioner, or any tax-forfeited 
 63.25  land, other than platted lots within a city or those lands 
 63.26  described under subdivision 3, clause (2), which is owned by the 
 63.27  state and administered by the commissioner or by the county in 
 63.28  which it is located; and 
 63.29     (2) land leased by the state from the United States of 
 63.30  America through the United States Secretary of Agriculture 
 63.31  pursuant to Title III of the Bankhead Jones Farm Tenant Act, 
 63.32  which land is commonly referred to as land utilization project 
 63.33  land that is administered by the commissioner. 
 63.34     <b>[EFFECTIVE DATE.]</b> This section is effective for aids paid 
 63.35  in calendar year 2006 and thereafter. 
 63.36     Sec. 41.  Minnesota Statutes 2004, section 477A.11, is 
 64.1   amended by adding a subdivision to read: 
 64.2      Subd. 5.  [LAND UTILIZATION PROJECT LAND.] "Land 
 64.3   utilization project land" means land that is leased by the state 
 64.4   from the United States through the United States Secretary of 
 64.5   Agriculture according to Title III of the Bankhead Jones Farm 
 64.6   Tenant Act and that is administered by the commissioner. 
 64.7      <b>[EFFECTIVE DATE.]</b> This section is effective for aids paid 
 64.8   in calendar year 2006 and thereafter. 
 64.9      Sec. 42.  Minnesota Statutes 2004, section 477A.12, 
 64.10  subdivision 1, is amended to read: 
 64.11     Subdivision 1.  [TYPES OF LAND; PAYMENTS.] (a) As an offset 
 64.12  for expenses incurred by counties and towns in support of 
 64.13  natural resources lands, the following amounts are annually 
 64.14  appropriated to the commissioner of natural resources from the 
 64.15  general fund for transfer to the commissioner of revenue.  The 
 64.16  commissioner of revenue shall pay the transferred funds to 
 64.17  counties as required by sections 477A.11 to 477A.145.  The 
 64.18  amounts are: 
 64.19     (1) for acquired natural resources land, $3, as adjusted 
 64.20  for inflation under section 477A.145, multiplied by the total 
 64.21  number of acres of acquired natural resources land or, at the 
 64.22  county's option three-fourths of one percent of the appraised 
 64.23  value of all acquired natural resources land in the county, 
 64.24  whichever is greater; 
 64.25     (2) 75 cents, as adjusted for inflation under section 
 64.26  477A.145, multiplied by the number of acres of 
 64.27  county-administered other natural resources land; and 
 64.28     (3) 75 cents, as adjusted for inflation under section 
 64.29  477A.145, multiplied by the total number of acres of land 
 64.30  utilization project land; 
 64.31     (3) (4) 37.5 cents, as adjusted for inflation under section 
 64.32  477A.145, multiplied by the number of acres of 
 64.33  commissioner-administered other natural resources land located 
 64.34  in each county as of July 1 of each year prior to the payment 
 64.35  year. 
 64.36     (b) The amount determined under paragraph (a), clause (1), 
 65.1   is payable for land that is acquired from a private owner and 
 65.2   owned by the Department of Transportation for the purpose of 
 65.3   replacing wetland losses caused by transportation projects, but 
 65.4   only if the county contains more than 500 acres of such land at 
 65.5   the time the certification is made under subdivision 2. 
 65.6      <b>[EFFECTIVE DATE.]</b> This section is effective for aids paid 
 65.7   in calendar year 2006 and thereafter. 
 65.8      Sec. 43.  Minnesota Statutes 2004, section 477A.12, 
 65.9   subdivision 2, is amended to read: 
 65.10     Subd. 2.  [PROCEDURE.] Lands for which payments in lieu are 
 65.11  made pursuant to section 97A.061, subdivision 3, and Laws 1973, 
 65.12  chapter 567, shall not be eligible for payments under this 
 65.13  section.  Each county auditor shall certify to the Department of 
 65.14  Natural Resources during July of each year prior to the payment 
 65.15  year the number of acres of county-administered other natural 
 65.16  resources land within the county.  The Department of Natural 
 65.17  resources may, in addition to the certification of acreage, 
 65.18  require descriptive lists of land so certified.  The 
 65.19  commissioner of natural resources shall determine and certify to 
 65.20  the commissioner of revenue by March 1 of the payment year:  
 65.21     (1) the number of acres and most recent appraised value of 
 65.22  acquired natural resources land within each county; 
 65.23     (2) the number of acres of commissioner-administered 
 65.24  natural resources land within each county; and 
 65.25     (3) the number of acres of county-administered other 
 65.26  natural resources land within each county, based on the reports 
 65.27  filed by each county auditor with the commissioner of natural 
 65.28  resources; and 
 65.29     (4) the number of acres of land utilization project land 
 65.30  within each county. 
 65.31     The commissioner of transportation shall determine and 
 65.32  certify to the commissioner of revenue by March 1 of the payment 
 65.33  year the number of acres of land and the appraised value of the 
 65.34  land described in subdivision 1, paragraph (b), but only if it 
 65.35  exceeds 500 acres. 
 65.36     The commissioner of revenue shall determine the 
 66.1   distributions provided for in this section using the number of 
 66.2   acres and appraised values certified by the commissioner of 
 66.3   natural resources and the commissioner of transportation by 
 66.4   March 1 of the payment year. 
 66.5      <b>[EFFECTIVE DATE.]</b> This section is effective for aids paid 
 66.6   in calendar year 2006 and thereafter. 
 66.7      Sec. 44.  Minnesota Statutes 2004, section 477A.14, 
 66.8   subdivision 1, is amended to read: 
 66.9      Subdivision 1.  [GENERAL DISTRIBUTION.] Except as provided 
 66.10  in subdivision 2 or in section 97A.061, subdivision 5, 40 
 66.11  percent of the total payment to the county shall be deposited in 
 66.12  the county general revenue fund to be used to provide property 
 66.13  tax levy reduction.  The remainder shall be distributed by the 
 66.14  county in the following priority:  
 66.15     (a) 37.5 cents, as adjusted for inflation under section 
 66.16  477A.145, for each acre of county-administered other natural 
 66.17  resources land shall be deposited in a resource development fund 
 66.18  to be created within the county treasury for use in resource 
 66.19  development, forest management, game and fish habitat 
 66.20  improvement, and recreational development and maintenance of 
 66.21  county-administered other natural resources land.  Any county 
 66.22  receiving less than $5,000 annually for the resource development 
 66.23  fund may elect to deposit that amount in the county general 
 66.24  revenue fund; 
 66.25     (b) From the funds remaining, within 30 days of receipt of 
 66.26  the payment to the county, the county treasurer shall pay each 
 66.27  organized township 30 cents, as adjusted for inflation under 
 66.28  section 477A.145, for each acre of acquired natural resources 
 66.29  land and each acre of land described in section 477A.12, 
 66.30  subdivision 1, paragraph (b), and 7.5 cents, as adjusted for 
 66.31  inflation under section 477A.145, for each acre of other natural 
 66.32  resources land and each acre of land utilization project land 
 66.33  located within its boundaries.  Payments for natural resources 
 66.34  lands not located in an organized township shall be deposited in 
 66.35  the county general revenue fund.  Payments to counties and 
 66.36  townships pursuant to this paragraph shall be used to provide 
 67.1   property tax levy reduction, except that of the payments for 
 67.2   natural resources lands not located in an organized township, 
 67.3   the county may allocate the amount determined to be necessary 
 67.4   for maintenance of roads in unorganized townships.  Provided 
 67.5   that, if the total payment to the county pursuant to section 
 67.6   477A.12 is not sufficient to fully fund the distribution 
 67.7   provided for in this clause, the amount available shall be 
 67.8   distributed to each township and the county general revenue fund 
 67.9   on a pro rata basis; and 
 67.10     (c) Any remaining funds shall be deposited in the county 
 67.11  general revenue fund.  Provided that, if the distribution to the 
 67.12  county general revenue fund exceeds $35,000, the excess shall be 
 67.13  used to provide property tax levy reduction. 
 67.14     <b>[EFFECTIVE DATE.]</b> This section is effective for aids paid 
 67.15  in calendar year 2006 and thereafter. 
 67.16     Sec. 45.  Laws 1998, chapter 389, article 3, section 42, 
 67.17  subdivision 2, as amended by Laws 2002, chapter 377, article 4, 
 67.18  section 24, is amended to read: 
 67.19     Subd. 2.  [RECAPTURE.] (a) Property or any portion thereof 
 67.20  qualifying under section 38 is subject to additional taxes if: 
 67.21     (1) ownership of the property is transferred to anyone 
 67.22  other than the spouse or child of the current owner; 
 67.23     (2) the current owner or the spouse or child of the current 
 67.24  owner has not conveyed or entered into a contract before July 1, 
 67.25  2007, to convey for ownership or public easement rights, (i) a 
 67.26  portion of the property to a one or more nonprofit foundation 
 67.27  foundations or corporation operating corporations; and (ii) a 
 67.28  portion of the property to one or more local governments; and 
 67.29  those entities shall separately or jointly operate the property 
 67.30  as an art park providing the services included in section 38, 
 67.31  clauses (2) to (5), and may also use some of the property for 
 67.32  other public purposes as determined by the local governments; or 
 67.33     (3) the nonprofit foundation or corporation to which a 
 67.34  portion of the property was transferred ceases to provide the 
 67.35  services included in section 38, clauses (2) to (5), earlier 
 67.36  than ten years following the effective date of the conveyance 
 68.1   conveyances or of the execution of the contract contracts to 
 68.2   convey. 
 68.3      (b) The additional taxes are imposed at the earlier of (1) 
 68.4   the year following transfer of ownership to anyone other than 
 68.5   the spouse or child of the current owner or a nonprofit 
 68.6   foundation or corporation or local government operating the 
 68.7   property as an art park and used for other public purposes, or 
 68.8   (2) for taxes payable in 2008, or (3) in the event the nonprofit 
 68.9   foundation or corporation to which a portion of the property was 
 68.10  conveyed ceases to provide the required services within ten 
 68.11  years after the conveyance, for taxes payable in the year 
 68.12  following the year when it ceased to do so.  
 68.13     The county board, with the approval of the city council, 
 68.14  shall determine the amount of the additional taxes due on the 
 68.15  portion of property which is no longer utilized as an art park; 
 68.16  provided, however, that the additional taxes are equal to must 
 68.17  not be greater than the difference between the taxes determined 
 68.18  on that portion of the property utilized as an art park under 
 68.19  sections 39 and 40 and the amount determined under subdivision 1 
 68.20  for all years that the property qualified under section 38.  The 
 68.21  additional taxes must be extended against the property on the 
 68.22  tax list for the current year; provided, however, that No 
 68.23  interest or penalties may be levied on the additional taxes if 
 68.24  timely paid amount provided that it is paid within 30 days of 
 68.25  the county's notice. 
 68.26     <b>[EFFECTIVE DATE.]</b> This section is effective March 1, 2005. 
 68.27     Sec. 46.  Laws 2001, First Special Session chapter 5, 
 68.28  article 3, section 8, the effective date, is amended to read: 
 68.29     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 68.30  levied in 2002, payable in 2003, through taxes levied in 2007 
 68.31  2009, payable in 2008 2010. 
 68.32     Sec. 47.  Laws 2005, chapter 43, section 1, the effective 
 68.33  date, if enacted, is amended to read: 
 68.34     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 68.35  levied in 2005 2004, payable in 2006 2005, and thereafter. 
 68.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 69.1   following final enactment. 
 69.2      Sec. 48.  [REPORT; PROPOSED STANDARDIZED ASSESSMENT AND 
 69.3   CLASSIFICATION STANDARDS.] 
 69.4      Recognizing the importance of uniform and professional 
 69.5   property tax assessment practices, the commissioner of revenue, 
 69.6   in consultation with appropriate stakeholder groups shall 
 69.7   develop and issue a report to the chairs of the house and senate 
 69.8   tax committees by February 1, 2006.  This report shall contain, 
 69.9   but not be limited to, recommendations and proposed requirements 
 69.10  for achieving standardized assessment and classification of 
 69.11  seasonal residential recreational property, residential 
 69.12  nonhomestead property, timber and woodland property, green acres 
 69.13  property, seasonal residential recreational commercial and 
 69.14  noncommercial property, and commercial/industrial property.  
 69.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 69.16  following final enactment. 
 69.17     Sec. 49.  [CODE OF CONDUCT AND ETHICS; ASSESSORS.] 
 69.18     The commissioner of revenue is directed to develop a code 
 69.19  of conduct and ethics for Minnesota assessors to ensure public 
 69.20  confidence in property assessment.  The commissioner shall 
 69.21  consult with representatives of the Minnesota Association of 
 69.22  Assessing Officers, the State Board of Assessors, and any other 
 69.23  groups that the commissioner deems appropriate.  The code must 
 69.24  include language that promotes fairness and uniformity and 
 69.25  recommends assessment practices that do not promote the 
 69.26  perception of a conflict of interest.  The code must be 
 69.27  completed and recommended to the Minnesota State Board of 
 69.28  Assessors for adopting by January 1, 2006.  This code must be 
 69.29  presented as part of the course required by Minnesota Statutes, 
 69.30  section 273.0755, paragraph (c). 
 69.31     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 69.32  following final enactment. 
 69.33     Sec. 50.  [SCHOOL DEBT SERVICE LEVIES; ALTERNATIVE TAX 
 69.34  BASE; PILOT PROJECT.] 
 69.35     Subdivision 1.  [COMMISSIONER DESIGNATION.] The 
 69.36  commissioner of education may select up to three school 
 70.1   districts to participate in the pilot project under this 
 70.2   section.  The commissioner must notify the selected school 
 70.3   districts by July 1, 2005.  
 70.4      Subd. 2.  [ELECTION BY SCHOOL BOARD.] A school board 
 70.5   designated by the commissioner under subdivision 1 may by 
 70.6   resolution elect to levy the debt service for a bond issued 
 70.7   after July 1, 2005, and before July 1, 2007, against the 
 70.8   alternative net tax capacity of the district, as defined under 
 70.9   subdivision 6, rather than the net tax capacity of the 
 70.10  district.  A resolution to levy against alternative net tax 
 70.11  capacity must be passed at an open meeting of the board, at 
 70.12  least 60 days prior to the referendum election.  A district 
 70.13  electing to issue bonds with a levy against alternative net tax 
 70.14  capacity must notify the commissioner of that intention in 
 70.15  filing the proposal required by Minnesota Statutes, section 
 70.16  123B.71, subdivision 9.  
 70.17     Subd. 3.  [DEBT SERVICE EQUALIZATION REVENUE.] For the 
 70.18  purposes of Minnesota Statutes, section 123B.53, subdivision 4, 
 70.19  debt service equalization revenue for a district that has issued 
 70.20  bonds under an election to levy against alternative net tax 
 70.21  capacity is the same as it would be if the levy were being made 
 70.22  against net tax capacity.  
 70.23     Subd. 4.  [APPORTIONMENT OF DEBT SERVICE AID.] Equalization 
 70.24  aid for a district that has issued bonds under an election to 
 70.25  levy against alternative net tax capacity must be apportioned 
 70.26  between the net tax capacity debt service levy and the 
 70.27  alternative net tax capacity debt service levy in the same 
 70.28  proportions as eligible debt service revenues resulting from 
 70.29  bonds issued against net tax capacity are to eligible debt 
 70.30  service revenues resulting from bonds issued against alternative 
 70.31  net tax capacity. 
 70.32     Subd. 5.  [ALTERNATIVE NET TAX CAPACITY DEBT SERVICE LEVY.] 
 70.33  The eligible debt service revenues resulting from bonds issued 
 70.34  against alternative net tax capacity, minus the debt service 
 70.35  equalization aid apportioned to the alternative net tax capacity 
 70.36  levy, must be levied against the alternative net tax capacity of 
 71.1   the district as defined in subdivision 6, and must be separately 
 71.2   certified to the county auditor under Minnesota Statutes, 
 71.3   section 275.07. 
 71.4      Subd. 6.  [ALTERNATIVE NET TAX CAPACITY.] "Alternative net 
 71.5   tax capacity" means the net tax capacity of all taxable property 
 71.6   in a district, as defined in Minnesota Statutes, section 273.13, 
 71.7   except: 
 71.8      (1) the first tier of class 2a property, excluding the 
 71.9   portion of class 2a property consisting of the house, garage, 
 71.10  and surrounding one acre of land of an agricultural homestead, 
 71.11  has an alternative net tax capacity equal to 0.14 percent of its 
 71.12  taxable market value; 
 71.13     (2) the upper tier of class 2a property and all other class 
 71.14  2 property has an alternative net tax capacity equal to 0.25 
 71.15  percent of its taxable market value; 
 71.16     (3) noncommercial class 4c(1) property has an alternative 
 71.17  net tax capacity equal to 0.75 percent of its taxable market 
 71.18  value; 
 71.19     (4) class 4a and 4b property has an alternative net tax 
 71.20  capacity equal to one percent of its taxable market value; 
 71.21     (5) the first tier of class 3 property has an alternative 
 71.22  net tax capacity equal to 1.25 percent of its taxable market 
 71.23  value; and 
 71.24     (6) class 5 property and the upper tier of class 3 property 
 71.25  has an alternative net tax capacity equal to 1.5 percent of its 
 71.26  taxable market value. 
 71.27     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 71.28  payable in 2006 and thereafter. 
 71.29     Sec. 51.  [SCHOOL PROPERTY; EXEMPTION 2005 ONLY.] 
 71.30     Notwithstanding Minnesota Statutes, section 272.02, 
 71.31  subdivision 38, paragraph (b), the following property is exempt 
 71.32  from taxation for assessment year 2004, for taxes payable in 
 71.33  2005, if it meets all the following criteria: 
 71.34     (1) is used to provide direct educational instruction for 
 71.35  grades 7 through 10; 
 71.36     (2) is located in a city of the first class that has a 
 72.1   population greater than 250,000 and less than 350,000; 
 72.2      (3) was purchased after July 1, 2004, by a nonprofit that 
 72.3   is exempt from federal income tax under section 501(c)(3) of the 
 72.4   Internal Revenue Code; and 
 72.5      (4) is leased and operated by two nonprofit corporations 
 72.6   organized under Minnesota Statutes, chapter 317A. 
 72.7      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 72.8   following final enactment.  
 72.9      Sec. 52.  [REPEALER.] 
 72.10     Laws 1998, chapter 389, article 3, section 41, is repealed. 
 72.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 72.12  following final enactment. 
 72.13                             ARTICLE 3 
 72.14                   PROPERTY TAX AIDS AND CREDITS 
 72.15     Section 1.  Minnesota Statutes 2004, section 4A.02, is 
 72.16  amended to read: 
 72.17     4A.02 [STATE DEMOGRAPHER.] 
 72.18     (a) The director shall appoint a state demographer.  The 
 72.19  demographer must be professionally competent in demography and 
 72.20  must possess demonstrated ability based upon past performance.  
 72.21     (b) The demographer shall: 
 72.22     (1) continuously gather and develop demographic data 
 72.23  relevant to the state; 
 72.24     (2) design and test methods of research and data 
 72.25  collection; 
 72.26     (3) periodically prepare population projections for the 
 72.27  state and designated regions and periodically prepare 
 72.28  projections for each county or other political subdivision of 
 72.29  the state as necessary to carry out the purposes of this 
 72.30  section; 
 72.31     (4) review, comment on, and prepare analysis of population 
 72.32  estimates and projections made by state agencies, political 
 72.33  subdivisions, other states, federal agencies, or nongovernmental 
 72.34  persons, institutions, or commissions; 
 72.35     (5) serve as the state liaison with the United States 
 72.36  Bureau of the Census, coordinate state and federal demographic 
 73.1   activities to the fullest extent possible, and aid the 
 73.2   legislature in preparing a census data plan and form for each 
 73.3   decennial census; 
 73.4      (6) compile an annual study of population estimates on the 
 73.5   basis of county, regional, or other political or geographical 
 73.6   subdivisions as necessary to carry out the purposes of this 
 73.7   section and section 4A.03; 
 73.8      (7) by January 1 of each year, issue a report to the 
 73.9   legislature containing an analysis of the demographic 
 73.10  implications of the annual population study and population 
 73.11  projections; 
 73.12     (8) prepare maps for all counties in the state, all 
 73.13  municipalities with a population of 10,000 or more, and other 
 73.14  municipalities as needed for census purposes, according to scale 
 73.15  and detail recommended by the United States Bureau of the 
 73.16  Census, with the maps of cities showing precinct boundaries; 
 73.17     (9) prepare an estimate of population and of the number of 
 73.18  households for each governmental subdivision for which the 
 73.19  Metropolitan Council does not prepare an annual estimate, and 
 73.20  convey the estimates to the governing body of each political 
 73.21  subdivision by May June 1 of each year; 
 73.22     (10) direct, under section 414.01, subdivision 14, and 
 73.23  certify population and household estimates of annexed or 
 73.24  detached areas of municipalities or towns after being notified 
 73.25  of the order or letter of approval by the director; 
 73.26     (11) prepare, for any purpose for which a population 
 73.27  estimate is required by law or needed to implement a law, a 
 73.28  population estimate of a municipality or town whose population 
 73.29  is affected by action under section 379.02 or 414.01, 
 73.30  subdivision 14; and 
 73.31     (12) prepare an estimate of average household size for each 
 73.32  statutory or home rule charter city with a population of 2,500 
 73.33  or more by May June 1 of each year. 
 73.34     (c) A governing body may challenge an estimate made under 
 73.35  paragraph (b) by filing their specific objections in writing 
 73.36  with the state demographer by June 10 24.  If the challenge does 
 74.1   not result in an acceptable estimate by June 24, the governing 
 74.2   body may have a special census conducted by the United States 
 74.3   Bureau of the Census.  The political subdivision must notify the 
 74.4   state demographer by July 1 of its intent to have the special 
 74.5   census conducted.  The political subdivision must bear all costs 
 74.6   of the special census.  Results of the special census must be 
 74.7   received by the state demographer by the next April 15 to be 
 74.8   used in that year's May June 1 estimate to the political 
 74.9   subdivision under paragraph (b). 
 74.10     (d) The state demographer shall certify the estimates of 
 74.11  population and household size to the commissioner of revenue by 
 74.12  July 15 each year, including any estimates still under objection.
 74.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 74.14  following final enactment. 
 74.15     Sec. 2.  Minnesota Statutes 2004, section 273.1384, 
 74.16  subdivision 1, is amended to read: 
 74.17     Subdivision 1.  [RESIDENTIAL HOMESTEAD MARKET VALUE 
 74.18  CREDIT.] Each county auditor shall determine a homestead credit 
 74.19  for each class 1a, 1b, 1c, and 2a homestead property within the 
 74.20  county equal to 0.4 percent of the first $76,000 of market value 
 74.21  of the property.  The amount of homestead credit for a homestead 
 74.22  may not exceed $304 and is reduced by minus .09 percent of the 
 74.23  market value in excess of $76,000.  The credit amount may not be 
 74.24  less than zero.  In the case of an agricultural or resort 
 74.25  homestead, only the market value of the house, garage, and 
 74.26  immediately surrounding one acre of land is eligible in 
 74.27  determining the property's homestead credit.  In the case of a 
 74.28  property which is classified as part homestead and part 
 74.29  nonhomestead, (i) the credit shall apply only to the homestead 
 74.30  portion of the property., but (ii) if a portion of a property is 
 74.31  classified as nonhomestead solely because not all the owners 
 74.32  occupy the property, or solely because both spouses do not 
 74.33  occupy the property, the credit amount shall be initially 
 74.34  computed as if that nonhomestead portion were also in the 
 74.35  homestead class and then prorated to the owner-occupant's 
 74.36  percentage of ownership or prorated to one-half if both spouses 
 75.1   do not occupy the property. 
 75.2      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 75.3   payable in 2006 and thereafter. 
 75.4      Sec. 3.  Minnesota Statutes 2004, section 276A.01, 
 75.5   subdivision 7, is amended to read: 
 75.6      Subd. 7.  [POPULATION.] "Population" means the most recent 
 75.7   estimate of the population of a municipality made by the state 
 75.8   demographer and filed with the commissioner of revenue as of 
 75.9   July 1 15 of the year in which a municipality's distribution net 
 75.10  tax capacity is calculated.  The state demographer shall 
 75.11  annually estimate the population of each municipality and, in 
 75.12  the case of a municipality which is located partly within and 
 75.13  partly without the area, the proportion of the total which 
 75.14  resides within the area, and shall file the estimates with the 
 75.15  commissioner of revenue. 
 75.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 75.17  following final enactment. 
 75.18     Sec. 4.  [473.24] [POPULATION ESTIMATES.] 
 75.19     (a) The Metropolitan Council shall annually prepare an 
 75.20  estimate of population for each county, city, and town in the 
 75.21  metropolitan area and an estimate of the number of households 
 75.22  and average household size for each city in the metropolitan 
 75.23  area with a population of 2,500 or more, and an estimate of 
 75.24  population over age 65 for each county in the metropolitan area, 
 75.25  and convey the estimates to the governing body of each county, 
 75.26  city, or town by June 1 each year.  In the case of a city or 
 75.27  town that is located partly within and partly without the 
 75.28  metropolitan area, the Metropolitan Council shall estimate the 
 75.29  proportion of the total population and the average size of 
 75.30  households that reside within the area.  The Metropolitan 
 75.31  Council may prepare an estimate of the population and of the 
 75.32  average household size for any other political subdivision 
 75.33  located in the metropolitan area. 
 75.34     (b) A governing body may challenge an estimate made under 
 75.35  this section by filing its specific objections in writing with 
 75.36  the Metropolitan Council by June 24.  If the challenge does not 
 76.1   result in an acceptable estimate, the governing body may have a 
 76.2   special census conducted by the United States Bureau of the 
 76.3   Census.  The political subdivision must notify the Metropolitan 
 76.4   Council on or before July 1 of its intent to have the special 
 76.5   census conducted.  The political subdivision must bear all costs 
 76.6   of the special census.  Results of the special census must be 
 76.7   received by the Metropolitan Council by the next April 15 to be 
 76.8   used in that year's June 1 estimate under this section.  The 
 76.9   Metropolitan Council shall certify the estimates of population 
 76.10  and the average household size to the state demographer and to 
 76.11  the commissioner of revenue by July 15 each year, including any 
 76.12  estimates still under objection.  
 76.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 76.14  following final enactment. 
 76.15     Sec. 5.  Minnesota Statutes 2004, section 473F.02, 
 76.16  subdivision 7, is amended to read: 
 76.17     Subd. 7.  [POPULATION.] "Population" means the most recent 
 76.18  estimate of the population of a municipality made by the 
 76.19  Metropolitan Council under section 473.24 and filed with the 
 76.20  commissioner of revenue as of July 1 15 of the year in which a 
 76.21  municipality's distribution net tax capacity is calculated.  The 
 76.22  council shall annually estimate the population of each 
 76.23  municipality as of a date which it determines and, in the case 
 76.24  of a municipality which is located partly within and partly 
 76.25  without the area, the proportion of the total which resides 
 76.26  within the area, and shall promptly thereafter file its 
 76.27  estimates with the commissioner of revenue. 
 76.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 76.29  following final enactment. 
 76.30     Sec. 6.  Minnesota Statutes 2004, section 477A.011, 
 76.31  subdivision 3, is amended to read: 
 76.32     Subd. 3.  [POPULATION.] "Population" means the 
 76.33  population estimated or established as of July 1 15 in an aid 
 76.34  calculation year by the most recent federal census, by a special 
 76.35  census conducted under contract with the United States Bureau of 
 76.36  the Census, by a population estimate made by the Metropolitan 
 77.1   Council pursuant to section 473.24, or by a population estimate 
 77.2   of the state demographer made pursuant to section 4A.02, 
 77.3   whichever is the most recent as to the stated date of the count 
 77.4   or estimate for the preceding calendar year, and which has been 
 77.5   certified to the commissioner of revenue on or before July 15 of 
 77.6   the aid calculation year.  The term "per capita" refers to 
 77.7   population as defined by this subdivision.  A revision of an 
 77.8   estimate or count is effective for these purposes only if it is 
 77.9   certified to the commissioner on or before July 15 of the aid 
 77.10  calculation year.  Clerical errors in the certification or use 
 77.11  of the estimates and counts established as of July 15 in the aid 
 77.12  calculation year are subject to correction within the time 
 77.13  periods allowed under section 477A.014. 
 77.14     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 77.15  following final enactment. 
 77.16     Sec. 7.  Minnesota Statutes 2004, section 477A.011, 
 77.17  subdivision 34, is amended to read: 
 77.18     Subd. 34.  [CITY REVENUE NEED.] (a) For a city with a 
 77.19  population equal to or greater than 2,500, "city revenue need" 
 77.20  is the sum of (1) 5.0734098 times the pre-1940 housing 
 77.21  percentage; plus (2) 19.141678 times the population decline 
 77.22  percentage; plus (3) 2504.06334 times the road accidents factor; 
 77.23  plus (4) 355.0547; minus (5) the metropolitan area factor; minus 
 77.24  (6) 49.10638 times the household size. 
 77.25     (b) For a city with a population less than 2,500, "city 
 77.26  revenue need" is the sum of (1) 2.387 times the pre-1940 housing 
 77.27  percentage; plus (2) 2.67591 times the commercial industrial 
 77.28  percentage; plus (3) 3.16042 times the population decline 
 77.29  percentage; plus (4) 1.206 times the transformed population; 
 77.30  minus (5) 62.772. 
 77.31     (c) For a city with a population of 2,500 or more and a 
 77.32  population in one of the most recently available five years that 
 77.33  was less than 2,500, "city revenue need" is the sum of (1) its 
 77.34  city revenue need calculated under paragraph (a) multiplied by 
 77.35  its transition factor; plus (2) its city revenue need calculated 
 77.36  under the formula in paragraph (b) multiplied by the difference 
 78.1   between one and its transition factor.  For purposes of this 
 78.2   paragraph, a city's "transition factor" is equal to 0.2 
 78.3   multiplied by the number of years that the city's population 
 78.4   estimate has been 2,500 or more.  This provision only applies 
 78.5   for aids payable in calendar years 2006 to 2008 to cities with a 
 78.6   2002 population of less than 2,500.  It applies to any city for 
 78.7   aids payable in 2009 and thereafter. 
 78.8      (d) The city revenue need cannot be less than zero. 
 78.9      (d) (e) For calendar year 2005 and subsequent years, the 
 78.10  city revenue need for a city, as determined in paragraphs (a) 
 78.11  to (c) (d), is multiplied by the ratio of the annual implicit 
 78.12  price deflator for government consumption expenditures and gross 
 78.13  investment for state and local governments as prepared by the 
 78.14  United States Department of Commerce, for the most recently 
 78.15  available year to the 2003 implicit price deflator for state and 
 78.16  local government purchases. 
 78.17     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 78.18  aids payable in 2006. 
 78.19     Sec. 8.  Minnesota Statutes 2004, section 477A.011, 
 78.20  subdivision 35, is amended to read: 
 78.21     Subd. 35.  [TAX EFFORT RATE.] "Tax effort rate" means the 
 78.22  net levy for all cities divided by the sum of the city net tax 
 78.23  capacity for all cities, unless the need increase percentage 
 78.24  determined under section 477A.013, subdivision 8, is 100 
 78.25  percent, in which case the tax effort rate is the rate needed so 
 78.26  that the total aid under section 477A.013, subdivision 9, equals 
 78.27  the total amount available for aid under section 477A.03, after 
 78.28  the subtractions in section 477A.014.  For purposes of this 
 78.29  section, "net levy" means the city levy, after all adjustments, 
 78.30  used for calculating the local tax rate under section 275.08 for 
 78.31  taxes payable in the year prior to the aid distribution.  The 
 78.32  fiscal disparity distribution levy under chapter 276A or 473F is 
 78.33  included in net levy. 
 78.34     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 78.35  aids payable in 2006. 
 78.36     Sec. 9.  Minnesota Statutes 2004, section 477A.011, 
 79.1   subdivision 36, is amended to read: 
 79.2      Subd. 36.  [CITY AID BASE.] (a) Except as otherwise 
 79.3   provided in this subdivision, "city aid base" is zero. 
 79.4      (b) The city aid base for any city with a population less 
 79.5   than 500 is increased by $40,000 for aids payable in calendar 
 79.6   year 1995 and thereafter, and the maximum amount of total aid it 
 79.7   may receive under section 477A.013, subdivision 9, paragraph 
 79.8   (c), is also increased by $40,000 for aids payable in calendar 
 79.9   year 1995 only, provided that: 
 79.10     (i) the average total tax capacity rate for taxes payable 
 79.11  in 1995 exceeds 200 percent; 
 79.12     (ii) the city portion of the tax capacity rate exceeds 100 
 79.13  percent; and 
 79.14     (iii) its city aid base is less than $60 per capita. 
 79.15     (c) The city aid base for a city is increased by $20,000 in 
 79.16  1998 and thereafter and the maximum amount of total aid it may 
 79.17  receive under section 477A.013, subdivision 9, paragraph (c), is 
 79.18  also increased by $20,000 in calendar year 1998 only, provided 
 79.19  that: 
 79.20     (i) the city has a population in 1994 of 2,500 or more; 
 79.21     (ii) the city is located in a county, outside of the 
 79.22  metropolitan area, which contains a city of the first class; 
 79.23     (iii) the city's net tax capacity used in calculating its 
 79.24  1996 aid under section 477A.013 is less than $400 per capita; 
 79.25  and 
 79.26     (iv) at least four percent of the total net tax capacity, 
 79.27  for taxes payable in 1996, of property located in the city is 
 79.28  classified as railroad property. 
 79.29     (d) The city aid base for a city is increased by $200,000 
 79.30  in 1999 and thereafter and the maximum amount of total aid it 
 79.31  may receive under section 477A.013, subdivision 9, paragraph 
 79.32  (c), is also increased by $200,000 in calendar year 1999 only, 
 79.33  provided that: 
 79.34     (i) the city was incorporated as a statutory city after 
 79.35  December 1, 1993; 
 79.36     (ii) its city aid base does not exceed $5,600; and 
 80.1      (iii) the city had a population in 1996 of 5,000 or more. 
 80.2      (e) The city aid base for a city is increased by $450,000 
 80.3   in 1999 to 2008 and the maximum amount of total aid it may 
 80.4   receive under section 477A.013, subdivision 9, paragraph (c), is 
 80.5   also increased by $450,000 in calendar year 1999 only, provided 
 80.6   that: 
 80.7      (i) the city had a population in 1996 of at least 50,000; 
 80.8      (ii) its population had increased by at least 40 percent in 
 80.9   the ten-year period ending in 1996; and 
 80.10     (iii) its city's net tax capacity for aids payable in 1998 
 80.11  is less than $700 per capita. 
 80.12     (f) Beginning in 2004, the city aid base for a city is 
 80.13  equal to the sum of its city aid base in 2003 and the amount of 
 80.14  additional aid it was certified to receive under section 477A.06 
 80.15  in 2003.  For 2004 only, the maximum amount of total aid a city 
 80.16  may receive under section 477A.013, subdivision 9, paragraph 
 80.17  (c), is also increased by the amount it was certified to receive 
 80.18  under section 477A.06 in 2003. 
 80.19     (g) The city aid base for a city is increased by $150,000 
 80.20  for aids payable in 2000 and thereafter, and the maximum amount 
 80.21  of total aid it may receive under section 477A.013, subdivision 
 80.22  9, paragraph (c), is also increased by $150,000 in calendar year 
 80.23  2000 only, provided that: 
 80.24     (1) the city has a population that is greater than 1,000 
 80.25  and less than 2,500; 
 80.26     (2) its commercial and industrial percentage for aids 
 80.27  payable in 1999 is greater than 45 percent; and 
 80.28     (3) the total market value of all commercial and industrial 
 80.29  property in the city for assessment year 1999 is at least 15 
 80.30  percent less than the total market value of all commercial and 
 80.31  industrial property in the city for assessment year 1998. 
 80.32     (h) The city aid base for a city is increased by $200,000 
 80.33  in 2000 and thereafter, and the maximum amount of total aid it 
 80.34  may receive under section 477A.013, subdivision 9, paragraph 
 80.35  (c), is also increased by $200,000 in calendar year 2000 only, 
 80.36  provided that: 
 81.1      (1) the city had a population in 1997 of 2,500 or more; 
 81.2      (2) the net tax capacity of the city used in calculating 
 81.3   its 1999 aid under section 477A.013 is less than $650 per 
 81.4   capita; 
 81.5      (3) the pre-1940 housing percentage of the city used in 
 81.6   calculating 1999 aid under section 477A.013 is greater than 12 
 81.7   percent; 
 81.8      (4) the 1999 local government aid of the city under section 
 81.9   477A.013 is less than 20 percent of the amount that the formula 
 81.10  aid of the city would have been if the need increase percentage 
 81.11  was 100 percent; and 
 81.12     (5) the city aid base of the city used in calculating aid 
 81.13  under section 477A.013 is less than $7 per capita. 
 81.14     (i) The city aid base for a city is increased by $102,000 
 81.15  in 2000 and thereafter, and the maximum amount of total aid it 
 81.16  may receive under section 477A.013, subdivision 9, paragraph 
 81.17  (c), is also increased by $102,000 in calendar year 2000 only, 
 81.18  provided that: 
 81.19     (1) the city has a population in 1997 of 2,000 or more; 
 81.20     (2) the net tax capacity of the city used in calculating 
 81.21  its 1999 aid under section 477A.013 is less than $455 per 
 81.22  capita; 
 81.23     (3) the net levy of the city used in calculating 1999 aid 
 81.24  under section 477A.013 is greater than $195 per capita; and 
 81.25     (4) the 1999 local government aid of the city under section 
 81.26  477A.013 is less than 38 percent of the amount that the formula 
 81.27  aid of the city would have been if the need increase percentage 
 81.28  was 100 percent. 
 81.29     (j) The city aid base for a city is increased by $32,000 in 
 81.30  2001 and thereafter, and the maximum amount of total aid it may 
 81.31  receive under section 477A.013, subdivision 9, paragraph (c), is 
 81.32  also increased by $32,000 in calendar year 2001 only, provided 
 81.33  that: 
 81.34     (1) the city has a population in 1998 that is greater than 
 81.35  200 but less than 500; 
 81.36     (2) the city's revenue need used in calculating aids 
 82.1   payable in 2000 was greater than $200 per capita; 
 82.2      (3) the city net tax capacity for the city used in 
 82.3   calculating aids available in 2000 was equal to or less than 
 82.4   $200 per capita; 
 82.5      (4) the city aid base of the city used in calculating aid 
 82.6   under section 477A.013 is less than $65 per capita; and 
 82.7      (5) the city's formula aid for aids payable in 2000 was 
 82.8   greater than zero. 
 82.9      (k) The city aid base for a city is increased by $7,200 in 
 82.10  2001 and thereafter, and the maximum amount of total aid it may 
 82.11  receive under section 477A.013, subdivision 9, paragraph (c), is 
 82.12  also increased by $7,200 in calendar year 2001 only, provided 
 82.13  that: 
 82.14     (1) the city had a population in 1998 that is greater than 
 82.15  200 but less than 500; 
 82.16     (2) the city's commercial industrial percentage used in 
 82.17  calculating aids payable in 2000 was less than ten percent; 
 82.18     (3) more than 25 percent of the city's population was 60 
 82.19  years old or older according to the 1990 census; 
 82.20     (4) the city aid base of the city used in calculating aid 
 82.21  under section 477A.013 is less than $15 per capita; and 
 82.22     (5) the city's formula aid for aids payable in 2000 was 
 82.23  greater than zero. 
 82.24     (l) The city aid base for a city is increased by $45,000 in 
 82.25  2001 and thereafter and by an additional $50,000 in calendar 
 82.26  years 2002 to 2011, and the maximum amount of total aid it may 
 82.27  receive under section 477A.013, subdivision 9, paragraph (c), is 
 82.28  also increased by $45,000 in calendar year 2001 only, and by 
 82.29  $50,000 in calendar year 2002 only, provided that: 
 82.30     (1) the net tax capacity of the city used in calculating 
 82.31  its 2000 aid under section 477A.013 is less than $810 per 
 82.32  capita; 
 82.33     (2) the population of the city declined more than two 
 82.34  percent between 1988 and 1998; 
 82.35     (3) the net levy of the city used in calculating 2000 aid 
 82.36  under section 477A.013 is greater than $240 per capita; and 
 83.1      (4) the city received less than $36 per capita in aid under 
 83.2   section 477A.013, subdivision 9, for aids payable in 2000. 
 83.3      (m) The city aid base for a city with a population of 
 83.4   10,000 or more which is located outside of the seven-county 
 83.5   metropolitan area is increased in 2002 and thereafter, and the 
 83.6   maximum amount of total aid it may receive under section 
 83.7   477A.013, subdivision 9, paragraph (b) or (c), is also increased 
 83.8   in calendar year 2002 only, by an amount equal to the lesser of: 
 83.9      (1)(i) the total population of the city, as determined by 
 83.10  the United States Bureau of the Census, in the 2000 census, (ii) 
 83.11  minus 5,000, (iii) times 60; or 
 83.12     (2) $2,500,000. 
 83.13     (n) The city aid base is increased by $50,000 in 2002 and 
 83.14  thereafter, and the maximum amount of total aid it may receive 
 83.15  under section 477A.013, subdivision 9, paragraph (c), is also 
 83.16  increased by $50,000 in calendar year 2002 only, provided that: 
 83.17     (1) the city is located in the seven-county metropolitan 
 83.18  area; 
 83.19     (2) its population in 2000 is between 10,000 and 20,000; 
 83.20  and 
 83.21     (3) its commercial industrial percentage, as calculated for 
 83.22  city aid payable in 2001, was greater than 25 percent. 
 83.23     (o) The city aid base for a city is increased by $150,000 
 83.24  in calendar years 2002 to 2011 and the maximum amount of total 
 83.25  aid it may receive under section 477A.013, subdivision 9, 
 83.26  paragraph (c), is also increased by $150,000 in calendar year 
 83.27  2002 only, provided that: 
 83.28     (1) the city had a population of at least 3,000 but no more 
 83.29  than 4,000 in 1999; 
 83.30     (2) its home county is located within the seven-county 
 83.31  metropolitan area; 
 83.32     (3) its pre-1940 housing percentage is less than 15 
 83.33  percent; and 
 83.34     (4) its city net tax capacity per capita for taxes payable 
 83.35  in 2000 is less than $900 per capita. 
 83.36     (p) The city aid base for a city is increased by $200,000 
 84.1   beginning in calendar year 2003 and the maximum amount of total 
 84.2   aid it may receive under section 477A.013, subdivision 9, 
 84.3   paragraph (c), is also increased by $200,000 in calendar year 
 84.4   2003 only, provided that the city qualified for an increase in 
 84.5   homestead and agricultural credit aid under Laws 1995, chapter 
 84.6   264, article 8, section 18. 
 84.7      (q) The city aid base for a city is increased by $200,000 
 84.8   in 2004 only and the maximum amount of total aid it may receive 
 84.9   under section 477A.013, subdivision 9, is also increased by 
 84.10  $200,000 in calendar year 2004 only, if the city is the site of 
 84.11  a nuclear dry cask storage facility. 
 84.12     (r) The city aid base for a city is increased by $10,000 in 
 84.13  2004 and thereafter and the maximum total aid it may receive 
 84.14  under section 477A.013, subdivision 9, is also increased by 
 84.15  $10,000 in calendar year 2004 only, if the city was included in 
 84.16  a federal major disaster designation issued on April 1, 1998, 
 84.17  and its pre-1940 housing stock was decreased by more than 40 
 84.18  percent between 1990 and 2000. 
 84.19     (s) The city aid base for a city is increased by $25,000 in 
 84.20  2006 and thereafter and the maximum total aid it may receive 
 84.21  under section 477A.013, subdivision 9, is also increased by 
 84.22  $25,000 in calendar year 2006 only if the city had a population 
 84.23  in 2003 of at least 1,000 and has a state park for which the 
 84.24  city provides rescue services and which comprised at least 14 
 84.25  percent of the total geographic area included within the city 
 84.26  boundaries in 2000. 
 84.27     <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
 84.28  payable in 2006 and thereafter. 
 84.29     Sec. 10.  Minnesota Statutes 2004, section 477A.011, 
 84.30  subdivision 38, is amended to read: 
 84.31     Subd. 38.  [HOUSEHOLD SIZE.] "Household size" means the 
 84.32  average number of persons per household in the jurisdiction as 
 84.33  most recently estimated and reported by the state 
 84.34  demographer and Metropolitan Council as of July 1 15 of the aid 
 84.35  calculation year.  A revision to an estimate or enumeration is 
 84.36  effective for these purposes only if it is certified to the 
 85.1   commissioner on or before July 15 of the aid calculation year.  
 85.2   Clerical errors in the certification or use of estimates and 
 85.3   counts established as of July 15 in the aid calculation year are 
 85.4   subject to correction within the time periods allowed under 
 85.5   section 477A.014. 
 85.6      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 85.7   following final enactment. 
 85.8      Sec. 11.  Minnesota Statutes 2004, section 477A.0124, 
 85.9   subdivision 2, is amended to read: 
 85.10     Subd. 2.  [DEFINITIONS.] (a) For the purposes of this 
 85.11  section, the following terms have the meanings given them. 
 85.12     (b) "County program aid" means the sum of "county need aid,"
 85.13  "county tax base equalization aid," and "county transition aid." 
 85.14     (c) "Age-adjusted population" means a county's population 
 85.15  multiplied by the county age index. 
 85.16     (d) "County age index" means the percentage of the 
 85.17  population over age 65 within the county divided by the 
 85.18  percentage of the population over age 65 within the state, 
 85.19  except that the age index for any county may not be greater than 
 85.20  1.8 nor less than 0.8. 
 85.21     (e) "Population over age 65" means the population over age 
 85.22  65 established as of July 1 15 in an aid calculation year by the 
 85.23  most recent federal census, by a special census conducted under 
 85.24  contract with the United States Bureau of the Census, by a 
 85.25  population estimate made by the Metropolitan Council, or by a 
 85.26  population estimate of the state demographer made pursuant to 
 85.27  section 4A.02, whichever is the most recent as to the stated 
 85.28  date of the count or estimate for the preceding calendar 
 85.29  year and which has been certified to the commissioner of revenue 
 85.30  on or before July 15 of the aid calculation year.  A revision to 
 85.31  an estimate or count is effective for these purposes only if 
 85.32  certified to the commissioner on or before July 15 of the aid 
 85.33  calculation year.  Clerical errors in the certification or use 
 85.34  of estimates and counts established as of July 15 in the aid 
 85.35  calculation year are subject to correction within the time 
 85.36  periods allowed under section 477A.014. 
 86.1      (f) "Part I crimes" means the three-year average annual 
 86.2   number of Part I crimes reported for each county by the 
 86.3   Department of Public Safety for the most recent years available. 
 86.4   By July 1 of each year, the commissioner of public safety shall 
 86.5   certify to the commissioner of revenue the number of Part I 
 86.6   crimes reported for each county for the three most recent 
 86.7   calendar years available. 
 86.8      (g) "Households receiving food stamps" means the average 
 86.9   monthly number of households receiving food stamps for the three 
 86.10  most recent years for which data is available.  By July 1 of 
 86.11  each year, the commissioner of human services must certify to 
 86.12  the commissioner of revenue the average monthly number of 
 86.13  households in the state and in each county that receive food 
 86.14  stamps, for the three most recent calendar years available. 
 86.15     (h) "County net tax capacity" means the net tax capacity of 
 86.16  the county, computed analogously to city net tax capacity under 
 86.17  section 477A.011, subdivision 20. 
 86.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 86.19  following final enactment. 
 86.20     Sec. 12.  Minnesota Statutes 2004, section 477A.0124, 
 86.21  subdivision 4, is amended to read: 
 86.22     Subd. 4.  [COUNTY TAX-BASE EQUALIZATION AID.] (a) For 
 86.23  2005 2006 and subsequent years, the money appropriated to county 
 86.24  tax-base equalization aid each calendar year, after the payment 
 86.25  under paragraph (f), shall be apportioned among the counties 
 86.26  according to each county's tax-base equalization aid factor. 
 86.27     (b) A county's tax-base equalization aid factor is equal to 
 86.28  the amount by which (i) $185 times the county's population, 
 86.29  exceeds (ii) 9.45 percent of the county's net tax capacity. 
 86.30     (c) In the case of a county with a population less than 
 86.31  10,000, the factor determined in paragraph (b) shall be 
 86.32  multiplied by a factor of three. 
 86.33     (d) In the case of a county with a population greater than 
 86.34  or equal to 10,000, but less than 12,500, the factor determined 
 86.35  in paragraph (b) shall be multiplied by a factor of two. 
 86.36     (e) In the case of a county with a population greater than 
 87.1   500,000, the factor determined in paragraph (b) shall be 
 87.2   multiplied by a factor of 0.25. 
 87.3      (f) Before the money appropriated to county base 
 87.4   equalization aid is apportioned among the counties as provided 
 87.5   in paragraph (a), an amount up to $73,259 is allocated annually 
 87.6   to Anoka County and up to $59,664 is annually allocated to 
 87.7   Washington County for the county to pay postretirement costs of 
 87.8   health insurance premiums for court employees.  The allocation 
 87.9   under this paragraph is in addition to the allocations under 
 87.10  paragraphs (a) to (e). 
 87.11     <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
 87.12  payable in 2006 and thereafter. 
 87.13     Sec. 13.  Minnesota Statutes 2004, section 477A.013, 
 87.14  subdivision 8, is amended to read: 
 87.15     Subd. 8.  [CITY FORMULA AID.] In calendar year 2004 and 
 87.16  subsequent years, the formula aid for a city is equal to the 
 87.17  need increase percentage multiplied by the difference between 
 87.18  (1) the city's revenue need multiplied by its population, and 
 87.19  (2) the sum of the city's net tax capacity multiplied by the tax 
 87.20  effort rate, and; the taconite aids under sections 298.28 and 
 87.21  298.282, multiplied by the following percentages:  
 87.22     (i) zero percent for aids payable in 2004; 
 87.23     (ii) 25 percent for aids payable in 2005; 
 87.24     (iii) 50 percent for aids payable in 2006; 
 87.25     (iv) 75 percent for aids payable in 2007; and 
 87.26     (v) 100 percent for aids payable in 2008 and thereafter; 
 87.27  and 
 87.28  for first class cities only, the amount raised by a one-half of 
 87.29  one percent local sales and use tax imposed in the city in the 
 87.30  calendar year before the year in which the aid is being 
 87.31  calculated.  
 87.32  No city may have a formula aid amount less than zero.  The need 
 87.33  increase percentage must be the same for all cities.  
 87.34     The applicable need increase percentage must be calculated 
 87.35  by the Department of Revenue so that the total of the aid under 
 87.36  subdivision 9 equals the total amount available for aid under 
 88.1   section 477A.03 after the subtraction under section 477A.014, 
 88.2   subdivisions 4 and 5.  The need increase percentage may not 
 88.3   exceed 100 percent.  
 88.4      <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 88.5   aids payable in 2006. 
 88.6      Sec. 14.  Minnesota Statutes 2004, section 477A.013, 
 88.7   subdivision 9, is amended to read: 
 88.8      Subd. 9.  [CITY AID DISTRIBUTION.] (a) In calendar year 
 88.9   2002 and thereafter, each city shall receive an aid distribution 
 88.10  equal to the sum of (1) the city formula aid under subdivision 
 88.11  8, and (2) its city aid base. 
 88.12     (b) The aid for a city in calendar year 2004 shall not 
 88.13  exceed the amount of its aid in calendar year 2003 after the 
 88.14  reductions under Laws 2003, First Special Session chapter 21, 
 88.15  article 5.  
 88.16     (c) For aids payable in 2005 and thereafter, the total aid 
 88.17  for any city shall not exceed the sum of (1) ten percent of the 
 88.18  city's net levy for the year prior to the aid distribution plus 
 88.19  (2) its total aid in the previous year.  For aids payable in 
 88.20  2005 2006 and thereafter, the total aid for any city with a 
 88.21  population of 2,500 or more, except for a city of the first 
 88.22  class located within the seven-county metropolitan area, may not 
 88.23  decrease from its total aid under this section in the previous 
 88.24  year by an amount greater than ten percent of its net levy in 
 88.25  the year prior to the aid distribution. 
 88.26     (d) (c) For aids payable in 2004 only, the total aid for a 
 88.27  city with a population less than 2,500 may not be less than the 
 88.28  amount it was certified to receive in 2003 minus the greater of 
 88.29  (1) the reduction to this aid payment in 2003 under Laws 2003, 
 88.30  First Special Session chapter 21, article 5, or (2) five percent 
 88.31  of its 2003 aid amount.  For aids payable in 2005 and 
 88.32  thereafter, the total aid for a city with a population less than 
 88.33  2,500 must not be less than the amount it was certified to 
 88.34  receive in the previous year minus five percent of its 2003 
 88.35  certified aid amount. 
 88.36     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 89.1   aids payable in 2006. 
 89.2      Sec. 15.  Minnesota Statutes 2004, section 477A.013, is 
 89.3   amended by adding a subdivision to read: 
 89.4      Subd. 10.  [LEVY ADJUSTMENTS FOR AID 
 89.5   DECREASES.] Notwithstanding any local ordinance or charter 
 89.6   provision, a city whose certified aid under subdivision 9 is 
 89.7   less than the amount it received in the previous year under the 
 89.8   same subdivision may increase its levy payable in the same year 
 89.9   as the certified aid is paid by an amount equal to the aid 
 89.10  decrease for that year. 
 89.11     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 89.12  property tax levies payable in 2006 and thereafter. 
 89.13     Sec. 16.  Minnesota Statutes 2004, section 477A.03, 
 89.14  subdivision 2a, is amended to read: 
 89.15     Subd. 2a.  [CITIES.] For aids payable in 2004, the total 
 89.16  aids paid under section 477A.013, subdivision 9, are limited to 
 89.17  $429,000,000.  For aids payable in 2005 and thereafter, the 
 89.18  total aids paid under section 477A.013, subdivision 9, 
 89.19  are increased limited to $437,052,000.  For aids payable in 
 89.20  2006, the total aids paid under section 477A.013, subdivision 9, 
 89.21  is limited to $419,552,000.  For aids payable in 2007 and 
 89.22  thereafter, the total aids paid under section 477A.013, 
 89.23  subdivision 9, is limited to $437,052,000 provided that the 
 89.24  taxpayer satisfaction survey in section 275.065 is in effect for 
 89.25  property taxes levied in the year in which the aid is 
 89.26  calculated, otherwise the amount is limited to $419,552,000. 
 89.27     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 89.28  aids payable in 2006. 
 89.29     Sec. 17.  Minnesota Statutes 2004, section 477A.03, 
 89.30  subdivision 2b, is amended to read: 
 89.31     Subd. 2b.  [COUNTIES.] (a) For aids payable in calendar 
 89.32  year 2005 and thereafter, the total aids paid to counties under 
 89.33  section 477A.0124, subdivision 3, are limited to $100,500,000.  
 89.34  Each calendar year, $500,000 shall be retained by the 
 89.35  commissioner of revenue to make reimbursements to the 
 89.36  commissioner of finance for payments made under section 611.27.  
 90.1   For calendar year 2004, the amount shall be in addition to the 
 90.2   payments authorized under section 477A.0124, subdivision 1.  For 
 90.3   calendar year 2005 and subsequent years, the amount shall be 
 90.4   deducted from the appropriation under this paragraph.  The 
 90.5   reimbursements shall be to defray the additional costs 
 90.6   associated with court-ordered counsel under section 611.27.  Any 
 90.7   retained amounts not used for reimbursement in a year shall be 
 90.8   included in the next distribution of county need aid that is 
 90.9   certified to the county auditors for the purpose of property tax 
 90.10  reduction for the next taxes payable year. 
 90.11     (b) For aids payable in 2005 and thereafter 2006, the total 
 90.12  aids under section 477A.0124, subdivision 4, are limited to 
 90.13  $105,000,000.  For aids payable in 2007 and thereafter, the 
 90.14  total aid under section 477A.0124, subdivision 4, is limited to 
 90.15  $105,132,923.  The commissioner of finance shall bill the 
 90.16  commissioner of revenue for the cost of preparation of local 
 90.17  impact notes as required by section 3.987, not to exceed 
 90.18  $207,000 in fiscal year 2004 and thereafter.  The commissioner 
 90.19  of education shall bill the commissioner of revenue for the cost 
 90.20  of preparation of local impact notes for school districts as 
 90.21  required by section 3.987, not to exceed $7,000 in fiscal year 
 90.22  2004 and thereafter.  The commissioner of revenue shall deduct 
 90.23  the amounts billed under this paragraph from the appropriation 
 90.24  under this paragraph.  The amounts deducted are appropriated to 
 90.25  the commissioner of finance and the commissioner of education 
 90.26  for the preparation of local impact notes. 
 90.27     <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
 90.28  payable in 2007 and thereafter. 
 90.29     Sec. 18.  Laws 2003, First Special Session chapter 21, 
 90.30  article 5, section 13, is amended to read: 
 90.31     Sec. 13.  [2004 CITY AID REDUCTIONS.] 
 90.32     The commissioner of revenue shall compute an aid reduction 
 90.33  amount for 2004 for each city as provided in this section. 
 90.34     The initial aid reduction amount for each city is the 
 90.35  amount by which the city's aid distribution under Minnesota 
 90.36  Statutes, section 477A.013, and related provisions payable in 
 91.1   2003 exceeds the city's 2004 distribution under those provisions.
 91.2      The minimum aid reduction amount for a city is the amount 
 91.3   of its reduction in 2003 under section 12.  If a city receives 
 91.4   an increase to its city aid base under Minnesota Statutes, 
 91.5   section 477A.011, subdivision 36, its minimum aid reduction is 
 91.6   reduced by an equal amount. 
 91.7      The maximum aid reduction amount for a city is an amount 
 91.8   equal to 14 percent of the city's total 2004 levy plus aid 
 91.9   revenue base, except that if the city has a city net tax 
 91.10  capacity for aids payable in 2004, as defined in Minnesota 
 91.11  Statutes, section 477A.011, subdivision 20, of $700 per capita 
 91.12  or less, the maximum aid reduction shall not exceed an amount 
 91.13  equal to 13 percent of the city's total 2004 levy plus aid 
 91.14  revenue base. 
 91.15     If the initial aid reduction amount for a city is less than 
 91.16  the minimum aid reduction amount for that city, the final aid 
 91.17  reduction amount for the city is the sum of the initial aid 
 91.18  reduction amount and the lesser of the amount of the city's 
 91.19  payable 2004 reimbursement under Minnesota Statutes, section 
 91.20  273.1384, or the difference between the minimum and initial aid 
 91.21  reduction amounts for the city, and the amount of the final aid 
 91.22  reduction in excess of the initial aid reduction is deducted 
 91.23  from the city's reimbursements pursuant to Minnesota Statutes, 
 91.24  section 273.1384. 
 91.25     If the initial aid reduction amount for a city is greater 
 91.26  than the maximum aid reduction amount for the city, the city 
 91.27  receives an additional distribution under this section equal to 
 91.28  the result of subtracting the maximum aid reduction amount from 
 91.29  the initial aid reduction amount.  This distribution shall be 
 91.30  paid in equal installments in 2004 on the dates specified in 
 91.31  Minnesota Statutes, section 477A.015.  The amount necessary for 
 91.32  these additional distributions is appropriated to the 
 91.33  commissioner of revenue from the general fund in fiscal year 
 91.34  2005. 
 91.35     The initial aid reduction is applied to the city's 
 91.36  distribution pursuant to Minnesota Statutes, section 477A.013, 
 92.1   and any aid reduction in excess of the initial aid reduction is 
 92.2   applied to the city's reimbursements pursuant to Minnesota 
 92.3   Statutes, section 273.1384. 
 92.4      To the extent that sufficient information is available on 
 92.5   each payment date in 2004, the commissioner of revenue shall pay 
 92.6   the reimbursements reduced under this section in equal 
 92.7   installments on the payment dates provided in law. 
 92.8      <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
 92.9   payable in 2004. 
 92.10     Sec. 19.  Laws 2003, First Special Session chapter 21, 
 92.11  article 6, section 9, is amended to read: 
 92.12     Sec. 9.  [DEFINITIONS.] 
 92.13     (a) For purposes of sections 9 to 15, the following terms 
 92.14  have the meanings given them in this section. 
 92.15     (b) The 2003 and 2004 "levy plus aid revenue base" for a 
 92.16  county is the sum of that county's certified property tax levy 
 92.17  for taxes payable in 2003, plus the sum of the amounts the 
 92.18  county was certified to receive in the designated calendar year 
 92.19  as: 
 92.20     (1) homestead and agricultural credit aid under Minnesota 
 92.21  Statutes, section 273.1398, subdivision 2, plus any additional 
 92.22  aid under section 16, minus the amount calculated under section 
 92.23  273.1398, subdivision 4a, paragraph (b), for counties in 
 92.24  judicial districts one, three, six, and ten, and 25 percent of 
 92.25  the amount calculated under section 273.1398, subdivision 4a, 
 92.26  paragraph (b), for counties in judicial districts two and four; 
 92.27     (2) the amount of county manufactured home homestead and 
 92.28  agricultural credit aid computed for the county for payment in 
 92.29  2003 under section 273.166; 
 92.30     (3) criminal justice aid under Minnesota Statutes, section 
 92.31  477A.0121; 
 92.32     (4) family preservation aid under Minnesota Statutes, 
 92.33  section 477A.0122; 
 92.34     (5) taconite aids under Minnesota Statutes, sections 298.28 
 92.35  and 298.282, including any aid which was required to be placed 
 92.36  in a special fund for expenditure in the next succeeding year; 
 93.1   and 
 93.2      (6) county program aid under section 477A.0124, exclusive 
 93.3   of the attached machinery aid component. 
 93.4      <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
 93.5   payable in 2004. 
 93.6      Sec. 20.  [2005 AND 2006 CITY AID PAYMENTS.] 
 93.7      In 2005 and 2006, market value credit reimbursements for 
 93.8   each city payable under Minnesota Statutes, section 273.1384, 
 93.9   are reduced by the dollar amount of the 2003 reduction in market 
 93.10  value credit reimbursements for that city due to Laws 2003, 
 93.11  First Special Session chapter 21, article 5, section 12.  No 
 93.12  city's 2005 or 2006 market value credit reimbursements are 
 93.13  reduced to less than zero under this section.  To the extent 
 93.14  sufficient information is available on each payment date, the 
 93.15  commissioner shall pay the annual 2005 and 2006 market value 
 93.16  credit reimbursement amounts, after reduction under this 
 93.17  section, to cities in equal installments on the dates specified 
 93.18  in Minnesota Statutes, section 273.1384. 
 93.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 93.20  following final enactment. 
 93.21     Sec. 21.  [COURT AID ADJUSTMENT.] 
 93.22     For aids payable in 2005 only, the amount of court aid paid 
 93.23  to Anoka County under Minnesota Statutes, section 273.1398, 
 93.24  subdivision 4a, is increased by $36,630 for aids payable in 2005 
 93.25  only and the amount paid to Washington County under Minnesota 
 93.26  Statutes, section 273.1398, subdivision 4a, is increased by 
 93.27  $29,832 for aids payable in 2005 only. 
 93.28     <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
 93.29  payable in 2005 only. 
 93.30     Sec. 22.  [SUPREME COURT BUDGET.] 
 93.31     The district courts general fund appropriation is reduced 
 93.32  by $66,462 in fiscal year 2006 and $132,923 beginning in fiscal 
 93.33  year 2007 to fund the amount transferred to county tax base 
 93.34  equalization aid to fund the payments under Minnesota Statutes, 
 93.35  section 477A.0124, subdivision 4, paragraph (f), and section 20. 
 93.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 94.1   following final enactment. 
 94.2                              ARTICLE 4 
 94.3                 DEPARTMENT OF REVENUE PROPERTY TAXES 
 94.4      Section 1.  Minnesota Statutes 2004, section 168A.05, 
 94.5   subdivision 1a, is amended to read: 
 94.6      Subd. 1a.  [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 
 94.7   PAYMENT.] In the case of a manufactured home as defined in 
 94.8   section 327.31, subdivision 6, the department shall not issue a 
 94.9   certificate of title unless the application under section 
 94.10  168A.04 is accompanied with a statement from the county auditor 
 94.11  or county treasurer where the manufactured home is presently 
 94.12  located, stating that all manufactured home personal property 
 94.13  taxes levied on the unit in the name of the current owner at the 
 94.14  time of transfer have been paid.  For this purpose, manufactured 
 94.15  home personal property taxes are treated as levied on January 1 
 94.16  of the payable year. 
 94.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 94.18  following final enactment. 
 94.19     Sec. 2.  Minnesota Statutes 2004, section 270.11, 
 94.20  subdivision 2, is amended to read: 
 94.21     Subd. 2.  [COUNTY ASSESSOR'S REPORTS OF ASSESSMENT FILED 
 94.22  WITH COMMISSIONER.] Each county assessor shall file by April 1 
 94.23  with the commissioner of revenue a copy of the abstract that 
 94.24  will be acted upon by the local and county boards of review.  
 94.25  The abstract must list the real and personal property in the 
 94.26  county itemized by assessment districts.  The assessor of each 
 94.27  county in the state shall file with the commissioner, within ten 
 94.28  working days following final action of the local board of review 
 94.29  or equalization and within five days following final action of 
 94.30  the county board of equalization, any changes made by the local 
 94.31  or county board.  The information must be filed in the manner 
 94.32  prescribed by the commissioner.  It must be accompanied by a 
 94.33  printed or typewritten copy of the proceedings of the 
 94.34  appropriate board. 
 94.35     The final abstract of assessments after adjustments by the 
 94.36  State Board of Equalization and inclusion of any omitted 
 95.1   property shall be submitted to the commissioner of revenue on or 
 95.2   before September 1 of each calendar year.  The final abstract 
 95.3   must separately report the captured tax capacity of tax 
 95.4   increment financing districts under section 469.177, subdivision 
 95.5   2, the metropolitan revenue areawide net tax capacity 
 95.6   contribution value values determined under section sections 
 95.7   276A.05, subdivision 1, and 473F.07, subdivision 1, and the 
 95.8   value subject to the power line credit under section 273.42. 
 95.9      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 95.10  following final enactment. 
 95.11     Sec. 3.  Minnesota Statutes 2004, section 270.16, 
 95.12  subdivision 2, is amended to read: 
 95.13     Subd. 2.  [FAILURE TO APPRAISE.] When an assessor has 
 95.14  failed to properly appraise at least one-quarter one-fifth of 
 95.15  the parcels of property in a district or county as provided in 
 95.16  section 273.01, the commissioner of revenue shall appoint a 
 95.17  special assessor and deputy assessor as necessary and cause a 
 95.18  reappraisal to be made of the property due for reassessment in 
 95.19  accordance with law. 
 95.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 95.21  following final enactment. 
 95.22     Sec. 4.  Minnesota Statutes 2004, section 272.01, 
 95.23  subdivision 2, is amended to read: 
 95.24     Subd. 2.  (a) When any real or personal property which is 
 95.25  exempt from ad valorem taxes, and taxes in lieu thereof, is 
 95.26  leased, loaned, or otherwise made available and used by a 
 95.27  private individual, association, or corporation in connection 
 95.28  with a business conducted for profit, there shall be imposed a 
 95.29  tax, for the privilege of so using or possessing such real or 
 95.30  personal property, in the same amount and to the same extent as 
 95.31  though the lessee or user was the owner of such property. 
 95.32     (b) The tax imposed by this subdivision shall not apply to: 
 95.33     (1) property leased or used as a concession in or relative 
 95.34  to the use in whole or part of a public park, market, 
 95.35  fairgrounds, port authority, economic development authority 
 95.36  established under chapter 469, municipal auditorium, municipal 
 96.1   parking facility, municipal museum, or municipal stadium; 
 96.2      (2) property of an airport owned by a city, town, county, 
 96.3   or group thereof which is:  
 96.4      (i) leased to or used by any person or entity including a 
 96.5   fixed base operator; and 
 96.6      (ii) used as a hangar for the storage or repair of aircraft 
 96.7   or to provide aviation goods, services, or facilities to the 
 96.8   airport or general public; 
 96.9   the exception from taxation provided in this clause does not 
 96.10  apply to: 
 96.11     (i) property located at an airport owned or operated by the 
 96.12  Metropolitan Airports Commission or by a city of over 50,000 
 96.13  population according to the most recent federal census or such a 
 96.14  city's airport authority; 
 96.15     (ii) hangars leased by a private individual, association, 
 96.16  or corporation in connection with a business conducted for 
 96.17  profit other than an aviation-related business; or 
 96.18     (iii) facilities leased by a private individual, 
 96.19  association, or corporation in connection with a business for 
 96.20  profit, that consists of a major jet engine repair facility 
 96.21  financed, in whole or part, with the proceeds of state bonds and 
 96.22  located in a tax increment financing district; 
 96.23     (3) property constituting or used as a public pedestrian 
 96.24  ramp or concourse in connection with a public airport; or 
 96.25     (4) property constituting or used as a passenger check-in 
 96.26  area or ticket sale counter, boarding area, or luggage claim 
 96.27  area in connection with a public airport but not the airports 
 96.28  owned or operated by the Metropolitan Airports Commission or 
 96.29  cities of over 50,000 population or an airport authority 
 96.30  therein.  Real estate owned by a municipality in connection with 
 96.31  the operation of a public airport and leased or used for 
 96.32  agricultural purposes is not exempt; 
 96.33     (5) property leased, loaned, or otherwise made available to 
 96.34  a private individual, corporation, or association under a 
 96.35  cooperative farming agreement made pursuant to section 97A.135; 
 96.36  or 
 97.1      (6) property leased, loaned, or otherwise made available to 
 97.2   a private individual, corporation, or association under section 
 97.3   272.68, subdivision 4. 
 97.4      (c) Taxes imposed by this subdivision are payable as in the 
 97.5   case of personal property taxes and shall be assessed to the 
 97.6   lessees or users of real or personal property in the same manner 
 97.7   as taxes assessed to owners of real or personal property, except 
 97.8   that such taxes shall not become a lien against the property.  
 97.9   When due, the taxes shall constitute a debt due from the lessee 
 97.10  or user to the state, township, city, county, and school 
 97.11  district for which the taxes were assessed and shall be 
 97.12  collected in the same manner as personal property taxes.  If 
 97.13  property subject to the tax imposed by this subdivision is 
 97.14  leased or used jointly by two or more persons, each lessee or 
 97.15  user shall be jointly and severally liable for payment of the 
 97.16  tax. 
 97.17     (d) The tax on real property of the state or any of its 
 97.18  political subdivisions that is leased by a private individual, 
 97.19  association, or corporation and becomes taxable under this 
 97.20  subdivision or other provision of law must be assessed and 
 97.21  collected as a personal property assessment.  The taxes do not 
 97.22  become a lien against the real property. 
 97.23     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 97.24  following final enactment. 
 97.25     Sec. 5.  Minnesota Statutes 2004, section 272.02, 
 97.26  subdivision 1a, is amended to read: 
 97.27     Subd. 1a.  [LIMITATIONS ON EXEMPTIONS.] The exemptions 
 97.28  granted by subdivision 1 are subject to the limits contained in 
 97.29  the other subdivisions of this section, section 272.025, or 
 97.30  273.13, subdivision 25, paragraph (c), clause (1) or (2), or 
 97.31  paragraph (d), clause (2) and all other provisions of applicable 
 97.32  law.  
 97.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 97.34  following final enactment. 
 97.35     Sec. 6.  Minnesota Statutes 2004, section 272.02, 
 97.36  subdivision 7, is amended to read: 
 98.1      Subd. 7.  [INSTITUTIONS OF PUBLIC CHARITY.] Institutions of 
 98.2   purely public charity are exempt except parcels of property 
 98.3   containing structures and the structures described in section 
 98.4   273.13, subdivision 25, paragraph (e), other than those that 
 98.5   qualify for exemption under subdivision 26.  In determining 
 98.6   whether rental housing property qualifies for exemption under 
 98.7   this subdivision, the following are not gifts or donations to 
 98.8   the owner of the rental housing: 
 98.9      (1) rent assistance provided by the government to or on 
 98.10  behalf of tenants; and 
 98.11     (2) financing assistance or tax credits provided by the 
 98.12  government to the owner on condition that specific units or a 
 98.13  specific quantity of units be set aside for persons or families 
 98.14  with certain income characteristics. 
 98.15     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 98.16  payable in 2004 and thereafter. 
 98.17     Sec. 7.  Minnesota Statutes 2004, section 272.02, is 
 98.18  amended by adding a subdivision to read: 
 98.19     Subd. 68.  [PROPERTY SUBJECT TO TACONITE PRODUCTION TAX OR 
 98.20  NET PROCEEDS TAX.] (a) Real and personal property described in 
 98.21  section 298.25 is exempt to the extent the tax on taconite and 
 98.22  iron sulphides under section 298.24 is described in section 
 98.23  298.25 as being in lieu of other taxes on such property.  This 
 98.24  exemption applies for taxes payable in each year that the tax 
 98.25  under section 298.24 is payable with respect to such property. 
 98.26     (b) Deposits of mineral, metal, or energy resources the 
 98.27  mining of which is subject to taxation under section 298.015 are 
 98.28  exempt.  This exemption applies for taxes payable in each year 
 98.29  that the tax under section 298.015 is payable with respect to 
 98.30  such property. 
 98.31     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 98.32  following final enactment. 
 98.33     Sec. 8.  Minnesota Statutes 2004, section 272.02, is 
 98.34  amended by adding a subdivision to read: 
 98.35     Subd. 69.  [RELIGIOUS CORPORATIONS.] Personal and real 
 98.36  property that a religious corporation, formed under section 
 99.1   317A.909, necessarily uses for a religious purpose is exempt to 
 99.2   the extent provided in section 317A.909, subdivision 3. 
 99.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 99.4   following final enactment. 
 99.5      Sec. 9.  Minnesota Statutes 2004, section 272.02, is 
 99.6   amended by adding a subdivision to read: 
 99.7      Subd. 70.  [CHILDREN'S HOMES.] Personal and real property 
 99.8   owned by a corporation formed under section 317A.907 is exempt 
 99.9   to the extent provided in section 317A.907, subdivision 7. 
 99.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 99.11  following final enactment. 
 99.12     Sec. 10.  Minnesota Statutes 2004, section 272.02, is 
 99.13  amended by adding a subdivision to read: 
 99.14     Subd. 71.  [HOUSING AND REDEVELOPMENT AUTHORITY AND TRIBAL 
 99.15  HOUSING AUTHORITY PROPERTY.] Property owned by a housing and 
 99.16  redevelopment authority described in chapter 469, or by a 
 99.17  designated housing authority described in section 469.040, 
 99.18  subdivision 5, is exempt to the extent provided in chapter 469. 
 99.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 99.20  following final enactment. 
 99.21     Sec. 11.  Minnesota Statutes 2004, section 272.02, is 
 99.22  amended by adding a subdivision to read: 
 99.23     Subd. 72.  [PROPERTY OF HOUSING AND REDEVELOPMENT 
 99.24  AUTHORITIES.] Property of projects of housing and redevelopment 
 99.25  authorities are exempt to the extent permitted by sections 
 99.26  469.042, subdivision 1, and 469.043, subdivisions 2 and 5. 
 99.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 99.28  following final enactment. 
 99.29     Sec. 12.  Minnesota Statutes 2004, section 272.02, is 
 99.30  amended by adding a subdivision to read: 
 99.31     Subd. 73.  [PROPERTY OF REGIONAL RAIL AUTHORITY.] Property 
 99.32  of a regional rail authority as defined in chapter 398A is 
 99.33  exempt to the extent permitted by section 398A.05. 
 99.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 99.35  following final enactment. 
 99.36     Sec. 13.  Minnesota Statutes 2004, section 272.02, is 
100.1   amended by adding a subdivision to read: 
100.2      Subd. 74.  [SPIRIT MOUNTAIN RECREATION AREA 
100.3   AUTHORITY.] Property owned by the Spirit Mountain Recreation 
100.4   Area Authority is exempt from taxation to the extent provided in 
100.5   Laws 1973, chapter 327, section 6. 
100.6      Sec. 14.  Minnesota Statutes 2004, section 272.02, is 
100.7   amended by adding a subdivision to read: 
100.8      Subd. 75.  [INSTALLED CAPACITY DEFINED.] For purposes of 
100.9   this section, the term "installed capacity" means generator 
100.10  nameplate capacity. 
100.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
100.12  following final enactment. 
100.13     Sec. 15.  Minnesota Statutes 2004, section 272.029, 
100.14  subdivision 4, is amended to read: 
100.15     Subd. 4.  [REPORTS.] (a) An owner of a wind energy 
100.16  conversion system subject to tax under subdivision 3 shall file 
100.17  a report with the commissioner of revenue annually on or before 
100.18  March February 1 detailing the amount of electricity in 
100.19  kilowatt-hours that was produced by the wind energy conversion 
100.20  system for the previous calendar year.  The commissioner shall 
100.21  prescribe the form of the report.  The report must contain the 
100.22  information required by the commissioner to determine the tax 
100.23  due to each county under this section for the current year.  If 
100.24  an owner of a wind energy conversion system subject to taxation 
100.25  under this section fails to file the report by the due date, the 
100.26  commissioner of revenue shall determine the tax based upon the 
100.27  nameplate capacity of the system multiplied by a capacity factor 
100.28  of 40 percent. 
100.29     (b) On or before March 31 February 28, the commissioner of 
100.30  revenue shall notify the owner of the wind energy conversion 
100.31  systems of the tax due to each county for the current year and 
100.32  shall certify to the county auditor of each county in which the 
100.33  systems are located the tax due from each owner for the current 
100.34  year. 
100.35     <b>[EFFECTIVE DATE.]</b> This section is effective for reports and 
100.36  certifications due in 2006 and thereafter. 
101.1      Sec. 16.  Minnesota Statutes 2004, section 272.029, 
101.2   subdivision 6, is amended to read: 
101.3      Subd. 6.  [DISTRIBUTION OF REVENUES.] Revenues from the 
101.4   taxes imposed under subdivision 5 must be part of the settlement 
101.5   between the county treasurer and the county auditor under 
101.6   section 276.09.  The revenue must be distributed by the county 
101.7   auditor or the county treasurer to all local taxing 
101.8   jurisdictions in which the wind energy conversion system is 
101.9   located, as follows:  beginning with distributions in 2006, 80 
101.10  percent to counties; 14 percent to cities and townships; and six 
101.11  percent to school districts; and for distributions occurring in 
101.12  2004 and 2005 in the same proportion that each of the local 
101.13  taxing jurisdiction's current year's net tax capacity based tax 
101.14  rate is to the current year's total local net tax capacity based 
101.15  rate. 
101.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
101.17  following final enactment. 
101.18     Sec. 17.  Minnesota Statutes 2004, section 273.11, 
101.19  subdivision 8, is amended to read: 
101.20     Subd. 8.  [LIMITED EQUITY COOPERATIVE APARTMENTS.] For the 
101.21  purposes of this subdivision, the terms defined in this 
101.22  subdivision have the meanings given them.  
101.23     A "limited equity cooperative" is a corporation organized 
101.24  under chapter 308A or 308B, which has as its primary purpose the 
101.25  provision of housing and related services to its members which 
101.26  meets one of the following criteria with respect to the income 
101.27  of its members:  (1) a minimum of 75 percent of members must 
101.28  have incomes at or less than 90 percent of area median income, 
101.29  (2) a minimum of 40 percent of members must have incomes at or 
101.30  less than 60 percent of area median income, or (3) a minimum of 
101.31  20 percent of members must have incomes at or less than 50 
101.32  percent of area median income.  For purposes of this clause, 
101.33  "member income" shall mean the income of a member existing at 
101.34  the time the member acquires cooperative membership, and median 
101.35  income shall mean the St. Paul-Minneapolis metropolitan area 
101.36  median income as determined by the United States Department of 
102.1   Housing and Urban Development.  It must also meet the following 
102.2   requirements:  
102.3      (a) The articles of incorporation set the sale price of 
102.4   occupancy entitling cooperative shares or memberships at no more 
102.5   than a transfer value determined as provided in the articles. 
102.6   That value may not exceed the sum of the following:  
102.7      (1) the consideration paid for the membership or shares by 
102.8   the first occupant of the unit, as shown in the records of the 
102.9   corporation; 
102.10     (2) the fair market value, as shown in the records of the 
102.11  corporation, of any improvements to the real property that were 
102.12  installed at the sole expense of the member with the prior 
102.13  approval of the board of directors; 
102.14     (3) accumulated interest, or an inflation allowance not to 
102.15  exceed the greater of a ten percent annual noncompounded 
102.16  increase on the consideration paid for the membership or share 
102.17  by the first occupant of the unit, or the amount that would have 
102.18  been paid on that consideration if interest had been paid on it 
102.19  at the rate of the percentage increase in the revised Consumer 
102.20  Price Index for All Urban Consumers for the Minneapolis-St. Paul 
102.21  metropolitan area prepared by the United States Department of 
102.22  Labor, provided that the amount determined pursuant to this 
102.23  clause may not exceed $500 for each year or fraction of a year 
102.24  the membership or share was owned; plus 
102.25     (4) real property capital contributions shown in the 
102.26  records of the corporation to have been paid by the transferor 
102.27  member and previous holders of the same membership, or of 
102.28  separate memberships that had entitled occupancy to the unit of 
102.29  the member involved.  These contributions include contributions 
102.30  to a corporate reserve account the use of which is restricted to 
102.31  real property improvements or acquisitions, contributions to the 
102.32  corporation which are used for real property improvements or 
102.33  acquisitions, and the amount of principal amortized by the 
102.34  corporation on its indebtedness due to the financing of real 
102.35  property acquisition or improvement or the averaging of 
102.36  principal paid by the corporation over the term of its real 
103.1   property-related indebtedness. 
103.2      (b) The articles of incorporation require that the board of 
103.3   directors limit the purchase price of stock or membership 
103.4   interests for new member-occupants or resident shareholders to 
103.5   an amount which does not exceed the transfer value for the 
103.6   membership or stock as defined in clause (a).  
103.7      (c) The articles of incorporation require that the total 
103.8   distribution out of capital to a member shall not exceed that 
103.9   transfer value. 
103.10     (d) The articles of incorporation require that upon 
103.11  liquidation of the corporation any assets remaining after 
103.12  retirement of corporate debts and distribution to members will 
103.13  be conveyed to a charitable organization described in section 
103.14  501(c)(3) of the Internal Revenue Code of 1986, as amended 
103.15  through December 31, 1992, or a public agency.  
103.16     A "limited equity cooperative apartment" is a dwelling unit 
103.17  owned by a limited equity cooperative.  
103.18     "Occupancy entitling cooperative share or membership" is 
103.19  the ownership interest in a cooperative organization which 
103.20  entitles the holder to an exclusive right to occupy a dwelling 
103.21  unit owned or leased by the cooperative.  
103.22     For purposes of taxation, the assessor shall value a unit 
103.23  owned by a limited equity cooperative at the lesser of its 
103.24  market value or the value determined by capitalizing the net 
103.25  operating income of a comparable apartment operated on a rental 
103.26  basis at the capitalization rate used in valuing comparable 
103.27  buildings that are not limited equity cooperatives.  If a 
103.28  cooperative fails to operate in accordance with the provisions 
103.29  of clauses (a) to (d), the property shall be subject to 
103.30  additional property taxes in the amount of the difference 
103.31  between the taxes determined in accordance with this subdivision 
103.32  for the last ten years that the property had been assessed 
103.33  pursuant to this subdivision and the amount that would have been 
103.34  paid if the provisions of this subdivision had not applied to 
103.35  it.  The additional taxes, plus interest at the rate specified 
103.36  in section 549.09, shall be extended against the property on the 
104.1   tax list for the current year. 
104.2      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
104.3   payable in 2004 and thereafter. 
104.4      Sec. 18.  Minnesota Statutes 2004, section 273.124, 
104.5   subdivision 3, is amended to read: 
104.6      Subd. 3.  [COOPERATIVES AND CHARITABLE CORPORATIONS; 
104.7   HOMESTEAD AND OTHER PROPERTY.] (a) When property is owned by a 
104.8   corporation or association organized under chapter 308A or 308B, 
104.9   and each person who owns a share or shares in the corporation or 
104.10  association is entitled to occupy a building on the property, or 
104.11  a unit within a building on the property, the corporation or 
104.12  association may claim homestead treatment for each dwelling, or 
104.13  for each unit in the case of a building containing several 
104.14  dwelling units, or for the part of the value of the building 
104.15  occupied by a shareholder.  Each building or unit must be 
104.16  designated by legal description or number.  The net tax capacity 
104.17  of each building or unit that qualifies for assessment as a 
104.18  homestead under this subdivision must include not more than 
104.19  one-half acre of land, if platted, nor more than 80 acres if 
104.20  unplatted.  The net tax capacity of the property is the sum of 
104.21  the net tax capacities of each of the respective buildings or 
104.22  units comprising the property, including the net tax capacity of 
104.23  each unit's or building's proportionate share of the land and 
104.24  any common buildings.  To qualify for the treatment provided by 
104.25  this subdivision, the corporation or association must be wholly 
104.26  owned by persons having a right to occupy a building or unit 
104.27  owned by the corporation or association.  A charitable 
104.28  corporation organized under the laws of Minnesota and not 
104.29  otherwise exempt thereunder with no outstanding stock qualifies 
104.30  for homestead treatment with respect to member residents of the 
104.31  dwelling units who have purchased and hold residential 
104.32  participation warrants entitling them to occupy the units. 
104.33     (b) To the extent provided in paragraph (a), a cooperative 
104.34  or corporation organized under chapter 308A may obtain separate 
104.35  assessment and valuation, and separate property tax statements 
104.36  for each residential homestead, residential nonhomestead, or for 
105.1   each seasonal residential recreational building or unit not used 
105.2   for commercial purposes.  The appropriate class rates under 
105.3   section 273.13 shall be applicable as if each building or unit 
105.4   were a separate tax parcel; provided, however, that the tax 
105.5   parcel which exists at the time the cooperative or corporation 
105.6   makes application under this subdivision shall be a single 
105.7   parcel for purposes of property taxes or the enforcement and 
105.8   collection thereof, other than as provided in paragraph (a) or 
105.9   this paragraph. 
105.10     (c) A member of a corporation or association may initially 
105.11  obtain the separate assessment and valuation and separate 
105.12  property tax statements, as provided in paragraph (b), by 
105.13  applying to the assessor by June 30 of the assessment year. 
105.14     (d) When a building, or dwelling units within a building, 
105.15  no longer qualify under paragraph (a) or (b), the current owner 
105.16  must notify the assessor within 30 days.  Failure to notify the 
105.17  assessor within 30 days shall result in the loss of benefits 
105.18  under paragraph (a) or (b) for taxes payable in the year that 
105.19  the failure is discovered.  For these purposes, "benefits under 
105.20  paragraph (a) or (b)" means the difference in the net tax 
105.21  capacity of the building or units which no longer qualify as 
105.22  computed under paragraph (a) or (b) and as computed under the 
105.23  otherwise applicable law, times the local tax rate applicable to 
105.24  the building for that taxes payable year.  Upon discovery of a 
105.25  failure to notify, the assessor shall inform the auditor of the 
105.26  difference in net tax capacity for the building or buildings in 
105.27  which units no longer qualify, and the auditor shall calculate 
105.28  the benefits under paragraph (a) or (b).  Such amount, plus a 
105.29  penalty equal to 100 percent of that amount, shall then be 
105.30  demanded of the building's owner.  The property owner may appeal 
105.31  the county's determination by serving copies of a petition for 
105.32  review with county officials as provided in section 278.01 and 
105.33  filing a proof of service as provided in section 278.01 with the 
105.34  Minnesota Tax Court within 60 days of the date of the notice 
105.35  from the county.  The appeal shall be governed by the Tax Court 
105.36  procedures provided in chapter 271, for cases relating to the 
106.1   tax laws as defined in section 271.01, subdivision 5; 
106.2   disregarding sections 273.125, subdivision 5, and 278.03, but 
106.3   including section 278.05, subdivision 2.  If the amount of the 
106.4   benefits under paragraph (a) or (b) and penalty are not paid 
106.5   within 60 days, and if no appeal has been filed, the county 
106.6   auditor shall certify the amount of the benefit and penalty to 
106.7   the succeeding year's tax list to be collected as part of the 
106.8   property taxes on the affected property. 
106.9      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
106.10  payable in 2004 and thereafter. 
106.11     Sec. 19.  Minnesota Statutes 2004, section 273.124, 
106.12  subdivision 6, is amended to read: 
106.13     Subd. 6.  [LEASEHOLD COOPERATIVES.] When one or more 
106.14  dwellings or one or more buildings which each contain several 
106.15  dwelling units is owned by a nonprofit corporation subject to 
106.16  the provisions of chapter 317A and qualifying under section 
106.17  501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as 
106.18  amended through December 31, 1990, or a limited partnership 
106.19  which corporation or partnership operates the property in 
106.20  conjunction with a cooperative association, and has received 
106.21  public financing, homestead treatment may be claimed by the 
106.22  cooperative association on behalf of the members of the 
106.23  cooperative for each dwelling unit occupied by a member of the 
106.24  cooperative.  The cooperative association must provide the 
106.25  assessor with the Social Security numbers of those members.  To 
106.26  qualify for the treatment provided by this subdivision, the 
106.27  following conditions must be met:  
106.28     (a) the cooperative association must be organized under 
106.29  chapter 308A or 308B and all voting members of the board of 
106.30  directors must be resident tenants of the cooperative and must 
106.31  be elected by the resident tenants of the cooperative; 
106.32     (b) the cooperative association must have a lease for 
106.33  occupancy of the property for a term of at least 20 years, which 
106.34  permits the cooperative association, while not in default on the 
106.35  lease, to participate materially in the management of the 
106.36  property, including material participation in establishing 
107.1   budgets, setting rent levels, and hiring and supervising a 
107.2   management agent; 
107.3      (c) to the extent permitted under state or federal law, the 
107.4   cooperative association must have a right under a written 
107.5   agreement with the owner to purchase the property if the owner 
107.6   proposes to sell it; if the cooperative association does not 
107.7   purchase the property it is offered for sale, the owner may not 
107.8   subsequently sell the property to another purchaser at a price 
107.9   lower than the price at which it was offered for sale to the 
107.10  cooperative association unless the cooperative association 
107.11  approves the sale; 
107.12     (d) a minimum of 40 percent of the cooperative 
107.13  association's members must have incomes at or less than 60 
107.14  percent of area median gross income as determined by the United 
107.15  States Secretary of Housing and Urban Development under section 
107.16  142(d)(2)(B) of the Internal Revenue Code of 1986, as amended 
107.17  through December 31, 1991.  For purposes of this clause, "member 
107.18  income" means the income of a member existing at the time the 
107.19  member acquires cooperative membership; 
107.20     (e) if a limited partnership owns the property, it must 
107.21  include as the managing general partner a nonprofit organization 
107.22  operating under the provisions of chapter 317A and qualifying 
107.23  under section 501(c)(3) or 501(c)(4) of the Internal Revenue 
107.24  Code of 1986, as amended through December 31, 1990, and the 
107.25  limited partnership agreement must provide that the managing 
107.26  general partner have sufficient powers so that it materially 
107.27  participates in the management and control of the limited 
107.28  partnership; 
107.29     (f) prior to becoming a member of a leasehold cooperative 
107.30  described in this subdivision, a person must have received 
107.31  notice that (1) describes leasehold cooperative property in 
107.32  plain language, including but not limited to the effects of 
107.33  classification under this subdivision on rents, property taxes 
107.34  and tax credits or refunds, and operating expenses, and (2) 
107.35  states that copies of the articles of incorporation and bylaws 
107.36  of the cooperative association, the lease between the owner and 
108.1   the cooperative association, a sample sublease between the 
108.2   cooperative association and a tenant, and, if the owner is a 
108.3   partnership, a copy of the limited partnership agreement, can be 
108.4   obtained upon written request at no charge from the owner, and 
108.5   the owner must send or deliver the materials within seven days 
108.6   after receiving any request; 
108.7      (g) if a dwelling unit of a building was occupied on the 
108.8   60th day prior to the date on which the unit became leasehold 
108.9   cooperative property described in this subdivision, the notice 
108.10  described in paragraph (f) must have been sent by first class 
108.11  mail to the occupant of the unit at least 60 days prior to the 
108.12  date on which the unit became leasehold cooperative property.  
108.13  For purposes of the notice under this paragraph, the copies of 
108.14  the documents referred to in paragraph (f) may be in proposed 
108.15  version, provided that any subsequent material alteration of 
108.16  those documents made after the occupant has requested a copy 
108.17  shall be disclosed to any occupant who has requested a copy of 
108.18  the document.  Copies of the articles of incorporation and 
108.19  certificate of limited partnership shall be filed with the 
108.20  secretary of state after the expiration of the 60-day period 
108.21  unless the change to leasehold cooperative status does not 
108.22  proceed; 
108.23     (h) the county attorney of the county in which the property 
108.24  is located must certify to the assessor that the property meets 
108.25  the requirements of this subdivision; 
108.26     (i) the public financing received must be from at least one 
108.27  of the following sources: 
108.28     (1) tax increment financing proceeds used for the 
108.29  acquisition or rehabilitation of the building or interest rate 
108.30  write-downs relating to the acquisition of the building; 
108.31     (2) government issued bonds exempt from taxes under section 
108.32  103 of the Internal Revenue Code of 1986, as amended through 
108.33  December 31, 1991, the proceeds of which are used for the 
108.34  acquisition or rehabilitation of the building; 
108.35     (3) programs under section 221(d)(3), 202, or 236, of Title 
108.36  II of the National Housing Act; 
109.1      (4) rental housing program funds under Section 8 of the 
109.2   United States Housing Act of 1937 or the market rate family 
109.3   graduated payment mortgage program funds administered by the 
109.4   Minnesota Housing Finance Agency that are used for the 
109.5   acquisition or rehabilitation of the building; 
109.6      (5) low-income housing credit under section 42 of the 
109.7   Internal Revenue Code of 1986, as amended through December 31, 
109.8   1991; 
109.9      (6) public financing provided by a local government used 
109.10  for the acquisition or rehabilitation of the building, including 
109.11  grants or loans from (i) federal community development block 
109.12  grants; (ii) HOME block grants; or (iii) residential rental 
109.13  bonds issued under chapter 474A; or 
109.14     (7) other rental housing program funds provided by the 
109.15  Minnesota Housing Finance Agency for the acquisition or 
109.16  rehabilitation of the building; 
109.17     (j) at the time of the initial request for homestead 
109.18  classification or of any transfer of ownership of the property, 
109.19  the governing body of the municipality in which the property is 
109.20  located must hold a public hearing and make the following 
109.21  findings: 
109.22     (1) that the granting of the homestead treatment of the 
109.23  apartment's units will facilitate safe, clean, affordable 
109.24  housing for the cooperative members that would otherwise not be 
109.25  available absent the homestead designation; 
109.26     (2) that the owner has presented information satisfactory 
109.27  to the governing body showing that the savings garnered from the 
109.28  homestead designation of the units will be used to reduce 
109.29  tenant's rents or provide a level of furnishing or maintenance 
109.30  not possible absent the designation; and 
109.31     (3) that the requirements of paragraphs (b), (d), and (i) 
109.32  have been met. 
109.33     Homestead treatment must be afforded to units occupied by 
109.34  members of the cooperative association and the units must be 
109.35  assessed as provided in subdivision 3, provided that any unit 
109.36  not so occupied shall be classified and assessed pursuant to the 
110.1   appropriate class.  No more than three acres of land may, for 
110.2   assessment purposes, be included with each dwelling unit that 
110.3   qualifies for homestead treatment under this subdivision. 
110.4      When dwelling units no longer qualify under this 
110.5   subdivision, the current owner must notify the assessor within 
110.6   60 days.  Failure to notify the assessor within 60 days shall 
110.7   result in the loss of benefits under this subdivision for taxes 
110.8   payable in the year that the failure is discovered.  For these 
110.9   purposes, "benefits under this subdivision" means the difference 
110.10  in the net tax capacity of the units which no longer qualify as 
110.11  computed under this subdivision and as computed under the 
110.12  otherwise applicable law, times the local tax rate applicable to 
110.13  the building for that taxes payable year.  Upon discovery of a 
110.14  failure to notify, the assessor shall inform the auditor of the 
110.15  difference in net tax capacity for the building or buildings in 
110.16  which units no longer qualify, and the auditor shall calculate 
110.17  the benefits under this subdivision.  Such amount, plus a 
110.18  penalty equal to 100 percent of that amount, shall then be 
110.19  demanded of the building's owner.  The property owner may appeal 
110.20  the county's determination by serving copies of a petition for 
110.21  review with county officials as provided in section 278.01 and 
110.22  filing a proof of service as provided in section 278.01 with the 
110.23  Minnesota Tax Court within 60 days of the date of the notice 
110.24  from the county.  The appeal shall be governed by the Tax Court 
110.25  procedures provided in chapter 271, for cases relating to the 
110.26  tax laws as defined in section 271.01, subdivision 5; 
110.27  disregarding sections 273.125, subdivision 5, and 278.03, but 
110.28  including section 278.05, subdivision 2.  If the amount of the 
110.29  benefits under this subdivision and penalty are not paid within 
110.30  60 days, and if no appeal has been filed, the county auditor 
110.31  shall certify the amount of the benefit and penalty to the 
110.32  succeeding year's tax list to be collected as part of the 
110.33  property taxes on the affected buildings. 
110.34     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
110.35  payable in 2004 and thereafter. 
110.36     Sec. 20.  Minnesota Statutes 2004, section 273.124, 
111.1   subdivision 8, is amended to read: 
111.2      Subd. 8.  [HOMESTEAD OWNED BY OR LEASED TO FAMILY FARM 
111.3   CORPORATION, JOINT FARM VENTURE, LIMITED LIABILITY COMPANY, OR 
111.4   PARTNERSHIP.] (a) Each family farm corporation, each; each joint 
111.5   family farm venture,; and each limited liability company, and 
111.6   each or partnership operating which operates a family farm; is 
111.7   entitled to class 1b under section 273.13, subdivision 22, 
111.8   paragraph (b), or class 2a assessment for one homestead occupied 
111.9   by a shareholder, member, or partner thereof who is residing on 
111.10  the land, and actively engaged in farming of the land owned by 
111.11  the family farm corporation, joint family farm venture, limited 
111.12  liability company, or partnership operating a family farm.  
111.13  Homestead treatment applies even if legal title to the property 
111.14  is in the name of the family farm corporation, joint family farm 
111.15  venture, limited liability company, or partnership operating the 
111.16  family farm, and not in the name of the person residing on it. 
111.17     "Family farm corporation," "family farm," and "partnership 
111.18  operating a family farm" have the meanings given in section 
111.19  500.24, except that the number of allowable shareholders, 
111.20  members, or partners under this subdivision shall not exceed 
111.21  12.  "Limited liability company" has the meaning contained in 
111.22  sections 322B.03, subdivision 28, and 500.24, subdivision 2, 
111.23  paragraphs (l) and (m).  "Joint family farm venture" means a 
111.24  cooperative agreement among two or more farm enterprises 
111.25  authorized to operate a family farm under section 500.24. 
111.26     (b) In addition to property specified in paragraph (a), any 
111.27  other residences owned by family farm corporations, joint family 
111.28  farm ventures, limited liability companies, or partnerships 
111.29  operating a family farm described in paragraph (a) which are 
111.30  located on agricultural land and occupied as homesteads by its 
111.31  shareholders, members, or partners who are actively engaged in 
111.32  farming on behalf of that corporation, joint farm venture, 
111.33  limited liability company, or partnership must also be assessed 
111.34  as class 2a property or as class 1b property under section 
111.35  273.13. 
111.36     (c) Agricultural property that is owned by a member, 
112.1   partner, or shareholder of a family farm corporation or joint 
112.2   family farm venture, limited liability company operating a 
112.3   family farm, or by a partnership operating a family farm and 
112.4   leased to the family farm corporation, limited liability 
112.5   company, or partnership operating a family farm, or joint farm 
112.6   venture, as defined in paragraph (a), is eligible for 
112.7   classification as class 1b or class 2a under section 273.13, if 
112.8   the owner is actually residing on the property, and is actually 
112.9   engaged in farming the land on behalf of that corporation, joint 
112.10  farm venture, limited liability company, or partnership.  This 
112.11  paragraph applies without regard to any legal possession rights 
112.12  of the family farm corporation, joint family farm venture, 
112.13  limited liability company, or partnership operating a family 
112.14  farm under the lease. 
112.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
112.16  following final enactment. 
112.17     Sec. 21.  Minnesota Statutes 2004, section 273.124, 
112.18  subdivision 21, is amended to read: 
112.19     Subd. 21.  [TRUST PROPERTY; HOMESTEAD.] Real property held 
112.20  by a trustee under a trust is eligible for classification as 
112.21  homestead property if: 
112.22     (1) the grantor or surviving spouse of the grantor of the 
112.23  trust occupies and uses the property as a homestead; 
112.24     (2) a relative or surviving relative of the grantor who 
112.25  meets the requirements of subdivision 1, paragraph (c), in the 
112.26  case of residential real estate; or subdivision 1, paragraph 
112.27  (d), in the case of agricultural property, occupies and uses the 
112.28  property as a homestead; 
112.29     (3) a family farm corporation, joint farm venture, limited 
112.30  liability company, or partnership operating a family farm rents 
112.31  the property held by a trustee under a trust, and the grantor, 
112.32  the spouse of the grantor, or the son or daughter of the 
112.33  grantor, who is also a shareholder, member, or partner of the 
112.34  corporation, joint farm venture, limited liability company, or 
112.35  partnership occupies and uses the property as a homestead, and 
112.36  or is actively farming the property on behalf of the 
113.1   corporation, joint farm venture, limited liability company, or 
113.2   partnership; or 
113.3      (4) a person who has received homestead classification for 
113.4   property taxes payable in 2000 on the basis of an unqualified 
113.5   legal right under the terms of the trust agreement to occupy the 
113.6   property as that person's homestead and who continues to use the 
113.7   property as a homestead or a person who received the homestead 
113.8   classification for taxes payable in 2005 under clause (3) who 
113.9   does not qualify under clause (3) for taxes payable in 2006 or 
113.10  thereafter but who continues to qualify under clause (3) as it 
113.11  existed for taxes payable in 2005. 
113.12     For purposes of this subdivision, "grantor" is defined as 
113.13  the person creating or establishing a testamentary, inter Vivos, 
113.14  revocable or irrevocable trust by written instrument or through 
113.15  the exercise of a power of appointment. 
113.16     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
113.17  payable in 2006 and thereafter. 
113.18     Sec. 22.  Minnesota Statutes 2004, section 273.1315, is 
113.19  amended to read: 
113.20     273.1315 [CERTIFICATION OF 1B PROPERTY.] 
113.21     Any property owner seeking classification and assessment of 
113.22  the owner's homestead as class 1b property pursuant to section 
113.23  273.13, subdivision 22, paragraph (b), shall file with the 
113.24  commissioner of revenue a 1b homestead declaration, on a form 
113.25  prescribed by the commissioner.  The declaration shall contain 
113.26  the following information:  
113.27     (a) the information necessary to verify that on or before 
113.28  June 30 of the filing year, the property owner or the owner's 
113.29  spouse satisfies the requirements of section 273.13, subdivision 
113.30  22, paragraph (b), for 1b classification; and 
113.31     (b) any additional information prescribed by the 
113.32  commissioner.  
113.33     The declaration must be filed on or before October 1 to be 
113.34  effective for property taxes payable during the succeeding 
113.35  calendar year.  The declaration and any supplementary 
113.36  information received from the property owner pursuant to this 
114.1   section shall be subject to chapter 270B.  If approved by the 
114.2   commissioner, the declaration remains in effect until the 
114.3   property no longer qualifies under section 273.13, subdivision 
114.4   22, paragraph (b).  Failure to notify the commissioner within 30 
114.5   days that the property no longer qualifies under that paragraph 
114.6   because of a sale, change in occupancy, or change in the status 
114.7   or condition of an occupant shall result in the penalty provided 
114.8   in section 273.124, subdivision 13, computed on the basis of the 
114.9   class 1b benefits for the property, and the property shall lose 
114.10  its current class 1b classification. 
114.11     The commissioner shall provide to the assessor on or before 
114.12  November 1 a listing of the parcels of property qualifying for 
114.13  1b classification.  
114.14     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
114.15  following final enactment. 
114.16     Sec. 23.  Minnesota Statutes 2004, section 273.19, 
114.17  subdivision 1a, is amended to read: 
114.18     Subd. 1a.  For purposes of this section, a lease includes 
114.19  any agreement, except a cooperative farming agreement pursuant 
114.20  to section 97A.135, subdivision 3, or a lease executed pursuant 
114.21  to section 272.68, subdivision 4, permitting a nonexempt person 
114.22  or entity to use the property, regardless of whether the 
114.23  agreement is characterized as a lease.  A lease has a "term of 
114.24  at least one year" if the term is for a period of less than one 
114.25  year and the lease permits the parties to renew the lease 
114.26  without requiring that similar terms for leasing the property 
114.27  will be offered to other applicants or bidders through a 
114.28  competitive bidding or other form of offer to potential lessees 
114.29  or users. 
114.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
114.31  following final enactment. 
114.32     Sec. 24.  Minnesota Statutes 2004, section 273.372, is 
114.33  amended to read: 
114.34     273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD 
114.35  VALUATIONS.] 
114.36     Subdivision 1.  [SCOPE.] (a) As provided in this section, 
115.1   an appeal by a utility or railroad company concerning the 
115.2   exemption, valuation, or classification of property for which 
115.3   the commissioner of revenue has provided the city or county 
115.4   assessor with valuations by order, or for which the commissioner 
115.5   has recommended values to the city or county assessor, must be 
115.6   brought against the commissioner in Tax Court or in district 
115.7   court of the county where the property is located, and not 
115.8   against the county or taxing district where the property is 
115.9   located.  
115.10     (b) This section governs administrative appeals and appeals 
115.11  to court of a claim that utility or railroad operating property 
115.12  has been partially, unfairly, or unequally assessed, or assessed 
115.13  at a valuation greater than its real or actual value, 
115.14  misclassified, or that the property is exempt.  This section 
115.15  applies only to property described in sections 270.81, 
115.16  subdivision 1, 273.33, 273.35, 273.36, and 273.37, and only with 
115.17  regard to taxable net tax capacities that have been provided to 
115.18  the city or county by the commissioner and which have not been 
115.19  changed by city or county.  If the taxable net tax capacity 
115.20  being appealed is not the taxable net tax capacity established 
115.21  by the commissioner, or if the appeal claims that the tax rate 
115.22  applied against the parcel is incorrect, or that the tax has 
115.23  been paid, this section does not apply. 
115.24     Subd. 2.  [CONTENTS AND FILING OF PETITION.] (a) In all 
115.25  appeals to court that are required to be brought against the 
115.26  commissioner under this section, the petition initiating the 
115.27  appeal must be served on the commissioner and must be filed with 
115.28  the Tax Court in Ramsey County, as provided in paragraph (b) or 
115.29  (c). 
115.30     (b) If the appeal to court is from an order of the 
115.31  commissioner, it must be brought under chapter 271, except that 
115.32  when the provisions of this section conflict with chapter 271, 
115.33  this section prevails.  In addition, the petition must include 
115.34  all the parcels encompassed by that order which the petitioner 
115.35  claims have been partially, unfairly, or unequally assessed, 
115.36  assessed at a valuation greater than their real or actual value, 
116.1   misclassified, or are exempt.  For this purpose, an order of the 
116.2   commissioner is either (1) a certification or notice of value by 
116.3   the commissioner for property described in subdivision 1, or (2) 
116.4   the final determination by the commissioner of either an 
116.5   administrative appeal conference or informal administrative 
116.6   appeal described in subdivision 4.  
116.7      (c) If the appeal is from the exemption, valuation, 
116.8   classification, or tax that results from implementation of the 
116.9   commissioner's order, certification, or recommendation, it must 
116.10  be brought under chapter 278, and the provisions in that chapter 
116.11  apply, except that service shall be on the commissioner only and 
116.12  not on the county local officials specified in section 278.01, 
116.13  subdivision 1, and if any other provision of this section 
116.14  conflicts with chapter 278, this section prevails.  In addition, 
116.15  the petition must include either all the utility parcels or all 
116.16  the railroad parcels in the state in which the petitioner claims 
116.17  an interest and which the petitioner claims have been partially, 
116.18  unfairly, or unequally assessed, assessed at a valuation greater 
116.19  than their real or actual value, misclassified, or are 
116.20  exempt.  This provision applies to the property described in 
116.21  sections 273.33, 273.35, 273.36, and 273.37, but only if the 
116.22  appealed values have remained unchanged from those provided to 
116.23  the city or county by the commissioner.  If the exemption, 
116.24  valuation, or classification being appealed has been changed by 
116.25  the city or county, then the action must be brought under 
116.26  chapter 278 in the county where the property is located and 
116.27  proper service must be made upon the county officials as 
116.28  specified in section 278.01, subdivision 1. 
116.29     Subd. 3.  [NOTICE.] Upon filing of any appeal in court by a 
116.30  utility company or railroad against the commissioner pursuant to 
116.31  this section, the commissioner shall give notice by first class 
116.32  mail to the county auditor of each county which would be 
116.33  affected by the appeal where property included in the petition 
116.34  is located. 
116.35     Subd. 4.  [ADMINISTRATIVE APPEALS.] (a) Companies that 
116.36  submit the reports under section 270.82 or 273.371 by the date 
117.1   specified in that section, or by the date specified by the 
117.2   commissioner in an extension, may appeal administratively to the 
117.3   commissioner under the procedures in section 270.11, subdivision 
117.4   6, prior to bringing an action in Tax Court or in district court 
117.5   , however, instituting an administrative appeal by submitting a 
117.6   written request with the commissioner does not change or 
117.7   modify for a conference within ten days after the date of the 
117.8   commissioner's valuation certification or notice to the company, 
117.9   or by May 15, whichever is earlier.  The commissioner shall 
117.10  conduct the conference upon the commissioner's entire files and 
117.11  records and such further information as may be offered.  The 
117.12  conference must be held no later than 20 days after the date of 
117.13  the commissioner's valuation certification or notice to the 
117.14  company, or by the date specified by the commissioner in an 
117.15  extension.  At a reasonable time after the conference the 
117.16  commissioner shall make a final determination of the matter and 
117.17  shall notify the company promptly of the determination.  The 
117.18  conference is not a contested case hearing. 
117.19     (b) In addition to the opportunity for a conference under 
117.20  paragraph (a), the commissioner shall make a more informal 
117.21  procedure available to railroad and utility companies to 
117.22  question values established by the commissioner through 
117.23  certification or notice.  The availability of the informal 
117.24  procedure does not change or modify the deadline for requesting 
117.25  a conference under paragraph (a), the deadline in section 271.06 
117.26  for appealing an order of the commissioner in Tax Court, or the 
117.27  deadline in section 278.01 for filing a property tax claim or 
117.28  objection in Tax Court or district appealing property taxes in 
117.29  court. 
117.30     <b>[EFFECTIVE DATE.]</b> This section is effective September 1, 
117.31  2005, and thereafter. 
117.32     Sec. 25.  Minnesota Statutes 2004, section 274.014, 
117.33  subdivision 2, is amended to read: 
117.34     Subd. 2.  [APPEALS AND EQUALIZATION COURSE.] By no later 
117.35  than January 1, Beginning in 2006, and each year thereafter, 
117.36  there must be at least one member at each meeting of a local 
118.1   board of appeal and equalization who has attended an appeals and 
118.2   equalization course developed or approved by the commissioner 
118.3   within the last four years, as certified by the commissioner.  
118.4   The course may be offered in conjunction with a meeting of the 
118.5   Minnesota League of Cities or the Minnesota Association of 
118.6   Townships.  The course content must include, but need not be 
118.7   limited to, a review of the handbook developed by the 
118.8   commissioner under subdivision 1. 
118.9      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
118.10  following final enactment. 
118.11     Sec. 26.  Minnesota Statutes 2004, section 274.014, 
118.12  subdivision 3, is amended to read: 
118.13     Subd. 3.  [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] (a) 
118.14  Any city or town that does not conducts local boards of appeal 
118.15  and equalization meetings must provide proof to the county 
118.16  assessor by December 1, 2006, and each year thereafter, that it 
118.17  is in compliance with the requirements of subdivision 2, and 
118.18  that it had.  Beginning in 2006, this notice must also verify 
118.19  that there was a quorum of voting members at each meeting of the 
118.20  board of appeal and equalization in the prior current year,.  A 
118.21  city or town that does not comply with these requirements is 
118.22  deemed to have transferred its board of appeal and equalization 
118.23  powers to the county under section 274.01, subdivision 3, 
118.24  for beginning with the following year's assessment and 
118.25  continuing unless the powers are reinstated under paragraph (c). 
118.26     (b) The county shall notify the taxpayers when the board of 
118.27  appeal and equalization for a city or town has been transferred 
118.28  to the county under this subdivision and, prior to the meeting 
118.29  time of the county board of equalization, the county shall make 
118.30  available to those taxpayers a procedure for a review of the 
118.31  assessments, including, but not limited to, open book meetings.  
118.32  This alternate review process shall take place in April and May. 
118.33     (c) A local board whose powers are transferred to the 
118.34  county under this subdivision may be reinstated by resolution of 
118.35  the governing body of the city or town and upon proof of 
118.36  compliance with the requirements of subdivision 2.  The 
119.1   resolution and proofs must be provided to the county assessor by 
119.2   December 1 in order to be effective for the following year's 
119.3   assessment. 
119.4      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
119.5   following final enactment. 
119.6      Sec. 27.  Minnesota Statutes 2004, section 274.14, is 
119.7   amended to read: 
119.8      274.14 [LENGTH OF SESSION; RECORD.] 
119.9      The county board of equalization or the special board of 
119.10  equalization appointed by it shall meet during the last ten 
119.11  meeting days in June.  For this purpose, "meeting days" are 
119.12  defined as any day of the week excluding Saturday and Sunday.  
119.13  The board may meet on any ten consecutive meeting days in June, 
119.14  after the second Friday in June, if.  The actual meeting dates 
119.15  are must be contained on the valuation notices mailed to each 
119.16  property owner in the county under as provided in section 
119.17  273.121.  For this purpose, "meeting days" is defined as any day 
119.18  of the week excluding Saturday and Sunday.  No action taken by 
119.19  the county board of review after June 30 is valid, except for 
119.20  corrections permitted in sections 273.01 and 274.01.  The county 
119.21  auditor shall keep an accurate record of the proceedings and 
119.22  orders of the board.  The record must be published like other 
119.23  proceedings of county commissioners.  A copy of the published 
119.24  record must be sent to the commissioner of revenue, with the 
119.25  abstract of assessment required by section 274.16.  
119.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
119.27  following final enactment. 
119.28     Sec. 28.  Minnesota Statutes 2004, section 275.07, 
119.29  subdivision 1, is amended to read: 
119.30     Subdivision 1.  [CERTIFICATION OF LEVY.] (a) Except as 
119.31  provided under paragraph (b), the taxes voted by cities, 
119.32  counties, school districts, and special districts shall be 
119.33  certified by the proper authorities to the county auditor on or 
119.34  before five working days after December 20 in each year.  A town 
119.35  must certify the levy adopted by the town board to the county 
119.36  auditor by September 15 each year.  If the town board modifies 
120.1   the levy at a special town meeting after September 15, the town 
120.2   board must recertify its levy to the county auditor on or before 
120.3   five working days after December 20.  The taxes certified shall 
120.4   be reduced by the county auditor by the aid received under 
120.5   section 273.1398, subdivision 3.  If a city, town, county, 
120.6   school district, or special district fails to certify its levy 
120.7   by that date, its levy shall be the amount levied by it for the 
120.8   preceding year. 
120.9      (b)(i) The taxes voted by counties under sections 103B.241, 
120.10  103B.245, and 103B.251 shall be separately certified by the 
120.11  county to the county auditor on or before five working days 
120.12  after December 20 in each year.  The taxes certified shall not 
120.13  be reduced by the county auditor by the aid received under 
120.14  section 273.1398, subdivision 3.  If a county fails to certify 
120.15  its levy by that date, its levy shall be the amount levied by it 
120.16  for the preceding year.  
120.17     (ii) For purposes of the proposed property tax notice under 
120.18  section 275.065 and the property tax statement under section 
120.19  276.04, for the first year in which the county implements the 
120.20  provisions of this paragraph, the county auditor shall reduce 
120.21  the county's levy for the preceding year to reflect any amount 
120.22  levied for water management purposes under clause (i) included 
120.23  in the county's levy. 
120.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
120.25  following final enactment. 
120.26     Sec. 29.  Minnesota Statutes 2004, section 275.07, 
120.27  subdivision 4, is amended to read: 
120.28     Subd. 4.  [REPORT TO COMMISSIONER.] (a) On or before 
120.29  October 8 of each year, the county auditor shall report to the 
120.30  commissioner of revenue the proposed levy certified by local 
120.31  units of government under section 275.065, subdivision 1.  If 
120.32  any taxing authorities have notified the county auditor that 
120.33  they are in the process of negotiating an agreement for sharing, 
120.34  merging, or consolidating services but that when the proposed 
120.35  levy was certified under section 275.065, subdivision 1c, the 
120.36  agreement was not yet finalized, the county auditor shall supply 
121.1   that information to the commissioner when filing the report 
121.2   under this section and shall recertify the affected levies as 
121.3   soon as practical after October 10. 
121.4      (b) On or before January 15 of each year, the county 
121.5   auditor shall report to the commissioner of revenue the final 
121.6   levy certified by local units of government under subdivision 1. 
121.7      (c) The levies must be reported in the manner prescribed by 
121.8   the commissioner.  The reports must show a total levy and the 
121.9   amount of each special levy. 
121.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
121.11  following final enactment. 
121.12     Sec. 30.  Minnesota Statutes 2004, section 276.112, is 
121.13  amended to read: 
121.14     276.112 [STATE PROPERTY TAXES; COUNTY TREASURER.] 
121.15     On or before January 25 each year, for the period ending 
121.16  December 31 of the prior year, and on or before June 29 28 each 
121.17  year, for the period ending on the most recent settlement day 
121.18  determined in section 276.09, and on or before December 2 each 
121.19  year, for the period ending November 20, the county treasurer 
121.20  must make full settlement with the county auditor according to 
121.21  sections 276.09, 276.10, and 276.111 for all receipts of state 
121.22  property taxes levied under section 275.025, and must transmit 
121.23  those receipts to the commissioner of revenue by electronic 
121.24  means. 
121.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
121.26  following final enactment. 
121.27     Sec. 31.  Minnesota Statutes 2004, section 282.016, is 
121.28  amended to read: 
121.29     282.016 [PROHIBITED PURCHASERS.] 
121.30     No (a) A county auditor, county treasurer, county attorney, 
121.31  court administrator of the district court, or county assessor 
121.32  or, supervisor of assessments, or deputy or clerk or an employee 
121.33  of such officer, and no a commissioner for tax-forfeited lands 
121.34  or an assistant to such commissioner may, must not become a 
121.35  purchaser, either personally or as an agent or attorney for 
121.36  another person, of the properties offered for sale under the 
122.1   provisions of this chapter, either personally, or as agent or 
122.2   attorney for any other person, except that in the county for 
122.3   which the person performs duties.  A person prohibited from 
122.4   purchasing property under this section must not directly or 
122.5   indirectly have another person purchase it on behalf of the 
122.6   prohibited purchaser for the prohibited purchaser's benefit or 
122.7   gain. 
122.8      (b) Notwithstanding paragraph (a), such officer, deputy, 
122.9   court administrator clerk, or employee or commissioner for 
122.10  tax-forfeited lands or assistant to such commissioner may (1) 
122.11  purchase lands owned by that official at the time the state 
122.12  became the absolute owner thereof or (2) bid upon and purchase 
122.13  forfeited property offered for sale under the alternate sale 
122.14  procedure described in section 282.01, subdivision 7a. 
122.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
122.16  following final enactment. 
122.17     Sec. 32.  Minnesota Statutes 2004, section 282.08, is 
122.18  amended to read: 
122.19     282.08 [APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.] 
122.20     The net proceeds from the sale or rental of any parcel of 
122.21  forfeited land, or from the sale of products from the forfeited 
122.22  land, must be apportioned by the county auditor to the taxing 
122.23  districts interested in the land, as follows: 
122.24     (1) the amounts necessary to pay the state general tax levy 
122.25  against the parcel for taxes payable in the year for which the 
122.26  tax judgment was entered, and for each subsequent payable year 
122.27  up to and including the year of forfeiture, must be apportioned 
122.28  to the state; 
122.29     (2) the portion required to pay any amounts included in the 
122.30  appraised value under section 282.01, subdivision 3, as 
122.31  representing increased value due to any public improvement made 
122.32  after forfeiture of the parcel to the state, but not exceeding 
122.33  the amount certified by the clerk of the municipality must be 
122.34  apportioned to the municipal subdivision entitled to it; 
122.35     (3) (2) the portion required to pay any amount included in 
122.36  the appraised value under section 282.019, subdivision 5, 
123.1   representing increased value due to response actions taken after 
123.2   forfeiture of the parcel to the state, but not exceeding the 
123.3   amount of expenses certified by the Pollution Control Agency or 
123.4   the commissioner of agriculture, must be apportioned to the 
123.5   agency or the commissioner of agriculture and deposited in the 
123.6   fund from which the expenses were paid; 
123.7      (4) (3) the portion of the remainder required to discharge 
123.8   any special assessment chargeable against the parcel for 
123.9   drainage or other purpose whether due or deferred at the time of 
123.10  forfeiture, must be apportioned to the municipal subdivision 
123.11  entitled to it; and 
123.12     (5) (4) any balance must be apportioned as follows: 
123.13     (i) The county board may annually by resolution set aside 
123.14  no more than 30 percent of the receipts remaining to be used for 
123.15  timber development on tax-forfeited land and dedicated memorial 
123.16  forests, to be expended under the supervision of the county 
123.17  board.  It must be expended only on projects approved by the 
123.18  commissioner of natural resources. 
123.19     (ii) The county board may annually by resolution set aside 
123.20  no more than 20 percent of the receipts remaining to be used for 
123.21  the acquisition and maintenance of county parks or recreational 
123.22  areas as defined in sections 398.31 to 398.36, to be expended 
123.23  under the supervision of the county board. 
123.24     (iii) Any balance remaining must be apportioned as 
123.25  follows:  county, 40 percent; town or city, 20 percent; and 
123.26  school district, 40 percent, provided, however, that in 
123.27  unorganized territory that portion which would have accrued to 
123.28  the township must be administered by the county board of 
123.29  commissioners. 
123.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
123.31  following final enactment for state general tax levy amounts 
123.32  payable in 2004 and thereafter. 
123.33     Sec. 33.  Minnesota Statutes 2004, section 282.15, is 
123.34  amended to read: 
123.35     282.15 [SALES OF FORFEITED AGRICULTURAL LANDS.] 
123.36     The sale shall be conducted by the auditor of the county in 
124.1   which the parcels lie.  The parcels shall be sold to the highest 
124.2   bidder but not for less than the appraised value.  The sales 
124.3   shall be for cash or on the following terms:  The appraised 
124.4   value of all merchantable timber on agricultural lands shall be 
124.5   paid for in full at the date of sale.  At least 15 percent of 
124.6   the purchase price of the land shall be paid in cash at the time 
124.7   of purchase.  The balance shall be paid in not more than 20 
124.8   equal annual installments, with interest at a rate equal to the 
124.9   rate in effect at the time under section 549.09 on the unpaid 
124.10  balance each year.  Both principal and interest are due and 
124.11  payable on December 31 each year following that in which the 
124.12  purchase was made.  The purchaser may pay any number of 
124.13  installments of principal and interest on or before their due 
124.14  date.  When the sale is on terms other than for cash in full, 
124.15  the purchaser shall receive from the county auditor a contract 
124.16  for deed, in a form prescribed by the attorney general.  The 
124.17  county auditor shall make a report to the commissioner of 
124.18  natural resources not more than 30 days after each public sale 
124.19  showing the lands sold at the sales, and submit a copy of each 
124.20  contract of sale. 
124.21     All lands sold pursuant to this section shall, on the 
124.22  second day of January following the date of the sale, must be 
124.23  restored to the tax rolls and become subject to taxation in the 
124.24  same manner as they were assessed and taxed before becoming the 
124.25  absolute property of the state for the assessment year 
124.26  determined under section 272.02, subdivision 38, paragraph (c).  
124.27     <b>[EFFECTIVE DATE.]</b> This section is effective for sales 
124.28  occurring on or after July 1, 2005. 
124.29     Sec. 34.  Minnesota Statutes 2004, section 282.21, is 
124.30  amended to read: 
124.31     282.21 [FORM OF CONVEYANCE.] 
124.32     When any sale has been made under sections 282.14 to 
124.33  282.22, upon payment in full of the purchase price, appropriate 
124.34  conveyance in fee in such form as may be prescribed by the 
124.35  attorney general shall be issued by the commissioner of finance 
124.36  to the purchaser or the purchaser's assigns and this conveyance 
125.1   shall have the force and effect of a patent from the state.  
125.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
125.3   following final enactment. 
125.4      Sec. 35.  Minnesota Statutes 2004, section 282.224, is 
125.5   amended to read: 
125.6      282.224 [FORM OF CONVEYANCE.] 
125.7      When any sale has been made under sections 282.221 to 
125.8   282.226, upon payment in full of the purchase price, appropriate 
125.9   conveyance in fee, in such form as may be prescribed by the 
125.10  attorney general, shall be issued by the commissioner of natural 
125.11  resources to the purchaser or the purchaser's assignee, and the 
125.12  conveyance shall have the force and effect of a patent from the 
125.13  state.  
125.14     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
125.15  following final enactment. 
125.16     Sec. 36.  Minnesota Statutes 2004, section 282.301, is 
125.17  amended to read: 
125.18     282.301 [RECEIPTS FOR PAYMENTS.] 
125.19     When any sale has been made under sections 282.012 and 
125.20  282.241 to 282.324, the purchaser shall receive from the county 
125.21  auditor at the time of repurchase a receipt, in such form as may 
125.22  be prescribed by the attorney general.  When the purchase price 
125.23  of a parcel of land shall be paid in full, the following facts 
125.24  shall be certified by the county auditor to the commissioner of 
125.25  revenue of the state of Minnesota:  the description of land, the 
125.26  date of sale, the name of the purchaser or the purchaser's 
125.27  assignee, and the date when the final installment of the 
125.28  purchase price was paid.  Upon payment in full of the purchase 
125.29  price, the purchaser or the assignee shall receive a quitclaim 
125.30  deed from the state, to be executed by the commissioner of 
125.31  revenue.  The deed must be sent to the county auditor who shall 
125.32  have it recorded before it is forwarded to the purchaser.  
125.33  Failure to make any payment herein required shall constitute 
125.34  default and upon such default and cancellation in accord with 
125.35  section 282.40, the right, title and interest of the purchaser 
125.36  or the purchaser's heirs, representatives, or assigns in such 
126.1   parcel shall terminate.  
126.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
126.3   following final enactment. 
126.4      Sec. 37.  Minnesota Statutes 2004, section 290B.05, 
126.5   subdivision 3, is amended to read: 
126.6      Subd. 3.  [CALCULATION OF DEFERRED PROPERTY TAX AMOUNT.] 
126.7   When final property tax amounts for the following year have been 
126.8   determined, the county auditor shall calculate the "deferred 
126.9   property tax amount."  The deferred property tax amount is equal 
126.10  to the lesser of (1) the maximum allowable deferral for the 
126.11  year; or (2) the difference between (i) the total amount of 
126.12  property taxes and special assessments levied upon the 
126.13  qualifying homestead by all taxing jurisdictions and (ii) the 
126.14  maximum property tax amount.  Any special assessments levied by 
126.15  any local unit of government must not be included in the total 
126.16  tax used to calculate the deferred tax amount. For this purpose 
126.17  "special assessments" includes any assessment, fee, or other 
126.18  charge that may by law, and which does, appear on the property 
126.19  tax statement for the property for collection under the laws 
126.20  applicable to the enforcement of real estate taxes.  Any tax 
126.21  attributable to new improvements made to the property after the 
126.22  initial application has been approved under section 290B.04, 
126.23  subdivision 2, must be excluded when determining any subsequent 
126.24  deferred property tax amount.  The county auditor shall 
126.25  annually, on or before April 15, certify to the commissioner of 
126.26  revenue the property tax deferral amounts determined under this 
126.27  subdivision by property and by owner.  
126.28     <b>[EFFECTIVE DATE.]</b> This section is effective for amounts 
126.29  deferred in 2006 and thereafter. 
126.30     Sec. 38.  Minnesota Statutes 2004, section 290C.05, is 
126.31  amended to read: 
126.32     290C.05 [ANNUAL CERTIFICATION.] 
126.33     On or before July 1 of each year, beginning with the year 
126.34  after the claimant has received an approved application, the 
126.35  commissioner shall send each claimant enrolled under the 
126.36  sustainable forest incentive program a certification form.  The 
127.1   claimant must sign the certification, attesting that the 
127.2   requirements and conditions for continued enrollment in the 
127.3   program are currently being met, and must return the signed 
127.4   certification form to the commissioner by August 15 of that same 
127.5   year.  Failure to If the claimant does not return an annual 
127.6   certification form by the due date shall result in removal of 
127.7   the lands from the provisions of the sustainable forest 
127.8   incentive program, and the imposition of any applicable removal 
127.9   penalty, the provisions in section 290C.11 apply.  The claimant 
127.10  may appeal the removal and any associated penalty according to 
127.11  the procedures and within the time allowed under this chapter. 
127.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
127.13  following final enactment. 
127.14     Sec. 39.  [290C.055] [LENGTH OF COVENANT.] 
127.15     The covenant remains in effect for a minimum of eight 
127.16  years.  If land is removed from the program before it has been 
127.17  enrolled for four years, the covenant remains in effect for 
127.18  eight years from the date recorded. 
127.19     If land that has been enrolled for four years or more is 
127.20  removed from the program for any reason, there is a waiting 
127.21  period before the covenant terminates.  The covenant terminates 
127.22  on January 1 of the fifth calendar year that begins after the 
127.23  date that: 
127.24     (1) the commissioner receives notification from the 
127.25  claimant that the claimant wishes to remove the land from the 
127.26  program under section 290C.10; or 
127.27     (2) the date that the land is removed from the program 
127.28  under section 290C.11. 
127.29     Notwithstanding the other provisions of this section, the 
127.30  covenant is terminated at the same time that the land is removed 
127.31  from the program due to acquisition of title or possession for a 
127.32  public purpose under section 290C.10. 
127.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
127.34  following final enactment. 
127.35     Sec. 40.  Minnesota Statutes 2004, section 290C.10, is 
127.36  amended to read: 
128.1      290C.10 [WITHDRAWAL PROCEDURES.] 
128.2      An approved claimant under the sustainable forest incentive 
128.3   program for a minimum of four years may notify the commissioner 
128.4   of the intent to terminate enrollment.  Within 90 days of 
128.5   receipt of notice to terminate enrollment, the commissioner 
128.6   shall inform the claimant in writing, acknowledging receipt of 
128.7   this notice and indicating the effective date of termination 
128.8   from the sustainable forest incentive program.  Termination of 
128.9   enrollment in the sustainable forest incentive program occurs on 
128.10  January 1 of the fifth calendar year that begins after receipt 
128.11  by the commissioner of the termination notice.  After the 
128.12  commissioner issues an effective date of termination, a claimant 
128.13  wishing to continue the land's enrollment in the sustainable 
128.14  forest incentive program beyond the termination date must apply 
128.15  for enrollment as prescribed in section 290C.04.  A claimant who 
128.16  withdraws a parcel of land from this program may not reenroll 
128.17  the parcel for a period of three years.  Within 90 days after 
128.18  the termination date, the commissioner shall execute and 
128.19  acknowledge a document releasing the land from the covenant 
128.20  required under this chapter.  The document must be mailed to the 
128.21  claimant and is entitled to be recorded.  The commissioner may 
128.22  allow early withdrawal from the Sustainable Forest Incentive Act 
128.23  without penalty in cases of condemnation when the state of 
128.24  Minnesota, any local government unit, or any other entity which 
128.25  has the right of eminent domain acquires title or possession to 
128.26  the land for a public purpose notwithstanding the provisions of 
128.27  this section.  In the case of such acquisition, the commissioner 
128.28  shall execute and acknowledge a document releasing the land 
128.29  acquired by the state, local government unit, or other entity 
128.30  from the covenant.  All other enrolled land must remain in the 
128.31  program. 
128.32     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
128.33  following final enactment. 
128.34     Sec. 41.  Minnesota Statutes 2004, section 373.45, 
128.35  subdivision 7, is amended to read: 
128.36     Subd. 7.  [AID REDUCTION FOR REPAYMENT.] (a) Except as 
129.1   provided in paragraph (b), the commissioner may reduce, by the 
129.2   amount paid by the state under this section on behalf of the 
129.3   county, plus the interest due on the state payments, the 
129.4   following aids payable to the county:  
129.5      (1) homestead and agricultural credit aid and disparity 
129.6   reduction aid payable under section 273.1398; 
129.7      (2) county criminal justice aid payable under section 
129.8   477A.0121; and 
129.9      (3) family preservation aid payable under section 477A.0122 
129.10  county program aid under section 477A.0124. 
129.11  The amount of any aid reduction reverts from the appropriate 
129.12  account to the state general fund.  
129.13     (b) If, after review of the financial situation of the 
129.14  county, the authority advises the commissioner that a total 
129.15  reduction of the aids would cause an undue hardship on the 
129.16  county, the authority, with the approval of the commissioner, 
129.17  may establish a different schedule for reduction of aids to 
129.18  repay the state.  The amount of aids to be reduced are decreased 
129.19  by any amounts repaid to the state by the county from other 
129.20  revenue sources. 
129.21     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
129.22  in 2005 and thereafter. 
129.23     Sec. 42.  Minnesota Statutes 2004, section 469.1735, 
129.24  subdivision 3, is amended to read: 
129.25     Subd. 3.  [TRANSFER AUTHORITY FOR PROPERTY TAX.] (a) A city 
129.26  may elect to use all or part of its allocation under subdivision 
129.27  2 to reimburse the city or county or both for property tax 
129.28  reductions under section 272.0212.  To elect this option, the 
129.29  city must notify the commissioner of revenue by October 1 of 
129.30  each calendar year of the amount of the property tax 
129.31  reductions for which it seeks reimbursements for taxes payable 
129.32  during the following current year and the governmental units to 
129.33  which the amounts will be paid.  The commissioner may require 
129.34  the city to provide information substantiating the amount of the 
129.35  reductions granted or any other information necessary to 
129.36  administer this provision.  The commissioner shall pay the 
130.1   reimbursements by December 26 of the taxes payable year.  Any 
130.2   amount transferred under this authority reduces the amount of 
130.3   tax credit certificates available under subdivisions 1 and 2. 
130.4      (b) The amount elected by the city under paragraph (a) is 
130.5   appropriated to the commissioner of revenue from the general 
130.6   fund to reimburse the city or county for tax reductions under 
130.7   section 272.0212.  The amount appropriated may not exceed the 
130.8   maximum amounts allocated to a city under subdivision 2, 
130.9   paragraph (b), less the amount of certificates issued by the 
130.10  city under subdivision 1, and is available until expended.  
130.11     <b>[EFFECTIVE DATE.]</b> This section is effective for 
130.12  reimbursements of taxes payable in 2005 and thereafter. 
130.13     Sec. 43.  Laws 2003, chapter 127, article 5, section 27, 
130.14  the effective date, is amended to read: 
130.15     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
130.16  payable in 2004 and thereafter distributions occurring on or 
130.17  after June 10, 2003. 
130.18     Sec. 44.  Laws 2003, chapter 127, article 5, section 28, 
130.19  the effective date, is amended to read: 
130.20     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
130.21  payable in 2004 and thereafter distributions occurring on or 
130.22  after June 10, 2003. 
130.23     Sec. 45.  [LINCOLN AND PIPESTONE COUNTIES; TOWN LEVY 
130.24  ADJUSTMENT FOR WIND ENERGY PRODUCTION TAX.] 
130.25     Notwithstanding the deadlines in Minnesota Statutes, 
130.26  section 275.07, towns located in Lincoln or Pipestone County are 
130.27  authorized to adjust their payable 2004 levy for all or a 
130.28  portion of their estimated wind energy production tax amounts 
130.29  for 2004, as computed by the commissioner of revenue from 
130.30  reports filed under Minnesota Statutes, section 272.029, 
130.31  subdivision 4.  The Lincoln and Pipestone County auditors may 
130.32  adjust the payable 2004 levy certifications under Minnesota 
130.33  Statutes, section 275.07, subdivision 1, based upon the towns 
130.34  that have recertified their levies under this section by March 
130.35  15, 2004. 
130.36     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
131.1   payable in 2004. 
131.2      Sec. 46.  [REPEALER.] 
131.3      (a) Minnesota Statutes 2004, sections 273.19, subdivision 
131.4   5; 274.05; 275.15; 275.61, subdivision 2; and 283.07, are 
131.5   repealed effective the day following final enactment. 
131.6      (b) Minnesota Statutes 2004, section 469.1794, subdivision 
131.7   6, is repealed effective the day following final enactment and 
131.8   applies to districts for which the request for certification was 
131.9   made on, before, or after August 1, 1979, and before August 1, 
131.10  2001. 
131.11     (c) Laws 1975, chapter 287, section 5, and Laws 2003, 
131.12  chapter 127, article 9, section 9, subdivision 4, are repealed 
131.13  effective without local approval for taxes payable in 2006 and 
131.14  thereafter. 
131.15     (d) Minnesota Statutes 2004, sections 270.85; 270.88; and 
131.16  273.37, subdivision 3, are repealed effective September 1, 2005. 
131.17                             ARTICLE 5 
131.18           INCOME, CORPORATE FRANCHISE, AND ESTATE TAXES 
131.19     Section 1.  Minnesota Statutes 2004, section 190.09, 
131.20  subdivision 2, is amended to read: 
131.21     Subd. 2.  [MISSION; EFFICIENCY.] It is part of the 
131.22  department's mission that within the department's resources the 
131.23  adjutant general shall endeavor to: 
131.24     (1) prevent the waste or unnecessary spending of public 
131.25  money; 
131.26     (2) use innovative fiscal and human resource practices to 
131.27  manage the state's resources and operate the department as 
131.28  efficiently as possible; 
131.29     (3) coordinate the department's activities wherever 
131.30  appropriate with the activities of other governmental agencies; 
131.31     (4) use technology where appropriate to increase agency 
131.32  productivity, improve customer service, increase public access 
131.33  to information about government, and increase public 
131.34  participation in the business of government; 
131.35     (5) utilize constructive and cooperative labor-management 
131.36  practices to the extent otherwise required by chapters 43A and 
132.1   179A; 
132.2      (6) report to the legislature on the performance of agency 
132.3   operations and the accomplishment of agency goals in the 
132.4   agency's biennial budget according to section 16A.10, 
132.5   subdivision 1; and 
132.6      (7) recommend to the legislature appropriate changes in law 
132.7   necessary to carry out the mission and improve the performance 
132.8   of the department; and 
132.9      (8) administer checkoff funds as provided in section 
132.10  290.433. 
132.11     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
132.12  years beginning after December 31, 2004. 
132.13     Sec. 2.  Minnesota Statutes 2004, section 289A.08, 
132.14  subdivision 1, is amended to read: 
132.15     Subdivision 1.  [GENERALLY; INDIVIDUALS.] (a) A taxpayer 
132.16  must file a return for each taxable year the taxpayer is 
132.17  required to file a return under section 6012 of the Internal 
132.18  Revenue Code, except that: 
132.19     (1) an individual who is not a Minnesota resident for any 
132.20  part of the year is not required to file a Minnesota income tax 
132.21  return if the individual's gross income derived from Minnesota 
132.22  sources as determined under sections 290.081, paragraph (a), and 
132.23  290.17, is less than the filing requirements for a single 
132.24  individual who is a full year resident of Minnesota; and 
132.25     (2) an individual who is a Minnesota resident is not 
132.26  required to file a Minnesota income tax return if the 
132.27  individual's gross income derived from Minnesota sources as 
132.28  determined under section 290.17, less the amount of the 
132.29  individual's gross income that consists of compensation paid to 
132.30  members of the armed forces of the United States or United 
132.31  Nations for active duty performed outside Minnesota, is less 
132.32  than the filing requirements for a single individual who is a 
132.33  full-year resident of Minnesota. 
132.34     (b) The decedent's final income tax return, and other 
132.35  income tax returns for prior years where the decedent had gross 
132.36  income in excess of the minimum amount at which an individual is 
133.1   required to file and did not file, must be filed by the 
133.2   decedent's personal representative, if any.  If there is no 
133.3   personal representative, the return or returns must be filed by 
133.4   the transferees, as defined in section 289A.38, subdivision 13, 
133.5   who receive property of the decedent. 
133.6      (c) The term "gross income," as it is used in this section, 
133.7   has the same meaning given it in section 290.01, subdivision 20. 
133.8      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
133.9   years beginning after December 31, 2004. 
133.10     Sec. 3.  Minnesota Statutes 2004, section 289A.08, 
133.11  subdivision 3, is amended to read: 
133.12     Subd. 3.  [CORPORATIONS.] A corporation that is subject to 
133.13  the state's jurisdiction to tax under section 290.014, 
133.14  subdivision 5, must file a return, except that a foreign 
133.15  operating corporation as defined in section 290.01, subdivision 
133.16  6b, is not required to file a return.  The commissioner shall 
133.17  adopt rules for the filing of one return on behalf of the 
133.18  members of an affiliated group of corporations that are required 
133.19  to file a combined report.  All members of an affiliated group 
133.20  that are required to file a combined report must file one return 
133.21  on behalf of the members of the group under rules adopted by the 
133.22  commissioner.  If a corporation claims on a return that it has 
133.23  paid tax in excess of the amount of taxes lawfully due, that 
133.24  corporation must include on that return information necessary 
133.25  for payment of the tax in excess of the amount lawfully due by 
133.26  electronic means. 
133.27     <b>[EFFECTIVE DATE.]</b> This section is effective for returns 
133.28  filed after December 31, 2005. 
133.29     Sec. 4.  Minnesota Statutes 2004, section 289A.08, 
133.30  subdivision 7, is amended to read: 
133.31     Subd. 7.  [COMPOSITE INCOME TAX RETURNS FOR NONRESIDENT 
133.32  PARTNERS, SHAREHOLDERS, AND BENEFICIARIES.] (a) The commissioner 
133.33  may allow a partnership with nonresident partners to file a 
133.34  composite return and to pay the tax on behalf of nonresident 
133.35  partners who have no other Minnesota source income.  This 
133.36  composite return must include the names, addresses, Social 
134.1   Security numbers, income allocation, and tax liability for the 
134.2   nonresident partners electing to be covered by the composite 
134.3   return.  
134.4      (b) The computation of a partner's tax liability must be 
134.5   determined by multiplying the income allocated to that partner 
134.6   by the highest rate used to determine the tax liability for 
134.7   individuals under section 290.06, subdivision 2c.  Nonbusiness 
134.8   deductions, standard deductions, or personal exemptions are not 
134.9   allowed. 
134.10     (c) The partnership must submit a request to use this 
134.11  composite return filing method for nonresident partners.  The 
134.12  requesting partnership must file a composite return in the form 
134.13  prescribed by the commissioner of revenue.  The filing of a 
134.14  composite return is considered a request to use the composite 
134.15  return filing method. 
134.16     (d) The electing partner must not have any Minnesota source 
134.17  income other than the income from the partnership and other 
134.18  electing partnerships.  If it is determined that the electing 
134.19  partner has other Minnesota source income, the inclusion of the 
134.20  income and tax liability for that partner under this provision 
134.21  will not constitute a return to satisfy the requirements of 
134.22  subdivision 1.  The tax paid for the individual as part of the 
134.23  composite return is allowed as a payment of the tax by the 
134.24  individual on the date on which the composite return payment was 
134.25  made.  If the electing nonresident partner has no other 
134.26  Minnesota source income, filing of the composite return is a 
134.27  return for purposes of subdivision 1. 
134.28     (e) This subdivision does not negate the requirement that 
134.29  an individual pay estimated tax if the individual's liability 
134.30  would exceed the requirements set forth in section 289A.25.  A 
134.31  composite estimate may, however, be filed in a manner similar to 
134.32  and containing the information required under paragraph (a). 
134.33     (f) If an electing partner's share of the partnership's 
134.34  gross income from Minnesota sources is less than the filing 
134.35  requirements for a nonresident under this subdivision, the tax 
134.36  liability is zero.  However, a statement showing the partner's 
135.1   share of gross income must be included as part of the composite 
135.2   return. 
135.3      (g) The election provided in this subdivision is not only 
135.4   available to any a partner other than who has no other Minnesota 
135.5   source income and who is either (1) a full-year nonresident 
135.6   individual who has no other Minnesota source income or (2) a 
135.7   trust or estate that does not claim a deduction under either 
135.8   section 651 or 661 of the Internal Revenue Code. 
135.9      (h) A corporation defined in section 290.9725 and its 
135.10  nonresident shareholders may make an election under this 
135.11  paragraph.  The provisions covering the partnership apply to the 
135.12  corporation and the provisions applying to the partner apply to 
135.13  the shareholder. 
135.14     (i) Estates and trusts distributing current income only and 
135.15  the nonresident individual beneficiaries of the estates or 
135.16  trusts may make an election under this paragraph.  The 
135.17  provisions covering the partnership apply to the estate or 
135.18  trust.  The provisions applying to the partner apply to the 
135.19  beneficiary.  
135.20     (j) For the purposes of this subdivision, "income" means 
135.21  the partner's share of federal adjusted gross income from the 
135.22  partnership modified by the additions provided in section 
135.23  290.01, subdivision 19a, clauses (6) and (7), and the 
135.24  subtractions provided in section 290.01, subdivision 19b, clause 
135.25  (11), to the extent the amount is assignable or allocable to 
135.26  Minnesota under section 290.17.  The subtraction allowed under 
135.27  section 290.01, subdivision 19b, clause (11), is only allowed on 
135.28  the composite tax computation to the extent the electing partner 
135.29  would have been allowed the subtraction. 
135.30     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
135.31  beginning after December 31, 2004. 
135.32     Sec. 5.  Minnesota Statutes 2004, section 289A.08, 
135.33  subdivision 13, is amended to read: 
135.34     Subd. 13.  [LONG AND SHORT FORMS.] The commissioner shall 
135.35  provide a long form individual income tax return and may provide 
135.36  a short form individual income tax return.  The returns shall be 
136.1   in a form that is consistent with the provisions of chapter 290, 
136.2   notwithstanding any other law to the contrary.  The nongame 
136.3   wildlife checkoff provided in section 290.431 and the dependent 
136.4   care credit provided in section 290.067 must be included on the 
136.5   short form.  The commissioner must provide information on local 
136.6   use taxes in the individual income tax instruction booklet, 
136.7   including a list of the jurisdictions with local use taxes.  The 
136.8   commissioner must provide this information in the same section 
136.9   of the booklet that provides information on the state use tax. 
136.10     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
136.11  years beginning after December 31, 2004. 
136.12     Sec. 6.  Minnesota Statutes 2004, section 289A.18, 
136.13  subdivision 1, is amended to read: 
136.14     Subdivision 1.  [INDIVIDUAL INCOME, FIDUCIARY INCOME, 
136.15  CORPORATE FRANCHISE, AND ENTERTAINMENT TAXES; PARTNERSHIP AND S 
136.16  CORPORATION RETURNS; INFORMATION RETURNS; MINING COMPANY 
136.17  RETURNS.] The returns required to be made under sections 289A.08 
136.18  and 289A.12 must be filed at the following times: 
136.19     (1) returns made on the basis of the calendar year must be 
136.20  filed on April 15 following the close of the calendar year, 
136.21  except that returns of corporations must be filed on March 15 
136.22  following the close of the calendar year; 
136.23     (2) returns made on the basis of the fiscal year must be 
136.24  filed on the 15th day of the fourth month following the close of 
136.25  the fiscal year, except that returns of corporations must be 
136.26  filed on the 15th day of the third month following the close of 
136.27  the fiscal year; 
136.28     (3) returns for a fractional part of a year must be filed 
136.29  on the 15th day of the fourth month following the end of the 
136.30  month in which falls the last day of the period for which the 
136.31  return is made, except that the returns of corporations must be 
136.32  filed on the 15th day of the third month following the end of 
136.33  the month tax year of the unitary group in which falls the last 
136.34  day of the period for which the return is made; 
136.35     (4) in the case of a final return of a decedent for a 
136.36  fractional part of a year, the return must be filed on the 15th 
137.1   day of the fourth month following the close of the 12-month 
137.2   period that began with the first day of that fractional part of 
137.3   a year; 
137.4      (5) in the case of the return of a cooperative association, 
137.5   returns must be filed on or before the 15th day of the ninth 
137.6   month following the close of the taxable year; 
137.7      (6) if a corporation has been divested from a unitary group 
137.8   and files a return for a fractional part of a year in which it 
137.9   was a member of a unitary business that files a combined report 
137.10  under section 290.34, subdivision 2, the divested corporation's 
137.11  return must be filed on the 15th day of the third month 
137.12  following the close of the common accounting period that 
137.13  includes the fractional year; 
137.14     (7) returns of entertainment entities must be filed on 
137.15  April 15 following the close of the calendar year; 
137.16     (8) returns required to be filed under section 289A.08, 
137.17  subdivision 4, must be filed on the 15th day of the fifth month 
137.18  following the close of the taxable year; 
137.19     (9) returns of mining companies must be filed on May 1 
137.20  following the close of the calendar year; and 
137.21     (10) returns required to be filed with the commissioner 
137.22  under section 289A.12, subdivision 2, 4 to 10, or 14, must be 
137.23  filed within 30 days after being demanded by the commissioner. 
137.24     <b>[EFFECTIVE DATE.]</b> This section is effective for fractional 
137.25  years closing after December 31, 2004. 
137.26     Sec. 7.  Minnesota Statutes 2004, section 289A.19, 
137.27  subdivision 4, is amended to read: 
137.28     Subd. 4.  [ESTATE TAX RETURNS.] When in the commissioner's 
137.29  judgment good cause exists, the commissioner may extend the time 
137.30  for filing an estate tax return for not more than six months.  
137.31  When an extension to file the federal estate tax return has been 
137.32  granted under section 6081 of the Internal Revenue Code, the 
137.33  time for filing the estate tax return is extended for that 
137.34  period.  If the estate requests an extension to file an estate 
137.35  tax return within the time provided in section 289A.18, 
137.36  subdivision 3, the commissioner shall extend the time for filing 
138.1   the estate tax return for six months. 
138.2      <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
138.3   decedents dying after December 31, 2004. 
138.4      Sec. 8.  Minnesota Statutes 2004, section 289A.20, 
138.5   subdivision 2, is amended to read: 
138.6      Subd. 2.  [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING, 
138.7   WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 
138.8   WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 
138.9   (a) A tax required to be deducted and withheld during the 
138.10  quarterly period must be paid on or before the last day of the 
138.11  month following the close of the quarterly period, unless an 
138.12  earlier time for payment is provided.  A tax required to be 
138.13  deducted and withheld from compensation of an entertainer and 
138.14  from a payment to an out-of-state contractor must be paid on or 
138.15  before the date the return for such tax must be filed under 
138.16  section 289A.18, subdivision 2.  Taxes required to be deducted 
138.17  and withheld by partnerships and, S corporations, and trusts 
138.18  must be paid on or before the date the return must be filed 
138.19  under section 289A.18, subdivision 2 a quarterly basis as 
138.20  estimated taxes under section 289A.25 for partnerships and 
138.21  trusts and under section 289A.26 for S corporations. 
138.22     (b) An employer who, during the previous quarter, withheld 
138.23  more than $1,500 of tax under section 290.92, subdivision 2a or 
138.24  3, or 290.923, subdivision 2, must deposit tax withheld under 
138.25  those sections with the commissioner within the time allowed to 
138.26  deposit the employer's federal withheld employment taxes under 
138.27  Code of Federal Regulations, title 26, section 31.6302-1, as 
138.28  amended through December 31, 2001, without regard to the safe 
138.29  harbor or de minimis rules in subparagraph (f) or the one-day 
138.30  rule in subsection (c), clause (3).  Taxpayers must submit a 
138.31  copy of their federal notice of deposit status to the 
138.32  commissioner upon request by the commissioner. 
138.33     (c) The commissioner may prescribe by rule other return 
138.34  periods or deposit requirements.  In prescribing the reporting 
138.35  period, the commissioner may classify payors according to the 
138.36  amount of their tax liability and may adopt an appropriate 
139.1   reporting period for the class that the commissioner judges to 
139.2   be consistent with efficient tax collection.  In no event will 
139.3   the duration of the reporting period be more than one year. 
139.4      (d) If less than the correct amount of tax is paid to the 
139.5   commissioner, proper adjustments with respect to both the tax 
139.6   and the amount to be deducted must be made, without interest, in 
139.7   the manner and at the times the commissioner prescribes.  If the 
139.8   underpayment cannot be adjusted, the amount of the underpayment 
139.9   will be assessed and collected in the manner and at the times 
139.10  the commissioner prescribes. 
139.11     (e) If the aggregate amount of the tax withheld during a 
139.12  fiscal year ending June 30 under section 290.92, subdivision 2a 
139.13  or 3, is equal to or exceeds the amounts established for 
139.14  remitting federal withheld taxes pursuant to the regulations 
139.15  promulgated under section 6302(h) of the Internal Revenue Code, 
139.16  the employer must remit each required deposit for wages paid in 
139.17  the subsequent calendar year by electronic means. 
139.18     (f) A third-party bulk filer as defined in section 290.92, 
139.19  subdivision 30, paragraph (a), clause (2), who remits 
139.20  withholding deposits must remit all deposits by electronic means 
139.21  as provided in paragraph (e), regardless of the aggregate amount 
139.22  of tax withheld during a fiscal year for all of the employers.  
139.23     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
139.24  beginning after December 31, 2005. 
139.25     Sec. 9.  Minnesota Statutes 2004, section 289A.31, 
139.26  subdivision 2, is amended to read: 
139.27     Subd. 2.  [JOINT INCOME TAX RETURNS.] (a) If a joint income 
139.28  tax return is made by a husband and wife, the liability for the 
139.29  tax is joint and several.  A spouse who qualifies for relief 
139.30  from a liability attributable to an underpayment under section 
139.31  6015(b) of the Internal Revenue Code is relieved of the state 
139.32  income tax liability on the underpayment.  
139.33     (b) In the case of individuals who were a husband and wife 
139.34  prior to the dissolution of their marriage or their legal 
139.35  separation, or prior to the death of one of the individuals, for 
139.36  tax liabilities reported on a joint or combined return, the 
140.1   liability of each person is limited to the proportion of the tax 
140.2   due on the return that equals that person's proportion of the 
140.3   total tax due if the husband and wife filed separate returns for 
140.4   the taxable year.  This provision is effective only when the 
140.5   commissioner receives written notice of the marriage 
140.6   dissolution, legal separation, or death of a spouse from the 
140.7   husband or wife.  No refund may be claimed by an ex-spouse, 
140.8   legally separated or widowed spouse for any taxes paid more than 
140.9   60 days before receipt by the commissioner of the written notice.
140.10     (c) A request for calculation of separate liability 
140.11  pursuant to paragraph (b) for taxes reported on a return must be 
140.12  made within six years after the due date of the return.  For 
140.13  calculation of separate liability for taxes assessed by the 
140.14  commissioner under section 289A.35 or 289A.37, the request must 
140.15  be made within six years after the date of assessment.  The 
140.16  commissioner is not required to calculate separate liability if 
140.17  the remaining unpaid liability for which recalculation is 
140.18  requested is $100 or less. 
140.19     <b>[EFFECTIVE DATE.]</b> This section is effective for requests 
140.20  for relief made on or after the day following final enactment. 
140.21     Sec. 10.  Minnesota Statutes 2004, section 289A.38, 
140.22  subdivision 7, is amended to read: 
140.23     Subd. 7.  [FEDERAL TAX CHANGES.] If the amount of income, 
140.24  items of tax preference, deductions, or credits for any year of 
140.25  a taxpayer as reported to the Internal Revenue Service is 
140.26  changed or corrected by the commissioner of Internal Revenue or 
140.27  other officer of the United States or other competent authority, 
140.28  or where a renegotiation of a contract or subcontract with the 
140.29  United States results in a change in income, items of tax 
140.30  preference, deductions, credits, or withholding tax, or, in the 
140.31  case of estate tax, where there are adjustments to the taxable 
140.32  estate resulting in a change to the credit for state death 
140.33  taxes, the taxpayer shall report the change or correction or 
140.34  renegotiation results in writing to the commissioner.  The 
140.35  report must be submitted within 180 days after the final 
140.36  determination and must be in the form of either an amended 
141.1   Minnesota estate, withholding tax, corporate franchise tax, or 
141.2   income tax return conceding the accuracy of the federal 
141.3   determination or a letter detailing how the federal 
141.4   determination is incorrect or does not change the Minnesota 
141.5   tax.  An amended Minnesota income tax return must be accompanied 
141.6   by an amended property tax refund return, if necessary.  A 
141.7   taxpayer filing an amended federal tax return must also file a 
141.8   copy of the amended return with the commissioner of revenue 
141.9   within 180 days after filing the amended return. 
141.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
141.11  following final enactment. 
141.12     Sec. 11.  Minnesota Statutes 2004, section 289A.50, 
141.13  subdivision 1a, is amended to read: 
141.14     Subd. 1a.  [REFUND FORM.] On or before January 1, 2000, the 
141.15  commissioner of revenue shall prepare and make available to 
141.16  taxpayers a form for filing claims for refund of taxes paid in 
141.17  excess of the amount due.  If the commissioner fails to prepare 
141.18  a form under this subdivision by January 1, 2000, any claims for 
141.19  refund made after January 1, 2000, and up to ten days after the 
141.20  form is made available to taxpayers are deemed to be made in 
141.21  compliance with the requirement of the form.  The commissioner 
141.22  may require corporate franchise taxpayers claiming a refund of 
141.23  corporate franchise taxes paid in excess of the amount lawfully 
141.24  due to include on the claim for refund or amended return 
141.25  information necessary for payment of the taxes paid in excess of 
141.26  taxes lawfully due by electronic means. 
141.27     <b>[EFFECTIVE DATE.]</b> This section is effective for claims for 
141.28  refund filed after December 31, 2005. 
141.29     Sec. 12.  Minnesota Statutes 2004, section 289A.60, 
141.30  subdivision 13, is amended to read: 
141.31     Subd. 13.  [PENALTIES FOR TAX RETURN PREPARERS.] (a) If an 
141.32  understatement of liability with respect to a return or claim 
141.33  for refund is due to a reckless disregard of laws and rules or 
141.34  willful attempt in any manner to understate the liability for a 
141.35  tax by a person who is a tax return preparer with respect to the 
141.36  return or claim, the person shall pay to the commissioner a 
142.1   penalty of $500.  If a part of a property tax refund claim is 
142.2   excessive due to a reckless disregard or willful attempt in any 
142.3   manner to overstate the claim for relief allowed under chapter 
142.4   290A by a person who is a tax refund or return preparer, the 
142.5   person shall pay to the commissioner a penalty of $500 with 
142.6   respect to the claim.  These penalties may not be assessed 
142.7   against the employer of a tax return preparer unless the 
142.8   employer was actively involved in the reckless disregard or 
142.9   willful attempt to understate the liability for a tax or to 
142.10  overstate the claim for refund.  These penalties are income tax 
142.11  liabilities and may be assessed at any time as provided in 
142.12  section 289A.38, subdivision 5. 
142.13     (b) A civil action in the name of the state of Minnesota 
142.14  may be commenced to enjoin any person who is a tax return 
142.15  preparer doing business in this state from further engaging in 
142.16  any conduct described in paragraph (c).  An action under this 
142.17  paragraph must be brought by the attorney general in the 
142.18  district court for the judicial district of the tax return 
142.19  preparer's residence or principal place of business, or in which 
142.20  the taxpayer with respect to whose tax return the action is 
142.21  brought resides.  The court may exercise its jurisdiction over 
142.22  the action separate and apart from any other action brought by 
142.23  the state of Minnesota against the tax return preparer or any 
142.24  taxpayer. 
142.25     (c) In an action under paragraph (b), if the court finds 
142.26  that a tax return preparer has: 
142.27     (1) engaged in any conduct subject to a civil penalty under 
142.28  section 289A.60 or a criminal penalty under section 289A.63; 
142.29     (2) misrepresented the preparer's eligibility to practice 
142.30  before the Department of Revenue, or otherwise misrepresented 
142.31  the preparer's experience or education as a tax return preparer; 
142.32     (3) guaranteed the payment of any tax refund or the 
142.33  allowance of any tax credit; or 
142.34     (4) engaged in any other fraudulent or deceptive conduct 
142.35  that substantially interferes with the proper administration of 
142.36  state tax law, and injunctive relief is appropriate to prevent 
143.1   the recurrence of that conduct, 
143.2   the court may enjoin the person from further engaging in that 
143.3   conduct. 
143.4      (d) If the court finds that a tax return preparer has 
143.5   continually or repeatedly engaged in conduct described in 
143.6   paragraph (c), and that an injunction prohibiting that conduct 
143.7   would not be sufficient to prevent the person's interference 
143.8   with the proper administration of state tax laws, the court may 
143.9   enjoin the person from acting as a tax return preparer.  The 
143.10  court may not enjoin the employer of a tax return preparer for 
143.11  conduct described in paragraph (c) engaged in by one or more of 
143.12  the employer's employees unless the employer was also actively 
143.13  involved in that conduct. 
143.14     (e) For purposes of this subdivision, the term 
143.15  "understatement of liability" means an understatement of the net 
143.16  amount payable with respect to a tax imposed by state tax law, 
143.17  or an overstatement of the net amount creditable or refundable 
143.18  with respect to a tax.  The determination of whether or not 
143.19  there is an understatement of liability must be made without 
143.20  regard to any administrative or judicial action involving the 
143.21  taxpayer.  For purposes of this subdivision, the amount 
143.22  determined for underpayment of estimated tax under either 
143.23  section 289A.25 or 289A.26 is not considered an understatement 
143.24  of liability. 
143.25     (f) For purposes of this subdivision, the term 
143.26  "overstatement of claim" means an overstatement of the net 
143.27  amount refundable with respect to a claim for property tax 
143.28  relief provided by chapter 290A.  The determination of whether 
143.29  or not there is an overstatement of a claim must be made without 
143.30  regard to administrative or judicial action involving the 
143.31  claimant. 
143.32     (g) For purposes of this section, the term "tax refund or 
143.33  return preparer" means an individual who prepares for 
143.34  compensation, or who employs one or more individuals to prepare 
143.35  for compensation, a return of tax, or a claim for refund of 
143.36  tax.  The preparation of a substantial part of a return or claim 
144.1   for refund is treated as if it were the preparation of the 
144.2   entire return or claim for refund.  An individual is not 
144.3   considered a tax return preparer merely because the individual: 
144.4      (1) gives typing, reproducing, or other mechanical 
144.5   assistance; 
144.6      (2) prepares a return or claim for refund of the employer, 
144.7   or an officer or employee of the employer, by whom the 
144.8   individual is regularly and continuously employed; 
144.9      (3) prepares a return or claim for refund of any person as 
144.10  a fiduciary for that person; or 
144.11     (4) prepares a claim for refund for a taxpayer in response 
144.12  to a tax order issued to the taxpayer. 
144.13     <b>[EFFECTIVE DATE.]</b> This section is effective for returns 
144.14  filed after December 31, 2005. 
144.15     Sec. 13.  Minnesota Statutes 2004, section 289A.60, is 
144.16  amended by adding a subdivision to read: 
144.17     Subd. 26.  [RESTRICTIONS ON TAXPAYERS WHO IMPROPERLY CLAIM 
144.18  REFUNDABLE CREDITS.] (a) If a person claims a credit or refund 
144.19  under section 290.067, 290.0671, 290.0674, or chapter 290A and 
144.20  the claimed credit or refund is determined to be claimed 
144.21  fraudulently or with reckless or intentional disregard of the 
144.22  applicable provisions for the credit or refund, the person is 
144.23  barred from claiming that credit or refund for the disallowance 
144.24  period. 
144.25     (b) For the purposes of paragraph (a), the "disallowance 
144.26  period" is (1) ten taxable years from the taxable year the 
144.27  credit or refund is claimed if the credit or refund was 
144.28  fraudulently claimed; and (2) two taxable years from the taxable 
144.29  year the credit or refund is claimed if the credit or refund was 
144.30  not fraudulent but was claimed with reckless or intentional 
144.31  disregard of the applicable provisions. 
144.32     <b>[EFFECTIVE DATE.]</b> This section is effective for credits or 
144.33  refunds claimed after December 31, 2005. 
144.34     Sec. 14.  Minnesota Statutes 2004, section 290.01, 
144.35  subdivision 7, is amended to read: 
144.36     Subd. 7.  [RESIDENT.] (a) The term "resident" means any 
145.1   individual domiciled in Minnesota, except that an individual is 
145.2   not a "resident" for the period of time that the individual is 
145.3   either: 
145.4      (1) on active duty stationed outside of Minnesota while in 
145.5   the armed forces of the United States or the United Nations; or 
145.6      (2) a "qualified individual" as defined in section 
145.7   911(d)(1) of the Internal Revenue Code, if the qualified 
145.8   individual notifies the county within three months of moving out 
145.9   of the country that homestead status be revoked for the 
145.10  Minnesota residence of the qualified individual, and the 
145.11  property is not classified as a homestead while the individual 
145.12  remains a qualified individual. 
145.13     (b) "Resident" also means any individual domiciled outside 
145.14  the state who maintains a place of abode in the state and spends 
145.15  in the aggregate more than one-half of the tax year in 
145.16  Minnesota, unless: 
145.17     (1) the individual or the spouse of the individual is in 
145.18  the armed forces of the United States; or 
145.19     (2) the individual is covered under the reciprocity 
145.20  provisions in section 290.081. 
145.21     For purposes of this subdivision, presence within the state 
145.22  for any part of a calendar day constitutes a day spent in the 
145.23  state.  Individuals shall keep adequate records to substantiate 
145.24  the days spent outside the state. 
145.25     The term "abode" means a dwelling maintained by an 
145.26  individual, whether or not owned by the individual and whether 
145.27  or not occupied by the individual, and includes a dwelling place 
145.28  owned or leased by the individual's spouse. 
145.29     (c) Neither the commissioner nor any court shall consider 
145.30  charitable contributions made by an individual within or without 
145.31  the state the following factors in determining if the individual 
145.32  is domiciled in Minnesota: 
145.33     (1) charitable contributions made by an individual within 
145.34  or without the state; 
145.35     (2) the jurisdiction from which an individual's 
145.36  professional licenses were issued; 
146.1      (3) the location of an individual's union memberships; 
146.2      (4) the location of accounts or transactions with financial 
146.3   institutions; 
146.4      (5) the location of the place of worship at which the 
146.5   individual is a member; 
146.6      (6) the location of business relationships and the place 
146.7   where business is transacted; 
146.8      (7) the location of social, fraternal, or athletic 
146.9   organizations or clubs, lodges, or country clubs, in which the 
146.10  individual is a member; and 
146.11     (8) statements made to an insurance company, concerning the 
146.12  individual's residence and on which insurance is based. 
146.13     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
146.14  beginning after December 31, 2004. 
146.15     Sec. 15.  Minnesota Statutes 2004, section 290.01, 
146.16  subdivision 7b, is amended to read: 
146.17     Subd. 7b.  [RESIDENT TRUST.] (a) Resident trust means a 
146.18  trust, except a grantor type trust, which either (1) was created 
146.19  by a will of a decedent who at death was domiciled in this state 
146.20  or (2) is an irrevocable trust, the grantor of which was 
146.21  domiciled in this state at the time the trust became 
146.22  irrevocable.  For the purpose of this subdivision, a trust is 
146.23  considered irrevocable to the extent the grantor is not treated 
146.24  as the owner thereof under sections 671 to 678 of the Internal 
146.25  Revenue Code.  The term "grantor type trust" means a trust where 
146.26  the income or gains of the trust are taxable to the grantor or 
146.27  others treated as substantial owners under sections 671 to 678 
146.28  of the Internal Revenue Code. 
146.29     (b)(1) A trust, other than a grantor type trust, that 
146.30  became irrevocable before January 1, 1996, or that was 
146.31  administered in Minnesota before January 1, 1996, is a resident 
146.32  trust only if two or more of the following conditions are 
146.33  satisfied: 
146.34     (i) a majority of the discretionary decisions of the 
146.35  trustees relative to the investment of trust assets are made in 
146.36  Minnesota; 
147.1      (ii) a majority of the discretionary decisions of the 
147.2   trustees relative to the distributions of trust income and 
147.3   principal are made in Minnesota; 
147.4      (iii) the official books and records of the trust, 
147.5   consisting of the original minutes of trustee meetings and the 
147.6   original trust instruments, are located in Minnesota. 
147.7      (2) For purposes of this paragraph, if the trustees 
147.8   delegate decisions and actions to an agent or custodian, the 
147.9   actions and decisions of the agent or custodian must not be 
147.10  taken into account in determining whether the trust is 
147.11  administered in Minnesota, if: 
147.12     (i) the delegation was permitted under the trust agreement; 
147.13     (ii) the trustees retain the power to revoke the delegation 
147.14  on reasonable notice; and 
147.15     (iii) the trustees monitor and evaluate the performance of 
147.16  the agent or custodian on a regular basis as is reasonably 
147.17  determined by the trustees. 
147.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
147.19  following final enactment. 
147.20     Sec. 16.  Minnesota Statutes 2004, section 290.01, 
147.21  subdivision 19a, is amended to read: 
147.22     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
147.23  individuals, estates, and trusts, there shall be added to 
147.24  federal taxable income: 
147.25     (1)(i) interest income on obligations of any state other 
147.26  than Minnesota or a political or governmental subdivision, 
147.27  municipality, or governmental agency or instrumentality of any 
147.28  state other than Minnesota exempt from federal income taxes 
147.29  under the Internal Revenue Code or any other federal statute; 
147.30  and 
147.31     (ii) exempt-interest dividends as defined in section 
147.32  852(b)(5) of the Internal Revenue Code, except the portion of 
147.33  the exempt-interest dividends derived from interest income on 
147.34  obligations of the state of Minnesota or its political or 
147.35  governmental subdivisions, municipalities, governmental agencies 
147.36  or instrumentalities, but only if the portion of the 
148.1   exempt-interest dividends from such Minnesota sources paid to 
148.2   all shareholders represents 95 percent or more of the 
148.3   exempt-interest dividends that are paid by the regulated 
148.4   investment company as defined in section 851(a) of the Internal 
148.5   Revenue Code, or the fund of the regulated investment company as 
148.6   defined in section 851(g) of the Internal Revenue Code, making 
148.7   the payment; and 
148.8      (iii) for the purposes of items (i) and (ii), interest on 
148.9   obligations of an Indian tribal government described in section 
148.10  7871(c) of the Internal Revenue Code shall be treated as 
148.11  interest income on obligations of the state in which the tribe 
148.12  is located; 
148.13     (2) the amount of income taxes paid or accrued within the 
148.14  taxable year under this chapter and income the amount of taxes 
148.15  based on net income paid to any other state or to any province 
148.16  or territory of Canada, to the extent allowed as a deduction 
148.17  under section 63(d) of the Internal Revenue Code, but the 
148.18  addition may not be more than the amount by which the itemized 
148.19  deductions as allowed under section 63(d) of the Internal 
148.20  Revenue Code exceeds the amount of the standard deduction as 
148.21  defined in section 63(c) of the Internal Revenue Code.  For the 
148.22  purpose of this paragraph, the disallowance of itemized 
148.23  deductions under section 68 of the Internal Revenue Code of 
148.24  1986, income tax is the last itemized deduction disallowed; 
148.25     (3) the capital gain amount of a lump sum distribution to 
148.26  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
148.27  Reform Act of 1986, Public Law 99-514, applies; 
148.28     (4) the amount of income taxes paid or accrued within the 
148.29  taxable year under this chapter and income taxes based on net 
148.30  income paid to any other state or any province or territory of 
148.31  Canada, to the extent allowed as a deduction in determining 
148.32  federal adjusted gross income.  For the purpose of this 
148.33  paragraph, income taxes do not include the taxes imposed by 
148.34  sections 290.0922, subdivision 1, paragraph (b), 290.9727, 
148.35  290.9728, and 290.9729; 
148.36     (5) the amount of expense, interest, or taxes disallowed 
149.1   pursuant to section 290.10 other than expenses or interest used 
149.2   in computing net interest income for the subtraction allowed 
149.3   under subdivision 19b, clause (1); 
149.4      (6) the amount of a partner's pro rata share of net income 
149.5   which does not flow through to the partner because the 
149.6   partnership elected to pay the tax on the income under section 
149.7   6242(a)(2) of the Internal Revenue Code; and 
149.8      (7) 80 percent of the depreciation deduction allowed under 
149.9   section 168(k) of the Internal Revenue Code.  For purposes of 
149.10  this clause, if the taxpayer has an activity that in the taxable 
149.11  year generates a deduction for depreciation under section 168(k) 
149.12  and the activity generates a loss for the taxable year that the 
149.13  taxpayer is not allowed to claim for the taxable year, "the 
149.14  depreciation allowed under section 168(k)" for the taxable year 
149.15  is limited to excess of the depreciation claimed by the activity 
149.16  under section 168(k) over the amount of the loss from the 
149.17  activity that is not allowed in the taxable year.  In succeeding 
149.18  taxable years when the losses not allowed in the taxable year 
149.19  are allowed, the depreciation under section 168(k) is allowed. 
149.20     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
149.21  beginning after December 31, 2004.  
149.22     Sec. 17.  Minnesota Statutes 2004, section 290.01, 
149.23  subdivision 19b, is amended to read: 
149.24     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
149.25  individuals, estates, and trusts, there shall be subtracted from 
149.26  federal taxable income: 
149.27     (1) net interest income on obligations of any authority, 
149.28  commission, or instrumentality of the United States to the 
149.29  extent includable in taxable income for federal income tax 
149.30  purposes but exempt from state income tax under the laws of the 
149.31  United States; 
149.32     (2) if included in federal taxable income, the amount of 
149.33  any overpayment of income tax to Minnesota or to any other 
149.34  state, for any previous taxable year, whether the amount is 
149.35  received as a refund or as a credit to another taxable year's 
149.36  income tax liability; 
150.1      (3) the amount paid to others, less the amount used to 
150.2   claim the credit allowed under section 290.0674, not to exceed 
150.3   $1,625 for each qualifying child in grades kindergarten to 6 and 
150.4   $2,500 for each qualifying child in grades 7 to 12, for tuition, 
150.5   textbooks, and transportation of each qualifying child in 
150.6   attending an elementary or secondary school situated in 
150.7   Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
150.8   wherein a resident of this state may legally fulfill the state's 
150.9   compulsory attendance laws, which is not operated for profit, 
150.10  and which adheres to the provisions of the Civil Rights Act of 
150.11  1964 and chapter 363A.  For the purposes of this clause, 
150.12  "tuition" includes fees or tuition as defined in section 
150.13  290.0674, subdivision 1, clause (1).  As used in this clause, 
150.14  "textbooks" includes books and other instructional materials and 
150.15  equipment purchased or leased for use in elementary and 
150.16  secondary schools in teaching only those subjects legally and 
150.17  commonly taught in public elementary and secondary schools in 
150.18  this state.  Equipment expenses qualifying for deduction 
150.19  includes expenses as defined and limited in section 290.0674, 
150.20  subdivision 1, clause (3).  "Textbooks" does not include 
150.21  instructional books and materials used in the teaching of 
150.22  religious tenets, doctrines, or worship, the purpose of which is 
150.23  to instill such tenets, doctrines, or worship, nor does it 
150.24  include books or materials for, or transportation to, 
150.25  extracurricular activities including sporting events, musical or 
150.26  dramatic events, speech activities, driver's education, or 
150.27  similar programs.  For purposes of the subtraction provided by 
150.28  this clause, "qualifying child" has the meaning given in section 
150.29  32(c)(3) of the Internal Revenue Code; 
150.30     (4) income as provided under section 290.0802; 
150.31     (5) to the extent included in federal adjusted gross 
150.32  income, income realized on disposition of property exempt from 
150.33  tax under section 290.491; 
150.34     (6) to the extent included in federal taxable income, 
150.35  postservice benefits for youth community service under section 
150.36  124D.42 for volunteer service under United States Code, title 
151.1   42, sections 12601 to 12604; 
151.2      (7) to the extent not deducted in determining federal 
151.3   taxable income by an individual who does not itemize deductions 
151.4   for federal income tax purposes for the taxable year, an amount 
151.5   equal to 50 percent of the excess of charitable contributions 
151.6   allowable as a deduction for the taxable year under section 
151.7   170(a) of the Internal Revenue Code over $500 ; 
151.8      (8) (7) for taxable years beginning before January 1, 2008, 
151.9   the amount of the federal small ethanol producer credit allowed 
151.10  under section 40(a)(3) of the Internal Revenue Code which is 
151.11  included in gross income under section 87 of the Internal 
151.12  Revenue Code; 
151.13     (9) (8) for individuals who are allowed a federal foreign 
151.14  tax credit for taxes that do not qualify for a credit under 
151.15  section 290.06, subdivision 22, an amount equal to the carryover 
151.16  of subnational foreign taxes for the taxable year, but not to 
151.17  exceed the total subnational foreign taxes reported in claiming 
151.18  the foreign tax credit.  For purposes of this clause, "federal 
151.19  foreign tax credit" means the credit allowed under section 27 of 
151.20  the Internal Revenue Code, and "carryover of subnational foreign 
151.21  taxes" equals the carryover allowed under section 904(c) of the 
151.22  Internal Revenue Code minus national level foreign taxes to the 
151.23  extent they exceed the federal foreign tax credit; 
151.24     (10) (9) in each of the five tax years immediately 
151.25  following the tax year in which an addition is required under 
151.26  subdivision 19a, clause (7), or 19c, clause (15), in the case of 
151.27  a shareholder of a corporation that is an S corporation, an 
151.28  amount equal to one-fifth of the delayed depreciation.  For 
151.29  purposes of this clause, "delayed depreciation" means the amount 
151.30  of the addition made by the taxpayer under subdivision 19a, 
151.31  clause (7), or subdivision 19c, clause (15), in the case of a 
151.32  shareholder of an S corporation, minus the positive value of any 
151.33  net operating loss under section 172 of the Internal Revenue 
151.34  Code generated for the tax year of the addition.  The resulting 
151.35  delayed depreciation cannot be less than zero; and 
151.36     (11) (10) job opportunity building zone income as provided 
152.1   under section 469.316.; 
152.2      (11) the amount of compensation paid to members of the 
152.3   Minnesota National Guard or other reserve components of the 
152.4   United States military for active service performed in 
152.5   Minnesota, excluding compensation for services performed under 
152.6   the Active Guard Reserve (AGR) program.  For purposes of this 
152.7   clause, "active service" means (i) state active service as 
152.8   defined in section 190.05, subdivision 5a, clause (1); (ii) 
152.9   federally funded state active service as defined in section 
152.10  190.05, subdivision 5b; or (iii) federal active service as 
152.11  defined in section 190.05, subdivision 5c, but "active service" 
152.12  excludes services performed exclusively for purposes of basic 
152.13  combat training, advanced individual training, annual training, 
152.14  and periodic inactive duty training; special training 
152.15  periodically made available to reserve members; and service 
152.16  performed in accordance with section 190.08, subdivision 3; 
152.17     (12) the amount of compensation paid to members of the 
152.18  armed forces of the United States or United Nations for active 
152.19  duty performed outside Minnesota; and 
152.20     (13) to the extent not deducted in computing federal 
152.21  taxable income, an amount, not to exceed $10,000, equal to 
152.22  qualified expenses related to a qualified donor's donation, 
152.23  while living, of one or more of the qualified donor's organs to 
152.24  another person for human organ transplantation.  For purposes of 
152.25  determining the extent to which expenses are deducted in 
152.26  computing federal taxable income, travel and lodging expenses 
152.27  related to an organ donation are considered deducted by an 
152.28  individual in determining federal taxable income to the extent 
152.29  they exceed 7.5 percent of federal adjusted gross income as 
152.30  defined in section 62 of the Internal Revenue Code.  For 
152.31  purposes of this clause, "organ" means all or part of an 
152.32  individual's liver, pancreas, kidney, intestine, lung, or bone 
152.33  marrow; "human organ transplantation" means the medical 
152.34  procedure by which transfer of a human organ is made from the 
152.35  body of one person to the body of another person; "qualified 
152.36  expenses" means unreimbursed expenses for both the individual 
153.1   and the qualified donor for (i) travel, (ii) lodging, and (iii) 
153.2   lost wages net of sick pay, except that such expenses may be 
153.3   subtracted under this clause only once; and "qualified donor" 
153.4   means the individual or the individual's dependent, as defined 
153.5   in section 152 of the Internal Revenue Code.  An individual may 
153.6   claim the subtraction in this clause only once for each instance 
153.7   of organ donation for transplantation during the taxable year in 
153.8   which the human organ donation and transplantation occurs. 
153.9      <b>[EFFECTIVE DATE.]</b> The amendment to clause (9) is effective 
153.10  retroactively for tax years beginning after December 31, 2001.  
153.11  The rest of this section is effective for the tax years 
153.12  beginning after December 31, 2004. 
153.13     Sec. 18.  Minnesota Statutes 2004, section 290.01, 
153.14  subdivision 19c, is amended to read: 
153.15     Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
153.16  INCOME.] For corporations, there shall be added to federal 
153.17  taxable income: 
153.18     (1) the amount of any deduction taken for federal income 
153.19  tax purposes for income, excise, or franchise taxes based on net 
153.20  income or related minimum taxes, including but not limited to 
153.21  the tax imposed under section 290.0922, paid by the corporation 
153.22  to Minnesota, another state, a political subdivision of another 
153.23  state, the District of Columbia, or any foreign country or 
153.24  possession of the United States; 
153.25     (2) interest not subject to federal tax upon obligations 
153.26  of:  the United States, its possessions, its agencies, or its 
153.27  instrumentalities; the state of Minnesota or any other state, 
153.28  any of its political or governmental subdivisions, any of its 
153.29  municipalities, or any of its governmental agencies or 
153.30  instrumentalities; the District of Columbia; or Indian tribal 
153.31  governments; 
153.32     (3) exempt-interest dividends received as defined in 
153.33  section 852(b)(5) of the Internal Revenue Code; 
153.34     (4) the amount of any net operating loss deduction taken 
153.35  for federal income tax purposes under section 172 or 832(c)(10) 
153.36  of the Internal Revenue Code or operations loss deduction under 
154.1   section 810 of the Internal Revenue Code; 
154.2      (5) the amount of any special deductions taken for federal 
154.3   income tax purposes under sections 241 to 247 of the Internal 
154.4   Revenue Code; 
154.5      (6) losses from the business of mining, as defined in 
154.6   section 290.05, subdivision 1, clause (a), that are not subject 
154.7   to Minnesota income tax; 
154.8      (7) the amount of any capital losses deducted for federal 
154.9   income tax purposes under sections 1211 and 1212 of the Internal 
154.10  Revenue Code; 
154.11     (8) the exempt foreign trade income of a foreign sales 
154.12  corporation under sections 921(a) and 291 of the Internal 
154.13  Revenue Code; 
154.14     (9) the amount of percentage depletion deducted under 
154.15  sections 611 through 614 and 291 of the Internal Revenue Code; 
154.16     (10) for certified pollution control facilities placed in 
154.17  service in a taxable year beginning before December 31, 1986, 
154.18  and for which amortization deductions were elected under section 
154.19  169 of the Internal Revenue Code of 1954, as amended through 
154.20  December 31, 1985, the amount of the amortization deduction 
154.21  allowed in computing federal taxable income for those 
154.22  facilities; 
154.23     (11) the amount of any deemed dividend from a foreign 
154.24  operating corporation determined pursuant to section 290.17, 
154.25  subdivision 4, paragraph (g); 
154.26     (12) the amount of any environmental tax paid under section 
154.27  59(a) of the Internal Revenue Code; 
154.28     (13) the amount of a partner's pro rata share of net income 
154.29  which does not flow through to the partner because the 
154.30  partnership elected to pay the tax on the income under section 
154.31  6242(a)(2) of the Internal Revenue Code; 
154.32     (14) (13) the amount of net income excluded under section 
154.33  114 of the Internal Revenue Code; 
154.34     (15) (14) any increase in subpart F income, as defined in 
154.35  section 952(a) of the Internal Revenue Code, for the taxable 
154.36  year when subpart F income is calculated without regard to the 
155.1   provisions of section 614 of Public Law 107-147; and 
155.2      (16) (15) 80 percent of the depreciation deduction allowed 
155.3   under section 168(k)(1)(A) and (k)(4)(A) of the Internal Revenue 
155.4   Code.  For purposes of this clause, if the taxpayer has an 
155.5   activity that in the taxable year generates a deduction for 
155.6   depreciation under section 168(k)(1)(A) and (k)(4)(A) and the 
155.7   activity generates a loss for the taxable year that the taxpayer 
155.8   is not allowed to claim for the taxable year, "the depreciation 
155.9   allowed under section 168(k)(1)(A) and (k)(4)(A)" for the 
155.10  taxable year is limited to excess of the depreciation claimed by 
155.11  the activity under section 168(k)(1)(A) and (k)(4)(A) over the 
155.12  amount of the loss from the activity that is not allowed in the 
155.13  taxable year.  In succeeding taxable years when the losses not 
155.14  allowed in the taxable year are allowed, the depreciation under 
155.15  section 168(k)(1)(A) and (k)(4)(A) is allowed. 
155.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
155.17  following final enactment. 
155.18     Sec. 19.  Minnesota Statutes 2004, section 290.06, 
155.19  subdivision 22, is amended to read: 
155.20     Subd. 22.  [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 
155.21  taxpayer who is liable for taxes based on or measured by net 
155.22  income to another state, as provided in paragraphs (b) through 
155.23  (f), upon income allocated or apportioned to Minnesota, is 
155.24  entitled to a credit for the tax paid to another state if the 
155.25  tax is actually paid in the taxable year or a subsequent taxable 
155.26  year.  A taxpayer who is a resident of this state pursuant to 
155.27  section 290.01, subdivision 7, clause (2) paragraph (b), and who 
155.28  is subject to income tax as a resident in the state of the 
155.29  individual's domicile is not allowed this credit unless the 
155.30  state of domicile does not allow a similar credit. 
155.31     (b) For an individual, estate, or trust, the credit is 
155.32  determined by multiplying the tax payable under this chapter by 
155.33  the ratio derived by dividing the income subject to tax in the 
155.34  other state that is also subject to tax in Minnesota while a 
155.35  resident of Minnesota by the taxpayer's federal adjusted gross 
155.36  income, as defined in section 62 of the Internal Revenue Code, 
156.1   modified by the addition required by section 290.01, subdivision 
156.2   19a, clause (1), and the subtraction allowed by section 290.01, 
156.3   subdivision 19b, clause (1), to the extent the income is 
156.4   allocated or assigned to Minnesota under sections 290.081 and 
156.5   290.17.  
156.6      (c) If the taxpayer is an athletic team that apportions all 
156.7   of its income under section 290.17, subdivision 5, the credit is 
156.8   determined by multiplying the tax payable under this chapter by 
156.9   the ratio derived from dividing the total net income subject to 
156.10  tax in the other state by the taxpayer's Minnesota taxable 
156.11  income. 
156.12     (d) The credit determined under paragraph (b) or (c) shall 
156.13  not exceed the amount of tax so paid to the other state on the 
156.14  gross income earned within the other state subject to tax under 
156.15  this chapter, nor shall the allowance of the credit reduce the 
156.16  taxes paid under this chapter to an amount less than what would 
156.17  be assessed if such income amount was excluded from taxable net 
156.18  income. 
156.19     (e) In the case of the tax assessed on a lump sum 
156.20  distribution under section 290.032, the credit allowed under 
156.21  paragraph (a) is the tax assessed by the other state on the lump 
156.22  sum distribution that is also subject to tax under section 
156.23  290.032, and shall not exceed the tax assessed under section 
156.24  290.032.  To the extent the total lump sum distribution defined 
156.25  in section 290.032, subdivision 1, includes lump sum 
156.26  distributions received in prior years or is all or in part an 
156.27  annuity contract, the reduction to the tax on the lump sum 
156.28  distribution allowed under section 290.032, subdivision 2, 
156.29  includes tax paid to another state that is properly apportioned 
156.30  to that distribution. 
156.31     (f) If a Minnesota resident reported an item of income to 
156.32  Minnesota and is assessed tax in such other state on that same 
156.33  income after the Minnesota statute of limitations has expired, 
156.34  the taxpayer shall receive a credit for that year under 
156.35  paragraph (a), notwithstanding any statute of limitations to the 
156.36  contrary.  The claim for the credit must be submitted within one 
157.1   year from the date the taxes were paid to the other state.  The 
157.2   taxpayer must submit sufficient proof to show entitlement to a 
157.3   credit. 
157.4      (g) For the purposes of this subdivision, a resident 
157.5   shareholder of a corporation treated as an "S" corporation under 
157.6   section 290.9725, must be considered to have paid a tax imposed 
157.7   on the shareholder in an amount equal to the shareholder's pro 
157.8   rata share of any net income tax paid by the S corporation to 
157.9   another state.  For the purposes of the preceding sentence, the 
157.10  term "net income tax" means any tax imposed on or measured by a 
157.11  corporation's net income. 
157.12     (h) For the purposes of this subdivision, a resident 
157.13  partner of an entity taxed as a partnership under the Internal 
157.14  Revenue Code must be considered to have paid a tax imposed on 
157.15  the partner in an amount equal to the partner's pro rata share 
157.16  of any net income tax paid by the partnership to another state.  
157.17  For purposes of the preceding sentence, the term "net income" 
157.18  tax means any tax imposed on or measured by a partnership's net 
157.19  income. 
157.20     (i) For the purposes of this subdivision, "another state": 
157.21     (1) includes: 
157.22     (i) the District of Columbia; and 
157.23     (ii) a province or territory of Canada; but 
157.24     (2) excludes Puerto Rico and the several territories 
157.25  organized by Congress. 
157.26     (j) The limitations on the credit in paragraphs (b), (c), 
157.27  and (d), are imposed on a state by state basis. 
157.28     (k) For a tax imposed by a province or territory of Canada, 
157.29  the tax for purposes of this subdivision is the excess of the 
157.30  tax over the amount of the foreign tax credit allowed under 
157.31  section 27 of the Internal Revenue Code.  In determining the 
157.32  amount of the foreign tax credit allowed, the net income taxes 
157.33  imposed by Canada on the income are deducted first.  Any 
157.34  remaining amount of the allowable foreign tax credit reduces the 
157.35  provincial or territorial tax that qualifies for the credit 
157.36  under this subdivision. 
158.1      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
158.2   beginning after December 31, 2004. 
158.3      Sec. 20.  Minnesota Statutes 2004, section 290.06, is 
158.4   amended by adding a subdivision to read: 
158.5      Subd. 32.  [DAIRY INVESTMENT CREDIT.] (a) A dairy 
158.6   investment credit is allowed against the tax computed under this 
158.7   chapter equal to the credit amount in the table, based on the 
158.8   amount paid or incurred by the taxpayer in the tax year and 
158.9   certified by the commissioner of agriculture under paragraph 
158.10  (f), for qualifying expenditures: 
158.11            Amount of   
158.12     qualifying expenditures              Credit amount 
158.13      up to $500,000                  ten percent of 
158.14                                      qualifying expenditures 
158.15      over $500,000, but not          $50,000, plus nine percent 
158.16      more than $600,000              of the amount of qualified 
158.17                                      expenditures in excess of 
158.18                                      $500,000 
158.19      over $600,000, but not          $59,000, plus seven percent 
158.20      more than $700,000              of the amount of qualified 
158.21                                      expenditures in excess of 
158.22                                      $600,000 
158.23      over $700,000, but not          $66,000, plus five percent 
158.24      more than $800,000              of the amount of qualified 
158.25                                      expenditures in excess of 
158.26                                      $700,000 
158.27      over $800,000, but not          $71,000, plus three percent 
158.28      more than $900,000              of the amount of qualified 
158.29                                      expenditures in excess of 
158.30                                      $800,000 
158.31      over $900,000, but not          $74,000, plus one percent 
158.32      more than $1,000,000            of the amount of qualified 
158.33                                      expenditures in excess of 
158.34                                      $900,000 
158.35      $1,000,000 or more              $75,000 
158.36     (b) "Qualifying expenditures," for purposes of this 
158.37  subdivision, means the expenses incurred for dairy animals for 
158.38  the construction or improvement of buildings or facilities, or 
158.39  the acquisition of equipment, for dairy animal housing, 
158.40  confinement, animal feeding, milk production, and waste 
158.41  management, including, but not limited to, the following: 
158.42     (1) freestall barns; 
158.43     (2) fences; 
158.44     (3) watering facilities; 
159.1      (4) feed storage and handling equipment; 
159.2      (5) milking parlors; 
159.3      (6) robotic equipment; 
159.4      (7) scales; 
159.5      (8) milk storage and cooling facilities; 
159.6      (9) bulk tanks; 
159.7      (10) manure handling equipment and storage facilities; 
159.8      (11) digesters; 
159.9      (12) equipment used to produce energy; 
159.10     (13) on-farm processing; and 
159.11     (14) development of pasture other than land acquisition.  
159.12  Qualifying expenditures only include amounts that are 
159.13  capitalized and deducted under either section 167 or 179 of the 
159.14  Internal Revenue Code in computing federal taxable income. 
159.15     (c) The credit is limited to the liability for tax, as 
159.16  computed under this section for the taxable year for which the 
159.17  credit certificate is issued.  If the amount of the credit 
159.18  determined under this section for any taxable year exceeds this 
159.19  limitation, the excess is a dairy investment credit carryover to 
159.20  each of the 15 succeeding taxable years.  The entire amount of 
159.21  the excess unused credit for the taxable year is carried first 
159.22  to the earliest of the taxable years to which the credit may be 
159.23  carried and then to each successive year to which the credit may 
159.24  be carried.  The amount of the unused credit which may be added 
159.25  under this paragraph shall not exceed the taxpayer's liability 
159.26  for tax less the dairy investment credit for the taxable year. 
159.27     (d) For a partnership or S corporation, the maximum amount 
159.28  of the credit applies to the entity, not the individual partner 
159.29  or shareholder. 
159.30     (e) To be eligible for the dairy investment credit in this 
159.31  subdivision, a taxpayer must apply to the commissioner of 
159.32  agriculture for a tax credit certificate.  The application must 
159.33  be made on forms prescribed by the commissioner of agriculture 
159.34  and must include a statement of the qualifying expenditures by 
159.35  the taxpayer. 
159.36     (f) The commissioner of agriculture shall certify credits 
160.1   in the order the forms required under paragraph (e) are received 
160.2   and approved by the commissioner of agriculture, until the 
160.3   maximum credit amount for the taxable year has been reached.  
160.4   The maximum credit amount is $900,000 for tax years beginning 
160.5   after December 31, 2004, and before January 1, 2006; and 
160.6   $1,000,000 per year for tax years beginning after December 31, 
160.7   2005. 
160.8      Any eligible applications for which certificates are not 
160.9   issued in a tax year because the commissioner of agriculture has 
160.10  issued certificates totaling the maximum credit amount for that 
160.11  tax year remain eligible for a credit certificate in subsequent 
160.12  tax years, in the order in which the forms were received by the 
160.13  commissioner of agriculture. 
160.14     <b>[EFFECTIVE DATE.]</b> This section is effective for assets 
160.15  placed in service in taxable years beginning after December 31, 
160.16  2004. 
160.17     Sec. 21.  Minnesota Statutes 2004, section 290.067, 
160.18  subdivision 1, is amended to read: 
160.19     Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
160.20  as a credit against the tax due from the taxpayer and a spouse, 
160.21  if any, under this chapter an amount equal to the dependent care 
160.22  credit for which the taxpayer is eligible pursuant to the 
160.23  provisions of section 21 of the Internal Revenue Code subject to 
160.24  the limitations provided in subdivision 2 except that in 
160.25  determining whether the child qualified as a dependent, income 
160.26  received as a Minnesota family investment program grant or 
160.27  allowance to or on behalf of the child must not be taken into 
160.28  account in determining whether the child received more than half 
160.29  of the child's support from the taxpayer, and the provisions of 
160.30  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
160.31     (b) If a child who has not attained the age of six years at 
160.32  the close of the taxable year is cared for at a licensed family 
160.33  day care home operated by the child's parent, the taxpayer is 
160.34  deemed to have paid employment-related expenses.  If the child 
160.35  is 16 months old or younger at the close of the taxable year, 
160.36  the amount of expenses deemed to have been paid equals the 
161.1   maximum limit for one qualified individual under section 21(c) 
161.2   and (d) of the Internal Revenue Code.  If the child is older 
161.3   than 16 months of age but has not attained the age of six years 
161.4   at the close of the taxable year, the amount of expenses deemed 
161.5   to have been paid equals the amount the licensee would charge 
161.6   for the care of a child of the same age for the same number of 
161.7   hours of care.  
161.8      (c) If a married couple: 
161.9      (1) has a child who has not attained the age of one year at 
161.10  the close of the taxable year; 
161.11     (2) files a joint tax return for the taxable year; and 
161.12     (3) does not participate in a dependent care assistance 
161.13  program as defined in section 129 of the Internal Revenue Code, 
161.14  in lieu of the actual employment related expenses paid for that 
161.15  child under paragraph (a) or the deemed amount under paragraph 
161.16  (b), the lesser of (i) the combined earned income of the couple 
161.17  or (ii) the amount of the maximum limit for one qualified 
161.18  individual under section 21(c) and (d) of the Internal Revenue 
161.19  Code will be deemed to be the employment related expense paid 
161.20  for that child.  The earned income limitation of section 21(d) 
161.21  of the Internal Revenue Code shall not apply to this deemed 
161.22  amount.  These deemed amounts apply regardless of whether any 
161.23  employment-related expenses have been paid.  
161.24     (d) If the taxpayer is not required and does not file a 
161.25  federal individual income tax return for the tax year, no credit 
161.26  is allowed for any amount paid to any person unless: 
161.27     (1) the name, address, and taxpayer identification number 
161.28  of the person are included on the return claiming the credit; or 
161.29     (2) if the person is an organization described in section 
161.30  501(c)(3) of the Internal Revenue Code and exempt from tax under 
161.31  section 501(a) of the Internal Revenue Code, the name and 
161.32  address of the person are included on the return claiming the 
161.33  credit.  
161.34  In the case of a failure to provide the information required 
161.35  under the preceding sentence, the preceding sentence does not 
161.36  apply if it is shown that the taxpayer exercised due diligence 
162.1   in attempting to provide the information required. 
162.2      In the case of a nonresident, part-year resident, or a 
162.3   person who has earned income not subject to tax under this 
162.4   chapter including earned income excluded pursuant to section 
162.5   290.01, subdivision 19b, clause (11), the credit determined 
162.6   under section 21 of the Internal Revenue Code must be allocated 
162.7   based on the ratio by which the earned income of the claimant 
162.8   and the claimant's spouse from Minnesota sources bears to the 
162.9   total earned income of the claimant and the claimant's spouse. 
162.10     For residents of Minnesota, the subtractions for military 
162.11  pay under section 290.01, subdivision 19b, clauses (11) and 
162.12  (12), are not considered "earned income not subject to tax under 
162.13  this chapter." 
162.14     Sec. 22.  Minnesota Statutes 2004, section 290.067, 
162.15  subdivision 2a, is amended to read: 
162.16     Subd. 2a.  [INCOME.] (a) For purposes of this section, 
162.17  "income" means the sum of the following: 
162.18     (1) federal adjusted gross income as defined in section 62 
162.19  of the Internal Revenue Code; and plus 
162.20     (2) the sum of the following amounts to the extent not 
162.21  included in clause (1): 
162.22     (i) all nontaxable income; 
162.23     (ii) the amount of a passive activity loss that is not 
162.24  disallowed as a result of section 469, paragraph (i) or (m) of 
162.25  the Internal Revenue Code and the amount of passive activity 
162.26  loss carryover allowed under section 469(b) of the Internal 
162.27  Revenue Code; 
162.28     (iii) an amount equal to the total of any discharge of 
162.29  qualified farm indebtedness of a solvent individual excluded 
162.30  from gross income under section 108(g) of the Internal Revenue 
162.31  Code; 
162.32     (iv) cash public assistance and relief; 
162.33     (v) any pension or annuity (including railroad retirement 
162.34  benefits, all payments received under the federal Social 
162.35  Security Act, supplemental security income, and veterans 
162.36  benefits), which was not exclusively funded by the claimant or 
163.1   spouse, or which was funded exclusively by the claimant or 
163.2   spouse and which funding payments were excluded from federal 
163.3   adjusted gross income in the years when the payments were made; 
163.4      (vi) interest received from the federal or a state 
163.5   government or any instrumentality or political subdivision 
163.6   thereof; 
163.7      (vii) workers' compensation; 
163.8      (viii) nontaxable strike benefits; 
163.9      (ix) the gross amounts of payments received in the nature 
163.10  of disability income or sick pay as a result of accident, 
163.11  sickness, or other disability, whether funded through insurance 
163.12  or otherwise; 
163.13     (x) a lump sum distribution under section 402(e)(3) of the 
163.14  Internal Revenue Code; 
163.15     (xi) contributions made by the claimant to an individual 
163.16  retirement account, including a qualified voluntary employee 
163.17  contribution; simplified employee pension plan; self-employed 
163.18  retirement plan; cash or deferred arrangement plan under section 
163.19  401(k) of the Internal Revenue Code; or deferred compensation 
163.20  plan under section 457 of the Internal Revenue Code; and 
163.21     (xii) nontaxable scholarship or fellowship grants; minus 
163.22     (3) in the case of a married couple filing a joint return, 
163.23  the earned income of the lesser-earning spouse, as defined in 
163.24  section 290.0675, subdivision 1, paragraph (d). 
163.25     In the case of an individual who files an income tax return 
163.26  on a fiscal year basis, the term "federal adjusted gross income" 
163.27  means federal adjusted gross income reflected in the fiscal year 
163.28  ending in the next calendar year.  Federal adjusted gross income 
163.29  may not be reduced by the amount of a net operating loss 
163.30  carryback or carryforward or a capital loss carryback or 
163.31  carryforward allowed for the year. 
163.32     (b) "Income" does not include: 
163.33     (1) amounts excluded pursuant to the Internal Revenue Code, 
163.34  sections 101(a) and 102; 
163.35     (2) amounts of any pension or annuity that were exclusively 
163.36  funded by the claimant or spouse if the funding payments were 
164.1   not excluded from federal adjusted gross income in the years 
164.2   when the payments were made; 
164.3      (3) surplus food or other relief in kind supplied by a 
164.4   governmental agency; 
164.5      (4) relief granted under chapter 290A; 
164.6      (5) child support payments received under a temporary or 
164.7   final decree of dissolution or legal separation; and 
164.8      (6) restitution payments received by eligible individuals 
164.9   and excludable interest as defined in section 803 of the 
164.10  Economic Growth and Tax Relief Reconciliation Act of 2001, 
164.11  Public Law 107-16. 
164.12     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
164.13  years beginning after December 31, 2005. 
164.14     Sec. 23.  Minnesota Statutes 2004, section 290.0671, 
164.15  subdivision 1, is amended to read: 
164.16     Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
164.17  allowed a credit against the tax imposed by this chapter equal 
164.18  to a percentage of earned income.  To receive a credit, a 
164.19  taxpayer must be eligible for a credit under section 32 of the 
164.20  Internal Revenue Code.  An individual who would have been 
164.21  eligible for a credit under section 32 of the Internal Revenue 
164.22  Code if the phaseout in section 32(b) were calculated based on 
164.23  the income thresholds provided in paragraphs (b) through (d) as 
164.24  adjusted in paragraphs (i) through (k) is also eligible for a 
164.25  credit under this section. 
164.26     (b) For individuals with no qualifying children, the credit 
164.27  equals 1.9125 percent of the first $4,620 of earned income.  The 
164.28  credit is reduced by 1.9125 percent of earned income or modified 
164.29  adjusted gross income, whichever is greater, in excess of 
164.30  $5,770, but in no case is the credit less than zero. 
164.31     (c) For individuals with one qualifying child, the credit 
164.32  equals 8.5 percent of the first $6,920 of earned income and 8.5 
164.33  percent of earned income over $12,080 but less than $13,450.  
164.34  The credit is reduced by 5.73 percent of earned income or 
164.35  modified adjusted gross income, whichever is greater, in excess 
164.36  of $15,080, but in no case is the credit less than zero. 
165.1      (d) For individuals with two or more qualifying children, 
165.2   the credit equals ten percent of the first $9,720 of earned 
165.3   income and 20 percent of earned income over $14,860 but less 
165.4   than $16,800.  The credit is reduced by 10.3 percent of earned 
165.5   income or modified adjusted gross income, whichever is greater, 
165.6   in excess of $17,890, but in no case is the credit less than 
165.7   zero. 
165.8      (e) For a nonresident or part-year resident, the credit 
165.9   must be allocated based on the percentage calculated under 
165.10  section 290.06, subdivision 2c, paragraph (e). 
165.11     (f) For a person who was a resident for the entire tax year 
165.12  and has earned income not subject to tax under this chapter, 
165.13  including income excluded under section 290.01, subdivision 19b, 
165.14  clause (11), the credit must be allocated based on the ratio of 
165.15  federal adjusted gross income reduced by the earned income not 
165.16  subject to tax under this chapter over federal adjusted gross 
165.17  income.  For purposes of this paragraph, the subtractions for 
165.18  military pay under section 290.01, subdivision 19b, clauses (11) 
165.19  and (12), are not considered "earned income not subject to tax 
165.20  under this chapter." 
165.21     (g) For tax years beginning after December 31, 2001, and 
165.22  before December 31, 2004, the $5,770 in paragraph (b), the 
165.23  $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
165.24  after being adjusted for inflation under subdivision 7, are each 
165.25  increased by $1,000 for married taxpayers filing joint returns. 
165.26     (h) For tax years beginning after December 31, 2004, and 
165.27  before December 31, 2007 2005, the $5,770 in paragraph (b), the 
165.28  $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
165.29  after being adjusted for inflation under subdivision 7, are each 
165.30  increased by $2,000 for married taxpayers filing joint returns. 
165.31     (i) For tax years beginning after December 31, 2005, and 
165.32  before December 31, 2007, the $5,770 in paragraph (b), the 
165.33  $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
165.34  after being adjusted for inflation under subdivision 7, are each 
165.35  increased by the greater of (i) $2,000 or (ii) the earned income 
165.36  of the lesser-earning spouse, for married taxpayers filing joint 
166.1   returns. 
166.2      (i) (j) For tax years beginning after December 31, 2007, 
166.3   and before December 31, 2010, the $5,770 in paragraph (b), the 
166.4   $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
166.5   after being adjusted for inflation under subdivision 7, are each 
166.6   increased by $3,000 the greater of (i) $3,000 or (ii) the earned 
166.7   income of the lesser-earning spouse, for married taxpayers 
166.8   filing joint returns.  For tax years beginning after December 
166.9   31, 2008, and before December 31, 2010, the $3,000 is adjusted 
166.10  annually for inflation under subdivision 7. 
166.11     (k) For tax years beginning after December 31, 2010, the 
166.12  $5,770 in paragraph (b), the $15,080 in paragraph (c), and the 
166.13  $17,890 in paragraph (d), after being adjusted for inflation 
166.14  under subdivision 7, are each increased by the earned income of 
166.15  the lesser-earning spouse, for married taxpayers filing joint 
166.16  returns. 
166.17     (j) (l) The commissioner shall construct tables showing the 
166.18  amount of the credit at various income levels and make them 
166.19  available to taxpayers.  The tables shall follow the schedule 
166.20  contained in this subdivision, except that the commissioner may 
166.21  graduate the transition between income brackets. 
166.22     Sec. 24.  Minnesota Statutes 2004, section 290.0671, 
166.23  subdivision 1a, is amended to read: 
166.24     Subd. 1a.  [DEFINITIONS.] For purposes of this section, the 
166.25  terms "qualifying child," and "earned income," and "adjusted 
166.26  gross income" have the meanings given in section 32(c) of the 
166.27  Internal Revenue Code, and the term "adjusted gross income" has 
166.28  the meaning given in section 62 of the Internal Revenue Code. 
166.29     "Earned income of the lesser-earning spouse" has the 
166.30  meaning given in section 290.0675, subdivision 1, paragraph (d). 
166.31     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
166.32  years beginning after December 31, 2004. 
166.33     Sec. 25.  Minnesota Statutes 2004, section 290.0672, 
166.34  subdivision 1, is amended to read: 
166.35     Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
166.36  section, the following terms have the meanings given. 
167.1      (b) "Long-term care insurance" means a policy that: 
167.2      (1) qualifies for a deduction under section 213 of the 
167.3   Internal Revenue Code, disregarding the 7.5 percent income test; 
167.4   or meets the requirements given in section 62A.46; or provides 
167.5   similar coverage issued under the laws of another jurisdiction; 
167.6   and 
167.7      (2) has a lifetime long-term care benefit limit of not less 
167.8   than $100,000; and 
167.9      (3) has been offered in compliance with the inflation 
167.10  protection requirements of section 62S.23. 
167.11     (c) "Qualified beneficiary" means the taxpayer or the 
167.12  taxpayer's spouse.  
167.13     (d) "Premiums deducted in determining federal taxable 
167.14  income" means the lesser of (1) long-term care insurance 
167.15  premiums that qualify as deductions under section 213 of the 
167.16  Internal Revenue Code; and (2) the total amount deductible for 
167.17  medical care under section 213 of the Internal Revenue Code. 
167.18     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
167.19  beginning after December 31, 2004. 
167.20     Sec. 26.  Minnesota Statutes 2004, section 290.0672, 
167.21  subdivision 2, is amended to read: 
167.22     Subd. 2.  [CREDIT.] A taxpayer is allowed a credit against 
167.23  the tax imposed by this chapter for long-term care insurance 
167.24  policy premiums paid during the tax year.  The credit for each 
167.25  policy equals 25 percent of premiums paid to the extent not 
167.26  deducted in determining federal taxable income.  A taxpayer may 
167.27  claim a credit for only one policy for each qualified 
167.28  beneficiary.  A maximum of $100 applies to each qualified 
167.29  beneficiary.  The maximum total credit allowed per year is $200 
167.30  for married couples filing joint returns and $100 for all other 
167.31  filers.  For a nonresident or part-year resident, the credit 
167.32  determined under this section must be allocated based on the 
167.33  percentage calculated under section 290.06, subdivision 2c, 
167.34  paragraph (e). 
167.35     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
167.36  beginning after December 31, 2004. 
168.1      Sec. 27.  Minnesota Statutes 2004, section 290.0674, 
168.2   subdivision 1, is amended to read: 
168.3      Subdivision 1.  [CREDIT ALLOWED.] An individual is allowed 
168.4   a credit against the tax imposed by this chapter in an amount 
168.5   equal to 75 percent of the amount paid for education-related 
168.6   expenses for a qualifying child in kindergarten through grade 
168.7   12.  For purposes of this section, "education-related expenses" 
168.8   means: 
168.9      (1) fees or tuition for instruction by an instructor under 
168.10  section 120A.22, subdivision 10, clause (1), (2), (3), (4), or 
168.11  (5), or a member of the Minnesota Music Teachers Association, 
168.12  and who is not a lineal ancestor or sibling of the dependent for 
168.13  instruction outside the regular school day or school year, 
168.14  including tutoring, driver's education offered as part of school 
168.15  curriculum, regardless of whether it is taken from a public or 
168.16  private entity or summer camps, in grade or age appropriate 
168.17  curricula that supplement curricula and instruction available 
168.18  during the regular school year, that assists a dependent to 
168.19  improve knowledge of core curriculum areas or to expand 
168.20  knowledge and skills under the graduation rule under section 
168.21  120B.02, paragraph (e), clauses (1) to (7), (9), and (10) 
168.22  required academic standards under section 120B.021, subdivision 
168.23  1, and the elective standard under section 120B.022, subdivision 
168.24  1, clause (2), and that do not include the teaching of religious 
168.25  tenets, doctrines, or worship, the purpose of which is to 
168.26  instill such tenets, doctrines, or worship; 
168.27     (2) expenses for textbooks, including books and other 
168.28  instructional materials and equipment purchased or leased for 
168.29  use in elementary and secondary schools in teaching only those 
168.30  subjects legally and commonly taught in public elementary and 
168.31  secondary schools in this state.  "Textbooks" does not include 
168.32  instructional books and materials used in the teaching of 
168.33  religious tenets, doctrines, or worship, the purpose of which is 
168.34  to instill such tenets, doctrines, or worship, nor does it 
168.35  include books or materials for extracurricular activities 
168.36  including sporting events, musical or dramatic events, speech 
169.1   activities, driver's education, or similar programs; 
169.2      (3) a maximum expense of $200 per family for personal 
169.3   computer hardware, excluding single purpose processors, and 
169.4   educational software that assists a dependent to improve 
169.5   knowledge of core curriculum areas or to expand knowledge and 
169.6   skills under the graduation rule under section 120B.02 required 
169.7   academic standards under section 120B.021, subdivision 1, and 
169.8   the elective standard under section 120B.022, subdivision 1, 
169.9   clause (2), purchased for use in the taxpayer's home and not 
169.10  used in a trade or business regardless of whether the computer 
169.11  is required by the dependent's school; and 
169.12     (4) the amount paid to others for transportation of a 
169.13  qualifying child attending an elementary or secondary school 
169.14  situated in Minnesota, North Dakota, South Dakota, Iowa, or 
169.15  Wisconsin, wherein a resident of this state may legally fulfill 
169.16  the state's compulsory attendance laws, which is not operated 
169.17  for profit, and which adheres to the provisions of the Civil 
169.18  Rights Act of 1964 and chapter 363A. 
169.19     For purposes of this section, "qualifying child" has the 
169.20  meaning given in section 32(c)(3) of the Internal Revenue Code. 
169.21     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
169.22  beginning after December 31, 2004. 
169.23     Sec. 28.  Minnesota Statutes 2004, section 290.0674, 
169.24  subdivision 2, is amended to read: 
169.25     Subd. 2.  [LIMITATIONS.] (a) For taxable years beginning 
169.26  after December 31, 2004, and before January 1, 2006, for 
169.27  claimants with income not greater than $33,500, the maximum 
169.28  credit allowed for a family is $1,000 per qualifying child and 
169.29  $2,000 per family multiplied by the number of qualifying 
169.30  children in kindergarten through grade 12 in the family.  No 
169.31  credit is allowed for education-related expenses for claimants 
169.32  with income greater than $37,500.  The maximum credit per child 
169.33  for families with one qualifying child in kindergarten through 
169.34  grade 12 is reduced by $1 for each $4 of household income over 
169.35  $33,500, and the maximum credit per family for families with two 
169.36  or more qualifying children in kindergarten through grade 12 is 
170.1   reduced by $2 for each $4 of household income over $33,500, but 
170.2   in no case is the credit less than zero. 
170.3      (b) For taxable years beginning after December 31, 2005, 
170.4   for claimants with income not greater than the greater of (i) 
170.5   $33,500 or (ii) 185 percent of the federal poverty guidelines, 
170.6   the maximum credit allowed for a family is $1,000 multiplied by 
170.7   the number of qualifying children in the family in grades 
170.8   kindergarten through 12.  The maximum credit per family is 
170.9   reduced by $1 multiplied by the number of qualifying children in 
170.10  the family in grades kindergarten through 12 for each $4 of 
170.11  household income over the greater of (i) $33,500 or (ii) 185 
170.12  percent of the federal poverty guidelines, but in no case is the 
170.13  credit less than zero. 
170.14     (c) For purposes of this section "income" has the meaning 
170.15  given in section 290.067, subdivision 2a.  In the case of a 
170.16  married claimant, a credit is not allowed unless a joint income 
170.17  tax return is filed.  For purposes of this section "federal 
170.18  poverty guidelines" means the guidelines published in the 
170.19  Federal Register in the tax year for which the credit is 
170.20  claimed, adjusted for family size. 
170.21     (b) (d) For a nonresident or part-year resident, the credit 
170.22  determined under subdivision 1 and the maximum credit amount in 
170.23  paragraph (a) must be allocated using the percentage calculated 
170.24  in section 290.06, subdivision 2c, paragraph (e). 
170.25     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
170.26  years beginning after December 31, 2004. 
170.27     Sec. 29.  Minnesota Statutes 2004, section 290.091, 
170.28  subdivision 2, is amended to read: 
170.29     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
170.30  this section, the following terms have the meanings given: 
170.31     (a) "Alternative minimum taxable income" means the sum of 
170.32  the following for the taxable year: 
170.33     (1) the taxpayer's federal alternative minimum taxable 
170.34  income as defined in section 55(b)(2) of the Internal Revenue 
170.35  Code; 
170.36     (2) the taxpayer's itemized deductions allowed in computing 
171.1   federal alternative minimum taxable income, but excluding: 
171.2      (i) the charitable contribution deduction under section 170 
171.3   of the Internal Revenue Code: 
171.4      (A) for taxable years beginning before January 1, 2006, to 
171.5   the extent that the deduction exceeds 1.0 percent of adjusted 
171.6   gross income, as defined; 
171.7      (B) for taxable years beginning after December 31, 2005, to 
171.8   the full extent of the deduction. 
171.9      For purposes of this clause, "adjusted gross income" has 
171.10  the meaning given in section 62 of the Internal Revenue Code; 
171.11     (ii) the medical expense deduction; 
171.12     (iii) the casualty, theft, and disaster loss deduction; and 
171.13     (iv) the impairment-related work expenses of a disabled 
171.14  person; 
171.15     (3) for depletion allowances computed under section 613A(c) 
171.16  of the Internal Revenue Code, with respect to each property (as 
171.17  defined in section 614 of the Internal Revenue Code), to the 
171.18  extent not included in federal alternative minimum taxable 
171.19  income, the excess of the deduction for depletion allowable 
171.20  under section 611 of the Internal Revenue Code for the taxable 
171.21  year over the adjusted basis of the property at the end of the 
171.22  taxable year (determined without regard to the depletion 
171.23  deduction for the taxable year); 
171.24     (4) to the extent not included in federal alternative 
171.25  minimum taxable income, the amount of the tax preference for 
171.26  intangible drilling cost under section 57(a)(2) of the Internal 
171.27  Revenue Code determined without regard to subparagraph (E); 
171.28     (5) to the extent not included in federal alternative 
171.29  minimum taxable income, the amount of interest income as 
171.30  provided by section 290.01, subdivision 19a, clause (1); and 
171.31     (6) the amount of addition required by section 290.01, 
171.32  subdivision 19a, clause (7); 
171.33     less the sum of the amounts determined under the following: 
171.34     (1) interest income as defined in section 290.01, 
171.35  subdivision 19b, clause (1); 
171.36     (2) an overpayment of state income tax as provided by 
172.1   section 290.01, subdivision 19b, clause (2), to the extent 
172.2   included in federal alternative minimum taxable income; 
172.3      (3) the amount of investment interest paid or accrued 
172.4   within the taxable year on indebtedness to the extent that the 
172.5   amount does not exceed net investment income, as defined in 
172.6   section 163(d)(4) of the Internal Revenue Code.  Interest does 
172.7   not include amounts deducted in computing federal adjusted gross 
172.8   income; and 
172.9      (4) amounts subtracted from federal taxable income as 
172.10  provided by section 290.01, subdivision 19b, clauses (10) and 
172.11  (11) (9) to (13). 
172.12     In the case of an estate or trust, alternative minimum 
172.13  taxable income must be computed as provided in section 59(c) of 
172.14  the Internal Revenue Code. 
172.15     (b) "Investment interest" means investment interest as 
172.16  defined in section 163(d)(3) of the Internal Revenue Code. 
172.17     (c) "Tentative minimum tax" equals 6.4 percent of 
172.18  alternative minimum taxable income after subtracting the 
172.19  exemption amount determined under subdivision 3. 
172.20     (d) "Regular tax" means the tax that would be imposed under 
172.21  this chapter (without regard to this section and section 
172.22  290.032), reduced by the sum of the nonrefundable credits 
172.23  allowed under this chapter.  
172.24     (e) "Net minimum tax" means the minimum tax imposed by this 
172.25  section. 
172.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
172.27  years beginning after December 31, 2004. 
172.28     Sec. 30.  Minnesota Statutes 2004, section 290.091, 
172.29  subdivision 3, is amended to read: 
172.30     Subd. 3.  [EXEMPTION AMOUNT.] (a) For purposes of computing 
172.31  the alternative minimum tax, the exemption amount is: 
172.32     (1) for taxable years beginning before January 1, 2005, the 
172.33  exemption determined under section 55(d) of the Internal Revenue 
172.34  Code, as amended through December 31, 1992; 
172.35     (2) for taxable years beginning after December 31, 2004, 
172.36  and before January 1, 2006, $42,000 for married couples filing 
173.1   joint returns; $21,000 for married individuals filing separate 
173.2   returns, estates, and trusts; and $31,500 for unmarried 
173.3   individuals; 
173.4      (3) for taxable years beginning after December 31, 2005, 
173.5   and before January 1, 2007, $45,000 for married couples filing 
173.6   joint returns; $22,500 for married individuals filing separate 
173.7   returns, estates, and trusts; and $33,750 for unmarried 
173.8   individuals; and 
173.9      (4) for taxable years beginning after December 31, 2006, 
173.10  and before January 1, 2008, $50,000 for married couples filing 
173.11  joint returns; $25,000 for married individuals filing separate 
173.12  returns, estates, and trusts; and $37,500 for unmarried 
173.13  individuals.  
173.14     (b) The exemption amount determined under this subdivision 
173.15  is subject to the phase out under section 55(d)(3) of the 
173.16  Internal Revenue Code, except that alternative minimum taxable 
173.17  income as determined under this section must be substituted in 
173.18  the computation of the phase out under section 55(d)(3). 
173.19     (c) For taxable years beginning after December 31, 2007, 
173.20  the exemption amount under paragraph (a), clause (4), must be 
173.21  adjusted for inflation.  The commissioner shall make the 
173.22  inflation adjustments in accordance with section 1(f) of the 
173.23  Internal Revenue Code except that for the purposes of this 
173.24  subdivision the percentage increase must be determined from the 
173.25  year starting September 1, 2006, and ending August 31, 2007, as 
173.26  the base year for adjusting for inflation for the tax year 
173.27  beginning after December 31, 2007.  The determination of the 
173.28  commissioner under this subdivision is not a rule under the 
173.29  Administrative Procedure Act. 
173.30     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
173.31  years beginning after December 31, 2004. 
173.32     Sec. 31.  Minnesota Statutes 2004, section 290.0922, 
173.33  subdivision 2, is amended to read: 
173.34     Subd. 2.  [EXEMPTIONS.] The following entities are exempt 
173.35  from the tax imposed by this section: 
173.36     (1) corporations exempt from tax under section 290.05; 
174.1      (2) real estate investment trusts; 
174.2      (3) regulated investment companies or a fund thereof; and 
174.3      (4) entities having a valid election in effect under 
174.4   section 860D(b) of the Internal Revenue Code; 
174.5      (5) town and farmers' mutual insurance companies; 
174.6      (6) cooperatives organized under chapter 308A or 308B that 
174.7   provide housing exclusively to persons age 55 and over and are 
174.8   classified as homesteads under section 273.124, subdivision 3; 
174.9   and 
174.10     (7) an entity, if for the taxable year all of its property 
174.11  is located in a job opportunity building zone designated under 
174.12  section 469.314 and all of its payroll is a job opportunity 
174.13  building zone payroll under section 469.310. 
174.14     Entities not specifically exempted by this subdivision are 
174.15  subject to tax under this section, notwithstanding section 
174.16  290.05.  
174.17     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
174.18  beginning after December 31, 2004. 
174.19     Sec. 32.  Minnesota Statutes 2004, section 290.191, 
174.20  subdivision 2, is amended to read: 
174.21     Subd. 2.  [APPORTIONMENT FORMULA OF GENERAL APPLICATION.] 
174.22  (a) Except for those trades or businesses required to use a 
174.23  different formula under subdivision 3 or section 290.36, and for 
174.24  those trades or businesses that receive permission to use some 
174.25  other method under section 290.20 or under subdivision 4, a 
174.26  trade or business required to apportion its net income must 
174.27  apportion its income to this state on the basis of the 
174.28  percentage obtained by taking the sum of:  
174.29     (1) 75 the percent for the sales factor under paragraph (b) 
174.30  of the percentage which the sales made within this state in 
174.31  connection with the trade or business during the tax period are 
174.32  of the total sales wherever made in connection with the trade or 
174.33  business during the tax period; 
174.34     (2) 12.5 the percent for the property factor under 
174.35  paragraph (b) of the percentage which the total tangible 
174.36  property used by the taxpayer in this state in connection with 
175.1   the trade or business during the tax period is of the total 
175.2   tangible property, wherever located, used by the taxpayer in 
175.3   connection with the trade or business during the tax period; and 
175.4      (3) 12.5 the percent for the payroll factor under paragraph 
175.5   (b) of the percentage which the taxpayer's total payrolls paid 
175.6   or incurred in this state or paid in respect to labor performed 
175.7   in this state in connection with the trade or business during 
175.8   the tax period are of the taxpayer's total payrolls paid or 
175.9   incurred in connection with the trade or business during the tax 
175.10  period.  
175.11     (b) For purposes of paragraph (a) and subdivision 3, the 
175.12  following percentages apply for the taxable years specified: 
175.13  Taxable years        Sales factor     Property     Payroll
175.14  beginning            percent          factor       factor
175.15  during calendar                       percent      percent
175.16  year 
175.17       2007                78             11           11 
175.18       2008                95            2.5          2.5 
175.19       2009 and later     100              0            0
175.20       calendar years 
175.21     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
175.22  beginning after December 31, 2006. 
175.23     Sec. 33.  Minnesota Statutes 2004, section 290.191, 
175.24  subdivision 3, is amended to read: 
175.25     Subd. 3.  [APPORTIONMENT FORMULA FOR FINANCIAL 
175.26  INSTITUTIONS.] Except for an investment company required to 
175.27  apportion its income under section 290.36, a financial 
175.28  institution that is required to apportion its net income must 
175.29  apportion its net income to this state on the basis of the 
175.30  percentage obtained by taking the sum of:  
175.31     (1) 75 the percent for the sales factor under subdivision 
175.32  2, paragraph (b), of the percentage which the receipts from 
175.33  within this state in connection with the trade or business 
175.34  during the tax period are of the total receipts in connection 
175.35  with the trade or business during the tax period, from wherever 
175.36  derived; 
176.1      (2) 12.5 the percent for the property factor under 
176.2   subdivision 2, paragraph (b), of the percentage which the sum of 
176.3   the total tangible property used by the taxpayer in this state 
176.4   and the intangible property owned by the taxpayer and attributed 
176.5   to this state in connection with the trade or business during 
176.6   the tax period is of the sum of the total tangible property, 
176.7   wherever located, used by the taxpayer and the intangible 
176.8   property owned by the taxpayer and attributed to all states in 
176.9   connection with the trade or business during the tax period; and 
176.10     (3) 12.5 the percent for the payroll factor under 
176.11  subdivision 2, paragraph (b), of the percentage which the 
176.12  taxpayer's total payrolls paid or incurred in this state or paid 
176.13  in respect to labor performed in this state in connection with 
176.14  the trade or business during the tax period are of the 
176.15  taxpayer's total payrolls paid or incurred in connection with 
176.16  the trade or business during the tax period. 
176.17     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
176.18  beginning after December 31, 2006. 
176.19     Sec. 34.  [290.433] [NATIONAL GUARD AND RESERVES CHECKOFF.] 
176.20     Subdivision 1.  [CHECKOFF ESTABLISHED.] (a) Every 
176.21  individual who files an income tax return may designate on their 
176.22  original return that $1 or more shall be added to the tax or 
176.23  deducted from the refund that would otherwise be payable by or 
176.24  to that individual and paid into a Minnesota military families 
176.25  relief account established in the special revenue fund.  The 
176.26  commissioner of revenue shall, on the income tax return, notify 
176.27  filers of their right to designate that a portion of their tax 
176.28  or refund shall be paid into the Minnesota military families 
176.29  relief account.  Amounts so designated to be paid shall be 
176.30  credited to the account as returns are processed, in as timely a 
176.31  manner as practical.  All interest earned on money accrued, 
176.32  gifts to the program, contributions to the program, and 
176.33  reimbursements of expenditures shall be credited to the 
176.34  account.  All money in the account is appropriated to the 
176.35  adjutant general of the Department of Military Affairs for the 
176.36  purpose of making grants as specified in subdivision 2. 
177.1      (b) The checkoff under this section is subject to removal 
177.2   from the income tax return as provided in section 290.439, 
177.3   subdivision 2.  
177.4      Subd. 2.  [GRANTS.] (a) The adjutant general is authorized 
177.5   to expend any money appropriated from the Minnesota military 
177.6   families relief account in the special revenue fund for the 
177.7   purpose of making grants: 
177.8      (1) directly to eligible individuals; or 
177.9      (2) to one or more eligible foundations for the purpose of 
177.10  making grants to eligible individuals, as provided in this 
177.11  section. 
177.12     (b) The term, "eligible individual" includes any Minnesota 
177.13  resident who is: 
177.14     (1) a member of the Minnesota National Guard or other 
177.15  United States armed forces reserves who has been ordered to 
177.16  federal active service since September 11, 2001, and has a 
177.17  financial need as a result of that service; 
177.18     (2) the spouse or dependent child of a person described in 
177.19  clause (1); or 
177.20     (3) the surviving spouse or surviving dependent child of a 
177.21  person described in clause (1). 
177.22     To be an eligible individual, a person described in clause 
177.23  (2) or (3) must be residing within the state of Minnesota. 
177.24     (c) The term "eligible foundation" includes any 
177.25  organization that: 
177.26     (1) is a tax-exempt organization under section 501(c)(3) of 
177.27  the Internal Revenue Code; 
177.28     (2) has articles of incorporation under chapter 317A 
177.29  specifying the purpose of the organization as including the 
177.30  provision of financial assistance to members of the Minnesota 
177.31  National Guard and other United States armed forces reserves and 
177.32  their families and survivors; and 
177.33     (3) agrees in writing to distribute any grant money 
177.34  received from the adjutant general under this section to 
177.35  eligible individuals as defined in this section and in 
177.36  accordance with any written policies and rules the adjutant 
178.1   general may impose as conditions of the grant to the foundation. 
178.2      (d) The maximum grant awarded to an eligible individual in 
178.3   a calendar year with funds from the Minnesota military families 
178.4   relief account, either through an eligible institution or 
178.5   directly from the adjutant general, may not exceed $2,000. 
178.6      (e) The state pledges and agrees with all contributors to 
178.7   the account to use the contributed funds solely for the purpose 
178.8   of providing assistance to eligible individuals. 
178.9      (f) The state further agrees that it will not impose 
178.10  additional conditions or restrictions that will limit or 
178.11  otherwise restrict the ability of the adjutant general to award 
178.12  grants under this section. 
178.13     (g) For purposes of this section, the term "federal active 
178.14  service" has the meaning given in section 190.05, subdivision 
178.15  5c, but excludes service performed exclusively for purposes of: 
178.16     (1) basic combat training, advanced individual training, 
178.17  annual training, and periodic inactive duty training; 
178.18     (2) special training periodically made available to reserve 
178.19  members; and 
178.20     (3) service performed in accordance with section 190.08, 
178.21  subdivision 3. 
178.22     Subd. 3.  [ANNUAL REPORT.] The adjutant general must report 
178.23  by February 1, 2007, and each year thereafter, to the chairs and 
178.24  ranking minority members of the legislative committees and 
178.25  divisions with jurisdiction over military and veterans' affairs 
178.26  on the number, amounts, and use of grants issued from the 
178.27  Minnesota military families relief account in the previous year 
178.28  and on the expenses related to administering the account. 
178.29     <b>[EFFECTIVE DATE.]</b> This section is effective for income tax 
178.30  returns for taxable years beginning after December 31, 2004. 
178.31     Sec. 35.  [290.434] [PUBLIC SAFETY OFFICER CHECKOFF.] 
178.32     (a) Every individual who files an income tax return may 
178.33  designate on their original return that $1 or more shall be 
178.34  added to the tax or deducted from the refund that would 
178.35  otherwise be payable by or to that individual and paid into a 
178.36  public safety officer memorial and survivor account in the 
179.1   special revenue fund.  The commissioner of revenue shall, on the 
179.2   income tax return, notify filers of their right to designate 
179.3   that a portion of their tax or refund shall be paid into the 
179.4   public safety officer memorial and survivor account.  The sum of 
179.5   the amounts so designated to be paid shall be credited to the 
179.6   account.  The account may be used by the commissioner of public 
179.7   safety to make grants to public safety officer associations that 
179.8   assist in building and preserving state memorial monuments, 
179.9   assist the families of public safety officers killed in the line 
179.10  of duty, award scholarships to surviving family members, and 
179.11  otherwise provide services relating to public safety officers 
179.12  killed in the line of duty.  All interest earned on money 
179.13  accrued, gifts to the program, contributions to the program, and 
179.14  reimbursements of expenditures shall be credited to the 
179.15  account.  All money in the account is appropriated to the 
179.16  commissioner of public safety for purposes of this section. 
179.17     (b) The state pledges and agrees with all contributors to 
179.18  the account to use the funds contributed solely for the 
179.19  maintenance of public safety officer memorials and for the 
179.20  benefit of survivors of Minnesota public safety officers killed 
179.21  in the line of duty and further agrees that it will not impose 
179.22  additional conditions or restrictions that will limit or 
179.23  otherwise restrict the ability of the commissioner of public 
179.24  safety, in consultation with the public safety officer memorial 
179.25  and survivor account advisory council, to award grants from the 
179.26  available funds in the most efficient and effective manner. 
179.27     (c) The commissioner of public safety must report by 
179.28  January 1, 2004, and each year thereafter to the chairs and 
179.29  ranking minority members of the legislative committees and 
179.30  divisions with jurisdiction over criminal justice policy and 
179.31  funding on the number, amounts, and use of grants issued from 
179.32  the account in the previous year. 
179.33     (d) A public safety officer memorial and survivor account 
179.34  advisory council is established to advise the commissioner of 
179.35  public safety on the distribution of grants under this section.  
179.36  The council must consist of eight members, one from each of the 
180.1   following organizations:  the Minnesota law enforcement memorial 
180.2   association, the Minnesota police and peace officers 
180.3   association, the Minnesota chiefs of police association, the 
180.4   Minnesota sheriffs association, the Minnesota state fire 
180.5   department association, the Minnesota state fire chiefs 
180.6   association, the Minnesota ambulance association, and the 
180.7   Minnesota emergency medical services association.  The council 
180.8   member is the executive director or president of the 
180.9   organization, or that person's designee.  Members must serve 
180.10  without compensation.  The commissioner must consider the 
180.11  advisory council's recommendations before awarding grants under 
180.12  this section. 
180.13     (e) As used in this section, "killed in the line of duty" 
180.14  and "public safety officer" have the meanings given in section 
180.15  299A.41. 
180.16     (f) The checkoff under this section is subject to removal 
180.17  from the income tax return as provided in section 290.439, 
180.18  subdivision 2. 
180.19     <b>[EFFECTIVE DATE.]</b> This section is effective for income tax 
180.20  returns for taxable years beginning after December 31, 2004. 
180.21     Sec. 36.  [290.435] [K-12 EDUCATION, HIGHER EDUCATION, 
180.22  TRANSPORTATION, HEALTH CARE, NURSING HOME, AND CLEAN WATER 
180.23  CHECKOFF.] 
180.24     Subdivision 1.  [CHECKOFFS.] (a) Every individual who files 
180.25  an income tax return may designate on their original return that 
180.26  $1 or more shall be added to the tax or deducted from the refund 
180.27  that would otherwise be payable by or to that individual. 
180.28     (b) The taxpayer shall designate that the added or deducted 
180.29  amount shall be paid into one or more of the following accounts 
180.30  and used for the stated purpose: 
180.31     (1) K-12 education, for technology and/or capital 
180.32  improvement grants to school districts; 
180.33     (2) higher education, for state assistance to individual 
180.34  students based on student need; 
180.35     (3) transportation, for local road and bridge funds; 
180.36     (4) health care, to provide funding for public health care 
181.1   programs; 
181.2      (5) nursing home assistance, for state reimbursement of 
181.3   nursing home costs; or 
181.4      (6) environmental clean water, for grants to cities for 
181.5   wastewater treatment facilities. 
181.6      (c) The taxpayer may not designate an amount less than $1 
181.7   to be paid into any of the accounts. 
181.8      Subd. 2.  [APPROPRIATION; SPECIAL ACCOUNTS.] (a) All 
181.9   amounts designated by taxpayers to be paid into the K-12 
181.10  education account under subdivision 1, clause (1), must be 
181.11  deposited in the state treasury and credited to a special K-12 
181.12  education account.  Money in the account is appropriated 
181.13  annually to the commissioner of education to make onetime grants 
181.14  to school districts for technology or capital improvements. 
181.15     (b) All amounts designated by taxpayers to be paid into the 
181.16  higher education account under subdivision 1, clause (2), must 
181.17  be deposited in the state treasury and credited to a special 
181.18  higher education account.  Money in the account is appropriated 
181.19  annually to the Minnesota Higher Education Services Office to 
181.20  provide financial assistance to students, based on financial 
181.21  needs, attending postsecondary educational institutions located 
181.22  in and operated by this state. 
181.23     (c) All amounts designated by taxpayers to be paid into the 
181.24  transportation account under subdivision 1, clause (3), must be 
181.25  deposited in the state treasury and credited to a special 
181.26  transportation account.  Money in the account is appropriated 
181.27  annually to the commissioner of transportation for improvements 
181.28  to local roads and bridges. 
181.29     (d) All amounts designated by taxpayers to be paid into the 
181.30  health care account under subdivision 1, clause (4), must be 
181.31  deposited in the state treasury and credited to a special health 
181.32  care account.  Money in the account is appropriated annually to 
181.33  the commissioner of human services to provide additional funds 
181.34  for adult participation in MinnesotaCare. 
181.35     (e) All amounts designated by taxpayers to be paid into the 
181.36  nursing home assistance account under subdivision 1, clause (5), 
182.1   must be deposited in the state treasury and credited to a 
182.2   special nursing home assistance account.  Money in the account 
182.3   is appropriated annually to the commissioner of human services 
182.4   to fund a onetime increase in state paid nursing home 
182.5   reimbursement rates. 
182.6      (f) All amounts designated by taxpayers to be paid into the 
182.7   environmental clean water account under subdivision 1, clause 
182.8   (6), must be deposited in the state treasury and credited to the 
182.9   wastewater infrastructure fund, and annually appropriated to the 
182.10  public facilities authority to make onetime grants to 
182.11  municipalities for wastewater treatment facilities. 
182.12     (g) All amounts appropriated from the special accounts 
182.13  under this section are onetime appropriations and do not become 
182.14  part of the base level funding for the 2006-2007 biennium. 
182.15     (h) The checkoffs under this section are subject to removal 
182.16  from the income tax return as provided in section 290.439, 
182.17  subdivision 2. 
182.18     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
182.19  years beginning after December 31, 2004. 
182.20     Sec. 37.  [290.439] [ADMINISTRATION OF CHECKOFFS.] 
182.21     Subdivision 1.  [FORMS.] The commissioner must provide a 
182.22  separate form as part of the income tax return that lists the 
182.23  nongame wildlife checkoff in section 290.432; the state election 
182.24  campaign fund checkoff in section 10A.31; the National Guard and 
182.25  Reserves checkoff in section 290.433; the public safety officer 
182.26  checkoff in section 290.434; and the education, higher 
182.27  education, transportation, health care, nursing home, and clean 
182.28  water checkoffs in section 290.435.  The commissioner must 
182.29  provide a single line on form M-1 for entering the total amount 
182.30  a taxpayer contributes to all the checkoffs listed on the 
182.31  separate form. 
182.32     Subd. 2.  [REMOVAL OF CHECKOFFS.] The commissioner must 
182.33  annually review usage of the income tax checkoffs in sections 
182.34  290.433 to 290.435, and determine the number of returns making 
182.35  contributions and the total amount contributed to each checkoff, 
182.36  including each of the separate checkoffs provided in section 
183.1   290.435.  If any of the checkoffs subject to review fails, for 
183.2   two consecutive tax years, to obtain contributions of at least 
183.3   $100,000 from at least eight percent of all returns that make 
183.4   contributions to any of the checkoffs in sections 10A.31 and 
183.5   290.433 to 290.435, the commissioner must remove the checkoff 
183.6   from the checkoff form and submit legislation proposing the 
183.7   repeal of the checkoff to the legislature. 
183.8      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
183.9   years beginning after December 31, 2004. 
183.10     Sec. 38.  Minnesota Statutes 2004, section 290.92, 
183.11  subdivision 4b, is amended to read: 
183.12     Subd. 4b.  [WITHHOLDING BY PARTNERSHIPS.] (a) A partnership 
183.13  shall deduct and withhold a tax as provided in paragraph (b) for 
183.14  nonresident individual partners based on their distributive 
183.15  shares of partnership income for a taxable year of the 
183.16  partnership. 
183.17     (b) The amount of tax withheld is determined by multiplying 
183.18  the partner's distributive share allocable to Minnesota under 
183.19  section 290.17, paid or credited during the taxable year by the 
183.20  highest rate used to determine the income tax liability for an 
183.21  individual under section 290.06, subdivision 2c, except that the 
183.22  amount of tax withheld may be determined by the commissioner if 
183.23  the partner submits a withholding exemption certificate under 
183.24  subdivision 5. 
183.25     (c) The commissioner may reduce or abate the tax withheld 
183.26  under this subdivision if the partnership had reasonable cause 
183.27  to believe that no tax was due under this section. 
183.28     (d) Notwithstanding paragraph (a), a partnership is not 
183.29  required to deduct and withhold tax for a nonresident partner if:
183.30     (1) the partner elects to have the tax due paid as part of 
183.31  the partnership's composite return under section 289A.08, 
183.32  subdivision 7; 
183.33     (2) the partner has Minnesota assignable federal adjusted 
183.34  gross income from the partnership of less than $1,000; or 
183.35     (3) the partnership is liquidated or terminated, the income 
183.36  was generated by a transaction related to the termination or 
184.1   liquidation, and no cash or other property was distributed in 
184.2   the current or prior taxable year; or 
184.3      (4) the distributive shares of partnership income are 
184.4   attributable to: 
184.5      (i) income required to be recognized because of discharge 
184.6   of indebtedness; 
184.7      (ii) income recognized because of a sale, exchange, or 
184.8   other disposition of real estate, depreciable property, or 
184.9   property described in section 179 of the Internal Revenue Code; 
184.10  or 
184.11     (iii) income recognized on the sale, exchange, or other 
184.12  disposition of any property that has been the subject of a basis 
184.13  reduction pursuant to section 108, 734, 743, 754, or 1017 of the 
184.14  Internal Revenue Code 
184.15  to the extent that the income does not include cash received or 
184.16  receivable or, if there is cash received or receivable, to the 
184.17  extent that the cash is required to be used to pay indebtedness 
184.18  by the partnership or a secured debt on partnership property; or 
184.19     (5) the partnership is a publicly traded partnership, as 
184.20  defined in section 7704(b) of the Internal Revenue Code. 
184.21     (e) For purposes of subdivision 6a, and sections 289A.09, 
184.22  subdivision 2, 289A.20, subdivision 2, paragraph (c), 289A.50, 
184.23  289A.56, 289A.60, and 289A.63, a partnership is considered an 
184.24  employer.  
184.25     (f) To the extent that income is exempt from withholding 
184.26  under paragraph (d), clause (4), the commissioner has a lien in 
184.27  an amount up to the amount that would be required to be withheld 
184.28  with respect to the income of the partner attributable to the 
184.29  partnership interest, but for the application of paragraph (d), 
184.30  clause (4).  The lien arises under section 270.69 from the date 
184.31  of assessment of the tax against the partner, and attaches to 
184.32  that partner's share of the profits and any other money due or 
184.33  to become due to that partner in respect of the partnership.  
184.34  Notice of the lien may be sent by mail to the partnership, 
184.35  without the necessity for recording the lien.  The notice has 
184.36  the force and effect of a levy under section 270.70, and is 
185.1   enforceable against the partnership in the manner provided by 
185.2   that section.  Upon payment in full of the liability subsequent 
185.3   to the notice of lien, the partnership must be notified that the 
185.4   lien has been satisfied.  
185.5      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
185.6   years beginning after December 31, 2004. 
185.7      Sec. 39.  Minnesota Statutes 2004, section 291.005, 
185.8   subdivision 1, is amended to read: 
185.9      Subdivision 1.  [SCOPE.] Unless the context otherwise 
185.10  clearly requires, the following terms used in this chapter shall 
185.11  have the following meanings: 
185.12     (1) "Federal gross estate" means the gross estate of a 
185.13  decedent as valued and otherwise determined for federal estate 
185.14  tax purposes by federal taxing authorities pursuant to the 
185.15  provisions of the Internal Revenue Code. 
185.16     (2) "Minnesota gross estate" means the federal gross estate 
185.17  of a decedent after (a) excluding therefrom any property 
185.18  included therein which has its situs outside Minnesota, and (b) 
185.19  including therein any property omitted from the federal gross 
185.20  estate which is includable therein, has its situs in Minnesota, 
185.21  and was not disclosed to federal taxing authorities.  
185.22     (3) "Personal representative" means the executor, 
185.23  administrator or other person appointed by the court to 
185.24  administer and dispose of the property of the decedent.  If 
185.25  there is no executor, administrator or other person appointed, 
185.26  qualified, and acting within this state, then any person in 
185.27  actual or constructive possession of any property having a situs 
185.28  in this state which is included in the federal gross estate of 
185.29  the decedent shall be deemed to be a personal representative to 
185.30  the extent of the property and the Minnesota estate tax due with 
185.31  respect to the property. 
185.32     (4) "Resident decedent" means an individual whose domicile 
185.33  at the time of death was in Minnesota. 
185.34     (5) "Nonresident decedent" means an individual whose 
185.35  domicile at the time of death was not in Minnesota. 
185.36     (6) "Situs of property" means, with respect to real 
186.1   property, the state or country in which it is located; with 
186.2   respect to tangible personal property, the state or country in 
186.3   which it was normally kept or located at the time of the 
186.4   decedent's death; and with respect to intangible personal 
186.5   property, the state or country in which the decedent was 
186.6   domiciled at death. 
186.7      (7) "Commissioner" means the commissioner of revenue or any 
186.8   person to whom the commissioner has delegated functions under 
186.9   this chapter. 
186.10     (8) "Internal Revenue Code" means the United States 
186.11  Internal Revenue Code of 1986, as amended through December 31, 
186.12  2002 April 15, 2005. 
186.13     (9) "Minnesota adjusted taxable estate" means federal 
186.14  adjusted taxable estate as defined by section 2011(b)(3) of the 
186.15  Internal Revenue Code, increased by the amount of deduction for 
186.16  state death taxes allowed under section 2058 of the Internal 
186.17  Revenue Code. 
186.18     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
186.19  decedents dying after December 31, 2004. 
186.20     Sec. 40.  Minnesota Statutes 2004, section 291.03, 
186.21  subdivision 1, is amended to read: 
186.22     Subdivision 1.  [TAX AMOUNT.] (a) The tax imposed shall be 
186.23  an amount equal to the proportion of the maximum credit for 
186.24  state death taxes computed under section 2011 of the Internal 
186.25  Revenue Code, as amended through December 31, 2000, for state 
186.26  death taxes but using Minnesota adjusted taxable estate instead 
186.27  of federal adjusted taxable estate, as the Minnesota gross 
186.28  estate bears to the value of the federal gross estate.  The tax 
186.29  determined under this paragraph shall not be greater than the 
186.30  federal estate tax amount computed by applying the rates and 
186.31  brackets under section 2001(c) of the Internal Revenue Code 
186.32  after the allowance of to the Minnesota adjusted gross estate 
186.33  and subtracting the federal credits credit allowed under section 
186.34  2010 of the Internal Revenue Code of 1986, as amended through 
186.35  December 31, 2000.  
186.36     (b) For the purposes of this section, expenses which are 
187.1   deducted for federal income tax purposes under section 642(g) of 
187.2   the Internal Revenue Code as amended through December 31, 2002, 
187.3   are not allowable in computing the tax under this chapter. 
187.4      (c) The executor may make a qualified terminable interest 
187.5   property election, as defined in section 2056(b)(7) of the 
187.6   Internal Revenue Code, for purposes of computing the marital 
187.7   deduction under section 2056 of the Internal Revenue Code for 
187.8   the tax under this chapter that differs from the amount elected 
187.9   for federal estate tax purposes.  The election may not exceed 
187.10  the federal election by more than the difference between the 
187.11  applicable exclusion amount under section 2010(c) of the 
187.12  Internal Revenue Code and under section 2010(c) of the Internal 
187.13  Revenue Code, as amended through December 31, 2000.  The 
187.14  election must be made on the tax return under this chapter and 
187.15  is irrevocable.  All tax under this chapter must be determined 
187.16  using the qualified terminable interest election made on the 
187.17  Minnesota return.  For purposes of applying sections 2044 and 
187.18  2207A of the Internal Revenue Code to the computation of the 
187.19  federal and Minnesota gross estates of the surviving spouse, 
187.20  amounts for which a qualified terminable interest property 
187.21  election has been made under this section must be treated as 
187.22  though a valid federal qualified terminable interest property 
187.23  election under section 2056(b)(7) of the Internal Revenue Code 
187.24  had been made. 
187.25     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
187.26  decedents dying after December 31, 2004, except paragraph (c) 
187.27  applies for estates of decedents dying after December 31, 2006. 
187.28     Sec. 41.  Minnesota Statutes 2004, section 298.01, 
187.29  subdivision 3, is amended to read: 
187.30     Subd. 3.  [OCCUPATION TAX; OTHER ORES.] Every person 
187.31  engaged in the business of mining or producing ores in this 
187.32  state, except iron ore or taconite concentrates, shall pay an 
187.33  occupation tax to the state of Minnesota as provided in this 
187.34  subdivision.  The tax is determined in the same manner as the 
187.35  tax imposed by section 290.02, except that sections 290.05, 
187.36  subdivision 1, clause (a), and 290.17, subdivision 4, and 
188.1   290.191, subdivision 2, do not apply.  A person subject to 
188.2   occupation tax under this section shall apportion its net income 
188.3   on the basis of the percentage obtained by taking the sum of: 
188.4      (1) 75 percent of the percentage which the sales made 
188.5   within this state in connection with the trade or business 
188.6   during the tax period are of the total sales wherever made in 
188.7   connection with the trade or business during the tax period; 
188.8      (2) 12.5 percent of the percentage which the total tangible 
188.9   property used by the taxpayer in this state in connection with 
188.10  the trade or business during the tax period is of the total 
188.11  tangible property, wherever located, used by the taxpayer in 
188.12  connection with the trade or business during the tax period; and 
188.13     (3) 12.5 percent of the percentage which the taxpayer's 
188.14  total payrolls paid or incurred in this state or paid in respect 
188.15  to labor performed in this state in connection with the trade or 
188.16  business during the tax period are of the taxpayer's total 
188.17  payrolls paid or incurred in connection with the trade or 
188.18  business during the tax period.  
188.19     The tax is in addition to all other taxes. 
188.20     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
188.21  beginning after December 31, 2006. 
188.22     Sec. 42.  Minnesota Statutes 2004, section 298.01, 
188.23  subdivision 4, is amended to read: 
188.24     Subd. 4.  [OCCUPATION TAX; IRON ORE; TACONITE 
188.25  CONCENTRATES.] A person engaged in the business of mining or 
188.26  producing of iron ore, taconite concentrates or direct reduced 
188.27  ore in this state shall pay an occupation tax to the state of 
188.28  Minnesota.  The tax is determined in the same manner as the tax 
188.29  imposed by section 290.02, except that sections 290.05, 
188.30  subdivision 1, clause (a), and 290.17, subdivision 4, and 
188.31  290.191, subdivision 2, do not apply.  A person subject to 
188.32  occupation tax under this section shall apportion its net income 
188.33  on the basis of the percentage obtained by taking the sum of: 
188.34     (1) 75 percent of the percentage which the sales made 
188.35  within this state in connection with the trade or business 
188.36  during the tax period are of the total sales wherever made in 
189.1   connection with the trade or business during the tax period; 
189.2      (2) 12.5 percent of the percentage which the total tangible 
189.3   property used by the taxpayer in this state in connection with 
189.4   the trade or business during the tax period is of the total 
189.5   tangible property, wherever located, used by the taxpayer in 
189.6   connection with the trade or business during the tax period; and 
189.7      (3) 12.5 percent of the percentage which the taxpayer's 
189.8   total payrolls paid or incurred in this state or paid in respect 
189.9   to labor performed in this state in connection with the trade or 
189.10  business during the tax period are of the taxpayer's total 
189.11  payrolls paid or incurred in connection with the trade or 
189.12  business during the tax period.  
189.13     The tax is in addition to all other taxes. 
189.14     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
189.15  beginning after December 31, 2006. 
189.16     Sec. 43.  [REPEALER.] 
189.17     Minnesota Rules, parts 8093.2000; and 8093.3000, are 
189.18  repealed effective the day following final enactment. 
189.19                             ARTICLE 6 
189.20                           FEDERAL UPDATE 
189.21     Section 1.  Minnesota Statutes 2004, section 289A.02, 
189.22  subdivision 7, is amended to read: 
189.23     Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
189.24  defined otherwise, "Internal Revenue Code" means the Internal 
189.25  Revenue Code of 1986, as amended through June 15, 2003 April 15, 
189.26  2005. 
189.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
189.28  following final enactment. 
189.29     Sec. 2.  Minnesota Statutes 2004, section 290.01, 
189.30  subdivision 19, as amended by Laws 2005, chapter 1, section 1, 
189.31  is amended to read: 
189.32     Subd. 19.  [NET INCOME.] The term "net income" means the 
189.33  federal taxable income, as defined in section 63 of the Internal 
189.34  Revenue Code of 1986, as amended through the date named in this 
189.35  subdivision, incorporating the federal effective dates of 
189.36  changes to the Internal Revenue Code and any elections made by 
190.1   the taxpayer in accordance with the Internal Revenue Code in 
190.2   determining federal taxable income for federal income tax 
190.3   purposes, and with the modifications provided in subdivisions 
190.4   19a to 19f. 
190.5      In the case of a regulated investment company or a fund 
190.6   thereof, as defined in section 851(a) or 851(g) of the Internal 
190.7   Revenue Code, federal taxable income means investment company 
190.8   taxable income as defined in section 852(b)(2) of the Internal 
190.9   Revenue Code, except that:  
190.10     (1) the exclusion of net capital gain provided in section 
190.11  852(b)(2)(A) of the Internal Revenue Code does not apply; 
190.12     (2) the deduction for dividends paid under section 
190.13  852(b)(2)(D) of the Internal Revenue Code must be applied by 
190.14  allowing a deduction for capital gain dividends and 
190.15  exempt-interest dividends as defined in sections 852(b)(3)(C) 
190.16  and 852(b)(5) of the Internal Revenue Code; and 
190.17     (3) the deduction for dividends paid must also be applied 
190.18  in the amount of any undistributed capital gains which the 
190.19  regulated investment company elects to have treated as provided 
190.20  in section 852(b)(3)(D) of the Internal Revenue Code.  
190.21     The net income of a real estate investment trust as defined 
190.22  and limited by section 856(a), (b), and (c) of the Internal 
190.23  Revenue Code means the real estate investment trust taxable 
190.24  income as defined in section 857(b)(2) of the Internal Revenue 
190.25  Code.  
190.26     The net income of a designated settlement fund as defined 
190.27  in section 468B(d) of the Internal Revenue Code means the gross 
190.28  income as defined in section 468B(b) of the Internal Revenue 
190.29  Code. 
190.30     The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
190.31  1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
190.32  1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
190.33  Protection Act, Public Law 104-188, the provisions of Public Law 
190.34  104-117, the provisions of sections 313(a) and (b)(1), 602(a), 
190.35  913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013, 
190.36  1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b) 
191.1   and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and 
191.2   1604(d)(1) of the Taxpayer Relief Act of 1997, Public Law 
191.3   105-34, the provisions of section 6010 of the Internal Revenue 
191.4   Service Restructuring and Reform Act of 1998, Public Law 
191.5   105-206, the provisions of section 4003 of the Omnibus 
191.6   Consolidated and Emergency Supplemental Appropriations Act, 
191.7   1999, Public Law 105-277, and the provisions of section 318 of 
191.8   the Consolidated Appropriation Act of 2001, Public Law 106-554, 
191.9   shall become effective at the time they become effective for 
191.10  federal purposes. 
191.11     The Internal Revenue Code of 1986, as amended through 
191.12  December 31, 1996 April 15, 2005, shall be in effect for taxable 
191.13  years beginning after December 31, 1996.  
191.14     The provisions of sections 202(a) and (b), 221(a), 225, 
191.15  312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 
191.16  (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 
191.17  1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 
191.18  1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 
191.19  of the Taxpayer Relief Act of 1997, Public Law 105-34, the 
191.20  provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002, 
191.21  and 7003 of the Internal Revenue Service Restructuring and 
191.22  Reform Act of 1998, Public Law 105-206, the provisions of 
191.23  section 3001 of the Omnibus Consolidated and Emergency 
191.24  Supplemental Appropriations Act, 1999, Public Law 105-277, the 
191.25  provisions of section 3001 of the Miscellaneous Trade and 
191.26  Technical Corrections Act of 1999, Public Law 106-36, and the 
191.27  provisions of section 316 of the Consolidated Appropriation Act 
191.28  of 2001, Public Law 106-554, shall become effective at the time 
191.29  they become effective for federal purposes. 
191.30     The Internal Revenue Code of 1986, as amended through 
191.31  December 31, 1997, shall be in effect for taxable years 
191.32  beginning after December 31, 1997. 
191.33     The provisions of sections 5002, 6009, 6011, and 7001 of 
191.34  the Internal Revenue Service Restructuring and Reform Act of 
191.35  1998, Public Law 105-206, the provisions of section 9010 of the 
191.36  Transportation Equity Act for the 21st Century, Public Law 
192.1   105-178, the provisions of sections 1004, 4002, and 5301 of the 
192.2   Omnibus Consolidation and Emergency Supplemental Appropriations 
192.3   Act, 1999, Public Law 105-277, the provision of section 303 of 
192.4   the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law 
192.5   105-369, the provisions of sections 532, 534, 536, 537, and 538 
192.6   of the Ticket to Work and Work Incentives Improvement Act of 
192.7   1999, Public Law 106-170, the provisions of the Installment Tax 
192.8   Correction Act of 2000, Public Law 106-573, and the provisions 
192.9   of section 309 of the Consolidated Appropriation Act of 2001, 
192.10  Public Law 106-554, shall become effective at the time they 
192.11  become effective for federal purposes. 
192.12     The Internal Revenue Code of 1986, as amended through 
192.13  December 31, 1998, shall be in effect for taxable years 
192.14  beginning after December 31, 1998.  
192.15     The provisions of the FSC Repeal and Extraterritorial 
192.16  Income Exclusion Act of 2000, Public Law 106-519, and the 
192.17  provision of section 412 of the Job Creation and Worker 
192.18  Assistance Act of 2002, Public Law 107-147, shall become 
192.19  effective at the time it became effective for federal purposes. 
192.20     The Internal Revenue Code of 1986, as amended through 
192.21  December 31, 1999, shall be in effect for taxable years 
192.22  beginning after December 31, 1999.  The provisions of sections 
192.23  306 and 401 of the Consolidated Appropriation Act of 2001, 
192.24  Public Law 106-554, and the provision of section 632(b)(2)(A) of 
192.25  the Economic Growth and Tax Relief Reconciliation Act of 2001, 
192.26  Public Law 107-16, and provisions of sections 101 and 402 of the 
192.27  Job Creation and Worker Assistance Act of 2002, Public Law 
192.28  107-147, shall become effective at the same time it became 
192.29  effective for federal purposes. 
192.30     The Internal Revenue Code of 1986, as amended through 
192.31  December 31, 2000, shall be in effect for taxable years 
192.32  beginning after December 31, 2000.  The provisions of sections 
192.33  659a and 671 of the Economic Growth and Tax Relief 
192.34  Reconciliation Act of 2001, Public Law 107-16, the provisions of 
192.35  sections 104, 105, and 111 of the Victims of Terrorism Tax 
192.36  Relief Act of 2001, Public Law 107-134, and the provisions of 
193.1   sections 201, 403, 413, and 606 of the Job Creation and Worker 
193.2   Assistance Act of 2002, Public Law 107-147, shall become 
193.3   effective at the same time it became effective for federal 
193.4   purposes. 
193.5      The Internal Revenue Code of 1986, as amended through March 
193.6   15, 2002, shall be in effect for taxable years beginning after 
193.7   December 31, 2001. 
193.8      The provisions of sections 101 and 102 of the Victims of 
193.9   Terrorism Tax Relief Act of 2001, Public Law 107-134, shall 
193.10  become effective at the same time it becomes effective for 
193.11  federal purposes. 
193.12     The Internal Revenue Code of 1986, as amended through June 
193.13  15, 2003, shall be in effect for taxable years beginning after 
193.14  December 31, 2002.  The provisions of section 201 of the Jobs 
193.15  and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if 
193.16  it is enacted into law, are effective at the same time it became 
193.17  effective for federal purposes.  The provisions of the Act of 
193.18  January 7, 2005, Public Law 109-1, to accelerate the income tax 
193.19  benefits for charitable cash contributions for the relief of 
193.20  victims of the Indian Ocean tsunami, are effective at the same 
193.21  time it became effective for federal purposes and apply to the 
193.22  subtraction under subdivision 19b, clause (7). 
193.23     Except as otherwise provided, references to the Internal 
193.24  Revenue Code in subdivisions 19a 19 to 19g 19f mean the code in 
193.25  effect for purposes of determining net income for the applicable 
193.26  year. 
193.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
193.28  following final enactment. 
193.29     Sec. 3.  Minnesota Statutes 2004, section 290.01, 
193.30  subdivision 19a, is amended to read: 
193.31     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
193.32  individuals, estates, and trusts, there shall be added to 
193.33  federal taxable income: 
193.34     (1)(i) interest income on obligations of any state other 
193.35  than Minnesota or a political or governmental subdivision, 
193.36  municipality, or governmental agency or instrumentality of any 
194.1   state other than Minnesota exempt from federal income taxes 
194.2   under the Internal Revenue Code or any other federal statute; 
194.3   and 
194.4      (ii) exempt-interest dividends as defined in section 
194.5   852(b)(5) of the Internal Revenue Code, except the portion of 
194.6   the exempt-interest dividends derived from interest income on 
194.7   obligations of the state of Minnesota or its political or 
194.8   governmental subdivisions, municipalities, governmental agencies 
194.9   or instrumentalities, but only if the portion of the 
194.10  exempt-interest dividends from such Minnesota sources paid to 
194.11  all shareholders represents 95 percent or more of the 
194.12  exempt-interest dividends that are paid by the regulated 
194.13  investment company as defined in section 851(a) of the Internal 
194.14  Revenue Code, or the fund of the regulated investment company as 
194.15  defined in section 851(g) of the Internal Revenue Code, making 
194.16  the payment; and 
194.17     (iii) for the purposes of items (i) and (ii), interest on 
194.18  obligations of an Indian tribal government described in section 
194.19  7871(c) of the Internal Revenue Code shall be treated as 
194.20  interest income on obligations of the state in which the tribe 
194.21  is located; 
194.22     (2) the amount of income or sales and use taxes paid or 
194.23  accrued within the taxable year under this chapter and income or 
194.24  sales and use taxes paid to any other state or to any province 
194.25  or territory of Canada, to the extent allowed as a deduction 
194.26  under section 63(d) of the Internal Revenue Code, but the 
194.27  addition may not be more than the amount by which the itemized 
194.28  deductions as allowed under section 63(d) of the Internal 
194.29  Revenue Code exceeds the amount of (i) the standard deduction as 
194.30  defined in section 63(c) of the Internal Revenue Code minus (ii) 
194.31  any addition required under clause (10).  For the purpose of 
194.32  this paragraph, the disallowance of itemized deductions under 
194.33  section 68 of the Internal Revenue Code of 1986, income or sales 
194.34  and use tax is the last itemized deduction disallowed; 
194.35     (3) the capital gain amount of a lump sum distribution to 
194.36  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
195.1   Reform Act of 1986, Public Law 99-514, applies; 
195.2      (4) the amount of income taxes paid or accrued within the 
195.3   taxable year under this chapter and income taxes paid to any 
195.4   other state or any province or territory of Canada, to the 
195.5   extent allowed as a deduction in determining federal adjusted 
195.6   gross income.  For the purpose of this paragraph, income taxes 
195.7   do not include the taxes imposed by sections 290.0922, 
195.8   subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
195.9      (5) the amount of expense, interest, or taxes disallowed 
195.10  pursuant to section 290.10; 
195.11     (6) the amount of a partner's pro rata share of net income 
195.12  which does not flow through to the partner because the 
195.13  partnership elected to pay the tax on the income under section 
195.14  6242(a)(2) of the Internal Revenue Code; and 
195.15     (7) 80 percent of the depreciation deduction allowed under 
195.16  section 168(k) of the Internal Revenue Code.  For purposes of 
195.17  this clause, if the taxpayer has an activity that in the taxable 
195.18  year generates a deduction for depreciation under section 168(k) 
195.19  and the activity generates a loss for the taxable year that the 
195.20  taxpayer is not allowed to claim for the taxable year, "the 
195.21  depreciation allowed under section 168(k)" for the taxable year 
195.22  is limited to excess of the depreciation claimed by the activity 
195.23  under section 168(k) over the amount of the loss from the 
195.24  activity that is not allowed in the taxable year.  In succeeding 
195.25  taxable years when the losses not allowed in the taxable year 
195.26  are allowed, the depreciation under section 168(k) is allowed; 
195.27     (8) 80 percent of the amount by which the deduction allowed 
195.28  by section 179 of the Internal Revenue Code exceeds the 
195.29  deduction allowable by section 179 of the Internal Revenue Code 
195.30  of 1986, as amended through December 31, 2003; 
195.31     (9) to the extent deducted in computing federal taxable 
195.32  income, the amount of the deduction allowable under section 199 
195.33  of the Internal Revenue Code; 
195.34     (10) for tax years beginning after December 31, 2006, to 
195.35  the extent deducted in computing federal taxable income, the 
195.36  amount by which the standard deduction allowed under section 
196.1   63(c) of the Internal Revenue Code exceeds the standard 
196.2   deduction allowable under section 63(c) of the Internal Revenue 
196.3   Code of 1986, as amended through December 31, 2003; and 
196.4      (11) the exclusion allowed under section 139A of the 
196.5   Internal Revenue Code for federal subsidies for prescription 
196.6   drug plans. 
196.7      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
196.8   beginning after December 31, 2004, except the changes in clause 
196.9   (2) are effective for tax years beginning after December 31, 
196.10  2003. 
196.11     Sec. 4.  Minnesota Statutes 2004, section 290.01, 
196.12  subdivision 19b, is amended to read: 
196.13     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
196.14  individuals, estates, and trusts, there shall be subtracted from 
196.15  federal taxable income: 
196.16     (1) interest income on obligations of any authority, 
196.17  commission, or instrumentality of the United States to the 
196.18  extent includable in taxable income for federal income tax 
196.19  purposes but exempt from state income tax under the laws of the 
196.20  United States; 
196.21     (2) if included in federal taxable income, the amount of 
196.22  any overpayment of income tax to Minnesota or to any other 
196.23  state, for any previous taxable year, whether the amount is 
196.24  received as a refund or as a credit to another taxable year's 
196.25  income tax liability; 
196.26     (3) the amount paid to others, less the amount used to 
196.27  claim the credit allowed under section 290.0674, not to exceed 
196.28  $1,625 for each qualifying child in grades kindergarten to 6 and 
196.29  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
196.30  textbooks, and transportation of each qualifying child in 
196.31  attending an elementary or secondary school situated in 
196.32  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
196.33  wherein a resident of this state may legally fulfill the state's 
196.34  compulsory attendance laws, which is not operated for profit, 
196.35  and which adheres to the provisions of the Civil Rights Act of 
196.36  1964 and chapter 363A.  For the purposes of this clause, 
197.1   "tuition" includes fees or tuition as defined in section 
197.2   290.0674, subdivision 1, clause (1).  As used in this clause, 
197.3   "textbooks" includes books and other instructional materials and 
197.4   equipment purchased or leased for use in elementary and 
197.5   secondary schools in teaching only those subjects legally and 
197.6   commonly taught in public elementary and secondary schools in 
197.7   this state.  Equipment expenses qualifying for deduction 
197.8   includes expenses as defined and limited in section 290.0674, 
197.9   subdivision 1, clause (3).  "Textbooks" does not include 
197.10  instructional books and materials used in the teaching of 
197.11  religious tenets, doctrines, or worship, the purpose of which is 
197.12  to instill such tenets, doctrines, or worship, nor does it 
197.13  include books or materials for, or transportation to, 
197.14  extracurricular activities including sporting events, musical or 
197.15  dramatic events, speech activities, driver's education, or 
197.16  similar programs.  For purposes of the subtraction provided by 
197.17  this clause, "qualifying child" has the meaning given in section 
197.18  32(c)(3) of the Internal Revenue Code; 
197.19     (4) income as provided under section 290.0802; 
197.20     (5) to the extent included in federal adjusted gross 
197.21  income, income realized on disposition of property exempt from 
197.22  tax under section 290.491; 
197.23     (6) to the extent included in federal taxable income, 
197.24  postservice benefits for youth community service under section 
197.25  124D.42 for volunteer service under United States Code, title 
197.26  42, sections 12601 to 12604; 
197.27     (7) to the extent not deducted in determining federal 
197.28  taxable income by an individual who does not itemize deductions 
197.29  for federal income tax purposes for the taxable year, an amount 
197.30  equal to 50 percent of the excess of charitable contributions 
197.31  over $500 allowable as a deduction for the taxable year under 
197.32  section 170(a) of the Internal Revenue Code over $500 and under 
197.33  the provisions of Public Law 109-1; 
197.34     (8) for taxable years beginning before January 1, 2008, the 
197.35  amount of the federal small ethanol producer credit allowed 
197.36  under section 40(a)(3) of the Internal Revenue Code which is 
198.1   included in gross income under section 87 of the Internal 
198.2   Revenue Code; 
198.3      (9) for individuals who are allowed a federal foreign tax 
198.4   credit for taxes that do not qualify for a credit under section 
198.5   290.06, subdivision 22, an amount equal to the carryover of 
198.6   subnational foreign taxes for the taxable year, but not to 
198.7   exceed the total subnational foreign taxes reported in claiming 
198.8   the foreign tax credit.  For purposes of this clause, "federal 
198.9   foreign tax credit" means the credit allowed under section 27 of 
198.10  the Internal Revenue Code, and "carryover of subnational foreign 
198.11  taxes" equals the carryover allowed under section 904(c) of the 
198.12  Internal Revenue Code minus national level foreign taxes to the 
198.13  extent they exceed the federal foreign tax credit; 
198.14     (10) in each of the five tax years immediately following 
198.15  the tax year in which an addition is required under subdivision 
198.16  19a, clause (7), an amount equal to one-fifth of the delayed 
198.17  depreciation.  For purposes of this clause, "delayed 
198.18  depreciation" means the amount of the addition made by the 
198.19  taxpayer under subdivision 19a, clause (7), minus the positive 
198.20  value of any net operating loss under section 172 of the 
198.21  Internal Revenue Code generated for the tax year of the 
198.22  addition.  The resulting delayed depreciation cannot be less 
198.23  than zero; and 
198.24     (11) job opportunity building zone income as provided under 
198.25  section 469.316.; 
198.26     (12) in each of the five tax years immediately following 
198.27  the tax year in which an addition is required under subdivision 
198.28  19a, clause (8), or 19c, clause (17), in the case of a 
198.29  shareholder of a corporation that is an S corporation, an amount 
198.30  equal to one-fifth of the addition made by the taxpayer under 
198.31  subdivision 19a, clause (8), or 19c, clause (17), in the case of 
198.32  a shareholder of a corporation that is an S corporation, minus 
198.33  the positive value of any net operating loss under section 172 
198.34  of the Internal Revenue Code generated for the tax year of the 
198.35  addition.  If the net operating loss exceeds the addition for 
198.36  the tax year, a subtraction is not allowed under this clause; 
199.1   and 
199.2      (13) to the extent included in federal taxable income, 
199.3   compensation paid to a service member as defined in United 
199.4   States Code, title 10, section 101(a)(5), for military service 
199.5   as defined in the Service Member Civil Relief Act, Public Law 
199.6   108-189, section 101(2). 
199.7      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
199.8   beginning after December 31, 2004, except the change to clause 
199.9   (7) is effective for tax years beginning after December 31, 2003.
199.10     Sec. 5.  Minnesota Statutes 2004, section 290.01, 
199.11  subdivision 19c, is amended to read: 
199.12     Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
199.13  INCOME.] For corporations, there shall be added to federal 
199.14  taxable income: 
199.15     (1) the amount of any deduction taken for federal income 
199.16  tax purposes for income, excise, or franchise taxes based on net 
199.17  income or related minimum taxes, including but not limited to 
199.18  the tax imposed under section 290.0922, paid by the corporation 
199.19  to Minnesota, another state, a political subdivision of another 
199.20  state, the District of Columbia, or any foreign country or 
199.21  possession of the United States; 
199.22     (2) interest not subject to federal tax upon obligations 
199.23  of:  the United States, its possessions, its agencies, or its 
199.24  instrumentalities; the state of Minnesota or any other state, 
199.25  any of its political or governmental subdivisions, any of its 
199.26  municipalities, or any of its governmental agencies or 
199.27  instrumentalities; the District of Columbia; or Indian tribal 
199.28  governments; 
199.29     (3) exempt-interest dividends received as defined in 
199.30  section 852(b)(5) of the Internal Revenue Code; 
199.31     (4) the amount of any net operating loss deduction taken 
199.32  for federal income tax purposes under section 172 or 832(c)(10) 
199.33  of the Internal Revenue Code or operations loss deduction under 
199.34  section 810 of the Internal Revenue Code; 
199.35     (5) the amount of any special deductions taken for federal 
199.36  income tax purposes under sections 241 to 247 of the Internal 
200.1   Revenue Code; 
200.2      (6) losses from the business of mining, as defined in 
200.3   section 290.05, subdivision 1, clause (a), that are not subject 
200.4   to Minnesota income tax; 
200.5      (7) the amount of any capital losses deducted for federal 
200.6   income tax purposes under sections 1211 and 1212 of the Internal 
200.7   Revenue Code; 
200.8      (8) the exempt foreign trade income of a foreign sales 
200.9   corporation under sections 921(a) and 291 of the Internal 
200.10  Revenue Code; 
200.11     (9) the amount of percentage depletion deducted under 
200.12  sections 611 through 614 and 291 of the Internal Revenue Code; 
200.13     (10) for certified pollution control facilities placed in 
200.14  service in a taxable year beginning before December 31, 1986, 
200.15  and for which amortization deductions were elected under section 
200.16  169 of the Internal Revenue Code of 1954, as amended through 
200.17  December 31, 1985, the amount of the amortization deduction 
200.18  allowed in computing federal taxable income for those 
200.19  facilities; 
200.20     (11) the amount of any deemed dividend from a foreign 
200.21  operating corporation determined pursuant to section 290.17, 
200.22  subdivision 4, paragraph (g); 
200.23     (12) the amount of any environmental tax paid under section 
200.24  59(a) of the Internal Revenue Code; 
200.25     (13) the amount of a partner's pro rata share of net income 
200.26  which does not flow through to the partner because the 
200.27  partnership elected to pay the tax on the income under section 
200.28  6242(a)(2) of the Internal Revenue Code; 
200.29     (14) the amount of net income excluded under section 114 of 
200.30  the Internal Revenue Code; 
200.31     (15) any increase in subpart F income, as defined in 
200.32  section 952(a) of the Internal Revenue Code, for the taxable 
200.33  year when subpart F income is calculated without regard to the 
200.34  provisions of section 614 of Public Law 107-147; and 
200.35     (16) 80 percent of the depreciation deduction allowed under 
200.36  section 168(k) of the Internal Revenue Code.  For purposes of 
201.1   this clause, if the taxpayer has an activity that in the taxable 
201.2   year generates a deduction for depreciation under section 168(k) 
201.3   and the activity generates a loss for the taxable year that the 
201.4   taxpayer is not allowed to claim for the taxable year, "the 
201.5   depreciation allowed under section 168(k)" for the taxable year 
201.6   is limited to excess of the depreciation claimed by the activity 
201.7   under section 168(k) over the amount of the loss from the 
201.8   activity that is not allowed in the taxable year.  In succeeding 
201.9   taxable years when the losses not allowed in the taxable year 
201.10  are allowed, the depreciation under section 168(k) is allowed; 
201.11     (17) 80 percent of the amount by which the deduction 
201.12  allowed by section 179 of the Internal Revenue Code exceeds the 
201.13  deduction allowable by section 179 of the Internal Revenue Code 
201.14  of 1986, as amended through December 31, 2003; 
201.15     (18) to the extent deducted in computing federal taxable 
201.16  income, the amount of the deduction allowable under section 199 
201.17  of the Internal Revenue Code; and 
201.18     (19) the exclusion allowed under section 139A of the 
201.19  Internal Revenue Code for federal subsidies for prescription 
201.20  drug plans. 
201.21     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
201.22  beginning after December 31, 2004. 
201.23     Sec. 6.  Minnesota Statutes 2004, section 290.01, 
201.24  subdivision 19d, is amended to read: 
201.25     Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
201.26  TAXABLE INCOME.] For corporations, there shall be subtracted 
201.27  from federal taxable income after the increases provided in 
201.28  subdivision 19c:  
201.29     (1) the amount of foreign dividend gross-up added to gross 
201.30  income for federal income tax purposes under section 78 of the 
201.31  Internal Revenue Code; 
201.32     (2) the amount of salary expense not allowed for federal 
201.33  income tax purposes due to claiming the federal jobs credit 
201.34  under section 51 of the Internal Revenue Code; 
201.35     (3) any dividend (not including any distribution in 
201.36  liquidation) paid within the taxable year by a national or state 
202.1   bank to the United States, or to any instrumentality of the 
202.2   United States exempt from federal income taxes, on the preferred 
202.3   stock of the bank owned by the United States or the 
202.4   instrumentality; 
202.5      (4) amounts disallowed for intangible drilling costs due to 
202.6   differences between this chapter and the Internal Revenue Code 
202.7   in taxable years beginning before January 1, 1987, as follows: 
202.8      (i) to the extent the disallowed costs are represented by 
202.9   physical property, an amount equal to the allowance for 
202.10  depreciation under Minnesota Statutes 1986, section 290.09, 
202.11  subdivision 7, subject to the modifications contained in 
202.12  subdivision 19e; and 
202.13     (ii) to the extent the disallowed costs are not represented 
202.14  by physical property, an amount equal to the allowance for cost 
202.15  depletion under Minnesota Statutes 1986, section 290.09, 
202.16  subdivision 8; 
202.17     (5) the deduction for capital losses pursuant to sections 
202.18  1211 and 1212 of the Internal Revenue Code, except that: 
202.19     (i) for capital losses incurred in taxable years beginning 
202.20  after December 31, 1986, capital loss carrybacks shall not be 
202.21  allowed; 
202.22     (ii) for capital losses incurred in taxable years beginning
202.23  after December 31, 1986, a capital loss carryover to each of the 
202.24  15 taxable years succeeding the loss year shall be allowed; 
202.25     (iii) for capital losses incurred in taxable years 
202.26  beginning before January 1, 1987, a capital loss carryback to 
202.27  each of the three taxable years preceding the loss year, subject 
202.28  to the provisions of Minnesota Statutes 1986, section 290.16, 
202.29  shall be allowed; and 
202.30     (iv) for capital losses incurred in taxable years beginning
202.31  before January 1, 1987, a capital loss carryover to each of the 
202.32  five taxable years succeeding the loss year to the extent such 
202.33  loss was not used in a prior taxable year and subject to the 
202.34  provisions of Minnesota Statutes 1986, section 290.16, shall be 
202.35  allowed; 
202.36     (6) an amount for interest and expenses relating to income 
203.1   not taxable for federal income tax purposes, if (i) the income 
203.2   is taxable under this chapter and (ii) the interest and expenses 
203.3   were disallowed as deductions under the provisions of section 
203.4   171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
203.5   federal taxable income; 
203.6      (7) in the case of mines, oil and gas wells, other natural 
203.7   deposits, and timber for which percentage depletion was 
203.8   disallowed pursuant to subdivision 19c, clause (11), a 
203.9   reasonable allowance for depletion based on actual cost.  In the 
203.10  case of leases the deduction must be apportioned between the 
203.11  lessor and lessee in accordance with rules prescribed by the 
203.12  commissioner.  In the case of property held in trust, the 
203.13  allowable deduction must be apportioned between the income 
203.14  beneficiaries and the trustee in accordance with the pertinent 
203.15  provisions of the trust, or if there is no provision in the 
203.16  instrument, on the basis of the trust's income allocable to 
203.17  each; 
203.18     (8) for certified pollution control facilities placed in 
203.19  service in a taxable year beginning before December 31, 1986, 
203.20  and for which amortization deductions were elected under section 
203.21  169 of the Internal Revenue Code of 1954, as amended through 
203.22  December 31, 1985, an amount equal to the allowance for 
203.23  depreciation under Minnesota Statutes 1986, section 290.09, 
203.24  subdivision 7; 
203.25     (9) amounts included in federal taxable income that are due 
203.26  to refunds of income, excise, or franchise taxes based on net 
203.27  income or related minimum taxes paid by the corporation to 
203.28  Minnesota, another state, a political subdivision of another 
203.29  state, the District of Columbia, or a foreign country or 
203.30  possession of the United States to the extent that the taxes 
203.31  were added to federal taxable income under section 290.01, 
203.32  subdivision 19c, clause (1), in a prior taxable year; 
203.33     (10) 80 percent of royalties, fees, or other like income 
203.34  accrued or received from a foreign operating corporation or a 
203.35  foreign corporation which is part of the same unitary business 
203.36  as the receiving corporation; 
204.1      (11) income or gains from the business of mining as defined 
204.2   in section 290.05, subdivision 1, clause (a), that are not 
204.3   subject to Minnesota franchise tax; 
204.4      (12) the amount of handicap access expenditures in the 
204.5   taxable year which are not allowed to be deducted or capitalized 
204.6   under section 44(d)(7) of the Internal Revenue Code; 
204.7      (13) the amount of qualified research expenses not allowed 
204.8   for federal income tax purposes under section 280C(c) of the 
204.9   Internal Revenue Code, but only to the extent that the amount 
204.10  exceeds the amount of the credit allowed under section 290.068; 
204.11     (14) the amount of salary expenses not allowed for federal 
204.12  income tax purposes due to claiming the Indian employment credit 
204.13  under section 45A(a) of the Internal Revenue Code; 
204.14     (15) the amount of any refund of environmental taxes paid 
204.15  under section 59A of the Internal Revenue Code; 
204.16     (16) for taxable years beginning before January 1, 2008, 
204.17  the amount of the federal small ethanol producer credit allowed 
204.18  under section 40(a)(3) of the Internal Revenue Code which is 
204.19  included in gross income under section 87 of the Internal 
204.20  Revenue Code; 
204.21     (17) for a corporation whose foreign sales corporation, as 
204.22  defined in section 922 of the Internal Revenue Code, constituted 
204.23  a foreign operating corporation during any taxable year ending 
204.24  before January 1, 1995, and a return was filed by August 15, 
204.25  1996, claiming the deduction under section 290.21, subdivision 
204.26  4, for income received from the foreign operating corporation, 
204.27  an amount equal to 1.23 multiplied by the amount of income 
204.28  excluded under section 114 of the Internal Revenue Code, 
204.29  provided the income is not income of a foreign operating 
204.30  company; 
204.31     (18) any decrease in subpart F income, as defined in 
204.32  section 952(a) of the Internal Revenue Code, for the taxable 
204.33  year when subpart F income is calculated without regard to the 
204.34  provisions of section 614 of Public Law 107-147; and 
204.35     (19) in each of the five tax years immediately following 
204.36  the tax year in which an addition is required under subdivision 
205.1   19c, clause (16), an amount equal to one-fifth of the delayed 
205.2   depreciation.  For purposes of this clause, "delayed 
205.3   depreciation" means the amount of the addition made by the 
205.4   taxpayer under subdivision 19c, clause (16).  The resulting 
205.5   delayed depreciation cannot be less than zero; and 
205.6      (20) in each of the five tax years immediately following 
205.7   the tax year in which an addition is required under subdivision 
205.8   19c, clause (17), an amount equal to one-fifth of the amount of 
205.9   the addition. 
205.10     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
205.11  beginning after December 31, 2004. 
205.12     Sec. 7.  Minnesota Statutes 2004, section 290.01, 
205.13  subdivision 31, is amended to read: 
205.14     Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
205.15  defined otherwise, "Internal Revenue Code" means the Internal 
205.16  Revenue Code of 1986, as amended through June 15, 2003 April 15, 
205.17  2005. 
205.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
205.19  following final enactment except the changes incorporated by 
205.20  federal changes are effective at the same times as the changes 
205.21  were effective for federal purposes. 
205.22     Sec. 8.  Minnesota Statutes 2004, section 290.032, 
205.23  subdivision 1, is amended to read: 
205.24     Subdivision 1.  [IMPOSITION.] There is hereby imposed as an 
205.25  addition to the annual income tax for a taxable year of a 
205.26  taxpayer in the classes described in section 290.03 a tax with 
205.27  respect to any distribution received by such taxpayer that is 
205.28  treated as a lump sum distribution under section 402(d) of the 
205.29  Internal Revenue Code 1401(c)(2) of the Small Business Job 
205.30  Protection Act, Public Law 104-188 and that is subject to tax 
205.31  for such taxable year under section 402(d) of the Internal 
205.32  Revenue Code 1401(c)(2) of the Small Business Job Protection 
205.33  Act, Public Law 104-188. 
205.34     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
205.35  beginning after December 31, 1999. 
205.36     Sec. 9.  Minnesota Statutes 2004, section 290.032, 
206.1   subdivision 2, is amended to read: 
206.2      Subd. 2.  [COMPUTATION.] The amount of tax imposed by 
206.3   subdivision 1 shall be computed in the same way as the tax 
206.4   imposed under section 402(d) of the Internal Revenue Code of 
206.5   1986, as amended through December 31, 1995, except that the 
206.6   initial separate tax shall be an amount equal to five times the 
206.7   tax which would be imposed by section 290.06, subdivision 2c, if 
206.8   the recipient was an unmarried individual, and the taxable net 
206.9   income was an amount equal to one-fifth of the excess of 
206.10     (i) the total taxable amount of the lump sum distribution 
206.11  for the year, over 
206.12     (ii) the minimum distribution allowance, and except that 
206.13  references in section 402(d) of the Internal Revenue Code of 
206.14  1986, as amended through December 31, 1995, to paragraph (1)(A) 
206.15  thereof shall instead be references to subdivision 1, and the 
206.16  excess, if any, of the subtraction base amount over federal 
206.17  taxable income for a qualified individual as provided under 
206.18  section 290.0802, subdivision 2. 
206.19     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
206.20  beginning after December 31, 1999. 
206.21     Sec. 10.  Minnesota Statutes 2004, section 290.06, 
206.22  subdivision 2c, is amended to read: 
206.23     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
206.24  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
206.25  married individuals filing joint returns and surviving spouses 
206.26  as defined in section 2(a) of the Internal Revenue Code must be 
206.27  computed by applying to their taxable net income the following 
206.28  schedule of rates: 
206.29     (1) On the first $25,680, 5.35 percent; 
206.30     (2) On all over $25,680, but not over $102,030, 7.05 
206.31  percent; 
206.32     (3) On all over $102,030, 7.85 percent. 
206.33     Married individuals filing separate returns, estates, and 
206.34  trusts must compute their income tax by applying the above rates 
206.35  to their taxable income, except that the income brackets will be 
206.36  one-half of the above amounts.  
207.1      (b) The income taxes imposed by this chapter upon unmarried 
207.2   individuals must be computed by applying to taxable net income 
207.3   the following schedule of rates: 
207.4      (1) On the first $17,570, 5.35 percent; 
207.5      (2) On all over $17,570, but not over $57,710, 7.05 
207.6   percent; 
207.7      (3) On all over $57,710, 7.85 percent. 
207.8      (c) The income taxes imposed by this chapter upon unmarried 
207.9   individuals qualifying as a head of household as defined in 
207.10  section 2(b) of the Internal Revenue Code must be computed by 
207.11  applying to taxable net income the following schedule of rates: 
207.12     (1) On the first $21,630, 5.35 percent; 
207.13     (2) On all over $21,630, but not over $86,910, 7.05 
207.14  percent; 
207.15     (3) On all over $86,910, 7.85 percent. 
207.16     (d) In lieu of a tax computed according to the rates set 
207.17  forth in this subdivision, the tax of any individual taxpayer 
207.18  whose taxable net income for the taxable year is less than an 
207.19  amount determined by the commissioner must be computed in 
207.20  accordance with tables prepared and issued by the commissioner 
207.21  of revenue based on income brackets of not more than $100.  The 
207.22  amount of tax for each bracket shall be computed at the rates 
207.23  set forth in this subdivision, provided that the commissioner 
207.24  may disregard a fractional part of a dollar unless it amounts to 
207.25  50 cents or more, in which case it may be increased to $1. 
207.26     (e) An individual who is not a Minnesota resident for the 
207.27  entire year must compute the individual's Minnesota income tax 
207.28  as provided in this subdivision.  After the application of the 
207.29  nonrefundable credits provided in this chapter, the tax 
207.30  liability must then be multiplied by a fraction in which:  
207.31     (1) the numerator is the individual's Minnesota source 
207.32  federal adjusted gross income as defined in section 62 of the 
207.33  Internal Revenue Code and increased by the additions required 
207.34  under section 290.01, subdivision 19a, clauses (1), (5), and 
207.35  (6), (7), (8), and (9), and reduced by the subtraction under 
207.36  section 290.01, subdivision 19b, clause (11), and the Minnesota 
208.1   assignable portion of the subtraction for United States 
208.2   government interest under section 290.01, subdivision 19b, 
208.3   clause (1), and the subtractions under clauses (10), (11), (12), 
208.4   and (13), after applying the allocation and assignability 
208.5   provisions of section 290.081, clause (a), or 290.17; and 
208.6      (2) the denominator is the individual's federal adjusted 
208.7   gross income as defined in section 62 of the Internal Revenue 
208.8   Code of 1986, increased by the amounts specified in section 
208.9   290.01, subdivision 19a, clauses (1), (5), and (6), (7), (8), 
208.10  and (9), and reduced by the amounts specified in section 290.01, 
208.11  subdivision 19b, clauses (1) and, (10), (11), (12), and (13). 
208.12     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
208.13  beginning after December 31, 2004. 
208.14     Sec. 11.  Minnesota Statutes 2004, section 290.067, 
208.15  subdivision 1, is amended to read: 
208.16     Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
208.17  as a credit against the tax due from the taxpayer and a spouse, 
208.18  if any, under this chapter an amount equal to the dependent care 
208.19  credit for which the taxpayer is eligible pursuant to the 
208.20  provisions of section 21 of the Internal Revenue Code subject to 
208.21  the limitations provided in subdivision 2 except that in 
208.22  determining whether the child qualified as a dependent, income 
208.23  received as a Minnesota family investment program grant or 
208.24  allowance to or on behalf of the child must not be taken into 
208.25  account in determining whether the child received more than half 
208.26  of the child's support from the taxpayer, and the provisions of 
208.27  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
208.28     (b) If a child who has not attained the age of six years at 
208.29  the close of the taxable year is cared for at a licensed family 
208.30  day care home operated by the child's parent, the taxpayer is 
208.31  deemed to have paid employment-related expenses.  If the child 
208.32  is 16 months old or younger at the close of the taxable year, 
208.33  the amount of expenses deemed to have been paid equals the 
208.34  maximum limit for one qualified individual under section 21(c) 
208.35  and (d) of the Internal Revenue Code.  If the child is older 
208.36  than 16 months of age but has not attained the age of six years 
209.1   at the close of the taxable year, the amount of expenses deemed 
209.2   to have been paid equals the amount the licensee would charge 
209.3   for the care of a child of the same age for the same number of 
209.4   hours of care.  
209.5      (c) If a married couple: 
209.6      (1) has a child who has not attained the age of one year at 
209.7   the close of the taxable year; 
209.8      (2) files a joint tax return for the taxable year; and 
209.9      (3) does not participate in a dependent care assistance 
209.10  program as defined in section 129 of the Internal Revenue Code, 
209.11  in lieu of the actual employment related expenses paid for that 
209.12  child under paragraph (a) or the deemed amount under paragraph 
209.13  (b), the lesser of (i) the combined earned income of the couple 
209.14  or (ii) the amount of the maximum limit for one qualified 
209.15  individual under section 21(c) and (d) of the Internal Revenue 
209.16  Code will be deemed to be the employment related expense paid 
209.17  for that child.  The earned income limitation of section 21(d) 
209.18  of the Internal Revenue Code shall not apply to this deemed 
209.19  amount.  These deemed amounts apply regardless of whether any 
209.20  employment-related expenses have been paid.  
209.21     (d) If the taxpayer is not required and does not file a 
209.22  federal individual income tax return for the tax year, no credit 
209.23  is allowed for any amount paid to any person unless: 
209.24     (1) the name, address, and taxpayer identification number 
209.25  of the person are included on the return claiming the credit; or 
209.26     (2) if the person is an organization described in section 
209.27  501(c)(3) of the Internal Revenue Code and exempt from tax under 
209.28  section 501(a) of the Internal Revenue Code, the name and 
209.29  address of the person are included on the return claiming the 
209.30  credit.  
209.31  In the case of a failure to provide the information required 
209.32  under the preceding sentence, the preceding sentence does not 
209.33  apply if it is shown that the taxpayer exercised due diligence 
209.34  in attempting to provide the information required. 
209.35     In the case of a nonresident, part-year resident, or a 
209.36  person who has earned income not subject to tax under this 
210.1   chapter including earned income excluded pursuant to section 
210.2   290.01, subdivision 19b, clause (11), the credit determined 
210.3   under section 21 of the Internal Revenue Code must be allocated 
210.4   based on the ratio by which the earned income of the claimant 
210.5   and the claimant's spouse from Minnesota sources bears to the 
210.6   total earned income of the claimant and the claimant's spouse. 
210.7      For residents of Minnesota, the exclusion of combat pay 
210.8   under section 112 of the Internal Revenue Code is not considered 
210.9   "earned income not subject to tax under this chapter." 
210.10     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
210.11  beginning after December 31, 2003. 
210.12     Sec. 12.  Minnesota Statutes 2004, section 290.067, 
210.13  subdivision 2a, is amended to read: 
210.14     Subd. 2a.  [INCOME.] (a) For purposes of this section, 
210.15  "income" means the sum of the following: 
210.16     (1) federal adjusted gross income as defined in section 62 
210.17  of the Internal Revenue Code; and 
210.18     (2) the sum of the following amounts to the extent not 
210.19  included in clause (1): 
210.20     (i) all nontaxable income; 
210.21     (ii) the amount of a passive activity loss that is not 
210.22  disallowed as a result of section 469, paragraph (i) or (m) of 
210.23  the Internal Revenue Code and the amount of passive activity 
210.24  loss carryover allowed under section 469(b) of the Internal 
210.25  Revenue Code; 
210.26     (iii) an amount equal to the total of any discharge of 
210.27  qualified farm indebtedness of a solvent individual excluded 
210.28  from gross income under section 108(g) of the Internal Revenue 
210.29  Code; 
210.30     (iv) cash public assistance and relief; 
210.31     (v) any pension or annuity (including railroad retirement 
210.32  benefits, all payments received under the federal Social 
210.33  Security Act, supplemental security income, and veterans 
210.34  benefits), which was not exclusively funded by the claimant or 
210.35  spouse, or which was funded exclusively by the claimant or 
210.36  spouse and which funding payments were excluded from federal 
211.1   adjusted gross income in the years when the payments were made; 
211.2      (vi) interest received from the federal or a state 
211.3   government or any instrumentality or political subdivision 
211.4   thereof; 
211.5      (vii) workers' compensation; 
211.6      (viii) nontaxable strike benefits; 
211.7      (ix) the gross amounts of payments received in the nature 
211.8   of disability income or sick pay as a result of accident, 
211.9   sickness, or other disability, whether funded through insurance 
211.10  or otherwise; 
211.11     (x) a lump sum distribution under section 402(e)(3) of the 
211.12  Internal Revenue Code of 1986, as amended through December 31, 
211.13  1995; 
211.14     (xi) contributions made by the claimant to an individual 
211.15  retirement account, including a qualified voluntary employee 
211.16  contribution; simplified employee pension plan; self-employed 
211.17  retirement plan; cash or deferred arrangement plan under section 
211.18  401(k) of the Internal Revenue Code; or deferred compensation 
211.19  plan under section 457 of the Internal Revenue Code; and 
211.20     (xii) nontaxable scholarship or fellowship grants; 
211.21     (xiii) the amount of deduction allowed under section 199 of 
211.22  the Internal Revenue Code; and 
211.23     (xiv) the amount of deduction allowed under section 220 or 
211.24  223 of the Internal Revenue Code. 
211.25     In the case of an individual who files an income tax return 
211.26  on a fiscal year basis, the term "federal adjusted gross income" 
211.27  means federal adjusted gross income reflected in the fiscal year 
211.28  ending in the next calendar year.  Federal adjusted gross income 
211.29  may not be reduced by the amount of a net operating loss 
211.30  carryback or carryforward or a capital loss carryback or 
211.31  carryforward allowed for the year. 
211.32     (b) "Income" does not include: 
211.33     (1) amounts excluded pursuant to the Internal Revenue Code, 
211.34  sections 101(a) and 102; 
211.35     (2) amounts of any pension or annuity that were exclusively 
211.36  funded by the claimant or spouse if the funding payments were 
212.1   not excluded from federal adjusted gross income in the years 
212.2   when the payments were made; 
212.3      (3) surplus food or other relief in kind supplied by a 
212.4   governmental agency; 
212.5      (4) relief granted under chapter 290A; 
212.6      (5) child support payments received under a temporary or 
212.7   final decree of dissolution or legal separation; and 
212.8      (6) restitution payments received by eligible individuals 
212.9   and excludable interest as defined in section 803 of the 
212.10  Economic Growth and Tax Relief Reconciliation Act of 2001, 
212.11  Public Law 107-16. 
212.12     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
212.13  beginning after December 31, 2003. 
212.14     Sec. 13.  Minnesota Statutes 2004, section 290.0671, 
212.15  subdivision 1, is amended to read: 
212.16     Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
212.17  allowed a credit against the tax imposed by this chapter equal 
212.18  to a percentage of earned income.  To receive a credit, a 
212.19  taxpayer must be eligible for a credit under section 32 of the 
212.20  Internal Revenue Code.  
212.21     (b) For individuals with no qualifying children, the credit 
212.22  equals 1.9125 percent of the first $4,620 of earned income.  The 
212.23  credit is reduced by 1.9125 percent of earned income or modified 
212.24  adjusted gross income, whichever is greater, in excess of 
212.25  $5,770, but in no case is the credit less than zero. 
212.26     (c) For individuals with one qualifying child, the credit 
212.27  equals 8.5 percent of the first $6,920 of earned income and 8.5 
212.28  percent of earned income over $12,080 but less than $13,450.  
212.29  The credit is reduced by 5.73 percent of earned income or 
212.30  modified adjusted gross income, whichever is greater, in excess 
212.31  of $15,080, but in no case is the credit less than zero. 
212.32     (d) For individuals with two or more qualifying children, 
212.33  the credit equals ten percent of the first $9,720 of earned 
212.34  income and 20 percent of earned income over $14,860 but less 
212.35  than $16,800.  The credit is reduced by 10.3 percent of earned 
212.36  income or modified adjusted gross income, whichever is greater, 
213.1   in excess of $17,890, but in no case is the credit less than 
213.2   zero. 
213.3      (e) For a nonresident or part-year resident, the credit 
213.4   must be allocated based on the percentage calculated under 
213.5   section 290.06, subdivision 2c, paragraph (e). 
213.6      (f) For a person who was a resident for the entire tax year 
213.7   and has earned income not subject to tax under this chapter, 
213.8   including income excluded under section 290.01, subdivision 19b, 
213.9   clause (11), the credit must be allocated based on the ratio of 
213.10  federal adjusted gross income reduced by the earned income not 
213.11  subject to tax under this chapter over federal adjusted gross 
213.12  income.  For the purposes of this paragraph, the exclusion of 
213.13  combat pay under section 112 of the Internal Revenue Code is not 
213.14  considered "earned income not subject to tax under this chapter."
213.15     (g) For tax years beginning after December 31, 2001, and 
213.16  before December 31, 2004, the $5,770 in paragraph (b), the 
213.17  $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
213.18  after being adjusted for inflation under subdivision 7, are each 
213.19  increased by $1,000 for married taxpayers filing joint returns. 
213.20     (h) For tax years beginning after December 31, 2004, and 
213.21  before December 31, 2007, the $5,770 in paragraph (b), the 
213.22  $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
213.23  after being adjusted for inflation under subdivision 7, are each 
213.24  increased by $2,000 for married taxpayers filing joint returns. 
213.25     (i) For tax years beginning after December 31, 2007, and 
213.26  before December 31, 2010, the $5,770 in paragraph (b), the 
213.27  $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
213.28  after being adjusted for inflation under subdivision 7, are each 
213.29  increased by $3,000 for married taxpayers filing joint returns.  
213.30  For tax years beginning after December 31, 2008, the $3,000 is 
213.31  adjusted annually for inflation under subdivision 7. 
213.32     (j) The commissioner shall construct tables showing the 
213.33  amount of the credit at various income levels and make them 
213.34  available to taxpayers.  The tables shall follow the schedule 
213.35  contained in this subdivision, except that the commissioner may 
213.36  graduate the transition between income brackets. 
214.1      <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
214.2   beginning after December 31, 2003. 
214.3      Sec. 14.  Minnesota Statutes 2004, section 290.0675, 
214.4   subdivision 1, is amended to read: 
214.5      Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
214.6   section the following terms have the meanings given. 
214.7      (b) "Earned income" means the sum of the following, to the 
214.8   extent included in Minnesota taxable income: 
214.9      (1) earned income as defined in section 32(c)(2) of the 
214.10  Internal Revenue Code; 
214.11     (2) income received from a retirement pension, 
214.12  profit-sharing, stock bonus, or annuity plan; and 
214.13     (3) Social Security benefits as defined in section 86(d)(1) 
214.14  of the Internal Revenue Code. 
214.15     (c) "Taxable income" means net income as defined in section 
214.16  290.01, subdivision 19. 
214.17     (d) "Earned income of lesser-earning spouse" means the 
214.18  earned income of the spouse with the lesser amount of earned 
214.19  income as defined in paragraph (b) for the taxable year minus 
214.20  the sum of (i) the amount for one exemption under section 151(d) 
214.21  of the Internal Revenue Code and (ii) one-half the amount of the 
214.22  standard deduction under section 63(c)(2)(A) and (4) of the 
214.23  Internal Revenue Code minus one-half of any addition required 
214.24  under section 290.01, subdivision 19a, clause (10). 
214.25     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
214.26  beginning after December 31, 2004. 
214.27     Sec. 15.  Minnesota Statutes 2004, section 290.091, 
214.28  subdivision 2, is amended to read: 
214.29     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
214.30  this section, the following terms have the meanings given: 
214.31     (a) "Alternative minimum taxable income" means the sum of 
214.32  the following for the taxable year: 
214.33     (1) the taxpayer's federal alternative minimum taxable 
214.34  income as defined in section 55(b)(2) of the Internal Revenue 
214.35  Code; 
214.36     (2) the taxpayer's itemized deductions allowed in computing 
215.1   federal alternative minimum taxable income, but excluding: 
215.2      (i) the charitable contribution deduction under section 170 
215.3   of the Internal Revenue Code to the extent that the deduction 
215.4   exceeds 1.0 percent of adjusted gross income, as defined in 
215.5   section 62 of the Internal Revenue Code; 
215.6      (ii) the medical expense deduction; 
215.7      (iii) the casualty, theft, and disaster loss deduction; and 
215.8      (iv) the impairment-related work expenses of a disabled 
215.9   person; 
215.10     (3) for depletion allowances computed under section 613A(c) 
215.11  of the Internal Revenue Code, with respect to each property (as 
215.12  defined in section 614 of the Internal Revenue Code), to the 
215.13  extent not included in federal alternative minimum taxable 
215.14  income, the excess of the deduction for depletion allowable 
215.15  under section 611 of the Internal Revenue Code for the taxable 
215.16  year over the adjusted basis of the property at the end of the 
215.17  taxable year (determined without regard to the depletion 
215.18  deduction for the taxable year); 
215.19     (4) to the extent not included in federal alternative 
215.20  minimum taxable income, the amount of the tax preference for 
215.21  intangible drilling cost under section 57(a)(2) of the Internal 
215.22  Revenue Code determined without regard to subparagraph (E); 
215.23     (5) to the extent not included in federal alternative 
215.24  minimum taxable income, the amount of interest income as 
215.25  provided by section 290.01, subdivision 19a, clause (1); and 
215.26     (6) the amount of addition required by section 290.01, 
215.27  subdivision 19a, clause clauses (7), (8), and (9); 
215.28     less the sum of the amounts determined under the following: 
215.29     (1) interest income as defined in section 290.01, 
215.30  subdivision 19b, clause (1); 
215.31     (2) an overpayment of state income tax as provided by 
215.32  section 290.01, subdivision 19b, clause (2), to the extent 
215.33  included in federal alternative minimum taxable income; 
215.34     (3) the amount of investment interest paid or accrued 
215.35  within the taxable year on indebtedness to the extent that the 
215.36  amount does not exceed net investment income, as defined in 
216.1   section 163(d)(4) of the Internal Revenue Code.  Interest does 
216.2   not include amounts deducted in computing federal adjusted gross 
216.3   income; and 
216.4      (4) amounts subtracted from federal taxable income as 
216.5   provided by section 290.01, subdivision 19b, clauses (10) and, 
216.6   (11), (12), and (13). 
216.7      In the case of an estate or trust, alternative minimum 
216.8   taxable income must be computed as provided in section 59(c) of 
216.9   the Internal Revenue Code. 
216.10     (b) "Investment interest" means investment interest as 
216.11  defined in section 163(d)(3) of the Internal Revenue Code. 
216.12     (c) "Tentative minimum tax" equals 6.4 percent of 
216.13  alternative minimum taxable income after subtracting the 
216.14  exemption amount determined under subdivision 3. 
216.15     (d) "Regular tax" means the tax that would be imposed under 
216.16  this chapter (without regard to this section and section 
216.17  290.032), reduced by the sum of the nonrefundable credits 
216.18  allowed under this chapter.  
216.19     (e) "Net minimum tax" means the minimum tax imposed by this 
216.20  section. 
216.21     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
216.22  beginning after December 31, 2004. 
216.23     Sec. 16.  Minnesota Statutes 2004, section 290A.03, 
216.24  subdivision 3, is amended to read: 
216.25     Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
216.26  following:  
216.27     (a) federal adjusted gross income as defined in the 
216.28  Internal Revenue Code; and 
216.29     (b) the sum of the following amounts to the extent not 
216.30  included in clause (a):  
216.31     (i) all nontaxable income; 
216.32     (ii) the amount of a passive activity loss that is not 
216.33  disallowed as a result of section 469, paragraph (i) or (m) of 
216.34  the Internal Revenue Code and the amount of passive activity 
216.35  loss carryover allowed under section 469(b) of the Internal 
216.36  Revenue Code; 
217.1      (iii) an amount equal to the total of any discharge of 
217.2   qualified farm indebtedness of a solvent individual excluded 
217.3   from gross income under section 108(g) of the Internal Revenue 
217.4   Code; 
217.5      (iv) cash public assistance and relief; 
217.6      (v) any pension or annuity (including railroad retirement 
217.7   benefits, all payments received under the federal Social 
217.8   Security Act, supplemental security income, and veterans 
217.9   benefits), which was not exclusively funded by the claimant or 
217.10  spouse, or which was funded exclusively by the claimant or 
217.11  spouse and which funding payments were excluded from federal 
217.12  adjusted gross income in the years when the payments were made; 
217.13     (vi) interest received from the federal or a state 
217.14  government or any instrumentality or political subdivision 
217.15  thereof; 
217.16     (vii) workers' compensation; 
217.17     (viii) nontaxable strike benefits; 
217.18     (ix) the gross amounts of payments received in the nature 
217.19  of disability income or sick pay as a result of accident, 
217.20  sickness, or other disability, whether funded through insurance 
217.21  or otherwise; 
217.22     (x) a lump sum distribution under section 402(e)(3) of the 
217.23  Internal Revenue Code of 1986, as amended through December 31, 
217.24  1995; 
217.25     (xi) contributions made by the claimant to an individual 
217.26  retirement account, including a qualified voluntary employee 
217.27  contribution; simplified employee pension plan; self-employed 
217.28  retirement plan; cash or deferred arrangement plan under section 
217.29  401(k) of the Internal Revenue Code; or deferred compensation 
217.30  plan under section 457 of the Internal Revenue Code; and 
217.31     (xii) nontaxable scholarship or fellowship grants; 
217.32     (xiii) the amount of deduction allowed under section 199 of 
217.33  the Internal Revenue Code; and 
217.34     (xiv) the amount of deduction allowed under section 220 or 
217.35  223 of the Internal Revenue Code.  
217.36     In the case of an individual who files an income tax return 
218.1   on a fiscal year basis, the term "federal adjusted gross income" 
218.2   shall mean federal adjusted gross income reflected in the fiscal 
218.3   year ending in the calendar year.  Federal adjusted gross income 
218.4   shall not be reduced by the amount of a net operating loss 
218.5   carryback or carryforward or a capital loss carryback or 
218.6   carryforward allowed for the year.  
218.7      (2) "Income" does not include:  
218.8      (a) amounts excluded pursuant to the Internal Revenue Code, 
218.9   sections 101(a) and 102; 
218.10     (b) amounts of any pension or annuity which was exclusively 
218.11  funded by the claimant or spouse and which funding payments were 
218.12  not excluded from federal adjusted gross income in the years 
218.13  when the payments were made; 
218.14     (c) surplus food or other relief in kind supplied by a 
218.15  governmental agency; 
218.16     (d) relief granted under this chapter; 
218.17     (e) child support payments received under a temporary or 
218.18  final decree of dissolution or legal separation; or 
218.19     (f) restitution payments received by eligible individuals 
218.20  and excludable interest as defined in section 803 of the 
218.21  Economic Growth and Tax Relief Reconciliation Act of 2001, 
218.22  Public Law 107-16.  
218.23     (3) The sum of the following amounts may be subtracted from 
218.24  income:  
218.25     (a) for the claimant's first dependent, the exemption 
218.26  amount multiplied by 1.4; 
218.27     (b) for the claimant's second dependent, the exemption 
218.28  amount multiplied by 1.3; 
218.29     (c) for the claimant's third dependent, the exemption 
218.30  amount multiplied by 1.2; 
218.31     (d) for the claimant's fourth dependent, the exemption 
218.32  amount multiplied by 1.1; 
218.33     (e) for the claimant's fifth dependent, the exemption 
218.34  amount; and 
218.35     (f) if the claimant or claimant's spouse was disabled or 
218.36  attained the age of 65 on or before December 31 of the year for 
219.1   which the taxes were levied or rent paid, the exemption amount.  
219.2      For purposes of this subdivision, the "exemption amount" 
219.3   means the exemption amount under section 151(d) of the Internal 
219.4   Revenue Code for the taxable year for which the income is 
219.5   reported.  
219.6      <b>[EFFECTIVE DATE.]</b> This section is effective for property 
219.7   tax refunds based on household income for 2004 and thereafter. 
219.8      Sec. 17.  Minnesota Statutes 2004, section 290A.03, 
219.9   subdivision 15, is amended to read: 
219.10     Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
219.11  means the Internal Revenue Code of 1986, as amended through June 
219.12  15, 2003 April 15, 2005. 
219.13     <b>[EFFECTIVE DATE.]</b> This section is effective for property 
219.14  tax refunds based on property taxes payable on or after December 
219.15  31, 2004, and rent paid on or after December 31, 2003. 
219.16                             ARTICLE 7 
219.17                        SALES AND USE TAXES 
219.18     Section 1.  Minnesota Statutes 2004, section 16C.03, is 
219.19  amended by adding a subdivision to read: 
219.20     Subd. 18.  [CONTRACTS WITH FOREIGN VENDORS.] (a) The 
219.21  commissioner and other agencies to which this section applies 
219.22  and the legislative branch of government shall, subject to 
219.23  paragraph (d), cancel a contract for goods or services from a 
219.24  vendor or an affiliate of a vendor or suspend or debar a vendor 
219.25  or an affiliate of a vendor from future contracts upon 
219.26  notification from the commissioner of revenue that the vendor or 
219.27  an affiliate of the vendor has not registered to collect the 
219.28  sales and use tax imposed under chapter 297A on its sales in 
219.29  Minnesota or to a destination in Minnesota.  This subdivision 
219.30  shall not apply to state colleges and universities, the courts, 
219.31  and any agency in the judicial branch of government.  For 
219.32  purposes of this subdivision, the term "affiliate" means any 
219.33  person or entity that is controlled by, or is under common 
219.34  control of, a vendor through stock ownership or other 
219.35  affiliation. 
219.36     (b) Beginning January 1, 2006, each vendor or affiliate of 
220.1   a vendor selling goods or services, subject to tax under chapter 
220.2   297A, to an agency or the legislature must provide its Minnesota 
220.3   sales and use tax business identification number, upon request, 
220.4   to show that the vendor is registered to collect Minnesota sales 
220.5   or use tax. 
220.6      (c) The commissioner of revenue shall periodically provide 
220.7   to the commissioner and the legislative branch a list of vendors 
220.8   who have not registered to collect Minnesota sales and use tax 
220.9   and who are subject to being suspended or debarred as vendors or 
220.10  having their contracts canceled. 
220.11     (d) The provisions of this subdivision may be waived by the 
220.12  commissioner or the legislative branch when the vendor is the 
220.13  single source of such goods or services, in the event of an 
220.14  emergency, or when it is in the best interests of the state as 
220.15  determined by the commissioner in consultation with the 
220.16  commissioner of revenue.  Such consultation is not a disclosure 
220.17  violation under chapter 270B. 
220.18     <b>[EFFECTIVE DATE.]</b> This section is effective for all 
220.19  contracts entered into after December 31, 2005. 
220.20     Sec. 2.  Minnesota Statutes 2004, section 289A.38, 
220.21  subdivision 6, is amended to read: 
220.22     Subd. 6.  [OMISSION IN EXCESS OF 25 PERCENT.] Additional 
220.23  taxes may be assessed within 6-1/2 years after the due date of 
220.24  the return or the date the return was filed, whichever is later, 
220.25  if: 
220.26     (1) the taxpayer omits from gross income an amount properly 
220.27  includable in it that is in excess of 25 percent of the amount 
220.28  of gross income stated in the return; 
220.29     (2) the taxpayer omits from a sales, use, or withholding 
220.30  tax return an amount of taxes in excess of 25 percent of the 
220.31  taxes reported in the return; or 
220.32     (3) the taxpayer omits from the gross estate assets in 
220.33  excess of 25 percent of the gross estate reported in the return. 
220.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
220.35  following final enactment. 
220.36     Sec. 3.  Minnesota Statutes 2004, section 289A.38, is 
221.1   amended by adding a subdivision to read: 
221.2      Subd. 15.  [PURCHASER FILED REFUND CLAIMS.] If a purchaser 
221.3   refund claim is filed under section 289A.50, subdivision 2a, and 
221.4   the basis for the claim is that the purchaser was improperly 
221.5   charged tax on an improvement to real property or on the 
221.6   purchase of nontaxable services, sales or use tax may be 
221.7   assessed for the cost of materials used to make the real 
221.8   property improvement or to perform the nontaxable service.  The 
221.9   assessment may be made against the person making the improvement 
221.10  to real property or the sale of nontaxable services, within the 
221.11  period prescribed in subdivision 1, or within one year after the 
221.12  date of the refund order, whichever is later. 
221.13     <b>[EFFECTIVE DATE.]</b> This section is effective for purchaser 
221.14  refund claims filed on or after July 1, 2005. 
221.15     Sec. 4.  Minnesota Statutes 2004, section 289A.40, 
221.16  subdivision 2, is amended to read: 
221.17     Subd. 2.  [BAD DEBT LOSS.] If a claim relates to an 
221.18  overpayment because of a failure to deduct a loss due to a bad 
221.19  debt or to a security becoming worthless, the claim is 
221.20  considered timely if filed within seven years from the date 
221.21  prescribed for the filing of the return.  A claim relating to an 
221.22  overpayment of taxes under chapter 297A must be filed within 
221.23  3-1/2 years from the date prescribed for filing the return, plus 
221.24  any extensions granted for filing the return, but only if filed 
221.25  within the extended time.  The refund or credit is limited to 
221.26  the amount of overpayment attributable to the loss.  "Bad debt" 
221.27  for purposes of this subdivision, has the same meaning as that 
221.28  term is used in United States Code, title 26, section 166, 
221.29  except that for a claim relating to an overpayment of taxes 
221.30  under chapter 297A the following are excluded from the 
221.31  calculation of bad debt:  financing charges or interest; sales 
221.32  or use taxes charged on the purchase price; uncollectible 
221.33  amounts on property that remain in the possession of the seller 
221.34  until the full purchase price is paid; expenses incurred in 
221.35  attempting to collect any debt; and repossessed property. 
221.36     <b>[EFFECTIVE DATE.]</b> For claims relating to an overpayment of 
222.1   taxes under chapter 297A, this section is effective for sales 
222.2   and purchases made on or after January 1, 2004; for all other 
222.3   bad debts or claims, this section is effective on or after July 
222.4   1, 2003. 
222.5      Sec. 5.  Minnesota Statutes 2004, section 289A.40, is 
222.6   amended by adding a subdivision to read: 
222.7      Subd. 4.  [PURCHASER FILED REFUND CLAIMS.] A claim for 
222.8   refund of taxes paid on a transaction not subject to tax under 
222.9   chapter 297A, where the purchaser may apply directly to the 
222.10  commissioner under section 289A.50, subdivision 2a, must be 
222.11  filed within 3-1/2 years from the 20th day of the month 
222.12  following the month of the invoice date for the purchase. 
222.13     <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
222.14  filed on or after the day following final enactment. 
222.15     Sec. 6.  Minnesota Statutes 2004, section 289A.40, is 
222.16  amended by adding a subdivision to read: 
222.17     Subd. 5.  [CAPITAL EQUIPMENT REFUND CLAIMS.] A claim for 
222.18  refund for taxes paid under chapter 297A on capital equipment 
222.19  must be filed within 3-1/2 years from the 20th day of the month 
222.20  following the month of the invoice date for the purchase of the 
222.21  capital equipment.  A claim for refund for taxes imposed on 
222.22  capital equipment under section 297A.63 must be filed within 
222.23  3-1/2 years from the date prescribed for filing the return, or 
222.24  one year from the date of an order assessing tax under section 
222.25  289A.37, subdivision 1, upon payment in full of the tax, 
222.26  penalties, and interest shown on the order, whichever period 
222.27  expires later. 
222.28     <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
222.29  filed on or after the day following final enactment. 
222.30     Sec. 7.  Minnesota Statutes 2004, section 297A.61, 
222.31  subdivision 3, is amended to read: 
222.32     Subd. 3.  [SALE AND PURCHASE.] (a) "Sale" and "purchase" 
222.33  include, but are not limited to, each of the transactions listed 
222.34  in this subdivision. 
222.35     (b) Sale and purchase include: 
222.36     (1) any transfer of title or possession, or both, of 
223.1   tangible personal property, whether absolutely or conditionally, 
223.2   for a consideration in money or by exchange or barter; and 
223.3      (2) the leasing of or the granting of a license to use or 
223.4   consume, for a consideration in money or by exchange or barter, 
223.5   tangible personal property, other than a manufactured home used 
223.6   for residential purposes for a continuous period of 30 days or 
223.7   more. 
223.8      (c) Sale and purchase include the production, fabrication, 
223.9   printing, or processing of tangible personal property for a 
223.10  consideration for consumers who furnish either directly or 
223.11  indirectly the materials used in the production, fabrication, 
223.12  printing, or processing. 
223.13     (d) Sale and purchase include the preparing for a 
223.14  consideration of food.  Notwithstanding section 297A.67, 
223.15  subdivision 2, taxable food includes, but is not limited to, the 
223.16  following: 
223.17     (1) prepared food sold by the retailer; 
223.18     (2) soft drinks; 
223.19     (3) candy; and 
223.20     (4) dietary supplements; and 
223.21     (5) all food sold through vending machines, except milk. 
223.22     (e) A sale and a purchase includes the furnishing for a 
223.23  consideration of electricity, gas, water, or steam for use or 
223.24  consumption within this state. 
223.25     (f) A sale and a purchase includes the transfer for a 
223.26  consideration of prewritten computer software whether delivered 
223.27  electronically, by load and leave, or otherwise.  
223.28     (g) A sale and a purchase includes the furnishing for a 
223.29  consideration of the following services: 
223.30     (1) the privilege of admission to places of amusement, 
223.31  recreational areas, or athletic events, and the making available 
223.32  of amusement devices, tanning facilities, reducing salons, steam 
223.33  baths, turkish baths, health clubs, and spas or athletic 
223.34  facilities; 
223.35     (2) lodging and related services by a hotel, rooming house, 
223.36  resort, campground, motel, or trailer camp and the granting of 
224.1   any similar license to use real property in a specific facility, 
224.2   other than the renting or leasing of it for a continuous period 
224.3   of 30 days or more under an enforceable written agreement that 
224.4   may not be terminated without prior notice; 
224.5      (3) nonresidential parking services, whether on a 
224.6   contractual, hourly, or other periodic basis, except for parking 
224.7   at a meter; 
224.8      (4) the granting of membership in a club, association, or 
224.9   other organization if: 
224.10     (i) the club, association, or other organization makes 
224.11  available for the use of its members sports and athletic 
224.12  facilities, without regard to whether a separate charge is 
224.13  assessed for use of the facilities; and 
224.14     (ii) use of the sports and athletic facility is not made 
224.15  available to the general public on the same basis as it is made 
224.16  available to members.  
224.17  Granting of membership means both onetime initiation fees and 
224.18  periodic membership dues.  Sports and athletic facilities 
224.19  include golf courses; tennis, racquetball, handball, and squash 
224.20  courts; basketball and volleyball facilities; running tracks; 
224.21  exercise equipment; swimming pools; and other similar athletic 
224.22  or sports facilities; 
224.23     (5) delivery of aggregate materials and concrete block by a 
224.24  third party if the delivery would be subject to the sales tax if 
224.25  provided by the seller of the aggregate material or concrete 
224.26  block; and 
224.27     (6) services as provided in this clause: 
224.28     (i) laundry and dry cleaning services including cleaning, 
224.29  pressing, repairing, altering, and storing clothes, linen 
224.30  services and supply, cleaning and blocking hats, and carpet, 
224.31  drapery, upholstery, and industrial cleaning.  Laundry and dry 
224.32  cleaning services do not include services provided by coin 
224.33  operated facilities operated by the customer; 
224.34     (ii) motor vehicle washing, waxing, and cleaning services, 
224.35  including services provided by coin operated facilities operated 
224.36  by the customer, and rustproofing, undercoating, and towing of 
225.1   motor vehicles; 
225.2      (iii) building and residential cleaning, maintenance, and 
225.3   disinfecting and exterminating services; 
225.4      (iv) detective, security, burglar, fire alarm, and armored 
225.5   car services; but not including services performed within the 
225.6   jurisdiction they serve by off-duty licensed peace officers as 
225.7   defined in section 626.84, subdivision 1, or services provided 
225.8   by a nonprofit organization for monitoring and electronic 
225.9   surveillance of persons placed on in-home detention pursuant to 
225.10  court order or under the direction of the Minnesota Department 
225.11  of Corrections; 
225.12     (v) pet grooming services; 
225.13     (vi) lawn care, fertilizing, mowing, spraying and sprigging 
225.14  services; garden planting and maintenance; tree, bush, and shrub 
225.15  pruning, bracing, spraying, and surgery; indoor plant care; 
225.16  tree, bush, shrub, and stump removal, except when performed as 
225.17  part of a land clearing contract as defined in section 297A.68, 
225.18  subdivision 40; and tree trimming for public utility lines.  
225.19  Services performed under a construction contract for the 
225.20  installation of shrubbery, plants, sod, trees, bushes, and 
225.21  similar items are not taxable; 
225.22     (vii) massages, except when provided by a licensed health 
225.23  care facility or professional or upon written referral from a 
225.24  licensed health care facility or professional for treatment of 
225.25  illness, injury, or disease; and 
225.26     (viii) the furnishing of lodging, board, and care services 
225.27  for animals in kennels and other similar arrangements, but 
225.28  excluding veterinary and horse boarding services. 
225.29     In applying the provisions of this chapter, the terms 
225.30  "tangible personal property" and "sales at retail" include 
225.31  taxable services listed in clause (6), items (i) to (vi) and 
225.32  (viii), and the provision of these taxable services, unless 
225.33  specifically provided otherwise.  Services performed by an 
225.34  employee for an employer are not taxable.  Services performed by 
225.35  a partnership or association for another partnership or 
225.36  association are not taxable if one of the entities owns or 
226.1   controls more than 80 percent of the voting power of the equity 
226.2   interest in the other entity.  Services performed between 
226.3   members of an affiliated group of corporations are not taxable.  
226.4   For purposes of the preceding sentence, "affiliated group of 
226.5   corporations" includes those entities that would be classified 
226.6   as members of an affiliated group under United States Code, 
226.7   title 26, section 1504, and that are eligible to file a 
226.8   consolidated tax return for federal income tax purposes. 
226.9      (h) A sale and a purchase includes the furnishing for a 
226.10  consideration of tangible personal property or taxable services 
226.11  by the United States or any of its agencies or 
226.12  instrumentalities, or the state of Minnesota, its agencies, 
226.13  instrumentalities, or political subdivisions. 
226.14     (i) A sale and a purchase includes the furnishing for a 
226.15  consideration of telecommunications services, including cable 
226.16  television services and direct satellite services.  
226.17  Telecommunications services are taxed to the extent allowed 
226.18  under federal law.  
226.19     (j) A sale and a purchase includes the furnishing for a 
226.20  consideration of installation if the installation charges would 
226.21  be subject to the sales tax if the installation were provided by 
226.22  the seller of the item being installed. 
226.23     (k) A sale and a purchase includes the rental of a vehicle 
226.24  by a motor vehicle dealer to a customer when (1) the vehicle is 
226.25  rented by the customer for a consideration, or (2) the motor 
226.26  vehicle dealer is reimbursed pursuant to a service contract as 
226.27  defined in section 65B.29, subdivision 1, clause (1). 
226.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
226.29  following final enactment except that the amendment to paragraph 
226.30  (d), clause (5), is effective for sales made after June 30, 
226.31  2005, and the amendment to paragraph (g), clause (6)(vi), is 
226.32  effective for sales and purchases made after October 28, 2002, 
226.33  but for land clearing contracts entered into after October 28, 
226.34  2002, no refunds may be claimed under Minnesota Statutes, 
226.35  section 289A.50, for sales taxes collected and remitted to the 
226.36  state on the land clearing contracts. 
227.1      Sec. 8.  Minnesota Statutes 2004, section 297A.61, 
227.2   subdivision 4, is amended to read: 
227.3      Subd. 4.  [RETAIL SALE.] (a) A "retail sale" means any 
227.4   sale, lease, or rental for any purpose, other than resale, 
227.5   sublease, or subrent of items by the purchaser in the normal 
227.6   course of business as defined in subdivision 21.  
227.7      (b) A sale of property used by the owner only by leasing it 
227.8   to others or by holding it in an effort to lease it, and put to 
227.9   no use by the owner other than resale after the lease or effort 
227.10  to lease, is a sale of property for resale.  
227.11     (c) A sale of master computer software that is purchased 
227.12  and used to make copies for sale or lease is a sale of property 
227.13  for resale.  
227.14     (d) A sale of building materials, supplies, and equipment 
227.15  to owners, contractors, subcontractors, or builders for the 
227.16  erection of buildings or the alteration, repair, or improvement 
227.17  of real property is a retail sale in whatever quantity sold, 
227.18  whether the sale is for purposes of resale in the form of real 
227.19  property or otherwise.  
227.20     (e) A sale of carpeting, linoleum, or similar floor 
227.21  covering to a person who provides for installation of the floor 
227.22  covering is a retail sale and not a sale for resale since a sale 
227.23  of floor covering which includes installation is a contract for 
227.24  the improvement of real property. 
227.25     (f) A sale of shrubbery, plants, sod, trees, and similar 
227.26  items to a person who provides for installation of the items is 
227.27  a retail sale and not a sale for resale since a sale of 
227.28  shrubbery, plants, sod, trees, and similar items that includes 
227.29  installation is a contract for the improvement of real property. 
227.30     (g) A sale of tangible personal property that is awarded as 
227.31  prizes is a retail sale and is not considered a sale of property 
227.32  for resale. 
227.33     (h) A sale of tangible personal property utilized or 
227.34  employed in the furnishing or providing of services under 
227.35  subdivision 3, paragraph (g), clause (1), including, but not 
227.36  limited to, property given as promotional items, is a retail 
228.1   sale and is not considered a sale of property for resale. 
228.2      (i) A sale of tangible personal property used in conducting 
228.3   lawful gambling under chapter 349 or the state lottery under 
228.4   chapter 349A, including, but not limited to, property given as 
228.5   promotional items, is a retail sale and is not considered a sale 
228.6   of property for resale. 
228.7      (j) A sale of machines, equipment, or devices that are used 
228.8   to furnish, provide, or dispense goods or services, including, 
228.9   but not limited to, coin-operated devices, is a retail sale and 
228.10  is not considered a sale of property for resale. 
228.11     (k) In the case of a lease, a retail sale occurs (1) when 
228.12  an obligation to make a lease payment becomes due under the 
228.13  terms of the agreement or the trade practices of the lessor or 
228.14  (2) in the case of a lease of a motor vehicle, as defined in 
228.15  section 297B.01, subdivision 5, but excluding vehicles with a 
228.16  manufacturer's gross vehicle weight rating greater than 11,000 
228.17  pounds and rentals of vehicles for not more than 28 days, at the 
228.18  time the lease is executed. 
228.19     (l) In the case of a conditional sales contract, a retail 
228.20  sale occurs upon the transfer of title or possession of the 
228.21  tangible personal property. 
228.22     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
228.23  following final enactment, except that the amendments to 
228.24  paragraph (k) are effective for leases entered into after 
228.25  September 30, 2005. 
228.26     Sec. 9.  Minnesota Statutes 2004, section 297A.61, is 
228.27  amended by adding a subdivision to read: 
228.28     Subd. 37.  [PERSONAL RAPID TRANSIT SYSTEM.] "Personal rapid 
228.29  transit system" means a transportation system of small, 
228.30  computer-controlled vehicles, transporting one to three 
228.31  passengers on elevated guideways in a transportation network 
228.32  operating on demand and nonstop directly to any stations in the 
228.33  network. 
228.34     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
228.35  purchases made after June 30, 2005. 
228.36     Sec. 10.  Minnesota Statutes 2004, section 297A.64, 
229.1   subdivision 4, is amended to read: 
229.2      Subd. 4.  [EXEMPTIONS.] (a) The tax and the fee imposed by 
229.3   this section do not apply to a lease or rental of (1) a vehicle 
229.4   to be used by the lessee to provide a licensed taxi service; (2) 
229.5   a hearse or limousine used in connection with a burial or 
229.6   funeral service; or (3) a van designed or adapted primarily for 
229.7   transporting property rather than passengers.  The tax and the 
229.8   fee imposed under this section do not apply when the lease or 
229.9   rental of a vehicle is exempt from the tax imposed under section 
229.10  297A.62, subdivision 1. 
229.11     (b) The lessor may elect not to charge the fee imposed in 
229.12  subdivision 2 if in the previous calendar year the lessor had no 
229.13  more than 20 vehicles available for lease that would have been 
229.14  subject to tax under this section, or no more than $50,000 in 
229.15  gross receipts that would have been subject to tax under this 
229.16  section.  
229.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
229.18  following final enactment. 
229.19     Sec. 11.  Minnesota Statutes 2004, section 297A.668, 
229.20  subdivision 1, is amended to read: 
229.21     Subdivision 1.  [ APPLICABILITY.] The provisions of this 
229.22  section apply regardless of the characterization of a product as 
229.23  tangible personal property, a digital good, or a service; but do 
229.24  not apply to telecommunications services, or the sales of motor 
229.25  vehicles, watercraft, aircraft, modular homes, manufactured 
229.26  homes, or mobile homes.  These provisions only apply to 
229.27  determine a seller's obligation to pay or collect and remit a 
229.28  sales or use tax with respect to the seller's sale of a 
229.29  product.  These provisions do not affect the obligation of a 
229.30  seller as purchaser to remit tax on the use of the product. 
229.31     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
229.32  following final enactment. 
229.33     Sec. 12.  Minnesota Statutes 2004, section 297A.668, 
229.34  subdivision 5, is amended to read: 
229.35     Subd. 5.  [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 
229.36  including lease or rental, of transportation equipment shall be 
230.1   sourced the same as a retail sale in accordance with the 
230.2   provisions of subdivision 2, notwithstanding the exclusion of 
230.3   lease or rental in subdivision 2. 
230.4      (b) "Transportation equipment" means any of the following: 
230.5      (1) locomotives and railcars that are utilized for the 
230.6   carriage of persons or property in interstate commerce; and/or 
230.7      (2) trucks and truck-tractors with a gross vehicle weight 
230.8   rating (GVWR) of 10,001 pounds or greater, trailers, 
230.9   semitrailers, or passenger buses that are: 
230.10     (i) registered through the international registration plan; 
230.11  and 
230.12     (ii) operated under authority of a carrier authorized and 
230.13  certified by the United States Department of Transportation or 
230.14  another federal authority to engage in the carriage of persons 
230.15  or property in interstate commerce; 
230.16     (3) aircraft that are operated by air carriers authorized 
230.17  and certificated by the United States Department of 
230.18  Transportation or another federal or a foreign authority to 
230.19  engage in the carriage of persons or property in interstate 
230.20  commerce; or 
230.21     (4) containers designed for use on and component parts 
230.22  attached or secured on the transportation equipment described in 
230.23  items (1) through (3).  
230.24     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
230.25  purchases made on or after January 1, 2004. 
230.26     Sec. 13.  Minnesota Statutes 2004, section 297A.67, 
230.27  subdivision 2, is amended to read: 
230.28     Subd. 2.  [FOOD AND FOOD INGREDIENTS.] Except as otherwise 
230.29  provided in this subdivision, food and food ingredients are 
230.30  exempt.  For purposes of this subdivision, "food" and "food 
230.31  ingredients" mean substances, whether in liquid, concentrated, 
230.32  solid, frozen, dried, or dehydrated form, that are sold for 
230.33  ingestion or chewing by humans and are consumed for their taste 
230.34  or nutritional value.  Food and food ingredients exempt under 
230.35  this subdivision do not include candy, soft drinks, food sold 
230.36  through vending machines, dietary supplements, and prepared 
231.1   foods.  Food and food ingredients do not include alcoholic 
231.2   beverages, dietary supplements, and tobacco.  For purposes of 
231.3   this subdivision, "alcoholic beverages" means beverages that are 
231.4   suitable for human consumption and contain one-half of one 
231.5   percent or more of alcohol by volume.  For purposes of this 
231.6   subdivision, "tobacco" means cigarettes, cigars, chewing or pipe 
231.7   tobacco, or any other item that contains tobacco.  For purposes 
231.8   of this subdivision, "dietary supplements" means any product, 
231.9   other than tobacco, intended to supplement the diet that: 
231.10     (1) contains one or more of the following dietary 
231.11  ingredients: 
231.12     (i) a vitamin; 
231.13     (ii) a mineral; 
231.14     (iii) an herb or other botanical; 
231.15     (iv) an amino acid; 
231.16     (v) a dietary substance for use by humans to supplement the 
231.17  diet by increasing the total dietary intake; and 
231.18     (vi) a concentrate, metabolite, constituent, extract, or 
231.19  combination of any ingredient described in items (i) to (v); 
231.20     (2) is intended for ingestion in tablet, capsule, powder, 
231.21  softgel, gelcap, or liquid form, or if not intended for 
231.22  ingestion in such form, is not represented as conventional food 
231.23  and is not represented for use as a sole item of a meal or of 
231.24  the diet; and 
231.25     (3) is required to be labeled as a dietary supplement, 
231.26  identifiable by the supplement facts box found on the label and 
231.27  as required pursuant to Code of Federal Regulations, title 21, 
231.28  section 101.36. 
231.29     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
231.30  on or after the day following final enactment. 
231.31     Sec. 14.  Minnesota Statutes 2004, section 297A.67, 
231.32  subdivision 7, is amended to read: 
231.33     Subd. 7.  [MEDICINES DRUGS; MEDICAL DEVICES.] 
231.34  (a) Prescribed Sales of the following drugs and medical devices 
231.35  are exempt: 
231.36     (1) drugs and medicine, and insulin, intended for internal 
232.1   or external use, in the cure, mitigation, treatment, or 
232.2   prevention of illness or disease in human beings are exempt.  
232.3   "Prescribed drugs and medicine" includes use, including 
232.4   over-the-counter drugs or medicine prescribed by a licensed 
232.5   health care professional. 
232.6      (b) Nonprescription medicines consisting principally 
232.7   (determined by the weight of all ingredients) of analgesics that 
232.8   are approved by the United States Food and Drug Administration 
232.9   for internal use by human beings are exempt.  For purposes of 
232.10  this subdivision, "principally" means greater than 50 percent 
232.11  analgesics by weight.  
232.12     (c) Prescription glasses, hospital beds, fever 
232.13  thermometers, reusable; 
232.14     (2) single-use finger-pricking devices for the extraction 
232.15  of blood, blood glucose monitoring machines, and 
232.16  other single-use devices and single-use diagnostic agents used 
232.17  in diagnosing, monitoring, or treating diabetes, and therapeutic 
232.18  and; 
232.19     (3) insulin and medical oxygen for human use, regardless of 
232.20  whether prescribed or sold over the counter; 
232.21     (4) prosthetic devices are exempt.  "Therapeutic devices" 
232.22  means devices that are attached or applied to the human body to 
232.23  cure, heal, or alleviate injury, illness, or disease, either 
232.24  directly or by administering a curative agent.  "Prosthetic 
232.25  devices" means devices that replace injured, diseased, or 
232.26  missing parts of the human body, either temporarily or 
232.27  permanently; 
232.28     (5) durable medical equipment for home use only; 
232.29     (6) mobility enhancing equipment; and 
232.30     (7) prescription corrective eyeglasses. 
232.31     (b) For purposes of this subdivision: 
232.32     (1) "Drug" means a compound, substance, or preparation, and 
232.33  any component of a compound, substance, or preparation, other 
232.34  than food and food ingredients, dietary supplements, or 
232.35  alcoholic beverages that is: 
232.36     (i) recognized in the official United States Pharmacopoeia, 
233.1   official Homeopathic Pharmacopoeia of the United States, or 
233.2   official National Formulary, and supplement to any of them; 
233.3      (ii) intended for use in the diagnosis, cure, mitigation, 
233.4   treatment, or prevention of disease; or 
233.5      (iii) intended to affect the structure or any function of 
233.6   the body. 
233.7      (2) "Durable medical equipment" means equipment, including 
233.8   repair and replacement parts, but not including mobility 
233.9   enhancing equipment, that: 
233.10     (i) can withstand repeated use; 
233.11     (ii) is primarily and customarily used to serve a medical 
233.12  purpose; 
233.13     (iii) generally is not useful to a person in the absence of 
233.14  illness or injury; and 
233.15     (iv) is not worn in or on the body. 
233.16     (3) "Mobility enhancing equipment" means equipment, 
233.17  including repair and replacement parts, but not including 
233.18  durable medical equipment, that: 
233.19     (i) is primarily and customarily used to provide or 
233.20  increase the ability to move from one place to another and that 
233.21  is appropriate for use either in a home or a motor vehicle; 
233.22     (ii) is not generally used by persons with normal mobility; 
233.23  and 
233.24     (iii) does not include any motor vehicle or equipment on a 
233.25  motor vehicle normally provided by a motor vehicle manufacturer. 
233.26     (4) "Over-the-counter drug" means a drug that contains a 
233.27  label that identifies the product as a drug as required by Code 
233.28  of Federal Regulations, title 21, section 201.66.  The label 
233.29  must include a "drug facts" panel or a statement of the active 
233.30  ingredients with a list of those ingredients contained in the 
233.31  compound, substance, or preparation.  Over-the-counter drugs do 
233.32  not include grooming and hygiene products, regardless of whether 
233.33  they otherwise meet the definition.  "Grooming and hygiene 
233.34  products" are soaps, cleaning solutions, shampoo, toothpaste, 
233.35  mouthwash, antiperspirants, and suntan lotions and sunscreens. 
233.36     (5) "Prescribed" and "prescription" means a direction in 
234.1   the form of an order, formula, or recipe issued in any form of 
234.2   oral, written, electronic, or other means of transmission by a 
234.3   duly licensed health care professional. 
234.4      (6) "Prosthetic device" means a replacement, corrective, or 
234.5   supportive device, including repair and replacement parts, worn 
234.6   on or in the body to: 
234.7      (i) artificially replace a missing portion of the body; 
234.8      (ii) prevent or correct physical deformity or malfunction; 
234.9   or 
234.10     (iii) support a weak or deformed portion of the body. 
234.11  Prosthetic device does not include corrective eyeglasses. 
234.12     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
234.13  purchases made after June 30, 2005. 
234.14     Sec. 15.  Minnesota Statutes 2004, section 297A.67, 
234.15  subdivision 9, is amended to read: 
234.16     Subd. 9.  [BABY PRODUCTS.] (a) Products such as lotion, 
234.17  creams, ointments, oil, powder, or shampoo, and other articles 
234.18  designed for application to the hair or skin of babies are 
234.19  exempt. 
234.20     (b) Baby bottles and nipples, pacifiers, teething rings, 
234.21  thumb sucking preventatives, and infant syringes are exempt. 
234.22     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
234.23  purchases made after June 30, 2005. 
234.24     Sec. 16.  Minnesota Statutes 2004, section 297A.67, 
234.25  subdivision 29, is amended to read: 
234.26     Subd. 29.  [SOLAR ENERGY EFFICIENT PRODUCTS.] (a) A 
234.27  residential lighting fixture or a compact fluorescent bulb is 
234.28  exempt if it has an energy star label. 
234.29     (b) The following products are exempt if they have an 
234.30  energyguide label that indicates that the product meets or 
234.31  exceeds the standards listed below: 
234.32     (1) an electric heat pump hot water heater with an energy 
234.33  factor of at least 1.9; 
234.34     (2) a natural gas water heater with an energy factor of at 
234.35  least 0.62; 
234.36     (3) a propane gas or fuel oil water heater with an energy 
235.1   factor of at least 0.62; 
235.2      (4) a natural gas furnace with an annual fuel utilization 
235.3   efficiency greater than 92 percent; and 
235.4      (5) a propane gas or fuel oil furnace with an annual fuel 
235.5   utilization efficiency greater than 92 percent. 
235.6      (c) A photovoltaic device solar energy system, as defined 
235.7   in section 216C.06, subdivision 17, is exempt.  For purposes of 
235.8   this subdivision, "photovoltaic device" means a solid-state 
235.9   electrical device, such as a solar module, that converts light 
235.10  directly into direct current electricity of voltage-current 
235.11  characteristics that are a function of the characteristics of 
235.12  the light source and the materials in and design of the device.  
235.13  A "solar module" is a photovoltaic device that produces a 
235.14  specified power output under defined test conditions, usually 
235.15  composed of groups of solar cells connected in series, in 
235.16  parallel, or in series-parallel combinations. 
235.17     (d) For purposes of this subdivision, "energy star label" 
235.18  means the label granted to certain products that meet United 
235.19  States Environmental Protection Agency and United States 
235.20  Department of Energy criteria for energy efficiency.  For 
235.21  purposes of this subdivision, "energyguide label" means the 
235.22  label that the United States Federal Trade Commissioner requires 
235.23  manufacturers to apply to certain appliances under United States 
235.24  Code, title 16, part 305. 
235.25     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
235.26  purchases made on or after August 1, 2005. 
235.27     Sec. 17.  Minnesota Statutes 2004, section 297A.67, is 
235.28  amended by adding a subdivision to read: 
235.29     Subd. 32.  [CIGARETTES.] Cigarettes upon which a tax has 
235.30  been imposed under section 297F.25 are exempt. 
235.31     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
235.32  purchases made after July 31, 2005. 
235.33     Sec. 18.  Minnesota Statutes 2004, section 297A.68, 
235.34  subdivision 2, is amended to read: 
235.35     Subd. 2.  [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 
235.36  (a) Materials stored, used, or consumed in industrial production 
236.1   of personal property intended to be sold ultimately at retail 
236.2   are exempt, whether or not the item so used becomes an 
236.3   ingredient or constituent part of the property produced.  
236.4   Materials that qualify for this exemption include, but are not 
236.5   limited to, the following: 
236.6      (1) chemicals, including chemicals used for cleaning food 
236.7   processing machinery and equipment; 
236.8      (2) materials, including chemicals, fuels, and electricity 
236.9   purchased by persons engaged in industrial production to treat 
236.10  waste generated as a result of the production process; 
236.11     (3) fuels, electricity, gas, and steam used or consumed in 
236.12  the production process, except that electricity, gas, or steam 
236.13  used for space heating, cooling, or lighting is exempt if (i) it 
236.14  is in excess of the average climate control or lighting for the 
236.15  production area, and (ii) it is necessary to produce that 
236.16  particular product; 
236.17     (4) petroleum products and lubricants; 
236.18     (5) packaging materials, including returnable containers 
236.19  used in packaging food and beverage products; 
236.20     (6) accessory tools, equipment, and other items that are 
236.21  separate detachable units with an ordinary useful life of less 
236.22  than 12 months used in producing a direct effect upon the 
236.23  product; and 
236.24     (7) the following materials, tools, and equipment used in 
236.25  metalcasting:  crucibles, thermocouple protection sheaths and 
236.26  tubes, stalk tubes, refractory materials, molten metal filters 
236.27  and filter boxes, degassing lances, and base blocks. 
236.28     (b) This exemption does not include: 
236.29     (1) machinery, equipment, implements, tools, accessories, 
236.30  appliances, contrivances and furniture and fixtures, except 
236.31  those listed in paragraph (a), clause (6); and 
236.32     (2) petroleum and special fuels used in producing or 
236.33  generating power for propelling ready-mixed concrete trucks on 
236.34  the public highways of this state. 
236.35     (c) Industrial production includes, but is not limited to, 
236.36  research, development, design or production of any tangible 
237.1   personal property, manufacturing, processing (other than by 
237.2   restaurants and consumers) of agricultural products (whether 
237.3   vegetable or animal), commercial fishing, refining, smelting, 
237.4   reducing, brewing, distilling, printing, mining, quarrying, 
237.5   lumbering, generating electricity, the production of road 
237.6   building materials, and the research, development, design, or 
237.7   production of computer software.  Industrial production does not 
237.8   include painting, cleaning, repairing or similar processing of 
237.9   property except as part of the original manufacturing process.  
237.10     (d) Industrial production does not include: 
237.11     (1) the furnishing of services listed in section 297A.61, 
237.12  subdivision 3, paragraph (g), clause (6), items (i) to (vi) and 
237.13  (viii); or 
237.14     (2) the transportation, transmission, or distribution of 
237.15  petroleum, liquefied gas, natural gas, water, or steam, in, by, 
237.16  or through pipes, lines, tanks, mains, or other means of 
237.17  transporting those products.  For purposes of this paragraph, 
237.18  "transportation, transmission, or distribution" does not include 
237.19  blending of petroleum or biodiesel fuel as defined in section 
237.20  239.77. 
237.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
237.22  following final enactment, except that the provision in 
237.23  paragraph (d) is effective for sales and purchases made after 
237.24  June 30, 2005. 
237.25     Sec. 19.  Minnesota Statutes 2004, section 297A.68, 
237.26  subdivision 5, is amended to read: 
237.27     Subd. 5.  [CAPITAL EQUIPMENT.] (a) Capital equipment is 
237.28  exempt.  The tax must be imposed and collected as if the rate 
237.29  under section 297A.62, subdivision 1, applied, and then refunded 
237.30  in the manner provided in section 297A.75, unless:  
237.31     (1) the purchaser qualifies as a small business as defined 
237.32  in section 645.445, subdivision 2, paragraphs (a) to (c); 
237.33     (2) the business is located in the state; and 
237.34     (3) the purchaser provides an exemption certificate as 
237.35  required in section 297A.72, subdivision 3. 
237.36     "Capital equipment" means machinery and equipment purchased 
238.1   or leased, and used in this state by the purchaser or lessee 
238.2   primarily for manufacturing, fabricating, mining, or refining 
238.3   tangible personal property to be sold ultimately at retail if 
238.4   the machinery and equipment are essential to the integrated 
238.5   production process of manufacturing, fabricating, mining, or 
238.6   refining.  Capital equipment also includes machinery and 
238.7   equipment used primarily to electronically transmit results 
238.8   retrieved by a customer of an on-line computerized data 
238.9   retrieval system. 
238.10     (b) Capital equipment includes, but is not limited to: 
238.11     (1) machinery and equipment used to operate, control, or 
238.12  regulate the production equipment; 
238.13     (2) machinery and equipment used for research and 
238.14  development, design, quality control, and testing activities; 
238.15     (3) environmental control devices that are used to maintain 
238.16  conditions such as temperature, humidity, light, or air pressure 
238.17  when those conditions are essential to and are part of the 
238.18  production process; 
238.19     (4) materials and supplies used to construct and install 
238.20  machinery or equipment; 
238.21     (5) repair and replacement parts, including accessories, 
238.22  whether purchased as spare parts, repair parts, or as upgrades 
238.23  or modifications to machinery or equipment; 
238.24     (6) materials used for foundations that support machinery 
238.25  or equipment; 
238.26     (7) materials used to construct and install special purpose 
238.27  buildings used in the production process; 
238.28     (8) ready-mixed concrete equipment in which the ready-mixed 
238.29  concrete is mixed as part of the delivery process regardless if 
238.30  mounted on a chassis, repair parts for ready-mixed concrete 
238.31  trucks, and leases of ready-mixed concrete trucks; and 
238.32     (9) machinery or equipment used for research, development, 
238.33  design, or production of computer software.  
238.34     (c) Capital equipment does not include the following: 
238.35     (1) motor vehicles taxed under chapter 297B; 
238.36     (2) machinery or equipment used to receive or store raw 
239.1   materials; 
239.2      (3) building materials, except for materials included in 
239.3   paragraph (b), clauses (6) and (7); 
239.4      (4) machinery or equipment used for nonproduction purposes, 
239.5   including, but not limited to, the following:  plant security, 
239.6   fire prevention, first aid, and hospital stations; support 
239.7   operations or administration; pollution control; and plant 
239.8   cleaning, disposal of scrap and waste, plant communications, 
239.9   space heating, cooling, lighting, or safety; 
239.10     (5) farm machinery and aquaculture production equipment as 
239.11  defined by section 297A.61, subdivisions 12 and 13; 
239.12     (6) machinery or equipment purchased and installed by a 
239.13  contractor as part of an improvement to real property; or 
239.14     (7) machinery and equipment used by restaurants in the 
239.15  furnishing, preparing, or serving of prepared foods as defined 
239.16  in section 297A.61, subdivision 31; 
239.17     (8) machinery and equipment used to furnish the services 
239.18  listed in section 297A.61, subdivision 3, paragraph (g), clause 
239.19  (6), items (i) to (vi) and (viii); 
239.20     (9) machinery or equipment used in the transportation, 
239.21  transmission, or distribution of petroleum, liquefied gas, 
239.22  natural gas, water, or steam, in, by, or through pipes, lines, 
239.23  tanks, mains, or other means of transporting those products.  
239.24  This clause does not apply to machinery or equipment used to 
239.25  blend petroleum or biodiesel fuel as defined in section 239.77; 
239.26  or 
239.27     (10) any other item that is not essential to the integrated 
239.28  process of manufacturing, fabricating, mining, or refining. 
239.29     (d) For purposes of this subdivision: 
239.30     (1) "Equipment" means independent devices or tools separate 
239.31  from machinery but essential to an integrated production 
239.32  process, including computers and computer software, used in 
239.33  operating, controlling, or regulating machinery and equipment; 
239.34  and any subunit or assembly comprising a component of any 
239.35  machinery or accessory or attachment parts of machinery, such as 
239.36  tools, dies, jigs, patterns, and molds.  
240.1      (2) "Fabricating" means to make, build, create, produce, or 
240.2   assemble components or property to work in a new or different 
240.3   manner. 
240.4      (3) "Integrated production process" means a process or 
240.5   series of operations through which tangible personal property is 
240.6   manufactured, fabricated, mined, or refined.  For purposes of 
240.7   this clause, (i) manufacturing begins with the removal of raw 
240.8   materials from inventory and ends when the last process prior to 
240.9   loading for shipment has been completed; (ii) fabricating begins 
240.10  with the removal from storage or inventory of the property to be 
240.11  assembled, processed, altered, or modified and ends with the 
240.12  creation or production of the new or changed product; (iii) 
240.13  mining begins with the removal of overburden from the site of 
240.14  the ores, minerals, stone, peat deposit, or surface materials 
240.15  and ends when the last process before stockpiling is completed; 
240.16  and (iv) refining begins with the removal from inventory or 
240.17  storage of a natural resource and ends with the conversion of 
240.18  the item to its completed form. 
240.19     (4) "Machinery" means mechanical, electronic, or electrical 
240.20  devices, including computers and computer software, that are 
240.21  purchased or constructed to be used for the activities set forth 
240.22  in paragraph (a), beginning with the removal of raw materials 
240.23  from inventory through completion of the product, including 
240.24  packaging of the product. 
240.25     (5) "Machinery and equipment used for pollution control" 
240.26  means machinery and equipment used solely to eliminate, prevent, 
240.27  or reduce pollution resulting from an activity described in 
240.28  paragraph (a).  
240.29     (6) "Manufacturing" means an operation or series of 
240.30  operations where raw materials are changed in form, composition, 
240.31  or condition by machinery and equipment and which results in the 
240.32  production of a new article of tangible personal property.  For 
240.33  purposes of this subdivision, "manufacturing" includes the 
240.34  generation of electricity or steam to be sold at retail. 
240.35     (7) "Mining" means the extraction of minerals, ores, stone, 
240.36  or peat. 
241.1      (8) "On-line data retrieval system" means a system whose 
241.2   cumulation of information is equally available and accessible to 
241.3   all its customers. 
241.4      (9) "Primarily" means machinery and equipment used 50 
241.5   percent or more of the time in an activity described in 
241.6   paragraph (a). 
241.7      (10) "Refining" means the process of converting a natural 
241.8   resource to an intermediate or finished product, including the 
241.9   treatment of water to be sold at retail. 
241.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
241.11  following final enactment, except that the second sentence in 
241.12  paragraph (a) is effective for sales and purchases made after 
241.13  December 31, 2005, and paragraph (c), clause (9), is effective 
241.14  for sales and purchases made after June 30, 2005.  
241.15     Sec. 20.  Minnesota Statutes 2004, section 297A.68, 
241.16  subdivision 28, is amended to read: 
241.17     Subd. 28.  [MEDICAL SUPPLIES.] Medical supplies purchased 
241.18  by a licensed health care facility or licensed health care 
241.19  professional to provide medical treatment to residents or 
241.20  patients are exempt.  The exemption does not apply to durable 
241.21  medical equipment or components of durable medical equipment, 
241.22  laboratory supplies, radiological supplies, and other items used 
241.23  in providing medical services.  For purposes of this 
241.24  subdivision, "medical supplies" means adhesive and nonadhesive 
241.25  bandages, gauze pads and strips, cotton applicators, 
241.26  antiseptics, nonprescription drugs, eye solution, and other 
241.27  similar supplies used directly on the resident or patient in 
241.28  providing medical services. 
241.29     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
241.30  purchases made after June 30, 2005. 
241.31     Sec. 21.  Minnesota Statutes 2004, section 297A.68, 
241.32  subdivision 35, is amended to read: 
241.33     Subd. 35.  [TELECOMMUNICATIONS EQUIPMENT.] (a) 
241.34  Telecommunications machinery and equipment purchased or leased 
241.35  for use directly by a telecommunications service provider 
241.36  primarily in the provision of telecommunications services that 
242.1   are ultimately to be sold at retail are exempt, regardless of 
242.2   whether purchased by the owner, a contractor, or a subcontractor.
242.3      (b) For purposes of this subdivision, "telecommunications 
242.4   machinery and equipment" includes, but is not limited to: 
242.5      (1) machinery, equipment, and fixtures utilized in 
242.6   receiving, initiating, amplifying, processing, transmitting, 
242.7   retransmitting, recording, switching, or monitoring 
242.8   telecommunications services, such as computers, transformers, 
242.9   amplifiers, routers, bridges, repeaters, multiplexers, and other 
242.10  items performing comparable functions; 
242.11     (2) machinery, equipment, and fixtures used in the 
242.12  transportation of telecommunications services, radio 
242.13  transmitters and receivers, satellite equipment, microwave 
242.14  equipment, and other transporting media, but not wire, cable, 
242.15  fiber, poles, or conduit; 
242.16     (3) ancillary machinery, equipment, and fixtures that 
242.17  regulate, control, protect, or enable the machinery in clauses 
242.18  (1) and (2) to accomplish its intended function, such as 
242.19  auxiliary power supply, test equipment, towers, heating, 
242.20  ventilating, and air conditioning equipment necessary to the 
242.21  operation of the telecommunications equipment; and software 
242.22  necessary to the operation of the telecommunications equipment; 
242.23  and 
242.24     (4) repair and replacement parts, including accessories, 
242.25  whether purchased as spare parts, repair parts, or as upgrades 
242.26  or modifications to qualified machinery or equipment. 
242.27     (c) For purposes of this subdivision, "telecommunications 
242.28  services" means telecommunications services as defined in 
242.29  section 297A.61, subdivision 24, paragraph paragraphs (a), only 
242.30  (c), and (d). 
242.31     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
242.32  following final enactment. 
242.33     Sec. 22.  Minnesota Statutes 2004, section 297A.68, 
242.34  subdivision 39, is amended to read: 
242.35     Subd. 39.  [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 
242.36  tangible personal property or services is exempt from tax or a 
243.1   tax rate increase for a period of six months from the effective 
243.2   date of the law change that results in the imposition of the tax 
243.3   or the tax rate increase under this chapter if: 
243.4      (1) the act imposing the tax or increasing the tax rate 
243.5   does not have transitional effective date language for existing 
243.6   construction contracts and construction bids; and 
243.7      (2) the requirements of paragraph (b) are met. 
243.8      (b) A sale is tax exempt under paragraph (a) if it meets 
243.9   the requirements of either clause (1) or (2): 
243.10     (1) For a construction contract: 
243.11     (i) the goods or services sold must be used for the 
243.12  performance of a bona fide written lump sum or fixed price 
243.13  construction contract; 
243.14     (ii) the contract must be entered into before the date the 
243.15  goods or services become subject to the sales tax or the tax 
243.16  rate was increased; 
243.17     (iii) the contract must not provide for allocation of 
243.18  future taxes; and 
243.19     (iv) for each qualifying contract the contractor must give 
243.20  the seller documentation of the contract on which an exemption 
243.21  is to be claimed. 
243.22     (2) For a construction bid: 
243.23     (i) the goods or services sold must be used pursuant to an 
243.24  obligation of a bid or bids; 
243.25     (ii) the bid or bids must be submitted and accepted before 
243.26  the date the goods or services became subject to the sales 
243.27  tax or the tax rate was increased; 
243.28     (iii) the bid or bids must not be able to be withdrawn, 
243.29  modified, or changed without forfeiting a bond; and 
243.30     (iv) for each qualifying bid, the contractor must give the 
243.31  seller documentation of the bid on which an exemption is to be 
243.32  claimed. 
243.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
243.34  following final enactment. 
243.35     Sec. 23.  Minnesota Statutes 2004, section 297A.68, is 
243.36  amended by adding a subdivision to read: 
244.1      Subd. 40.  [LAND CLEARING.] Tree, bush, shrub, and stump 
244.2   removal are exempt when sold to contractors or subcontractors as 
244.3   part of a land clearing contract.  For purposes of this 
244.4   subdivision, "land clearing contract" means a contract for the 
244.5   removal of trees, bushes, and shrubs, including the removal of 
244.6   roots and stumps, to develop a site.  This exemption does not 
244.7   apply to land clearing of a portion of a site to allow for 
244.8   remodeling, improvement, or expansion of an existing structure. 
244.9      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
244.10  purchases made after October 28, 2002, but for land clearing 
244.11  contracts entered into after October 28, 2002, no refunds may be 
244.12  claimed under Minnesota Statutes, section 289A.50, for sales 
244.13  taxes collected and remitted to the state on the land clearing 
244.14  contracts. 
244.15     Sec. 24.  Minnesota Statutes 2004, section 297A.68, is 
244.16  amended by adding a subdivision to read: 
244.17     Subd. 41.  [PERSONAL RAPID TRANSIT SYSTEM.] (a) Machinery, 
244.18  equipment, and supplies purchased or leased, and used by the 
244.19  purchaser or lessee in this state directly in the provision of a 
244.20  personal rapid transit system as defined in section 297A.61, 
244.21  subdivision 37, which provides service to the public on a 
244.22  regular and continuing basis, are exempt, provided that the 
244.23  system is operated independent of any government subsidies.  
244.24  Machinery, equipment, and supplies that qualify for this 
244.25  exemption include, but are not limited to, the following: 
244.26     (1) vehicles, guideways, and related parts used directly in 
244.27  the transit system; 
244.28     (2) computers and equipment used primarily for operating, 
244.29  controlling, and regulating the system; 
244.30     (3) machinery, equipment, furniture, and fixtures necessary 
244.31  for the functioning of system stations; 
244.32     (4) machinery, equipment, implements, tools, and supplies 
244.33  used to maintain vehicles, guideways, and stations; and 
244.34     (5) electricity and other fuels used in the provision of 
244.35  the transit service, including heating, cooling, and lighting of 
244.36  system stations. 
245.1      (b) This exemption does not include machinery, equipment, 
245.2   and supplies used for nonproduction purposes such as operations 
245.3   support and administration. 
245.4      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
245.5   purchases made after June 30, 2005. 
245.6      Sec. 25.  Minnesota Statutes 2004, section 297A.70, 
245.7   subdivision 10, is amended to read: 
245.8      Subd. 10.  [NONPROFIT TICKETS OR ADMISSIONS.] (a) Tickets 
245.9   or admissions to an event are exempt if all the gross receipts 
245.10  are recorded as such, in accordance with generally accepted 
245.11  accounting principles, on the books of one or more organizations 
245.12  whose primary mission is to provide an opportunity for citizens 
245.13  of the state to participate in the creation, performance, or 
245.14  appreciation of the arts, and provided that each organization is:
245.15     (1) an organization described in section 501(c)(3) of the 
245.16  Internal Revenue Code in which voluntary contributions make up 
245.17  at least the following percent of the organization's annual 
245.18  revenue in its most recently completed 12-month fiscal year, or 
245.19  in the current year if the organization has not completed a 
245.20  12-month fiscal year: 
245.21     (i) for sales made after July 31, 2001, and before July 1, 
245.22  2002, for the organization's fiscal year completed in calendar 
245.23  year 2000, three percent; 
245.24     (ii) for sales made on or after July 1, 2002, and on or 
245.25  before June 30, 2003, for the organization's fiscal year 
245.26  completed in calendar year 2001, three percent; 
245.27     (iii) for sales made on or after July 1, 2003, and on or 
245.28  before June 30, 2004, for the organization's fiscal year 
245.29  completed in calendar year 2002, four percent; and 
245.30     (iv) for sales made in each 12-month period, beginning on 
245.31  July 1, 2004, and each subsequent year, for the organization's 
245.32  fiscal year completed in the preceding calendar year, five 
245.33  percent; 
245.34     (2) a municipal board that promotes cultural and arts 
245.35  activities; or 
245.36     (3) the University of Minnesota, a state college and 
246.1   university, or a private nonprofit college or university 
246.2   provided that the event is held at a university-owned facility 
246.3   owned by the educational institution holding the event.  
246.4   The exemption only applies if the entire proceeds, after 
246.5   reasonable expenses, are used solely to provide opportunities 
246.6   for citizens of the state to participate in the creation, 
246.7   performance, or appreciation of the arts. 
246.8      (b) Tickets or admissions to the premises of the Minnesota 
246.9   Zoological Garden are exempt, provided that the exemption under 
246.10  this paragraph does not apply to tickets or admissions to 
246.11  performances or events held on the premises unless the 
246.12  performance or event is sponsored and conducted exclusively by 
246.13  the Minnesota Zoological Board or employees of the Minnesota 
246.14  Zoological Garden. 
246.15     <b>[EFFECTIVE DATE.]</b> This section is effective for tickets and 
246.16  admissions to events held on or after July 1, 2005, but does not 
246.17  apply to events for which sales of tickets or admissions were 
246.18  made prior to July 1, 2005. 
246.19     Sec. 26.  Minnesota Statutes 2004, section 297A.71, 
246.20  subdivision 12, is amended to read: 
246.21     Subd. 12.  [CHAIR LIFTS, RAMPS, ELEVATORS.] Chair lifts, 
246.22  ramps, and Elevators and building materials used to install or 
246.23  construct them chair lifts, ramps, and elevators are exempt, if 
246.24  they are authorized by a physician and installed in or attached 
246.25  to the owner's homestead.  The tax must be imposed and collected 
246.26  as if the rate under section 297A.62, subdivision 1, applied and 
246.27  then refunded in the manner provided in section 297A.75. 
246.28     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
246.29  purchases made after June 30, 2005. 
246.30     Sec. 27.  Minnesota Statutes 2004, section 297A.71, is 
246.31  amended by adding a subdivision to read: 
246.32     Subd. 33.  [PERSONAL RAPID TRANSIT SYSTEM.] Materials, 
246.33  equipment, and supplies used in the construction, expansion, or 
246.34  improvement of a personal rapid transit system as defined in 
246.35  section 297A.61, subdivision 37, which provides service to the 
246.36  public on a regular and continuing basis, are exempt, provided 
247.1   that the system is operated independent of any government 
247.2   subsidies. 
247.3      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
247.4   purchases made after June 30, 2005. 
247.5      Sec. 28.  Minnesota Statutes 2004, section 297A.72, is 
247.6   amended by adding a subdivision to read: 
247.7      Subd. 3.  [EXEMPTION CERTIFICATE FOR SMALL BUSINESSES.] A 
247.8   small business, as defined in section 645.455, subdivision 2, 
247.9   paragraphs (a) to (c), that is located in the state may apply to 
247.10  the commissioner for an exemption certificate to purchase exempt 
247.11  capital equipment without paying the sales tax at the time of 
247.12  the sale.  The business must provide information required by the 
247.13  commissioner to verify that it meets the definition of small 
247.14  business in the preceding calendar year, or in the case of a new 
247.15  business, that it will meet the definition in the first full 
247.16  year of operations.  A decision by the commissioner on whether a 
247.17  business qualifies for this exemption is final.  The exemption 
247.18  certificate must be in the form and meet the requirements 
247.19  imposed under this chapter and chapter 289A on other sales and 
247.20  use tax exemption certificates, but it shall only be in effect 
247.21  for two years from the date of issuance. 
247.22     <b>[EFFECTIVE DATE.]</b> This section is effective for 
247.23  applications submitted to the commissioner of revenue after July 
247.24  1, 2005. 
247.25     Sec. 29.  Minnesota Statutes 2004, section 297A.75, 
247.26  subdivision 1, is amended to read: 
247.27     Subdivision 1.  [TAX COLLECTED.] The tax on the gross 
247.28  receipts from the sale of the following exempt items must be 
247.29  imposed and collected as if the sale were taxable and the rate 
247.30  under section 297A.62, subdivision 1, applied.  The exempt items 
247.31  include: 
247.32     (1) capital equipment exempt under section 297A.68, 
247.33  subdivision 5; 
247.34     (2) building materials for an agricultural processing 
247.35  facility exempt under section 297A.71, subdivision 13; 
247.36     (3) building materials for mineral production facilities 
248.1   exempt under section 297A.71, subdivision 14; 
248.2      (4) building materials for correctional facilities under 
248.3   section 297A.71, subdivision 3; 
248.4      (5) building materials used in a residence for disabled 
248.5   veterans exempt under section 297A.71, subdivision 11; 
248.6      (6) chair lifts, ramps, elevators, and associated building 
248.7   materials exempt under section 297A.71, subdivision 12; 
248.8      (7) building materials for the Long Lake Conservation 
248.9   Center exempt under section 297A.71, subdivision 17; 
248.10     (8) materials, supplies, fixtures, furnishings, and 
248.11  equipment for a county law enforcement and family service center 
248.12  under section 297A.71, subdivision 26; and 
248.13     (9) materials and supplies for qualified low-income housing 
248.14  under section 297A.71, subdivision 23. 
248.15     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
248.16  purchases made after June 30, 2005. 
248.17     Sec. 30.  [297A.82] [MOTOR VEHICLE LEASES.] 
248.18     Subdivision 1.  [MOTOR VEHICLE LEASE PRICE; PAYMENT.] (a) 
248.19  In the case of a lease of a motor vehicle as provided in section 
248.20  297A.61, subdivision 4, paragraph (k), clause (2), the tax is 
248.21  imposed on the total amount to be paid by the lessee under the 
248.22  lease agreement.  The lessor shall collect the tax in full at 
248.23  the time the lease is executed or, if the tax is included in the 
248.24  lease and the lease is assigned, the tax is due from the 
248.25  original lessor at the time the lease is assigned.  The total 
248.26  amount to be paid by the lessee under the lease agreement equals 
248.27  the agreed-upon value of the vehicle less manufacturer's 
248.28  rebates, the stated residual value of the leased vehicle, and 
248.29  the total value allowed for a vehicle owned by the lessee taken 
248.30  in trade by the lessor, plus the price of any taxable goods and 
248.31  services included in the lease and the rent charge as provided 
248.32  by Code of Federal Regulations, title 12, section 213.4, 
248.33  excluding any rent charge related to the capitalization of the 
248.34  tax. 
248.35     (b) If the total amount paid by the lessee for use of the 
248.36  leased vehicle includes amounts that are not calculated at the 
249.1   time the lease is executed, the tax is imposed and must be 
249.2   collected by the lessor at the time the amounts are paid by the 
249.3   lessee.  In the case of a lease which by its terms may be 
249.4   renewed, the sales tax is due and payable on the total amount to 
249.5   be paid during the initial term of the lease, and then for each 
249.6   subsequent renewal period on the total amount to be paid during 
249.7   the renewal period. 
249.8      (c) If a lease is canceled or rescinded on or before 90 
249.9   days of its execution or if a vehicle is returned to the 
249.10  manufacturer under section 325F.665, the lessor may file a claim 
249.11  for a refund of the total tax paid minus the amount of tax due 
249.12  for the period the vehicle is used by the lessee. 
249.13     (d) If a lessee's obligation to make payments on a lease is 
249.14  canceled more than 90 days after its execution, a credit is 
249.15  allowed against sales tax or motor vehicles sales tax due on a 
249.16  subsequent lease or purchase of a motor vehicle if that lease or 
249.17  purchase is consummated within 30 days of the date the prior 
249.18  lease was canceled.  The amount of the credit is equal to (1) 
249.19  the sales tax paid at the inception of the lease, multiplied by 
249.20  (2) the ratio of the number of full months remaining in the 
249.21  lease at the time of termination compared to the term of the 
249.22  lease used in calculating sales tax paid at the inception of the 
249.23  lease. 
249.24     Subd. 2.  [LEASE ORIGINATING IN ANOTHER STATE.] When the 
249.25  lease of a motor vehicle as defined in section 297A.61, 
249.26  subdivision 4, paragraph (k), clause (2), originates in another 
249.27  state, the sales tax under subdivision 1 shall be calculated by 
249.28  the lessor on the total amount that is due under the lease 
249.29  agreement after the vehicle is required to be registered in 
249.30  Minnesota.  If the total amount to be paid by the lessee under 
249.31  the lease agreement has already been subjected to tax by another 
249.32  state, a credit for taxes paid in the other state is allowed as 
249.33  provided in section 297A.80. 
249.34     <b>[EFFECTIVE DATE.]</b> Subdivision 1 of this section is 
249.35  effective for leases entered into after September 30, 2005.  
249.36  Subdivision 2 of this section is effective for vehicles 
250.1   registering in Minnesota after September 30, 2005. 
250.2      Sec. 31.  Minnesota Statutes 2004, section 297A.87, 
250.3   subdivision 2, is amended to read: 
250.4      Subd. 2.  [SELLER'S PERMIT OR ALTERNATE STATEMENT.] (a) The 
250.5   operator of an event under subdivision 1 shall obtain one of the 
250.6   following from a person who wishes to do business as a seller at 
250.7   the event: 
250.8      (1) evidence that the person holds a valid seller's permit 
250.9   under section 297A.84; or 
250.10     (2) a written statement that the person is not offering for 
250.11  sale any item that is taxable under this chapter; or 
250.12     (3) a written statement that this is the only selling event 
250.13  that the person will be participating in for that calendar year, 
250.14  that the person will be participating for three or fewer days, 
250.15  and that the person will make less than $500 in total sales at 
250.16  the event.  The written statement shall include the person's 
250.17  name, address, and telephone number. 
250.18     (b) The operator shall require the evidence or statement as 
250.19  a prerequisite to participating in the event as a seller. 
250.20     <b>[EFFECTIVE DATE.]</b> This section is effective for selling 
250.21  events occurring after June 15, 2005. 
250.22     Sec. 32.  Minnesota Statutes 2004, section 297A.87, 
250.23  subdivision 3, is amended to read: 
250.24     Subd. 3.  [OCCASIONAL SALE PROVISIONS NOT APPLICABLE UNDER 
250.25  LIMITED CIRCUMSTANCES.] The isolated and occasional 
250.26  sale provisions provision under section 297A.67, subdivision 23, 
250.27  or applies, provided that the seller only participates for three 
250.28  or fewer days in one event per calendar year, makes $500 or less 
250.29  in sales at the event, and provides the written statement 
250.30  required in subdivision 2, paragraph (a), clause (3).  The 
250.31  isolated and occasional sales provision under section 297A.68, 
250.32  subdivision 25, do does not apply to a seller at an event under 
250.33  this section. 
250.34     <b>[EFFECTIVE DATE.]</b> This section is effective for selling 
250.35  events occurring after June 15, 2005. 
250.36     Sec. 33.  [297A.981] [LOCAL SALES TAXES; CERTAIN CITIES OF 
251.1   THE FIRST CLASS.] 
251.2      Subdivision 1.  [GENERAL AUTHORITY; CERTAIN CITIES.] (a) 
251.3   Notwithstanding sections 297A.99 and 477A.016, or any other 
251.4   contrary provision of law, ordinance, or charter, a city of the 
251.5   first class located in the seven-county metropolitan area may 
251.6   impose a local sales tax of one-half of one percent on sale 
251.7   transactions taxable under this chapter that occur within the 
251.8   city.  The tax base is the same as defined in section 297A.99, 
251.9   subdivision 4.  This tax is in addition to any other local sales 
251.10  tax imposed under other general or special law and must not be 
251.11  included when calculating sales tax limits imposed under other 
251.12  law, ordinance, or charter. 
251.13     Subd. 2.  [USE TAX.] If the city imposes the tax authorized 
251.14  in subdivision 1, a compensating use tax also applies, at the 
251.15  same rate as the sales tax, on the use, storage, distribution, 
251.16  or consumption of tangible personal property or taxable services.
251.17     Subd. 3.  [USE OF REVENUES.] (a) Revenues received from 
251.18  taxes imposed under subdivisions 1 and 2, minus the reasonable 
251.19  costs of collection, may be used by the city for any purpose for 
251.20  which the city is authorized to make expenditures. 
251.21     Subd. 4.  [COLLECTION; ENFORCEMENT; ADMINISTRATION.] A tax 
251.22  imposed under this section shall be administered, collected, and 
251.23  enforced by the commissioner of revenue as provided for under 
251.24  section 297A.99, subdivision 9.  The commissioner shall remit 
251.25  the proceeds, minus refunds and the costs of collection, as 
251.26  provided for in section 297A.99, subdivision 11. 
251.27     Subd. 5.  [LOCAL APPROVAL.] The question of imposing the 
251.28  local sales tax must be submitted to the voters at a general or 
251.29  a special election held for this purpose.  If the majority of 
251.30  the votes cast on the question are in the affirmative, the tax 
251.31  shall be imposed on the first day of the next calendar quarter 
251.32  beginning at least 30 days after the day of local approval. 
251.33     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2005. 
251.34     Sec. 34.  Minnesota Statutes 2004, section 297A.99, 
251.35  subdivision 1, is amended to read: 
251.36     Subdivision 1.  [AUTHORIZATION; SCOPE.] (a) A political 
252.1   subdivision of this state may impose a general sales tax if 
252.2   permitted by special law or if the political subdivision enacted 
252.3   and imposed the tax before the effective date of section 
252.4   477A.016 and its predecessor provision, or if the tax is allowed 
252.5   under section 297A.981. 
252.6      (b) This section governs the imposition of a general sales 
252.7   tax by the political subdivision.  The provisions of this 
252.8   section preempt the provisions of any special law: 
252.9      (1) enacted before June 2, 1997, or 
252.10     (2) enacted on or after June 2, 1997, that does not 
252.11  explicitly exempt the special law provision from this section's 
252.12  rules by reference. 
252.13     (c) This section does not apply to or preempt a sales tax 
252.14  on motor vehicles or a special excise tax on motor vehicles. 
252.15     <b>[EFFECTIVE DATE.]</b> This section is effective for local sales 
252.16  taxes for which the authorizing referendum is held after June 
252.17  30, 2005. 
252.18     Sec. 35.  Minnesota Statutes 2004, section 297A.99, 
252.19  subdivision 4, is amended to read: 
252.20     Subd. 4.  [TAX BASE.] (a) The tax applies to sales taxable 
252.21  under this chapter that occur within the political subdivision. 
252.22     (b) Taxable goods or services are subject to a political 
252.23  subdivision's sales tax, if they are performed either: 
252.24     (1) within the political subdivision, or 
252.25     (2) partly within and partly without the political 
252.26  subdivision and more of the service is performed within the 
252.27  political subdivision, based on the cost of performance sourced 
252.28  to the political subdivision pursuant to section 297A.668. 
252.29     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
252.30  on or after January 1, 2004. 
252.31     Sec. 36.  Minnesota Statutes 2004, section 297A.99, 
252.32  subdivision 9, is amended to read: 
252.33     Subd. 9.  [ENFORCEMENT; COLLECTION; AND ADMINISTRATION.] 
252.34  (a) The commissioner of revenue shall collect the taxes subject 
252.35  to this section.  The commissioner may collect the tax with the 
252.36  state sales and use tax.  All taxes under this section are 
253.1   subject to the same penalties, interest, and enforcement 
253.2   provisions as apply to the state sales and use tax. 
253.3      (b) A request for a refund of state sales tax paid in 
253.4   excess of the amount of tax legally due includes a request for a 
253.5   refund of the political subdivision taxes paid on the goods or 
253.6   services.  The commissioner shall refund to the taxpayer the 
253.7   full amount of the political subdivision taxes paid on exempt 
253.8   sales or use. 
253.9      (c) A political subdivision shall incur a legal debt to the 
253.10  state for refunds of local sales taxes made by the commissioner 
253.11  after a tax has terminated when the amount of the refunds 
253.12  exceeds the amount of local sales taxes collected for but not 
253.13  remitted to the political subdivision.  The commissioner of 
253.14  revenue shall deduct the amount of the debt from the next 
253.15  payment scheduled to be made to the political subdivision under 
253.16  section 273.1384, 273.1398, or sections 477A.011 to 477A.014.  
253.17  The commissioner shall deposit the money in the state treasury 
253.18  and credit it to the general fund. 
253.19     <b>[EFFECTIVE DATE.]</b> This section is effective for all refunds 
253.20  made on or after the day following final enactment. 
253.21     Sec. 37.  Minnesota Statutes 2004, section 297A.99, is 
253.22  amended by adding a subdivision to read: 
253.23     Subd. 12a.  [NOTIFICATION OF USE TAX.] Any city or county 
253.24  imposing a local sales and use tax, which maintains an official 
253.25  web site, must display on its main home page a notice that 
253.26  residents and businesses in the city or county may owe a local 
253.27  use tax on purchases of goods and services made outside of the 
253.28  city or county limits.  The notice must provide information, 
253.29  including a link to any relevant Department of Revenue Web site, 
253.30  on how the taxpayer may get information and forms necessary for 
253.31  calculating and paying the tax.  If the city or county provides 
253.32  and bills for sewer, water, garbage collection, or other public 
253.33  utility services, the billing statement must also include a 
253.34  notice that residents and businesses may owe a local use tax on 
253.35  purchases made outside of the city or county limits and provide 
253.36  information on how the taxpayer may get information and forms 
254.1   necessary for calculating and paying the tax. 
254.2      <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2006.
254.3      Sec. 38.  Minnesota Statutes 2004, section 477A.016, is 
254.4   amended to read: 
254.5      477A.016 [NEW TAXES PROHIBITED.] 
254.6      No county, city, town or other taxing authority shall 
254.7   increase a present tax or impose a new tax on sales or income, 
254.8   except as provided in section 297A.981.  
254.9      <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2005. 
254.10     Sec. 39.  Laws 1998, chapter 389, article 8, section 43, 
254.11  subdivision 3, is amended to read: 
254.12     Subd. 3.  [USE OF REVENUES.] Revenues received from the 
254.13  taxes authorized by subdivisions 1 and 2 must be used by the 
254.14  city to pay for the cost of collecting and administering the 
254.15  taxes and to pay for the following projects: 
254.16     (1) transportation infrastructure improvements including 
254.17  both highway and airport improvements; 
254.18     (2) improvements to the civic center complex; 
254.19     (3) a municipal water, sewer, and storm sewer project 
254.20  necessary to improve regional ground water quality; and 
254.21     (4) construction of a regional recreation and sports center 
254.22  and associated other facilities available for both community and 
254.23  student use, located at or adjacent to the Rochester center. 
254.24  The total amount of capital expenditures or bonds for these 
254.25  projects that may be paid from the revenues raised from the 
254.26  taxes authorized in this section may not exceed $71,500,000.  
254.27  The total amount of capital expenditures or bonds for the 
254.28  project in clause (4) that may be paid from the revenues raised 
254.29  from the taxes authorized in this section may not exceed 
254.30  $20,000,000. 
254.31     <b>[EFFECTIVE DATE; LOCAL APPROVAL.]</b> This section is effective 
254.32  the day after the governing body of Rochester and its chief 
254.33  clerical officer timely complete their compliance with Minnesota 
254.34  Statutes, section 645.021, subdivisions 2 and 3. 
254.35     Sec. 40.  Laws 2001, First Special Session chapter 5, 
254.36  article 12, section 95, as amended by Laws 2002, chapter 377, 
255.1   article 3, section 24, and Laws 2003, First Special Session 
255.2   chapter 21, article 8, section 15, is amended to read:  
255.3      Sec. 95.  [REPEALER.] 
255.4      (a) Minnesota Statutes 2000, sections 297A.61, subdivision 
255.5   16; 297A.68, subdivision 21; and 297A.71, subdivision 2, are 
255.6   repealed effective for sales and purchases occurring after June 
255.7   30, 2001, except that the repeal of section 297A.61, subdivision 
255.8   16, paragraph (d), is effective for sales and purchases 
255.9   occurring after July 31, 2001. 
255.10     (b) Minnesota Statutes 2000, sections section 297A.62, 
255.11  subdivision 2, and 297A.64, subdivision 1, are is repealed 
255.12  effective for sales and purchases made after December 31, 2005. 
255.13     (c) Minnesota Statutes 2000, section 297A.71, subdivision 
255.14  15, is repealed effective for sales and purchases made after 
255.15  June 30, 2002. 
255.16     (d) Minnesota Statutes 2000, section 297A.71, subdivision 
255.17  16, is repealed effective for sales and purchases occurring 
255.18  after December 31, 2002. 
255.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
255.20  following final enactment. 
255.21     Sec. 41.  Laws 2002, chapter 377, article 3, section 4, the 
255.22  effective date, is amended to read: 
255.23     <b>[EFFECTIVE DATE.]</b> With the exception of clause (2), item 
255.24  (ii), This section is effective for sales and purchases made 
255.25  after June 30, 2002.  Clause (2), item (ii), is effective for 
255.26  sales and purchases made after June 30, 2002, and before January 
255.27  1, 2006. 
255.28     Sec. 42.  [REPEALER.] 
255.29     Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200, 
255.30  subparts 5 and 6; 8130.0400, subpart 9; 8130.1200, subparts 5 
255.31  and 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1 
255.32  and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200; 
255.33  8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 
255.34  5; and 8130.8800, subpart 4, are repealed. 
255.35     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
255.36  following final enactment. 
256.1                              ARTICLE 8 
256.2                        SPECIAL TAXES AND FEES 
256.3      Section 1.  Minnesota Statutes 2004, section 240.30, is 
256.4   amended by adding a subdivision to read: 
256.5      Subd. 11.  [FRANCHISE FEE.] As a condition of operating a 
256.6   card club under this section, the licensee must pay a fee to the 
256.7   commission equal to 15 percent of the gross revenues, less any 
256.8   refunds, for charges imposed under subdivision 4.  Payment, 
256.9   collection, and administration of the fee must be made in the 
256.10  same manner and under the terms provided under section 240.15 
256.11  for the tax on pari-mutuel pools.  The commission shall deposit 
256.12  all of the revenues from the fee in the state treasury and 
256.13  amounts deposited must be credited to the general fund.  The 
256.14  amount of the fee under this subdivision does not reduce the 
256.15  obligation to set aside revenues from the card club under 
256.16  section 240.135. 
256.17     <b>[EFFECTIVE DATE.]</b> This section is effective for charges and 
256.18  revenues received after June 30, 2005. 
256.19     Sec. 2.  Minnesota Statutes 2004, section 287.04, is 
256.20  amended to read: 
256.21     287.04 [EXEMPTIONS.] 
256.22     The tax imposed by section 287.035 does not apply to:  
256.23     (a) A decree of marriage dissolution or an instrument made 
256.24  pursuant to it.  
256.25     (b) A mortgage given to correct a misdescription of the 
256.26  mortgaged property. 
256.27     (c) A mortgage or other instrument that adds additional 
256.28  security for the same debt for which mortgage registry tax has 
256.29  been paid.  
256.30     (d) A contract for the conveyance of any interest in real 
256.31  property, including a contract for deed. 
256.32     (e) A mortgage secured by real property subject to the 
256.33  minerals production tax of sections 298.24 to 298.28. 
256.34     (f) The principal amount of a mortgage loan made under a 
256.35  low and moderate income or other affordable housing program, if 
256.36  the mortgagee is a federal, state, or local government agency. 
257.1      (g) Mortgages granted by fraternal benefit societies 
257.2   subject to section 64B.24. 
257.3      (h) A mortgage amendment or extension, as defined in 
257.4   section 287.01. 
257.5      (i) An agricultural mortgage if the proceeds of the loan 
257.6   secured by the mortgage are used to acquire or improve real 
257.7   property classified under section 273.13, subdivision 23, 
257.8   paragraph (a), or (b), clause (1), (2), or (3). 
257.9      (j) A mortgage on an armory building as set forth in 
257.10  section 193.147. 
257.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
257.12  following final enactment. 
257.13     Sec. 3.  Minnesota Statutes 2004, section 295.52, 
257.14  subdivision 4, is amended to read: 
257.15     Subd. 4.  [USE TAX; PRESCRIPTION DRUGS.] (a) A person that 
257.16  receives prescription drugs for resale or use in Minnesota, 
257.17  other than from a wholesale drug distributor that is subject to 
257.18  tax under subdivision 3, is subject to a tax equal to the price 
257.19  paid to the wholesale drug distributor multiplied by the tax 
257.20  percentage specified in this section.  Liability for the tax is 
257.21  incurred when prescription drugs are received or delivered in 
257.22  Minnesota by the person. 
257.23     (b) A person that receives prescription drugs for use in 
257.24  Minnesota from a nonresident pharmacy required to be registered 
257.25  under section 151.19 is subject to a tax equal to the price paid 
257.26  by the nonresident pharmacy to the wholesale drug distributor or 
257.27  the price received by the nonresident pharmacy, whichever is 
257.28  lower, multiplied by the tax percentage specified in this 
257.29  section.  Liability for the tax is incurred when prescription 
257.30  drugs are received in Minnesota by the person.  
257.31     (c) A tax imposed under this subdivision does not apply to 
257.32  purchases by an individual for personal use or consumption. 
257.33     <b>[EFFECTIVE DATE.]</b> This section is effective for purchases 
257.34  made after June 30, 2005. 
257.35     Sec. 4.  Minnesota Statutes 2004, section 295.53, 
257.36  subdivision 1, is amended to read: 
258.1      Subdivision 1.  [EXEMPTIONS.] (a) The following payments 
258.2   are excluded from the gross revenues subject to the hospital, 
258.3   surgical center, or health care provider taxes under sections 
258.4   295.50 to 295.59: 
258.5      (1) payments received for services provided under the 
258.6   Medicare program, including payments received from the 
258.7   government, and organizations governed by sections 1833 and 1876 
258.8   of title XVIII of the federal Social Security Act, United States 
258.9   Code, title 42, section 1395, and enrollee deductibles, 
258.10  coinsurance, and co-payments, whether paid by the Medicare 
258.11  enrollee or by a Medicare supplemental coverage as defined in 
258.12  section 62A.011, subdivision 3, clause (10), or by Medicaid 
258.13  payments under title XIX of the federal Social Security Act.  
258.14  Payments for services not covered by Medicare are taxable; 
258.15     (2) payments received for home health care services; 
258.16     (3) payments received from hospitals or surgical centers 
258.17  for goods and services on which liability for tax is imposed 
258.18  under section 295.52 or the source of funds for the payment is 
258.19  exempt under clause (1), (7), (10), or (14); 
258.20     (4) payments received from health care providers for goods 
258.21  and services on which liability for tax is imposed under this 
258.22  chapter or the source of funds for the payment is exempt under 
258.23  clause (1), (7), (10), or (14); 
258.24     (5) amounts paid for legend drugs, other than nutritional 
258.25  products, to a wholesale drug distributor who is subject to tax 
258.26  under section 295.52, subdivision 3, reduced by reimbursements 
258.27  received for legend drugs otherwise exempt under this chapter; 
258.28     (6) payments received by a health care provider or the 
258.29  wholly owned subsidiary of a health care provider for care 
258.30  provided outside Minnesota; 
258.31     (7) payments received from the chemical dependency fund 
258.32  under chapter 254B; 
258.33     (8) payments received in the nature of charitable donations 
258.34  that are not designated for providing patient services to a 
258.35  specific individual or group; 
258.36     (9) payments received for providing patient services 
259.1   incurred through a formal program of health care research 
259.2   conducted in conformity with federal regulations governing 
259.3   research on human subjects.  Payments received from patients or 
259.4   from other persons paying on behalf of the patients are subject 
259.5   to tax; 
259.6      (10) payments received from any governmental agency for 
259.7   services benefiting the public, not including payments made by 
259.8   the government in its capacity as an employer or insurer or 
259.9   payments made by the government for services provided under 
259.10  general assistance medical care, the MinnesotaCare program, or 
259.11  the medical assistance program governed by title XIX of the 
259.12  federal Social Security Act, United States Code, title 42, 
259.13  sections 1396 to 1396v; 
259.14     (11) government payments received by the commissioner of 
259.15  human services for state-operated services; 
259.16     (12) payments received by a health care provider for 
259.17  hearing aids and related equipment or prescription eyewear 
259.18  delivered outside of Minnesota; 
259.19     (13) payments received by an educational institution from 
259.20  student tuition, student activity fees, health care service 
259.21  fees, government appropriations, donations, or grants, and for 
259.22  services identified in and provided under an individualized 
259.23  education plan as defined in section 256B.0625 or Code of 
259.24  Federal Regulations, chapter 34, section 300.340(a).  Fee for 
259.25  service payments and payments for extended coverage are taxable; 
259.26  and 
259.27     (14) payments received under the federal Employees Health 
259.28  Benefits Act, United States Code, title 5, section 8909(f), as 
259.29  amended by the Omnibus Reconciliation Act of 1990.  Enrollee 
259.30  deductibles, coinsurance, and co-payments are subject to tax; 
259.31  and 
259.32     (15) payments received under the federal Tricare program, 
259.33  Code of Federal Regulations, title 32, section 199.17(a)(7).  
259.34  Enrollee deductibles, coinsurance, and co-payments are subject 
259.35  to tax. 
259.36     (b) Payments received by wholesale drug distributors for 
260.1   legend drugs sold directly to veterinarians or veterinary bulk 
260.2   purchasing organizations are excluded from the gross revenues 
260.3   subject to the wholesale drug distributor tax under sections 
260.4   295.50 to 295.59. 
260.5      <b>[EFFECTIVE DATE.]</b> The change made to paragraph (a), clause 
260.6   (14), of this section is effective for enrollee deductibles, 
260.7   coinsurance, and co-payments received under the federal 
260.8   Employees Health Benefits Act on or after the day following 
260.9   final enactment.  Paragraph (a), clause (15), is effective for 
260.10  gross revenues received under the federal Tricare program after 
260.11  December 31, 2004. 
260.12     Sec. 5.  Minnesota Statutes 2004, section 295.582, is 
260.13  amended to read: 
260.14     295.582 [AUTHORITY.] 
260.15     Subdivision 1.  [TRANSFER TO THIRD-PARTY PURCHASERS.] (a) A 
260.16  hospital, surgical center, or health care provider that is 
260.17  subject to a tax under section 295.52, or a pharmacy that has 
260.18  paid additional expense transferred under this section by a 
260.19  wholesale drug distributor, may transfer additional expense 
260.20  generated by section 295.52 obligations on to all third-party 
260.21  contracts for the purchase of health care services on behalf of 
260.22  a patient or consumer.  The additional expense transferred to 
260.23  the third-party purchaser must not exceed the tax percentage 
260.24  specified in section 295.52 multiplied against the gross 
260.25  revenues received under the third-party contract, and the tax 
260.26  percentage specified in section 295.52 multiplied against 
260.27  co-payments and deductibles paid by the individual patient or 
260.28  consumer.  A health care provider who chooses to transfer the 
260.29  tax specified in section 295.52 may itemize the tax on patient 
260.30  billings.  The expense must not be generated on revenues derived 
260.31  from payments that are excluded from the tax under section 
260.32  295.53.  All third-party purchasers of health care services 
260.33  including, but not limited to, third-party purchasers regulated 
260.34  under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79, 
260.35  or 79A, or under section 471.61 or 471.617, and a pharmacy 
260.36  benefits manager must pay the transferred expense in addition to 
261.1   any payments due under existing contracts with the hospital, 
261.2   surgical center, pharmacy, or health care provider, to the 
261.3   extent allowed under federal law.  A third-party purchaser of 
261.4   health care services includes, but is not limited to, a health 
261.5   carrier or community integrated service network that pays for 
261.6   health care services on behalf of patients or that reimburses, 
261.7   indemnifies, compensates, or otherwise insures patients for 
261.8   health care services and for purposes of this section, a 
261.9   pharmacy benefits manager means an entity that performs pharmacy 
261.10  benefits management.  A third-party purchaser shall comply with 
261.11  this section regardless of whether the third-party purchaser is 
261.12  a for-profit, not-for-profit, or nonprofit entity or whether the 
261.13  health care provider has chosen to itemize the tax on patient 
261.14  billings.  If the third-party purchaser's contract limits 
261.15  provider payment to a specified amount, such as an usual and 
261.16  customary fee schedule, the third-party purchaser must still pay 
261.17  the tax transferred or itemized by a health care provider based 
261.18  upon the contractual fee.  A third-party purchaser is also 
261.19  responsible for reimbursing providers for the percentage tax 
261.20  levied on co-payments or deductibles paid by the insured.  A 
261.21  wholesale drug distributor may transfer additional expense 
261.22  generated by section 295.52 obligations to entities that 
261.23  purchase from the wholesaler, and the entities must pay the 
261.24  additional expense.  Nothing in this section limits the ability 
261.25  of a hospital, surgical center, pharmacy, wholesale drug 
261.26  distributor, or health care provider to recover all or part of 
261.27  the section 295.52 obligation by other methods, including 
261.28  increasing fees or charges.  Nothing in this section prohibits a 
261.29  pharmacy from passing on additional fees or charges to a 
261.30  pharmacy benefits manager. 
261.31     (b) Each third-party purchaser regulated under any chapter 
261.32  cited in paragraph (a) shall include with its annual renewal for 
261.33  certification of authority or licensure documentation indicating 
261.34  compliance with paragraph (a).  The documentation must include 
261.35  information relating to a third-party purchaser's means for 
261.36  compliance with paragraph (a) for health care providers who 
262.1   itemize the tax on patient billings. 
262.2      (c) Any hospital, surgical center, or health care provider 
262.3   subject to a tax under section 295.52 or a pharmacy that has 
262.4   paid additional expense transferred under this section by a 
262.5   wholesale drug distributor may file a complaint with the 
262.6   commissioner responsible for regulating the third-party 
262.7   purchaser if at any time the third-party purchaser fails to 
262.8   comply with paragraph (a).  
262.9      (d) If the commissioner responsible for regulating the 
262.10  third-party purchaser finds at any time that the third-party 
262.11  purchaser has not complied with paragraph (a), the commissioner 
262.12  may take enforcement action against a third-party purchaser 
262.13  which is subject to the commissioner's regulatory jurisdiction 
262.14  and which does not allow a hospital, surgical center, pharmacy, 
262.15  or provider to pass-through the tax.  The commissioner may by 
262.16  order fine or censure the third-party purchaser or revoke or 
262.17  suspend the certificate of authority or license of the 
262.18  third-party purchaser to do business in this state if the 
262.19  commissioner finds that the third-party purchaser has not 
262.20  complied with this section.  The third-party purchaser may 
262.21  appeal the commissioner's order through a contested case hearing 
262.22  in accordance with chapter 14.  
262.23     Subd. 2.  [WHOLESALE DRUG DISTRIBUTOR TAX; AGREEMENT.] A 
262.24  contracting agreement between a health plan company or a 
262.25  pharmacy benefits manager and a resident or nonresident pharmacy 
262.26  registered under chapter 151, may not prohibit: 
262.27     (1) a pharmacy that has paid additional expense transferred 
262.28  under this section by a wholesale drug distributor from 
262.29  exercising its option under this section to transfer such 
262.30  additional expenses generated by the section 295.52 obligations 
262.31  on to the health plan company, a pharmacy benefits manager, or a 
262.32  third-party purchaser; or 
262.33     (2) a pharmacy that is subject to tax under section 295.52, 
262.34  subdivision 4, from exercising its option under this section to 
262.35  recover all or part of the section 295.52 obligations from the 
262.36  health plan company, a pharmacy benefits manager, or a 
263.1   third-party purchaser by other methods, including increasing 
263.2   fees or charges. 
263.3      Sec. 6.  Minnesota Statutes 2004, section 295.60, 
263.4   subdivision 3, is amended to read: 
263.5      Subd. 3.  [PAYMENT.] (a) Each furrier shall make estimated 
263.6   payments of the taxes for the calendar year in quarterly 
263.7   installments to the commissioner by April 15, July 15, October 
263.8   15, and January 15 of the following calendar year. 
263.9      (b) Estimated tax payments are not required if: 
263.10     (1) the tax for the current calendar year is less than 
263.11  $500; or 
263.12     (2) the tax for the previous calendar year is less than 
263.13  $500, if the taxpayer had a tax liability and was doing business 
263.14  the entire year. 
263.15     (c) Underpayment of estimated installments bear interest at 
263.16  the rate specified in section 270.75, from the due date of the 
263.17  payment until paid or until the due date of the annual return, 
263.18  whichever comes first.  An underpayment of an estimated 
263.19  installment is the difference between the amount paid and the 
263.20  lesser of (1) 90 percent of one-quarter of the tax for the 
263.21  calendar year the tax for the actual gross revenues received 
263.22  during the quarter, or (2) one-quarter of the total tax for the 
263.23  previous calendar year if the taxpayer had a tax liability and 
263.24  was doing business the entire year. 
263.25     <b>[EFFECTIVE DATE.]</b> This section is effective for gross 
263.26  revenues received after December 31, 2004. 
263.27     Sec. 7.  [295.75] [LIQUOR GROSS RECEIPTS TAX.] 
263.28     Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
263.29  section, the following terms have the meanings given. 
263.30     (b) "Commissioner" means the commissioner of revenue.  
263.31     (c) "Gross receipts" means the total amount received, in 
263.32  money or by barter or exchange, for all liquor sales at retail 
263.33  as measured by the sales price, but does not include any taxes 
263.34  imposed directly on the consumer that are separately stated on 
263.35  the invoice, bill of sale, or similar document given to the 
263.36  purchaser. 
264.1      (d) "Liquor" means:  
264.2      (1) intoxicating liquor, as defined in section 340A.101, 
264.3   subdivision 14; 
264.4      (2) beverage containing intoxicating liquor; and 
264.5      (3) 3.2 percent malt liquor, as defined in section 
264.6   340A.101, subdivision 19, when sold at an on-sale or off-sale 
264.7   municipal liquor store or other establishment licensed to sell 
264.8   any type of intoxicating liquor. 
264.9      (e) "Liquor retailer" means a retailer that sells liquor.  
264.10     (f) "Retail sale" has the meaning given in section 297A.61, 
264.11  subdivision 4.  
264.12     Subd. 2.  [GROSS RECEIPTS TAX IMPOSED.] A tax is imposed on 
264.13  each liquor retailer equal to 2.5 percent of gross receipts from 
264.14  retail sales in Minnesota of liquor.  
264.15     Subd. 3.  [USE TAX IMPOSED; CREDIT FOR TAXES PAID.] (a) A 
264.16  person that receives liquor for use or storage in Minnesota, 
264.17  other than from a liquor retailer that paid the tax under 
264.18  subdivision 2, is subject to tax at the rate imposed under 
264.19  subdivision 2.  Liability for the tax is incurred when the 
264.20  person has possession of the liquor in Minnesota.  The tax must 
264.21  be remitted to the commissioner in the same manner prescribed 
264.22  for the taxes imposed under chapter 297A. 
264.23     (b) A person that has paid taxes to another jurisdiction on 
264.24  the same transaction and is subject to tax under this section is 
264.25  entitled to a credit for the tax legally due and paid to another 
264.26  jurisdiction to the extent of the lesser of (1) the tax actually 
264.27  paid to the other jurisdiction, or (2) the amount of tax imposed 
264.28  by Minnesota on the transaction subject to tax in the other 
264.29  jurisdiction. 
264.30     Subd. 4.  [TAX COLLECTION REQUIRED.] A liquor retailer with 
264.31  nexus in Minnesota, who is not subject to tax under subdivision 
264.32  2, is required to collect the tax imposed under subdivision 3 
264.33  from the purchaser of the liquor and give the purchaser a 
264.34  receipt for the tax paid.  The tax collected must be remitted to 
264.35  the commissioner in the same manner prescribed for the taxes 
264.36  imposed under chapter 297A.  
265.1      Subd. 5.  [TAXES PAID TO ANOTHER JURISDICTION; CREDIT.] A 
265.2   liquor retailer that has paid taxes to another jurisdiction 
265.3   measured by gross receipts and is subject to tax under this 
265.4   section on the same gross receipts is entitled to a credit for 
265.5   the tax legally due and paid to another jurisdiction to the 
265.6   extent of the lesser of (1) the tax actually paid to the other 
265.7   jurisdiction, or (2) the amount of tax imposed by Minnesota on 
265.8   the gross receipts subject to tax in the other taxing 
265.9   jurisdictions. 
265.10     Subd. 6.  [EXEMPTIONS.] All of the exemptions applicable to 
265.11  the taxes imposed under chapter 297A are applicable to the taxes 
265.12  imposed under this section. 
265.13     Subd. 7.  [SOURCING OF SALES.] All of the provisions of 
265.14  section 297A.668 apply to the taxes imposed by this section. 
265.15     Subd. 8.  [PAYMENT; REPORTING.] A liquor retailer shall 
265.16  report the tax on a return prescribed by the commissioner of 
265.17  revenue, and shall remit the tax with the return.  The return 
265.18  and the tax must be filed and paid using the filing cycle and 
265.19  due dates provided for taxes imposed under chapter 297A. 
265.20     Subd. 9.  [ADMINISTRATION.] Unless specifically provided 
265.21  otherwise by this section, the audit, assessment, refund, 
265.22  penalty, interest, enforcement, collection remedies, appeal, and 
265.23  administrative provisions of chapters 270 and 289A that are 
265.24  applicable to taxes imposed under chapter 297A apply to taxes 
265.25  imposed under this section.  
265.26     Subd. 10.  [INTEREST ON OVERPAYMENTS.] Interest must be 
265.27  paid on an overpayment refunded or credited to the taxpayer from 
265.28  the date of payment of the tax until the date the refund is paid 
265.29  or credited.  For purposes of this subdivision, the date of 
265.30  payment is the due date of the return or the date of actual 
265.31  payment of the tax, whichever is later. 
265.32     Subd. 11.  [DEPOSIT OF REVENUES.] The commissioner shall 
265.33  deposit all revenues, including penalties and interest, derived 
265.34  from the tax imposed by this section in the general fund. 
265.35     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
265.36  purchases occurring on or after January 1, 2006. 
266.1      Sec. 8.  Minnesota Statutes 2004, section 296A.22, is 
266.2   amended by adding a subdivision to read: 
266.3      Subd. 9.  [ABATEMENT OF PENALTY.] (a) The commissioner may 
266.4   by written order abate any penalty imposed under this section, 
266.5   if in the commissioner's opinion there is reasonable cause to do 
266.6   so. 
266.7      (b) A request for abatement of penalty must be filed with 
266.8   the commissioner within 60 days of the date the notice stating 
266.9   that a penalty has been imposed was mailed to the taxpayer's 
266.10  last known address. 
266.11     (c) If the commissioner issues an order denying a request 
266.12  for abatement of penalty, the taxpayer may file an 
266.13  administrative appeal as provided in section 296A.25 or appeal 
266.14  to Tax Court as provided in section 271.06.  If the commissioner 
266.15  does not issue an order on the abatement request within 60 days 
266.16  from the date the request is received, the taxpayer may appeal 
266.17  to Tax Court as provided in section 271.06. 
266.18     <b>[EFFECTIVE DATE.]</b> This section is effective for penalties 
266.19  imposed on or after the day following final enactment. 
266.20     Sec. 9.  Minnesota Statutes 2004, section 297E.01, 
266.21  subdivision 5, is amended to read: 
266.22     Subd. 5.  [DISTRIBUTOR.] "Distributor" means a distributor 
266.23  as defined in section 349.12, subdivision 11, or a person or 
266.24  linked bingo game provider who markets, sells, or provides 
266.25  gambling product to a person or entity for resale or use at the 
266.26  retail level.  
266.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
266.28  following final enactment. 
266.29     Sec. 10.  Minnesota Statutes 2004, section 297E.01, 
266.30  subdivision 7, is amended to read: 
266.31     Subd. 7.  [GAMBLING PRODUCT.] "Gambling product" means 
266.32  bingo hard cards, bingo paper, or sheets, or linked bingo paper 
266.33  sheets; pull-tabs; tipboards; paddletickets and paddleticket 
266.34  cards; raffle tickets; or any other ticket, card, board, 
266.35  placard, device, or token that represents a chance, for which 
266.36  consideration is paid, to win a prize.  
267.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
267.2   following final enactment. 
267.3      Sec. 11.  Minnesota Statutes 2004, section 297E.01, is 
267.4   amended by adding a subdivision to read: 
267.5      Subd. 9a.  [LINKED BINGO GAME.] "Linked bingo game" means a 
267.6   bingo game played at two or more locations where licensed 
267.7   organizations are authorized to conduct bingo, when there is a 
267.8   common prize pool and a common selection of numbers or symbols 
267.9   conducted at one location, and when the results of the selection 
267.10  are transmitted to all participating locations by satellite, 
267.11  telephone, or other means by a linked bingo game provider. 
267.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
267.13  following final enactment. 
267.14     Sec. 12.  Minnesota Statutes 2004, section 297E.01, is 
267.15  amended by adding a subdivision to read: 
267.16     Subd. 9b.  [LINKED BINGO GAME PROVIDER.] "Linked bingo game 
267.17  provider" means any person who provides the means to link bingo 
267.18  prizes in a linked bingo game, who provides linked bingo paper 
267.19  sheets to the participating organizations, who provides linked 
267.20  bingo prize management, and who provides the linked bingo game 
267.21  system. 
267.22     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
267.23  following final enactment. 
267.24     Sec. 13.  Minnesota Statutes 2004, section 297E.06, 
267.25  subdivision 2, is amended to read: 
267.26     Subd. 2.  [BUSINESS RECORDS.] An organization shall 
267.27  maintain records supporting the gambling activity reported to 
267.28  the commissioner.  Records include, but are not limited to, the 
267.29  following items:  
267.30     (1) all winning and unsold tickets, cards, or stubs for 
267.31  pull-tab, tipboard, paddlewheel, and raffle games; 
267.32     (2) all reports and statements, including checker's 
267.33  records, for each bingo occasion; 
267.34     (3) all cash journals and ledgers, deposit slips, register 
267.35  tapes, and bank statements supporting gambling activity 
267.36  receipts; 
268.1      (4) all invoices that represent purchases of gambling 
268.2   product; 
268.3      (5) all canceled checks or copies of substitute checks as 
268.4   defined in Public Law 108-100, section 3, check recorders, 
268.5   journals and ledgers, vouchers, invoices, bank statements, and 
268.6   other documents supporting gambling activity expenditures; and 
268.7      (6) all organizational meeting minutes.  
268.8      All records required to be kept by this section must be 
268.9   preserved by the organization for at least 3-1/2 years and may 
268.10  be inspected by the commissioner of revenue at any reasonable 
268.11  time without notice or a search warrant.  
268.12     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2005. 
268.13     Sec. 14.  Minnesota Statutes 2004, section 297E.07, is 
268.14  amended to read: 
268.15     297E.07 [INSPECTION RIGHTS.] 
268.16     At any reasonable time, without notice and without a search 
268.17  warrant, the commissioner may enter a place of business of a 
268.18  manufacturer, distributor, or organization, or linked bingo game 
268.19  provider; any site from which pull-tabs or tipboards or other 
268.20  gambling equipment or gambling product are being manufactured, 
268.21  stored, or sold; or any site at which lawful gambling is being 
268.22  conducted, and inspect the premises, books, records, and other 
268.23  documents required to be kept under this chapter to determine 
268.24  whether or not this chapter is being fully complied with.  If 
268.25  the commissioner is denied free access to or is hindered or 
268.26  interfered with in making an inspection of the place of 
268.27  business, books, or records, the permit of the distributor may 
268.28  be revoked by the commissioner, and the license of the 
268.29  manufacturer, the distributor, or the organization, or linked 
268.30  bingo game provider may be revoked by the board. 
268.31     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
268.32  following final enactment. 
268.33     Sec. 15.  Minnesota Statutes 2004, section 297F.08, 
268.34  subdivision 12, is amended to read: 
268.35     Subd. 12.  [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 
268.36  person may not transport or cause to be transported from this 
269.1   state cigarettes for sale in another state without first 
269.2   affixing to the cigarettes the stamp required by the state in 
269.3   which the cigarettes are to be sold or paying any other excise 
269.4   tax on the cigarettes imposed by the state in which the 
269.5   cigarettes are to be sold. 
269.6      (b) A person may not affix to cigarettes the stamp required 
269.7   by another state or pay any other excise tax on the cigarettes 
269.8   imposed by another state if the other state prohibits stamps 
269.9   from being affixed to the cigarettes, prohibits the payment of 
269.10  any other excise tax on the cigarettes, or prohibits the sale of 
269.11  the cigarettes. 
269.12     (c) Not later than 15 days after the end of each calendar 
269.13  quarter, a person who transports or causes to be transported 
269.14  from this state cigarettes for sale in another state shall 
269.15  submit to the commissioner a report identifying the quantity and 
269.16  style of each brand of the cigarettes transported or caused to 
269.17  be transported in the preceding calendar quarter, and the name 
269.18  and address of each recipient of the cigarettes.  This reporting 
269.19  requirement only applies to cigarettes manufactured by companies 
269.20  that are not original or subsequent participating manufacturers 
269.21  in the Master Settlement Agreement with other states. 
269.22     (d) For purposes of this section, "person" has the meaning 
269.23  given in section 297F.01, subdivision 12.  Person does not 
269.24  include any common or contract carrier, or public warehouse that 
269.25  is not owned, in whole or in part, directly or indirectly by 
269.26  such person, and does not include a manufacturer that has 
269.27  entered into is an original or subsequent participating 
269.28  manufacturer in the Master Settlement Agreement with other 
269.29  states. 
269.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
269.31  following final enactment. 
269.32     Sec. 16.  Minnesota Statutes 2004, section 297F.08, is 
269.33  amended by adding a subdivision to read: 
269.34     Subd. 13.  [BOND.] The commissioner may require the 
269.35  furnishing of a corporate surety bond or a certified check in an 
269.36  amount suitable to guarantee payment of the tax stamps purchased 
270.1   by a distributor.  The bond or certified check may be required 
270.2   when the commissioner determines that a distributor is (1) 
270.3   delinquent in the filing of any return required under this 
270.4   chapter, or (2) delinquent in the payment of any uncontested tax 
270.5   liability under this chapter.  The distributor shall furnish the 
270.6   bond or certified check for a period of two years, after which, 
270.7   if the distributor has not been delinquent in the filing of any 
270.8   returns required under this chapter, or delinquent in the paying 
270.9   of any tax under this chapter, a bond or certified check is no 
270.10  longer required.  The commissioner at any time may apply the 
270.11  bond or certified check to any unpaid taxes or fees, including 
270.12  interest and penalties, owed to the department by the 
270.13  distributor. 
270.14     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
270.15  following final enactment. 
270.16     Sec. 17.  Minnesota Statutes 2004, section 297F.09, 
270.17  subdivision 1, is amended to read: 
270.18     Subdivision 1.  [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 
270.19  or before the 18th day of each calendar month, a distributor 
270.20  with a place of business in this state shall file a return with 
270.21  the commissioner showing the quantity of cigarettes manufactured 
270.22  or brought in from outside the state or purchased during the 
270.23  preceding calendar month and the quantity of cigarettes sold or 
270.24  otherwise disposed of in this state and outside this state 
270.25  during that month.  A licensed distributor outside this state 
270.26  shall in like manner file a return showing the quantity of 
270.27  cigarettes shipped or transported into this state during the 
270.28  preceding calendar month.  Returns must be made in the form and 
270.29  manner prescribed by the commissioner and must contain any other 
270.30  information required by the commissioner.  The return must be 
270.31  accompanied by a remittance for the full unpaid tax liability 
270.32  shown by it.  The return for the May liability and 85 percent of 
270.33  the estimated June liability is due on the date payment of the 
270.34  tax is due.  For distributors subject to the accelerated tax 
270.35  payment requirements in subdivision 10, the return for the May 
270.36  liability is due two business days before June 30th of the year 
271.1   and the return for the June liability is due on or before August 
271.2   18th of the year. 
271.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
271.4   following final enactment. 
271.5      Sec. 18.  Minnesota Statutes 2004, section 297F.09, 
271.6   subdivision 2, is amended to read: 
271.7      Subd. 2.  [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 
271.8   On or before the 18th day of each calendar month, a distributor 
271.9   with a place of business in this state shall file a return with 
271.10  the commissioner showing the quantity and wholesale sales price 
271.11  of each tobacco product: 
271.12     (1) brought, or caused to be brought, into this state for 
271.13  sale; and 
271.14     (2) made, manufactured, or fabricated in this state for 
271.15  sale in this state, during the preceding calendar month.  
271.16  Every licensed distributor outside this state shall in like 
271.17  manner file a return showing the quantity and wholesale sales 
271.18  price of each tobacco product shipped or transported to 
271.19  retailers in this state to be sold by those retailers, during 
271.20  the preceding calendar month.  Returns must be made in the form 
271.21  and manner prescribed by the commissioner and must contain any 
271.22  other information required by the commissioner.  The return must 
271.23  be accompanied by a remittance for the full tax liability 
271.24  shown.  The return for the May liability and 85 percent of the 
271.25  estimated June liability is due on the date payment of the tax 
271.26  is due.  For distributors subject to the accelerated tax payment 
271.27  requirements in subdivision 10, the return for the May liability 
271.28  is due two business days before June 30th of the year and the 
271.29  return for the June liability is due on or before August 18th of 
271.30  the year. 
271.31     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
271.32  following final enactment. 
271.33     Sec. 19.  Minnesota Statutes 2004, section 297F.14, 
271.34  subdivision 4, is amended to read: 
271.35     Subd. 4.  [BAD DEBT.] The commissioner may adopt rules 
271.36  providing a refund of the tax paid under this chapter if the tax 
272.1   paid qualifies as a bad debt under section 166(a) of the 
272.2   Internal Revenue Code.  For any reporting period, a taxpayer may 
272.3   offset against taxes payable under this chapter the amount of 
272.4   taxes previously paid under this chapter that is attributable to 
272.5   a bad debt.  The taxes must have been included in a transaction 
272.6   the consideration for which was a debt owed to the taxpayer and 
272.7   which became uncollectible, but only in proportion to the 
272.8   portion of debt that became uncollectible.  To qualify for 
272.9   offset under this subdivision, the debt must have qualified as a 
272.10  bad debt under section 166(a) of the Internal Revenue Code.  The 
272.11  taxpayer may claim the offset within the time period prescribed 
272.12  in section 297F.17, subdivision 6.  If the taxpayer is no longer 
272.13  liable for taxes imposed under this chapter, the commissioner 
272.14  shall refund to the taxpayer the amount of the taxes 
272.15  attributable to the bad debt.  Any recovery of the tax claimed 
272.16  as a refund or credit must be reported to the commissioner on 
272.17  the tax return for the month in which the recovery is made.  If 
272.18  the taxpayer is no longer required to file returns under this 
272.19  chapter, the taxpayer must reimburse the commissioner for tax 
272.20  recovered in the month following the recovery. 
272.21     <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
272.22  filed on or after July 1, 2005. 
272.23     Sec. 20.  [297F.25] [CIGARETTE SALES TAX.] 
272.24     Subdivision 1.  [IMPOSITION.] A tax is imposed on 
272.25  distributors on the sale of cigarettes by a cigarette 
272.26  distributor to a retailer or cigarette subjobber for resale in 
272.27  this state.  The tax is equal to 6.5 percent of the weighted 
272.28  average retail price.  The weighted average retail price must be 
272.29  expressed in cents per pack when rounded to the nearest 
272.30  one-tenth of a cent.  The weighted average retail price must be 
272.31  determined annually, with new rates published by May 1, and 
272.32  effective for sales on or after August 1.  The weighted average 
272.33  retail price must be established by surveying cigarette 
272.34  retailers statewide in a manner and time determined by the 
272.35  commissioner.  The determination of the commissioner pursuant to 
272.36  this subdivision is not a "rule" and is not subject to the 
273.1   Administrative Procedure Act contained in chapter 14.  As of 
273.2   August 1, 2005, the tax is 20 cents per pack of 20 cigarettes.  
273.3   For packs of cigarettes with other than 20 cigarettes, the tax 
273.4   must be adjusted proportionally. 
273.5      Subd. 2.  [PAYMENT.] Each taxpayer must remit payments of 
273.6   the taxes to the commissioner on the same dates prescribed under 
273.7   section 297F.09, subdivision 1, for cigarette tax returns, 
273.8   including the accelerated remittance of the June liability. 
273.9      Subd. 3.  [RETURN.] A taxpayer must file a return with the 
273.10  commissioner on the same dates prescribed under section 297F.09, 
273.11  subdivision 1, for cigarette tax returns.  Notwithstanding any 
273.12  other provisions of this chapter, the tax due on the return is 
273.13  based upon actual stamps purchased during the reporting period. 
273.14     Subd. 4.  [FORM OF RETURN.] The return must contain the 
273.15  information and be in the form prescribed by the commissioner. 
273.16     Subd. 5.  [TAX AS DEBT.] The tax that is required to be 
273.17  paid by the distributor is a debt from the retailer or cigarette 
273.18  subjobber to the distributor recoverable at law in the same 
273.19  manner as other debts.  A cigarette retailer or subjobber must 
273.20  pay the tax imposed under subdivision 1 to the distributor 
273.21  before the 12th day of the month following the month in which 
273.22  the cigarettes were purchased from the distributor. 
273.23     Subd. 6.  [SALES TAX STAMP.] Payment of the tax imposed 
273.24  under section 297F.05 and by this section must be evidenced by a 
273.25  dual-purpose single stamp affixed to each package. 
273.26     Subd. 7.  [ADMINISTRATION.] The stamping, audit, 
273.27  assessment, interest, penalty, appeal, refund, and collection 
273.28  provisions applicable to the taxes imposed under this chapter 
273.29  apply to taxes imposed under this section. 
273.30     Subd. 8.  [DEPOSIT OF REVENUES.] Notwithstanding the 
273.31  provisions of section 297F.10, the commissioner shall deposit 
273.32  all revenues, including penalties and interest, derived from the 
273.33  tax imposed by this section, in the general fund. 
273.34     <b>[EFFECTIVE DATE.]</b> This section is effective for all sales 
273.35  made on or after August 1, 2005. 
273.36     Sec. 21.  Minnesota Statutes 2004, section 297G.09, is 
274.1   amended by adding a subdivision to read: 
274.2      Subd. 9.  [QUARTERLY AND ANNUAL PAYMENTS AND RETURNS.] (a) 
274.3   If a manufacturer, wholesaler, brewer, or importer has an 
274.4   average liquor tax liability equal to or less than $500 per 
274.5   month in any quarter of a calendar year, and has substantially 
274.6   complied with the state tax laws during the preceding four 
274.7   calendar quarters, the manufacturer, wholesaler, brewer, or 
274.8   importer may request authorization to file and pay the taxes 
274.9   quarterly in subsequent calendar quarters.  The authorization 
274.10  remains in effect during the period in which the manufacturer's, 
274.11  wholesaler's, brewer's, or importer's quarterly returns reflect 
274.12  liquor tax liabilities of less than $1,500 and there is 
274.13  continued compliance with state tax laws. 
274.14     (b) If a manufacturer, wholesaler, brewer, or importer has 
274.15  an average liquor tax liability equal to or less than $100 per 
274.16  month during a calendar year, and has substantially complied 
274.17  with the state tax laws during that period, the manufacturer, 
274.18  wholesaler, brewer, or importer may request authorization to 
274.19  file and pay the taxes annually in subsequent years.  The 
274.20  authorization remains in effect during the period in which the 
274.21  manufacturer's, wholesaler's, brewer's, or importer's annual 
274.22  returns reflect liquor tax liabilities of less than $1,200 and 
274.23  there is continued compliance with state tax laws. 
274.24     (c) The commissioner may also grant quarterly or annual 
274.25  filing and payment authorizations to manufacturers, wholesalers, 
274.26  brewers, or importers if the commissioner concludes that the 
274.27  manufacturer's, wholesaler's, brewer's, or importer's future tax 
274.28  liabilities will be less than the monthly totals identified in 
274.29  paragraphs (a) and (b).  An authorization granted under this 
274.30  paragraph is subject to the same conditions as an authorization 
274.31  granted under paragraphs (a) and (b). 
274.32     (d) The annual tax return and payments must be filed and 
274.33  paid on or before the 18th day of January following the calendar 
274.34  year.  The quarterly returns and payments must be filed and paid 
274.35  on or before April 18 for the quarter ending March 31, on or 
274.36  before July 18 for the quarter ending June 30, on or before 
275.1   October 18 for the quarter ending September 30, and on or before 
275.2   January 18 for the quarter ending December 31. 
275.3      <b>[EFFECTIVE DATE.]</b> This section is effective for tax returns 
275.4   and payments due on or after January 1, 2006. 
275.5      Sec. 22.  Minnesota Statutes 2004, section 297I.01, is 
275.6   amended by adding a subdivision to read: 
275.7      Subd. 6a.  [DIRECT BUSINESS.] (a) "Direct business" means 
275.8   all insurance provided by an insurance company or its agents, 
275.9   and specifically includes stop-loss insurance purchased in 
275.10  connection with a self-insurance plan for employee health 
275.11  benefits or for other purposes, but excludes: 
275.12     (1) reinsurance in which an insurance company assumes the 
275.13  liability of another insurance company; and 
275.14     (2) self-insurance. 
275.15     (b) For purposes of this subdivision, an insurance company 
275.16  includes a nonprofit health service corporation, health 
275.17  maintenance organization, and community integrated service 
275.18  network. 
275.19     <b>[EFFECTIVE DATE.]</b> This section is effective for insurance 
275.20  premiums received after December 31, 2005. 
275.21     Sec. 23.  Minnesota Statutes 2004, section 297I.01, is 
275.22  amended by adding a subdivision to read: 
275.23     Subd. 13a.  [REINSURANCE.] "Reinsurance" is insurance 
275.24  whereby an insurance company, for a consideration, agrees to 
275.25  indemnify another insurance company against all or part of the 
275.26  loss which the latter may sustain under the policy or policies 
275.27  which it has issued. 
275.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
275.29  following final enactment. 
275.30     Sec. 24.  Minnesota Statutes 2004, section 297I.05, 
275.31  subdivision 4, is amended to read: 
275.32     Subd. 4.  [MUTUAL PROPERTY AND CASUALTY COMPANIES WITH 
275.33  TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 
275.34  tax is imposed on mutual property and casualty companies that 
275.35  had total assets greater than $5,000,000 at the end of the 
275.36  calendar year but that had total assets less than $1,600,000,000 
276.1   on December 31, 1989.  The rate of tax is equal to: 
276.2      (1) two percent of gross premiums less return premiums on 
276.3   all direct business received by the insurer or agents of the 
276.4   insurer in Minnesota the tax under subdivision 14 for life 
276.5   insurance, in cash or otherwise, during the year; and 
276.6      (2) 1.26 percent of gross premiums less return premiums on 
276.7   all other direct business received by the insurer or agents of 
276.8   the insurer in Minnesota, in cash or otherwise, during the year. 
276.9      <b>[EFFECTIVE DATE.]</b> This section is effective for premiums 
276.10  received after December 31, 2007. 
276.11     Sec. 25.  Minnesota Statutes 2004, section 297I.05, 
276.12  subdivision 5, is amended to read: 
276.13     Subd. 5.  [HEALTH MAINTENANCE ORGANIZATIONS, NONPROFIT 
276.14  HEALTH SERVICE PLAN CORPORATIONS, AND COMMUNITY INTEGRATED 
276.15  SERVICE NETWORKS.] (a) Health maintenance organizations, 
276.16  community integrated service networks, and nonprofit health care 
276.17  service plan corporations are exempt from the tax imposed under 
276.18  this section for premiums received in calendar years 2001 to 
276.19  2003. 
276.20     (b) For calendar years after 2003, A tax is imposed on 
276.21  health maintenance organizations, community integrated service 
276.22  networks, and nonprofit health care service plan corporations.  
276.23  The rate of tax is equal to one percent of gross premiums less 
276.24  return premiums on all direct business received by the 
276.25  organization, network, or corporation or its agents in 
276.26  Minnesota, in cash or otherwise, in the calendar year. 
276.27     (c) In approving the premium rates as required in sections 
276.28  62L.08, subdivision 8, and 62A.65, subdivision 3, the 
276.29  commissioners of health and commerce shall ensure that any 
276.30  exemption from tax as described in paragraph (a) is reflected in 
276.31  the premium rate. 
276.32     (d) (b) The commissioner shall deposit all revenues, 
276.33  including penalties and interest, collected under this chapter 
276.34  from health maintenance organizations, community integrated 
276.35  service networks, and nonprofit health service plan corporations 
276.36  in the health care access fund.  Refunds of overpayments of tax 
277.1   imposed by this subdivision must be paid from the health care 
277.2   access fund.  There is annually appropriated from the health 
277.3   care access fund to the commissioner the amount necessary to 
277.4   make any refunds of the tax imposed under this subdivision. 
277.5      <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2005.
277.6      Sec. 26.  Minnesota Statutes 2004, section 297I.05, is 
277.7   amended by adding a subdivision to read: 
277.8      Subd. 14.  [LIFE INSURANCE.] A tax is imposed on life 
277.9   insurance.  The rate of the tax equals 1.5 percent of gross 
277.10  premiums less return premiums on all direct business received by 
277.11  the insurer or agents of the insurer in Minnesota for life 
277.12  insurance, in cash or otherwise, during the year. 
277.13     <b>[EFFECTIVE DATE.]</b> This section is effective for premiums 
277.14  received after December 31, 2007. 
277.15     Sec. 27.  Minnesota Statutes 2004, section 298.24, 
277.16  subdivision 1, is amended to read: 
277.17     Subdivision 1.  (a) For concentrate produced in 2001, 2002, 
277.18  and 2003, there is imposed upon taconite and iron sulphides, and 
277.19  upon the mining and quarrying thereof, and upon the production 
277.20  of iron ore concentrate therefrom, and upon the concentrate so 
277.21  produced, a tax of $2.103 per gross ton of merchantable iron ore 
277.22  concentrate produced therefrom.  
277.23     (b) For concentrates produced in 2004 and subsequent years, 
277.24  the tax rate shall be equal to the preceding year's tax rate 
277.25  plus an amount equal to the preceding year's tax rate multiplied 
277.26  by the percentage increase in the implicit price deflator from 
277.27  the fourth quarter of the second preceding year to the fourth 
277.28  quarter of the preceding year.  "Implicit price deflator" means 
277.29  the implicit price deflator for the gross domestic product 
277.30  prepared by the Bureau of Economic Analysis of the United States 
277.31  Department of Commerce.  
277.32     (c) On concentrates produced in 1997 and thereafter, an 
277.33  additional tax is imposed equal to three cents per gross ton of 
277.34  merchantable iron ore concentrate for each one percent that the 
277.35  iron content of the product exceeds 72 percent, when dried at 
277.36  212 degrees Fahrenheit. 
278.1      (d) The tax shall be imposed on the average of the 
278.2   production for the current year and the previous two years.  The 
278.3   rate of the tax imposed will be the current year's tax rate.  
278.4   This clause shall not apply in the case of the closing of a 
278.5   taconite facility if the property taxes on the facility would be 
278.6   higher if this clause and section 298.25 were not applicable.  
278.7      (e) If the tax or any part of the tax imposed by this 
278.8   subdivision is held to be unconstitutional, a tax of $2.103 per 
278.9   gross ton of merchantable iron ore concentrate produced shall be 
278.10  imposed.  
278.11     (f) Consistent with the intent of this subdivision to 
278.12  impose a tax based upon the weight of merchantable iron ore 
278.13  concentrate, the commissioner of revenue may indirectly 
278.14  determine the weight of merchantable iron ore concentrate 
278.15  included in fluxed pellets by subtracting the weight of the 
278.16  limestone, dolomite, or olivine derivatives or other basic flux 
278.17  additives included in the pellets from the weight of the 
278.18  pellets.  For purposes of this paragraph, "fluxed pellets" are 
278.19  pellets produced in a process in which limestone, dolomite, 
278.20  olivine, or other basic flux additives are combined with 
278.21  merchantable iron ore concentrate.  No subtraction from the 
278.22  weight of the pellets shall be allowed for binders, mineral and 
278.23  chemical additives other than basic flux additives, or moisture. 
278.24     (g)(1) Notwithstanding any other provision of this 
278.25  subdivision, for the first two years of a plant's commercial 
278.26  production of direct reduced ore, no tax is imposed under this 
278.27  section.  As used in this paragraph, "commercial production" is 
278.28  production of more than 50,000 tons of direct reduced ore in the 
278.29  current year or in any prior year, "noncommercial production" is 
278.30  production of 50,000 tons or less of direct reduced ore in any 
278.31  year, and "direct reduced ore" is ore that results in a product 
278.32  that has an iron content of at least 75 percent.  For the third 
278.33  year of a plant's commercial production of direct reduced ore, 
278.34  the rate to be applied to direct reduced ore is 25 percent of 
278.35  the rate otherwise determined under this subdivision.  For the 
278.36  fourth such commercial production year, the rate is 50 percent 
279.1   of the rate otherwise determined under this subdivision; for the 
279.2   fifth such commercial production year, the rate is 75 percent of 
279.3   the rate otherwise determined under this subdivision; and for 
279.4   all subsequent commercial production years, the full rate is 
279.5   imposed. 
279.6      (2) Subject to clause (1), production of direct reduced ore 
279.7   in this state is subject to the tax imposed by this section, but 
279.8   if that production is not produced by a producer of taconite or 
279.9   iron sulfides, the production of taconite or iron sulfides 
279.10  consumed in the production of direct reduced iron in this state 
279.11  is not subject to the tax imposed by this section on taconite or 
279.12  iron sulfides. 
279.13     (3) Notwithstanding any other provision of this 
279.14  subdivision, no tax is imposed on direct reduced ore under this 
279.15  section during the facility's noncommercial production of direct 
279.16  reduced ore.  The taconite or iron sulphides consumed in the 
279.17  noncommercial production of direct reduced ore is subject to the 
279.18  tax imposed by this section on taconite and iron sulphides.  
279.19     <b>[EFFECTIVE DATE.]</b> This section is effective for direct 
279.20  reduced ore produced after the day following final enactment. 
279.21     Sec. 28.  Minnesota Statutes 2004, section 298.75, is 
279.22  amended by adding a subdivision to read: 
279.23     Subd. 10.  [TAX MAY BE IMPOSED, CASS COUNTY.] (a) If Cass 
279.24  County does not impose a tax under this section, the town of 
279.25  Sylvan in Cass County may impose the aggregate materials tax 
279.26  under this section. 
279.27     (b) For purposes of exercising the powers contained in this 
279.28  section, the "town" is deemed to be the "county." 
279.29     (c) All provisions in this section apply to the town of 
279.30  Sylvan, except that in lieu of the distribution of the tax 
279.31  proceeds under subdivision 7, all proceeds of the tax must be 
279.32  retained by the town. 
279.33     (d) If Cass County imposes an aggregate materials tax under 
279.34  this section, the tax imposed by the town of Sylvan under this 
279.35  subdivision is repealed on the effective date of the Cass County 
279.36  tax. 
280.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day after 
280.2   the governing body of the town of Sylvan and its chief clerical 
280.3   officer comply with Minnesota Statutes, section 645.021, 
280.4   subdivisions 2 and 3. 
280.5      Sec. 29.  Minnesota Statutes 2004, section 473.843, 
280.6   subdivision 5, is amended to read: 
280.7      Subd. 5.  [PENALTIES; ENFORCEMENT.] The audit, penalty, and 
280.8   enforcement provisions applicable to corporate franchise taxes 
280.9   imposed under chapter 290 apply to the fees imposed under this 
280.10  section.  The commissioner of revenue shall administer the 
280.11  provisions.  
280.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
280.13  following final enactment. 
280.14     Sec. 30.  [FLOOR STOCKS TAX.] 
280.15     Subdivision 1.  [CIGARETTES.] A floor stocks cigarette 
280.16  sales tax is imposed on every person engaged in the business in 
280.17  this state as a distributor, retailer, subjobber, vendor, 
280.18  manufacturer, or manufacturer's representative of cigarettes, on 
280.19  the stamped cigarettes and unaffixed stamps in the person's 
280.20  possession or under the person's control at 12:01 a.m. on August 
280.21  1, 2005.  The tax is imposed at the rate of 20 cents per pack of 
280.22  20 cigarettes.  For packs of cigarettes with other than 20 
280.23  cigarettes, the tax shall be adjusted proportionally. 
280.24     Each distributor, by August 10, 2005, shall file a return 
280.25  with the commissioner, in the form the commissioner prescribes, 
280.26  showing the stamped cigarettes and unaffixed stamps on hand at 
280.27  12:01 a.m. on August 1, 2005, and the amount of tax due on the 
280.28  cigarettes and unaffixed stamps.  The tax imposed by this 
280.29  section is due and payable by September 7, 2005, and after that 
280.30  date bears interest at the rate of one percent a month. 
280.31     Each retailer, subjobber, vendor, manufacturer, or 
280.32  manufacturer's representative, by August 10, 2005, shall file a 
280.33  return with the commissioner, in the form the commissioner 
280.34  prescribes, showing the cigarettes on hand at 12:01 a.m. on 
280.35  August 1, 2005, and the amount of tax due on the cigarettes.  
280.36  The tax imposed by this section is due and payable by September 
281.1   7, 2005, and after that date bears interest at the rate of one 
281.2   percent a month. 
281.3      Subd. 2.  [AUDIT AND ENFORCEMENT.] The tax imposed by this 
281.4   section is subject to the audit, assessment, penalty, and 
281.5   collection provisions applicable to the taxes imposed under 
281.6   Minnesota Statutes, chapter 297F.  The commissioner may require 
281.7   a distributor to receive and maintain copies of floor stocks tax 
281.8   returns filed by all persons requesting a credit for returned 
281.9   cigarettes. 
281.10     Subd. 3.  [DEPOSIT OF PROCEEDS.] The revenue from the tax 
281.11  imposed under this section shall be deposited by the 
281.12  commissioner in the state treasury and credited to the general 
281.13  fund. 
281.14     <b>[EFFECTIVE DATE.]</b> This section is effective August 1, 2005. 
281.15     Sec. 31.  [REPEALER.] 
281.16     Minnesota Statutes 2004, section 297E.12, subdivision 10, 
281.17  is repealed effective the day following final enactment. 
281.18                             ARTICLE 9 
281.19                        ECONOMIC DEVELOPMENT
281.20     Section 1.  Minnesota Statutes 2004, section 272.02, 
281.21  subdivision 64, is amended to read: 
281.22     Subd. 64.  [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 
281.23  Improvements to real property, and personal property, classified 
281.24  under section 273.13, subdivision 24, and located within a job 
281.25  opportunity building zone, designated under section 469.314, are 
281.26  exempt from ad valorem taxes levied under chapter 275. 
281.27     (b) Improvements to real property, and tangible personal 
281.28  property, of an agricultural production facility located within 
281.29  an agricultural processing facility zone, designated under 
281.30  section 469.314, is exempt from ad valorem taxes levied under 
281.31  chapter 275. 
281.32     (c) For property to qualify for exemption under paragraph 
281.33  (a), the occupant must be a qualified business, as defined in 
281.34  section 469.310. 
281.35     (d) The exemption applies beginning for the first 
281.36  assessment year after designation of the job opportunity 
282.1   building zone by the commissioner of employment and economic 
282.2   development.  The exemption applies to each assessment year that 
282.3   begins during the duration of the job opportunity building zone 
282.4   and to property.  To be exempt, the property must be occupied by 
282.5   July 1 of the assessment year by a qualified business that has 
282.6   signed the business subsidy agreement and relocation agreement, 
282.7   if required, by July 1 of the assessment year.  This exemption 
282.8   does not apply to: 
282.9      (1) the levy under section 475.61 or similar levy 
282.10  provisions under any other law to pay general obligation bonds; 
282.11  or 
282.12     (2) a levy under section 126C.17, if the levy was approved 
282.13  by the voters before the designation of the job opportunity 
282.14  building zone. 
282.15     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
282.16  payable in 2006 and thereafter. 
282.17     Sec. 2.  Minnesota Statutes 2004, section 272.0212, 
282.18  subdivision 1, is amended to read: 
282.19     Subdivision 1.  [EXEMPTION.] All qualified property in a 
282.20  zone is exempt to the extent and for a period up to the duration 
282.21  provided by the zone designation and under sections 469.1731 to 
282.22  469.1735. 
282.23     <b>[EFFECTIVE DATE.]</b> This section is effective for development 
282.24  agreements approved after the day following final enactment and 
282.25  beginning for property taxes payable in 2006. 
282.26     Sec. 3.  Minnesota Statutes 2004, section 272.0212, 
282.27  subdivision 2, is amended to read: 
282.28     Subd. 2.  [LIMITS ON EXEMPTION.] (a) Property in a zone is 
282.29  not exempt under this section from the following: 
282.30     (1) special assessments; 
282.31     (2) ad valorem property taxes specifically levied for the 
282.32  payment of principal and interest on debt obligations; and 
282.33     (3) all taxes levied by a school district, except school 
282.34  referendum levies as defined in section 126C.17. 
282.35     (b) The city may limit the property tax exemption to a 
282.36  shorter period than the duration of the zone or to a percentage 
283.1   of the property taxes payable or both. 
283.2      <b>[EFFECTIVE DATE.]</b> This section is effective for development 
283.3   agreements approved after the day following final enactment and 
283.4   beginning for property taxes payable in 2006. 
283.5      Sec. 4.  Minnesota Statutes 2004, section 289A.56, is 
283.6   amended by adding a subdivision to read: 
283.7      Subd. 7.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
283.8   REFUNDS.] Notwithstanding subdivision 3, for refunds payable 
283.9   under section 297A.68, subdivision 38, interest is computed from 
283.10  90 days after the refund claim is filed with the commissioner. 
283.11     <b>[EFFECTIVE DATE.]</b> This section is effective for refund 
283.12  claims filed on or after July 1, 2005. 
283.13     Sec. 5.  Minnesota Statutes 2004, section 297A.68, 
283.14  subdivision 37, is amended to read: 
283.15     Subd. 37.  [JOB OPPORTUNITY BUILDING ZONES.] (a) Purchases 
283.16  of tangible personal property or taxable services by a qualified 
283.17  business, as defined in section 469.310, are exempt if the 
283.18  property or services are primarily used or consumed in a job 
283.19  opportunity building zone designated under section 469.314.  For 
283.20  purposes of this subdivision, aircraft that are operated under a 
283.21  Federal Aviation Administration Restricted Airworthiness 
283.22  Certificate according to Code of Federal Regulations, title 14, 
283.23  part 21, section 21.25(b)(3), relating to aerial surveying, and 
283.24  that are based, maintained, and dispatched from a job 
283.25  opportunity building zone, and any aerial camera package, 
283.26  including any camera, computer, and navigation device contained 
283.27  in the package, that is used in the aircraft, qualify as 
283.28  primarily used or consumed in a job opportunity building zone if 
283.29  the imagery acquired from the aerial camera package is returned 
283.30  to the job opportunity building zone for processing. 
283.31     (b) Purchase and use of construction materials and supplies 
283.32  for construction of improvements to real property in a job 
283.33  opportunity building zone are exempt if the improvements after 
283.34  completion of construction are to be used in the conduct of a 
283.35  qualified business, as defined in section 469.310.  This 
283.36  exemption applies regardless of whether the purchases are made 
284.1   by the business or a contractor.  The exemption does not apply 
284.2   unless the business subsidy agreement entered into pursuant to 
284.3   section 469.313 requires the prevailing wage to be paid on the 
284.4   construction project. 
284.5      (c) The exemptions under this subdivision apply to a local 
284.6   sales and use tax regardless of whether the local sales tax is 
284.7   imposed on the sales taxable as defined under this chapter. 
284.8      (d) This subdivision applies to sales, if the purchase was 
284.9   made and delivery received during the duration of the zone. 
284.10     <b>[EFFECTIVE DATE.]</b> The amendment to paragraph (a) is 
284.11  effective for sales made after June 30, 2005. 
284.12     Sec. 6.  Minnesota Statutes 2004, section 297A.68, 
284.13  subdivision 38, is amended to read: 
284.14     Subd. 38.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
284.15  ZONE.] (a) Purchases of tangible personal property or taxable 
284.16  services by a qualified business, as defined in section 469.330, 
284.17  are exempt if the property or services are primarily used or 
284.18  consumed in a biotechnology and health sciences industry zone 
284.19  designated under section 469.334. 
284.20     (b) Purchase and use of construction materials and, 
284.21  supplies for, or equipment used or consumed in the construction 
284.22  of improvements to real property in a biotechnology and health 
284.23  sciences industry zone are exempt if the improvements after 
284.24  completion of construction are to be used in the conduct of a 
284.25  qualified business, as defined in section 469.330.  This 
284.26  exemption applies regardless of whether the purchases are made 
284.27  by the business or a contractor. 
284.28     (c) The exemptions under this subdivision apply to a local 
284.29  sales and use tax regardless of whether the local sales tax is 
284.30  imposed on the sales taxable as defined under this chapter. 
284.31     (d)(1) The tax on sales of goods or services exempted under 
284.32  this subdivision are imposed and collected as if the applicable 
284.33  rate under section 297A.62 applied.  Upon application by the 
284.34  purchaser, on forms prescribed by the commissioner, a refund 
284.35  equal to the tax paid must be paid to the purchaser.  The 
284.36  application must include sufficient information to permit the 
285.1   commissioner to verify the sales tax paid and the eligibility of 
285.2   the claimant to receive the credit.  No more than two 
285.3   applications for refunds may be filed under this subdivision in 
285.4   a calendar year.  The provisions of section 289A.40 apply to the 
285.5   refunds payable under this subdivision. 
285.6      (2) The amount required to make the refunds is annually 
285.7   appropriated to the commissioner of revenue. 
285.8      (3) The aggregate amount refunded to a qualified business 
285.9   must not exceed the amount allocated to the qualified business 
285.10  under section 469.335. 
285.11     (e) This subdivision applies only to sales made during the 
285.12  duration of the designation of the zone. 
285.13     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
285.14  after December 31, 2003. 
285.15     Sec. 7.  Minnesota Statutes 2004, section 469.169, is 
285.16  amended by adding a subdivision to read: 
285.17     Subd. 17.  [ADDITIONAL BORDER CITY ALLOCATIONS.] (a) In 
285.18  addition to tax reductions authorized in subdivisions 7 to 16, 
285.19  the commissioner shall allocate $750,000 for tax reductions to 
285.20  border city enterprise zones in cities located on the western 
285.21  border of the state.  The commissioner shall make allocations to 
285.22  zones in cities on the western border on a per capita basis.  
285.23  Allocations made under this subdivision may be used for tax 
285.24  reductions as provided in section 469.171, or for other offsets 
285.25  of taxes imposed on or remitted by businesses located in the 
285.26  enterprise zone, but only if the municipality determines that 
285.27  the granting of the tax reduction or offset is necessary in 
285.28  order to retain a business within or attract a business to the 
285.29  zone.  Any portion of the allocation provided in this paragraph 
285.30  may alternatively be used for tax reductions under section 
285.31  469.1732 or 469.1734. 
285.32     (b) The commissioner shall allocate $750,000 for tax 
285.33  reductions under section 469.1732 or 469.1734 to cities with 
285.34  border city enterprise zones located on the western border of 
285.35  the state.  The commissioner shall allocate this amount among 
285.36  the cities on a per capita basis.  Any portion of the allocation 
286.1   provided in this paragraph may alternatively be used for tax 
286.2   reductions as provided in section 469.171.  
286.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
286.4   following final enactment. 
286.5      Sec. 8.  Minnesota Statutes 2004, section 469.176, 
286.6   subdivision 4l, is amended to read: 
286.7      Subd. 4l.  [PROHIBITED FACILITIES.] (a) No tax increment 
286.8   from any district may be used for: 
286.9      (1) a commons area used as a public park; or 
286.10     (2) a facility used for social, recreational, or conference 
286.11  purposes; or 
286.12     (3) a property that includes a casino or other facility 
286.13  conducting class III gaming as defined in United States Code, 
286.14  title 25, section 2703, regardless of whether it is conducted by 
286.15  an Indian tribe or tribal business. 
286.16     (b) This subdivision does not apply to a privately owned 
286.17  facility for conference purposes or a parking structure. 
286.18     <b>[EFFECTIVE DATE.]</b> This section is effective for 
286.19  expenditures of increment made after June 30, 2005, regardless 
286.20  of when the request for certification of the district was made. 
286.21     Sec. 9.  Minnesota Statutes 2004, section 469.176, 
286.22  subdivision 7, is amended to read: 
286.23     Subd. 7.  [PARCELS NOT INCLUDABLE IN DISTRICTS.] (a) The 
286.24  authority may request inclusion in a tax increment financing 
286.25  district and the county auditor may certify the original tax 
286.26  capacity of a parcel or a part of a parcel that qualified under 
286.27  the provisions of section 273.111 or 273.112 or chapter 473H for 
286.28  taxes payable in any of the five calendar years before the 
286.29  filing of the request for certification only for: 
286.30     (1) a district in which 85 percent or more of the planned 
286.31  buildings and facilities (determined on the basis of square 
286.32  footage) are a qualified manufacturing facility or a qualified 
286.33  distribution facility or a combination of both; or 
286.34     (2) a qualified housing district. 
286.35     (b)(1) A distribution facility means buildings and other 
286.36  improvements to real property that are used to conduct 
287.1   activities in at least each of the following categories: 
287.2      (i) to store or warehouse tangible personal property; 
287.3      (ii) to take orders for shipment, mailing, or delivery; 
287.4      (iii) to prepare personal property for shipment, mailing, 
287.5   or delivery; and 
287.6      (iv) to ship, mail, or deliver property. 
287.7      (2) A manufacturing facility includes space used for 
287.8   manufacturing or producing tangible personal property, including 
287.9   processing resulting in the change in condition of the property, 
287.10  and space necessary for and related to the manufacturing 
287.11  activities. 
287.12     (3) To be a qualified facility, the owner or operator of a 
287.13  manufacturing or distribution facility must agree to pay and pay 
287.14  90 percent or more of the employees of the facility at a rate 
287.15  equal to or greater than 160 percent of the federal minimum wage 
287.16  for individuals over the age of 20. 
287.17     (c) The authority may not request inclusion in a tax 
287.18  increment financing district and the county auditor may not 
287.19  certify the original tax capacity of a parcel or a part of a 
287.20  parcel that contains or is expected to contain uses, facilities, 
287.21  properties, or businesses containing class III gaming, as 
287.22  defined in United States Code, title 25, section 2703, 
287.23  regardless of whether it is conducted by an Indian tribe or 
287.24  tribal business. 
287.25     <b>[EFFECTIVE DATE.]</b> This section is effective for parcels for 
287.26  which the request for certification is made after June 30, 2005. 
287.27     Sec. 10.  Minnesota Statutes 2004, section 469.310, 
287.28  subdivision 11, is amended to read: 
287.29     Subd. 11.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
287.30  means A person carrying on a trade or business at a place of 
287.31  business located within a job opportunity building zone is a 
287.32  qualified business for the purposes of sections 469.310 to 
287.33  469.320 according to the criteria in paragraphs (b) to (f).  
287.34     (b) A person is a qualified business only on those parcels 
287.35  of land for which the person has entered into a business subsidy 
287.36  agreement, as required under section 469.313, with the 
288.1   appropriate local government unit in which the parcels are 
288.2   located. 
288.3      (c) Prior to execution of the business subsidy agreement, 
288.4   the local government unit must consider the following factors: 
288.5      (1) how wages plus benefits compare to 110 percent of the 
288.6   statewide poverty rate for a family of four; 
288.7      (2) how wages compare to the regional industry average; 
288.8      (3) the number of jobs that will be provided relative to 
288.9   overall employment in the community; 
288.10     (4) the economic outlook for the industry the business will 
288.11  engage in; 
288.12     (5) sales that will be generated from outside the state of 
288.13  Minnesota; 
288.14     (6) how the business will build on existing regional 
288.15  strengths or diversify the regional economy; 
288.16     (7) how the business will increase capital investment in 
288.17  the zone; and 
288.18     (8) any other criteria the commissioner deems necessary. 
288.19     (b) (d) A person that relocates a trade or business from 
288.20  outside a job opportunity building zone into a zone is not a 
288.21  qualified business, unless the business meets all of the 
288.22  requirements of paragraphs (b) and (c) and: 
288.23     (1)(i) increases full-time employment in the first full 
288.24  year of operation within the job opportunity building zone by at 
288.25  least a minimum of five jobs or 20 percent, whichever is 
288.26  greater, measured relative to the operations that were relocated 
288.27  and maintains the required level of employment for each year the 
288.28  zone designation applies; or 
288.29     (ii) makes a capital investment in the property located 
288.30  within a zone equivalent to ten percent of the gross revenues of 
288.31  operation that were relocated in the immediately preceding 
288.32  taxable year; and 
288.33     (2) enters a binding written agreement with the 
288.34  commissioner that: 
288.35     (i) pledges the business will meet the requirements of 
288.36  clause (1); 
289.1      (ii) provides for repayment of all tax benefits enumerated 
289.2   under section 469.315 to the business under the procedures in 
289.3   section 469.319, if the requirements of clause (1) are not met 
289.4   for the taxable year or for taxes payable during the year in 
289.5   which the requirements were not met; and 
289.6      (iii) contains any other terms the commissioner determines 
289.7   appropriate. 
289.8      (e) The commissioner may waive the requirements under 
289.9   paragraph (d), clause (1), if the commissioner determines that 
289.10  the qualified business will substantially achieve the factors 
289.11  under this subdivision. 
289.12     (f) A business is not a qualified business if, at its 
289.13  location or locations in the zone, the business is primarily 
289.14  engaged in making retail sales to purchasers who are physically 
289.15  present at the business's zone location. 
289.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
289.17  following final enactment and applies to any business entering a 
289.18  business subsidy agreement for a job opportunity development 
289.19  zone after that date, except that paragraph (b) is effective 
289.20  retroactively from June 9, 2003. 
289.21     Sec. 11.  Minnesota Statutes 2004, section 469.310, is 
289.22  amended by adding a subdivision to read: 
289.23     Subd. 13.  [RELOCATION PAYROLL PERCENTAGE.] "Relocation 
289.24  payroll percentage" is a fraction, the numerator of which is the 
289.25  zone payroll of the business for the tax year minus the payroll 
289.26  from the relocated operations in the last full year of 
289.27  operations prior to the relocation, and the denominator of which 
289.28  is the zone payroll of the business for the tax year.  The 
289.29  relocation payroll percentage of a business that is not a 
289.30  relocating business is 100 percent. 
289.31     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
289.32  following final enactment but applies only to qualified 
289.33  businesses with business subsidy agreements that are fully 
289.34  executed after June 30, 2005. 
289.35     Sec. 12.  Minnesota Statutes 2004, section 469.315, is 
289.36  amended to read: 
290.1      469.315 [TAX INCENTIVES AVAILABLE IN ZONES.] 
290.2      Qualified businesses that operate in a job opportunity 
290.3   building zone, individuals who invest in a qualified business 
290.4   that operates in a job opportunity building zone, and property 
290.5   located in a job opportunity building zone qualify for: 
290.6      (1) exemption from individual income taxes as provided 
290.7   under section 469.316; 
290.8      (2) exemption from corporate franchise taxes as provided 
290.9   under section 469.317; 
290.10     (3) exemption from the state sales and use tax and any 
290.11  local sales and use taxes on qualifying purchases as provided in 
290.12  section 297A.68, subdivision 37; 
290.13     (4) exemption from the state sales tax on motor vehicles 
290.14  and any local sales tax on motor vehicles as provided under 
290.15  section 297B.03; 
290.16     (5) exemption from the property tax as provided in section 
290.17  272.02, subdivision 64; 
290.18     (6) exemption from the wind energy production tax under 
290.19  section 272.029, subdivision 7; and 
290.20     (7) the jobs credit allowed under section 469.318. 
290.21  The sales tax exemption under section 297A.68, subdivision 37, 
290.22  paragraph (b), is not "financial assistance" under section 
290.23  116J.871 or a "business subsidy" under section 116J.993 unless 
290.24  the business subsidy agreement entered into pursuant to section 
290.25  469.313 requires the payment of the prevailing wage.  
290.26     <b>[EFFECTIVE DATE.]</b> This section is effective retroactively 
290.27  from January 1, 2004. 
290.28     Sec. 13.  Minnesota Statutes 2004, section 469.316, is 
290.29  amended to read: 
290.30     469.316 [INDIVIDUAL INCOME TAX EXEMPTION.] 
290.31     Subdivision 1.  [APPLICATION.] An individual, estate, or 
290.32  trust operating a trade or business in a job opportunity 
290.33  building zone, and an individual, estate, or trust making a 
290.34  qualifying investment in a qualified business operating in a job 
290.35  opportunity building zone qualifies for the exemptions from 
290.36  taxes imposed under chapter 290, as provided in this section.  
291.1   The exemptions provided under this section apply only to the 
291.2   extent that the income otherwise would be taxable under chapter 
291.3   290.  Subtractions under this section from federal taxable 
291.4   income, alternative minimum taxable income, or any other base 
291.5   subject to tax are limited to the amount that otherwise would be 
291.6   included in the tax base absent the exemption under this 
291.7   section.  This section applies only to taxable years beginning 
291.8   during the duration of the job opportunity building zone. 
291.9      Subd. 2.  [RENTS.] An individual, estate, or trust is 
291.10  exempt from the taxes imposed under chapter 290 on net rents 
291.11  derived from real or tangible personal property used by a 
291.12  qualified business and located in a zone for a taxable year in 
291.13  which the zone was designated a job opportunity building zone.  
291.14  If tangible personal property was used both within and outside 
291.15  of the zone by the qualified business, the exemption amount for 
291.16  the net rental income must be multiplied by a fraction, the 
291.17  numerator of which is the number of days the property was used 
291.18  in the zone and the denominator of which is the total days the 
291.19  property is rented by the qualified business. 
291.20     Subd. 3.  [BUSINESS INCOME.] An individual, estate, or 
291.21  trust is exempt from the taxes imposed under chapter 290 on net 
291.22  income from the operation of a qualified business in a job 
291.23  opportunity building zone.  If the trade or business is carried 
291.24  on within and without the zone and the individual is not a 
291.25  resident of Minnesota, or the taxpayer is an estate or trust, 
291.26  the exemption must be apportioned based on the zone percentage 
291.27  and the relocation payroll percentage for the taxable year.  If 
291.28  the trade or business is carried on within and without the zone 
291.29  and the individual is a resident of Minnesota, the exemption 
291.30  must be apportioned based on the zone percentage and the 
291.31  relocation payroll percentage for the taxable year, except the 
291.32  ratios under section 469.310, subdivision 7, clause (1), items 
291.33  (i) and (ii), must use the denominators of the property and 
291.34  payroll factors determined under section 290.191.  No 
291.35  subtraction is allowed under this section in excess of 20 
291.36  percent of the sum of the job opportunity building zone payroll 
292.1   and the adjusted basis of the property at the time that the 
292.2   property is first used in the job opportunity building zone by 
292.3   the business. 
292.4      Subd. 4.  [CAPITAL GAINS.] (a) An individual, estate, or 
292.5   trust is exempt from the taxes imposed under chapter 290 on: 
292.6      (1) net gain derived on a sale or exchange of real property 
292.7   located in the zone and used by a qualified business.  If the 
292.8   property was held by the individual, estate, or trust during a 
292.9   period when the zone was not designated, the gain must be 
292.10  prorated based on the percentage of time, measured in calendar 
292.11  days, that the real property was held by the individual, estate, 
292.12  or trust during the period the zone designation was in effect to 
292.13  the total period of time the real property was held by the 
292.14  individual; 
292.15     (2) net gain derived on a sale or exchange of tangible 
292.16  personal property used by a qualified business in the zone.  If 
292.17  the property was held by the individual, estate, or trust during 
292.18  a period when the zone was not designated, the gain must be 
292.19  prorated based on the percentage of time, measured in calendar 
292.20  days, that the property was held by the individual, estate, or 
292.21  trust during the period the zone designation was in effect to 
292.22  the total period of time the property was held by the 
292.23  individual.  If the tangible personal property was used outside 
292.24  of the zone during the period of the zone's designation, the 
292.25  exemption must be multiplied by a fraction, the numerator of 
292.26  which is the number of days the property was used in the zone 
292.27  during the time of the designation and the denominator of which 
292.28  is the total days the property was held during the time of the 
292.29  designation; and 
292.30     (3) net gain derived on a sale of an ownership interest in 
292.31  a qualified business operating in the job opportunity building 
292.32  zone, meeting the requirements of paragraph (b).  The exemption 
292.33  on the gain must be multiplied by the zone percentage of the 
292.34  business for the taxable year prior to the sale. 
292.35     (b) A qualified business meets the requirements of 
292.36  paragraph (a), clause (3), if it is a corporation, an S 
293.1   corporation, or a partnership, and for the taxable year its job 
293.2   opportunity building zone percentage exceeds 25 percent.  For 
293.3   purposes of paragraph (a), clause (3), the zone percentage must 
293.4   be calculated by modifying the ratios under section 469.310, 
293.5   subdivision 7, clause (1), items (i) and (ii), to use the 
293.6   denominators of the property and payroll factors determined 
293.7   under section 290.191.  Upon the request of an individual, 
293.8   estate, or trust holding an ownership interest in the entity, 
293.9   the entity must certify to the owner, in writing, the job 
293.10  opportunity building zone percentage needed to determine the 
293.11  exemption. 
293.12     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
293.13  beginning after December 31, 2003, except that changes in 
293.14  subdivision 3 relating to the relocation payroll percentage are 
293.15  effective the day following final enactment and apply only to 
293.16  qualified businesses with business subsidy agreements that are 
293.17  fully executed after June 30, 2005. 
293.18     Sec. 14.  Minnesota Statutes 2004, section 469.317, is 
293.19  amended to read: 
293.20     469.317 [CORPORATE FRANCHISE TAX EXEMPTION.] 
293.21     (a) A qualified business is exempt from taxation under 
293.22  section 290.02, the alternative minimum tax under section 
293.23  290.0921, and the minimum fee under section 290.0922, on the 
293.24  portion of its income attributable to operations within the 
293.25  zone.  This exemption is determined as follows: 
293.26     (1) for purposes of the tax imposed under section 290.02, 
293.27  by multiplying its taxable net income by its zone percentage and 
293.28  by its relocation payroll percentage and subtracting the result 
293.29  in determining taxable income; 
293.30     (2) for purposes of the alternative minimum tax under 
293.31  section 290.0921, by multiplying its alternative minimum taxable 
293.32  income by its zone percentage and by its relocation payroll 
293.33  percentage and reducing alternative minimum taxable income by 
293.34  this amount; and 
293.35     (3) for purposes of the minimum fee under section 290.0922, 
293.36  by excluding property and payroll in the zone from the 
294.1   computations of the fee or by exempting the entity under section 
294.2   290.0922, subdivision 2, clause (7). 
294.3      (b) No subtraction is allowed under this section in excess 
294.4   of 20 percent of the sum of the corporation's job opportunity 
294.5   building zone payroll and the adjusted basis of the property at 
294.6   the time that the property is first used in the job opportunity 
294.7   building zone by the corporation. 
294.8      (c) This section applies only to taxable years beginning 
294.9   during the duration of the job opportunity building zone. 
294.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
294.11  following final enactment but applies only to qualified 
294.12  businesses with business subsidy agreements that are fully 
294.13  executed after June 30, 2005. 
294.14     Sec. 15.  Minnesota Statutes 2004, section 469.319, 
294.15  subdivision 1, is amended to read: 
294.16     Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
294.17  repay the amount of the total tax reduction listed in section 
294.18  469.315 and any refund under section 469.318 in excess of tax 
294.19  liability, received during the two years immediately before it 
294.20  ceased to operate in the zone, if the business: 
294.21     (1) received tax reductions authorized by section 469.315; 
294.22  and 
294.23     (2)(i) did not meet the goals specified in an agreement 
294.24  entered into with the applicant that states any obligation the 
294.25  qualified business must fulfill in order to be eligible for tax 
294.26  benefits.  The commissioner of employment and economic 
294.27  development may extend for up to one year the period for meeting 
294.28  any goals provided in an agreement.  The applicant may extend 
294.29  the period for meeting other goals by documenting in writing the 
294.30  reason for the extension and attaching a copy of the document to 
294.31  its next annual report to the commissioner of employment and 
294.32  economic development; or 
294.33     (ii) ceased to operate its facility located within the job 
294.34  opportunity building zone or otherwise ceases to be or is not a 
294.35  qualified business. 
294.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
295.1   following final enactment. 
295.2      Sec. 16.  Minnesota Statutes 2004, section 469.319, is 
295.3   amended by adding a subdivision to read: 
295.4      Subd. 6.  [RECONCILIATION.] Where this section is 
295.5   inconsistent with section 116J.994, subdivision 3, paragraph 
295.6   (e), or 6, or any other provisions of sections 116J.993 to 
295.7   116J.995, this section prevails. 
295.8      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
295.9   following final enactment. 
295.10     Sec. 17.  Minnesota Statutes 2004, section 469.320, 
295.11  subdivision 3, is amended to read: 
295.12     Subd. 3.  [REMEDIES.] If the commissioner determines, based 
295.13  on a report filed under subdivision 1 or other available 
295.14  information, that a zone or subzone is failing to meet its 
295.15  performance goals, the commissioner may take any actions the 
295.16  commissioner determines appropriate, including modification of 
295.17  the boundaries of the zone or a subzone or termination of the 
295.18  zone or a subzone.  Before taking any action, the commissioner 
295.19  shall consult with the applicant and the affected local 
295.20  government units, including notifying them of the proposed 
295.21  actions to be taken.  The commissioner shall publish any order 
295.22  modifying a zone in the State Register and on the Internet.  The 
295.23  applicant may appeal the commissioner's order under the 
295.24  contested case procedures of chapter 14. 
295.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
295.26  following final enactment. 
295.27     Sec. 18.  Minnesota Statutes 2004, section 469.330, 
295.28  subdivision 11, is amended to read: 
295.29     Subd. 11.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
295.30  means a person carrying on a trade or business at a 
295.31  biotechnology and health sciences industry facility located 
295.32  within a biotechnology and health sciences industry zone.  A 
295.33  person is a qualified business only on those parcels of land for 
295.34  which it has entered into a business subsidy agreement, as 
295.35  required under section 469.333, with the appropriate local 
295.36  government unit in which the parcels are located. 
296.1      (b) A person that relocates a biotechnology and health 
296.2   sciences industry facility from outside a biotechnology and 
296.3   health sciences industry zone into a zone is not a qualified 
296.4   business, unless the business: 
296.5      (1)(i) increases full-time employment in the first full 
296.6   year of operation within the biotechnology and health sciences 
296.7   industry zone by at least 20 percent measured relative to the 
296.8   operations that were relocated and maintains the required level 
296.9   of employment for each year the zone designation applies; or 
296.10     (ii) makes a capital investment in the property located 
296.11  within a zone equivalent to ten percent of the gross revenues of 
296.12  operation that were relocated in the immediately preceding 
296.13  taxable year; and 
296.14     (2) enters a binding written agreement with the 
296.15  commissioner that: 
296.16     (i) pledges the business will meet the requirements of 
296.17  clause (1); 
296.18     (ii) provides for repayment of all tax benefits enumerated 
296.19  under section 469.336 to the business under the procedures in 
296.20  section 469.340, if the requirements of clause (1) are not met; 
296.21  and 
296.22     (iii) contains any other terms the commissioner determines 
296.23  appropriate. 
296.24     <b>[EFFECTIVE DATE.]</b> This section is effective retroactively 
296.25  from June 9, 2003. 
296.26     Sec. 19.  Minnesota Statutes 2004, section 469.335, is 
296.27  amended to read: 
296.28     469.335 [APPLICATION FOR TAX BENEFITS.] 
296.29     (a) To claim a tax credit or exemption against a state tax 
296.30  under section 469.336, clauses (2) through (5), a business must 
296.31  apply to the commissioner for a tax credit certificate.  As a 
296.32  condition of its application, the business must agree to furnish 
296.33  information to the commissioner that is sufficient to verify the 
296.34  eligibility for any credits or exemptions claimed.  The total 
296.35  amount of the state tax credits and exemptions allowed for the 
296.36  specified period may not exceed the amount of the tax credit 
297.1   certificates provided by the commissioner to the business.  The 
297.2   commissioner must verify to the commissioner of revenue the 
297.3   amount of tax exemptions or credits for which each business is 
297.4   eligible. 
297.5      (b) A tax credit certificate issued under this section may 
297.6   specify the particular tax exemptions or credits against a state 
297.7   tax that the qualified business is eligible to claim under 
297.8   section 469.336, clauses (2) through (5), and the amount of each 
297.9   exemption or credit allowed. 
297.10     (c) The commissioner may issue $1,000,000 of tax credits or 
297.11  exemptions in fiscal year 2004.  Any tax credits or exemptions 
297.12  not awarded in fiscal year 2004 may be awarded in fiscal year 
297.13  2005.  Any tax credits or exemptions not awarded in fiscal year 
297.14  2004 or 2005 do not cancel and may be awarded in fiscal years 
297.15  2006 and 2007. 
297.16     (d) A qualified business must use the tax credits or tax 
297.17  exemptions granted under this section by the later of the end of 
297.18  the state fiscal year or the taxpayer's tax year in which the 
297.19  credits or exemptions are granted. 
297.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
297.21  following final enactment. 
297.22     Sec. 20.  Minnesota Statutes 2004, section 469.337, is 
297.23  amended to read: 
297.24     469.337 [CORPORATE FRANCHISE TAX EXEMPTION.] 
297.25     (a) A qualified business is exempt from taxation under 
297.26  section 290.02, the alternative minimum tax under section 
297.27  290.0921, and the minimum fee under section 290.0922, on the 
297.28  portion of its income attributable to operations of a qualified 
297.29  business within the biotechnology and health sciences industry 
297.30  zone.  This exemption is determined as follows: 
297.31     (1) for purposes of the tax imposed under section 290.02, 
297.32  by multiplying its taxable net income by its zone percentage and 
297.33  subtracting the result in determining taxable income; 
297.34     (2) for purposes of the alternative minimum tax under 
297.35  section 290.0921, by multiplying its alternative minimum taxable 
297.36  income by its zone percentage and reducing alternative minimum 
298.1   taxable income by this amount; and 
298.2      (3) for purposes of the minimum fee under section 290.0922, 
298.3   by excluding zone property and payroll in the zone from the 
298.4   computations of the fee.  The qualified business is exempt from 
298.5   the minimum fee if all of its property is located in the zone 
298.6   and all of its payroll is zone payroll. 
298.7      (b) No subtraction is allowed under this section in excess 
298.8   of 20 percent of the sum of the corporation's biotechnology and 
298.9   health sciences industry zone payroll and the adjusted basis of 
298.10  the property at the time that the property is first used in the 
298.11  biotechnology and health sciences industry zone by the 
298.12  corporation. 
298.13     (c) No reduction in tax is allowed in excess of the amount 
298.14  allocated under section 469.335. 
298.15     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
298.16  beginning after December 31, 2003. 
298.17     Sec. 21.  Minnesota Statutes 2004, section 469.340, 
298.18  subdivision 1, is amended to read: 
298.19     Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
298.20  repay the amount of the tax reduction listed in section 469.336 
298.21  and any refunds under sections 469.338 and 469.339 in excess of 
298.22  tax liability, received during the two years immediately before 
298.23  it ceased to operate in the zone, if the business: 
298.24     (1) received tax reductions authorized by section 469.336; 
298.25  and 
298.26     (2)(i) did not meet the goals specified in an agreement 
298.27  entered into with the applicant that states any obligation the 
298.28  qualified business must fulfill in order to be eligible for tax 
298.29  benefits.  The commissioner of employment and economic 
298.30  development may extend for up to one year the period for meeting 
298.31  any goals provided in an agreement.  The applicant may extend 
298.32  the period for meeting other goals by documenting in writing the 
298.33  reason for the extension and attaching a copy of the document to 
298.34  its next annual report to the commissioner of employment and 
298.35  economic development; or 
298.36     (ii) ceased to operate its facility located within the 
299.1   biotechnology and health sciences industry zone or otherwise 
299.2   ceases to be or is not a qualified business. 
299.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
299.4   following final enactment. 
299.5      Sec. 22.  [FERGUS FALLS; ECONOMIC DEVELOPMENT.] 
299.6      Notwithstanding the time limits in Minnesota Statutes 2004, 
299.7   section 272.02, subdivision 39, the holding of property by the 
299.8   city of Fergus Falls for later resale for economic development 
299.9   purposes is considered a public purpose for purposes of 
299.10  Minnesota Statutes, section 272.02, subdivision 8, for a period 
299.11  not to exceed 15 years.  The other requirements of Minnesota 
299.12  Statutes, section 272.02, subdivision 39, apply to property held 
299.13  by the city under this section. 
299.14     <b>[EFFECTIVE DATE.]</b> This section is effective the day after 
299.15  approval by the governing body of the city of Fergus Falls and 
299.16  compliance with Minnesota Statutes, section 645.021, subdivision 
299.17  3. 
299.18     Sec. 23.  [CITY OF TAYLORS FALLS; BORDER CITY DEVELOPMENT 
299.19  ZONE.] 
299.20     Subdivision 1.  [AUTHORIZATION.] The governing body of the 
299.21  city of Taylors Falls may designate all or any part of the city 
299.22  as a border city development zone. 
299.23     Subd. 2.  [APPLICATION OF GENERAL LAW.] (a) Minnesota 
299.24  Statutes, sections 469.1731 to 469.1735, apply to the border 
299.25  city development zones designated under this section.  The 
299.26  governing body of the city may exercise the powers granted under 
299.27  Minnesota Statutes, sections 469.1731 to 469.1735, including 
299.28  powers that apply outside of the zones. 
299.29     (b) The allocation under subdivision 3 for purposes of 
299.30  Minnesota Statutes, section 469.1735, subdivision 2, is 
299.31  appropriated to the commissioner of revenue. 
299.32     Subd. 3.  [ALLOCATION OF STATE TAX REDUCTIONS.] (a) The 
299.33  cumulative total amount of the state portion of the tax 
299.34  reductions for all years of the program under Minnesota 
299.35  Statutes, sections 469.1731 to 469.1735, for the city of Taylors 
299.36  Falls, is limited to $100,000. 
300.1      (b) This allocation may be used for tax reductions provided 
300.2   in Minnesota Statutes, section 469.1732 or 469.1734, or for 
300.3   reimbursements under Minnesota Statutes, section 469.1735, 
300.4   subdivision 3, but only if the governing body of the city of 
300.5   Taylors Falls determines that the tax reduction or offset is 
300.6   necessary to enable a business to expand within the city or to 
300.7   attract a business to the city. 
300.8      (c) The commissioner of revenue may waive the limit under 
300.9   this subdivision using the same rules and standards provided in 
300.10  Minnesota Statutes, section 469.169, subdivision 12, paragraph 
300.11  (b). 
300.12     <b>[EFFECTIVE DATE; LOCAL APPROVAL.]</b> This section is effective 
300.13  upon approval by a majority of the voters of the city of Taylors 
300.14  Falls voting on the question at a general election. 
300.15     Sec. 24.  [REVISOR'S INSTRUCTION.] 
300.16     The revisor shall renumber Minnesota Statutes, section 
300.17  469.310, subdivision 11, as section 469.3135, and insert the 
300.18  following definition of "qualified business" in Minnesota 
300.19  Statutes, section 469.310:  "'Qualified business' means the 
300.20  entity described in section 469.3135." 
300.21     Sec. 25.  [REPEALER.] 
300.22     Minnesota Statutes 2004, section 272.02, subdivision 65, is 
300.23  repealed effective for taxes payable in 2006 and thereafter.  
300.24  Minnesota Statutes 2004, section 477A.08, is repealed effective 
300.25  for aid payable in 2005 and thereafter. 
300.26                             ARTICLE 10 
300.27                            TAX SHELTERS 
300.28     Section 1.  [270.103] [EQUITABLE ACTIONS.] 
300.29     (a) The commissioner may bring a civil action to enjoin any 
300.30  person from taking action or failing to take action that is 
300.31  subject to penalty under section 289A.60, subdivisions 7, 20, 
300.32  20a, 26, 27, and 28. 
300.33     (b) In any action under paragraph (a), the court may enjoin 
300.34  the person from engaging in the conduct, if the court finds that:
300.35     (1) the person has engaged in the specified conduct; and 
300.36     (2) injunctive relief is appropriate to prevent recurrence 
301.1   of the conduct. 
301.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
301.3   following final enactment. 
301.4      Sec. 2.  [289A.121] [TAX SHELTERS SPECIAL RULES.] 
301.5      Subdivision 1.  [SCOPE.] The provisions of this section 
301.6   apply to a tax shelter that: 
301.7      (1) is organized in this state; 
301.8      (2) is doing business in this state; 
301.9      (3) is deriving income from sources in this state; or 
301.10     (4) has one or more investors that are Minnesota taxpayers 
301.11  under chapter 290. 
301.12     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
301.13  the definitions under sections 6111 and 6112 of the Internal 
301.14  Revenue Code, including the regulations under those sections, 
301.15  apply. 
301.16     (b) The term "tax shelter" includes any reportable 
301.17  transaction under subdivision 5. 
301.18     Subd. 3.  [REGISTRATION.] (a) Any tax shelter organizer 
301.19  required to register a tax shelter under section 6111 of the 
301.20  Internal Revenue Code must register the shelter with the 
301.21  commissioner. 
301.22     (b) A tax shelter organizer subject to this subdivision 
301.23  must send a duplicate of the federal registration information, 
301.24  along with any other information the commissioner requires, to 
301.25  the commissioner not later than the day on which interests in 
301.26  that tax shelter are first offered for sale. 
301.27     (c) In addition to the requirements under paragraph (b), 
301.28  any listed transactions must be registered with the commissioner 
301.29  by the latest of: 
301.30     (1) 60 days after entering into the transaction; 
301.31     (2) 60 days after the transaction becomes a listed 
301.32  transaction; or 
301.33     (3) December 31, 2005. 
301.34     Subd. 4.  [REGISTRATION NUMBER.] (a) Any person required to 
301.35  register under section 6111 of the Internal Revenue Code who 
301.36  receives a tax registration number from the Secretary of the 
302.1   Treasury must, within 30 days after requested by the 
302.2   commissioner, file a statement of that registration number with 
302.3   the commissioner. 
302.4      (b) Any person who sells or otherwise transfers an interest 
302.5   in a tax shelter must, in the same time and manner required 
302.6   under section 6111(b) of the Internal Revenue Code, furnish to 
302.7   each investor who purchases or otherwise acquires an interest in 
302.8   the tax shelter the identification number assigned under federal 
302.9   law to the tax shelter. 
302.10     (c) Any person claiming any deduction, credit, or other tax 
302.11  benefit by reason of a tax shelter must include on the return of 
302.12  tax on which the deduction, credit, or other benefit is claimed 
302.13  the identification number assigned under federal law to the tax 
302.14  shelter. 
302.15     Subd. 5.  [REPORTABLE TRANSACTIONS.] (a) For each taxable 
302.16  year in which a taxpayer must make a disclosure statement under 
302.17  Code of Federal Regulations, title 26, section 1.6011-4, for a 
302.18  reportable transaction, including a listed transaction, in which 
302.19  the taxpayer participated in a taxable year for which a return 
302.20  is required under chapter 290, the taxpayer must file a copy of 
302.21  the disclosure with the commissioner. 
302.22     (b) Any taxpayer that is a member of a unitary business 
302.23  group that includes any person that must make a disclosure 
302.24  statement under Code of Federal Regulations, title 26, section 
302.25  1.6011-4, must file a disclosure under this subdivision. 
302.26     (c) Disclosure under this subdivision is required for any 
302.27  transaction entered into after December 31, 2001, that the 
302.28  Internal Revenue Service determines is a listed transaction at 
302.29  any time, and must be made in the manner prescribed by the 
302.30  commissioner.  For transactions in which the taxpayer 
302.31  participated for taxable years ending before December 31, 2005, 
302.32  disclosure must be made by the due date of the first return 
302.33  required under chapter 290 after the enactment of this section.  
302.34  With respect to transactions in which the taxpayer participated 
302.35  for taxable years ending on and after December 31, 2005, 
302.36  disclosure must be made in the time and manner prescribed in the 
303.1   Code of Federal Regulations, title 26, section 1.6011-4(e). 
303.2      (d) Notwithstanding paragraphs (a) to (c), no disclosure is 
303.3   required for transactions entered into after December 31, 2001, 
303.4   and before January 1, 2006, (1) if the taxpayer has filed an 
303.5   amended income tax return which reverses the tax benefits of the 
303.6   potential tax avoidance transaction, or (2) as a result of a 
303.7   federal audit the Internal Revenue Service has determined the 
303.8   tax treatment of the transaction and an amended return has been 
303.9   filed to reflect the federal treatment. 
303.10     Subd. 6.  [ABUSIVE SHELTERS; LISTS OF INVESTORS.] (a) Any 
303.11  person required to maintain a list under section 6112 of the 
303.12  Internal Revenue Code with respect to a potentially abusive tax 
303.13  shelter must furnish the list to the commissioner no later than 
303.14  when required under federal law.  The list required under this 
303.15  subdivision must include the same information required with 
303.16  respect to a potentially abusive tax shelter under Code of 
303.17  Federal Regulations, title 26, section 301.6112-1, and any other 
303.18  information the commissioner requires. 
303.19     (b) For transactions entered into on or after December 31, 
303.20  2001, that become listed transactions at any time, the list must 
303.21  be furnished to the commissioner by the latest of: 
303.22     (1) 60 days after entering into the transaction; 
303.23     (2) 60 days after the transaction becomes a listed 
303.24  transaction; or 
303.25     (3) December 31, 2005. 
303.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
303.27  following final enactment. 
303.28     Sec. 3.  Minnesota Statutes 2004, section 289A.38, is 
303.29  amended by adding a subdivision to read: 
303.30     Subd. 15.  [REPORTABLE TRANSACTIONS.] If a taxpayer fails 
303.31  to include on any return or statement for any taxable year any 
303.32  information with respect to a reportable transaction, as 
303.33  required by federal law and under section 289A.121, subdivision 
303.34  5, the commissioner may recompute the tax, including a refund, 
303.35  within six years after the return is filed with respect to the 
303.36  taxable year in which the taxpayer participated in the 
304.1   reportable transaction.  If tax is assessable solely because of 
304.2   this section, the assessable deficiency is limited to the items 
304.3   that were not disclosed as required under section 289A.121, 
304.4   subdivision 5. 
304.5      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
304.6   following final enactment. 
304.7      Sec. 4.  Minnesota Statutes 2004, section 289A.60, 
304.8   subdivision 4, is amended to read: 
304.9      Subd. 4.  [SUBSTANTIAL UNDERSTATEMENT OF LIABILITY; 
304.10  PENALTY.] (a) The commissioner of revenue shall impose a penalty 
304.11  for substantial understatement of any tax payable to the 
304.12  commissioner, except a tax imposed under chapter 297A. 
304.13     (b) There must be added to the tax an amount equal to 20 
304.14  percent of the amount of any underpayment attributable to the 
304.15  understatement.  There is a substantial understatement of tax 
304.16  for the period if the amount of the understatement for the 
304.17  period exceeds the greater of:  
304.18     (1) ten percent of the tax required to be shown on the 
304.19  return for the period; or 
304.20     (2)(a)(i) $10,000 in the case of a mining company or a 
304.21  corporation, other than an S corporation as defined in section 
304.22  290.9725, when the tax is imposed by chapter 290 or section 
304.23  298.01 or 298.015, or 
304.24     (b)(ii) $5,000 in the case of any other taxpayer, and in 
304.25  the case of a mining company or a corporation any tax not 
304.26  imposed by chapter 290 or section 298.01 or 298.015.  
304.27     (c) For a corporation, other than an S corporation, that 
304.28  has been contacted by the commissioner regarding the use of a 
304.29  potentially abusive tax shelter, as defined under section 
304.30  289A.121, there is also a substantial understatement of tax for 
304.31  any taxable year if the amount of the understatement for the 
304.32  taxable year exceeds the lesser of: 
304.33     (1) ten percent of the tax required to be shown on the 
304.34  return for the taxable year (or, if greater, $2,500); or 
304.35     (2) $5,000,000. 
304.36     (d) The term "understatement" means the excess of the 
305.1   amount of the tax required to be shown on the return for the 
305.2   period, over the amount of the tax imposed that is shown on the 
305.3   return.  The amount of the understatement shall be reduced by 
305.4   that part of the understatement that is attributable to the tax 
305.5   treatment of any item by the taxpayer if there is or was 
305.6   substantial authority for the treatment, or any item with 
305.7   respect to which the relevant facts affecting the item's tax 
305.8   treatment are adequately disclosed in the return or in a 
305.9   statement attached to the return.  The special rules in cases 
305.10  involving tax shelters provided in section 6662(d)(2)(C) of the 
305.11  Internal Revenue Code shall apply and shall apply to a tax 
305.12  shelter the principal purpose of which is the avoidance or 
305.13  evasion of state taxes.  The commissioner may abate all or any 
305.14  part of the addition to the tax provided by this section on a 
305.15  showing by the taxpayer that there was reasonable cause for the 
305.16  understatement, or part of it, and that the taxpayer acted in 
305.17  good faith.  The additional tax and penalty shall bear interest 
305.18  at the rate specified in section 270.75 from the time the tax 
305.19  should have been paid until paid. 
305.20     (e) For taxpayers that have been contacted by the 
305.21  commissioner regarding the use of a potentially abusive tax 
305.22  shelter within the meaning of section 298A.121, the amount of 
305.23  the understatement is reduced by that part of the understatement 
305.24  that is attributable to the tax treatment of any item by the 
305.25  taxpayer if the taxpayer had reasonable belief that the tax 
305.26  treatment was more likely than not the proper treatment or if 
305.27  any item with respect to which the relevant facts affecting the 
305.28  item's tax treatment are adequately disclosed in the return or 
305.29  in a statement attached to the return. 
305.30     <b>[EFFECTIVE DATE.]</b> This section is effective for taxpayers 
305.31  contacted by the commissioner after the day following final 
305.32  enactment. 
305.33     Sec. 5.  Minnesota Statutes 2004, section 289A.60, 
305.34  subdivision 7, is amended to read: 
305.35     Subd. 7.  [PENALTY FOR FRIVOLOUS RETURN.] (a) If a taxpayer 
305.36  files what purports to be a tax return or a claim for refund but 
306.1   which does not contain information on which the substantial 
306.2   correctness of the purported return or claim for refund may be 
306.3   judged or contains information that on its face shows that the 
306.4   purported return or claim for refund is substantially incorrect 
306.5   and the conduct is due to a position that is frivolous or a 
306.6   desire that appears on the purported return or claim for refund 
306.7   to delay or impede the administration of Minnesota tax laws, 
306.8   then the individual shall pay a penalty of the greater of $1,000 
306.9   or 25 percent of the amount of tax required to be shown on the 
306.10  return.  In a proceeding involving the issue of whether or not a 
306.11  person is liable for this penalty, the burden of proof is on the 
306.12  commissioner.  
306.13     (b) If the taxpayer has been contacted by the commissioner 
306.14  of revenue regarding the use of a potentially abusive tax 
306.15  shelter within the meaning of section 289A.121, the penalty 
306.16  under this subdivision is the greater of $5,000 or 25 percent of 
306.17  the amount of tax required to be shown on the return. 
306.18     <b>[EFFECTIVE DATE.]</b> This section is effective for returns or 
306.19  claims filed after the day following final enactment. 
306.20     Sec. 6.  Minnesota Statutes 2004, section 289A.60, 
306.21  subdivision 20, is amended to read: 
306.22     Subd. 20.  [PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.] 
306.23  Any person who: 
306.24     (1)(i) organizes or assists in the organization of a 
306.25  partnership or other entity, an investment plan or arrangement, 
306.26  or any other plan or arrangement, or (ii) participates in the 
306.27  sale of any interest in an entity or plan or arrangement 
306.28  referred to in clause (i); and 
306.29     (2) makes or furnishes in connection with the organization 
306.30  or sale a statement with respect to the allowability of a 
306.31  deduction or credit, the excludability of income, or the 
306.32  securing of any other tax benefit by reason of holding an 
306.33  interest in the entity or participating in the plan or 
306.34  arrangement that the person knows or has reason to know is false 
306.35  or fraudulent concerning any material matter, shall pay a 
306.36  penalty equal to the greater of $1,000 or 20 50 percent of the 
307.1   gross income derived or to be derived by the person from the 
307.2   activity. 
307.3      The penalty imposed by this subdivision is in addition to 
307.4   any other penalty provided by this section.  The penalty must be 
307.5   collected in the same manner as any delinquent income tax.  In a 
307.6   proceeding involving the issue of whether or not any person is 
307.7   liable for this penalty, the burden of proof is upon the 
307.8   commissioner. 
307.9      <b>[EFFECTIVE DATE.]</b> This section is effective for 
307.10  transactions entered into after the day following final 
307.11  enactment. 
307.12     Sec. 7.  Minnesota Statutes 2004, section 289A.60, is 
307.13  amended by adding a subdivision to read: 
307.14     Subd. 20a.  [AIDING AND ABETTING UNDERSTATING OF TAX 
307.15  LIABILITY.] (a) A penalty in the amount under paragraph (b) for 
307.16  each document is imposed on each person who: 
307.17     (1) aids or assists in, procures, or advises with respect 
307.18  to, the preparation or presentation of any portion of a return, 
307.19  affidavit, claim, or other document; 
307.20     (2) knows or has reason to believe that the portion of a 
307.21  return, affidavit, claim, or other document will be used in 
307.22  connection with any material matter arising under the Minnesota 
307.23  individual income or corporate franchise tax; and 
307.24     (3) knows that the portion, if so used, would result in an 
307.25  understatement of the liability for tax of another person. 
307.26     (b)(1) Except as provided in clause (2), the amount of the 
307.27  penalty imposed by this subdivision is $1,000. 
307.28     (2) If the return, affidavit, claim, or other document 
307.29  relates to the tax liability of a corporation, the amount of the 
307.30  penalty imposed by paragraph (a) is $10,000. 
307.31     (3) If any person is subject to a penalty under paragraph 
307.32  (a) for any document relating to any taxpayer for any taxable 
307.33  period or taxable event, the person is not subject to a penalty 
307.34  under paragraph (a) for any other document relating to the 
307.35  taxpayer for the taxable period or event. 
307.36     (c) For purposes of this subdivision, "procures" includes 
308.1   (i) ordering or otherwise causing any other person to do an act, 
308.2   and (ii) knowing of, and not attempting to prevent, 
308.3   participation by any other person in an act. 
308.4      (d) The penalty under this subdivision applies whether or 
308.5   not the understatement is with the knowledge or consent of the 
308.6   persons authorized or required to present the return, affidavit, 
308.7   claim, or other document. 
308.8      (e) For purposes of paragraph (a), clause (1), a person 
308.9   furnishing typing, reproducing, or other mechanical assistance 
308.10  with respect to a document is not treated as having aided or 
308.11  assisted in the preparation of the document by reason of the 
308.12  assistance. 
308.13     (f)(1) Except as provided by clause (2), the penalty 
308.14  imposed by this section is in addition to any other penalty 
308.15  provided by law. 
308.16     (2) No penalty applies under subdivision 20 to any person 
308.17  for any document for which a penalty is assessed on the person 
308.18  under this subdivision. 
308.19     <b>[EFFECTIVE DATE.]</b> This section is effective for documents 
308.20  prepared after the day following final enactment. 
308.21     Sec. 8.  Minnesota Statutes 2004, section 289A.60, is 
308.22  amended by adding a subdivision to read: 
308.23     Subd. 26.  [TAX SHELTER PENALTIES; REGISTRATION AND 
308.24  LISTING.] (a) For purposes of this subdivision, "material 
308.25  advisor" has the meaning given it under Code of Federal 
308.26  Regulations, title 26, section 301.6112-1(c)(2). 
308.27     (b) The penalties in this subdivision apply in connection 
308.28  with the use of tax shelters, as defined under section 289A.121. 
308.29     (c) A person who fails to register a tax shelter, including 
308.30  providing all of the required information under section 
308.31  289A.121, subdivision 3, is subject to a penalty of $15,000.  If 
308.32  the tax shelter is a listed shelter and disclosure is not made 
308.33  as required by section 289A.121, subdivision 5, a penalty 
308.34  applies equal to the greater of: 
308.35     (1) $100,000; 
308.36     (2) 50 percent of the gross income that the organizer or 
309.1   material advisor derived from that activity; or 
309.2      (3) 75 percent of the gross income that the organizer or 
309.3   material advisor derived from that activity if the organizer or 
309.4   material advisor intentionally failed to act. 
309.5      (d) Any person who fails to supply a tax shelter 
309.6   registration number required under section 289A.121, subdivision 
309.7   4, paragraph (b), is subject to a penalty of $100 for each 
309.8   failure.  Any person who fails to include a tax shelter 
309.9   registration number on a return as required under section 
309.10  289A.121, subdivision 4, paragraph (c), is subject to a penalty 
309.11  of $250 for each failure, unless the failure was due to 
309.12  reasonable cause.  The penalties under this paragraph are in 
309.13  addition to any penalties under paragraph (c). 
309.14     (e) The person required to maintain or provide a list under 
309.15  section 289A.121, subdivision 6, is subject to a penalty equal 
309.16  to: 
309.17     (1) for reportable transactions, $10,000 for each day after 
309.18  the 20th day that the organizer or material advisor failed to 
309.19  make the list available to the commissioner after written 
309.20  request for that list was made; and 
309.21     (2) for listed transactions, the greater of: 
309.22     (i) $100,000; or 
309.23     (ii) 50 percent of the gross income that the organizer or 
309.24  material advisor derived from that activity. 
309.25     (f) The penalty imposed by this subdivision is in addition 
309.26  to any penalty imposed under this section. 
309.27     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
309.28  years beginning after December 31, 2000. 
309.29     Sec. 9.  Minnesota Statutes 2004, section 289A.60, is 
309.30  amended by adding a subdivision to read: 
309.31     Subd. 27.  [FAILURE TO REPORT; REPORTABLE TRANSACTION.] (a) 
309.32  Any large entity or high net worth individual who fails to 
309.33  include on any return or statement any information with respect 
309.34  to a reportable transaction that is required under section 6011 
309.35  of the Internal Revenue Code and under section 289A.121, to be 
309.36  included with that return or statement must pay a penalty for 
310.1   each omission in the amount determined under paragraph (b). 
310.2      (b) The penalty is $15,000, except for a listed transaction 
310.3   the penalty is $30,000. 
310.4      (c) For purposes of this subdivision: 
310.5      (1) "High net worth individual" means, for a transaction, 
310.6   an individual whose net worth exceeds $2,000,000 immediately 
310.7   before the transaction. 
310.8      (2) "Large entity" means, for any taxable year, a person, 
310.9   other than an individual, with gross receipts in excess of 
310.10  $10,000,000 for either the taxable year in which the reportable 
310.11  transaction occurs or in the preceding taxable year.  Rules 
310.12  similar to the rules of section 448(c)(2) and 448(c)(3) of the 
310.13  Internal Revenue Code, other than section 448(c)(3)(A) of the 
310.14  Internal Revenue Code, apply. 
310.15     (3) "Reportable transaction" means a reportable transaction 
310.16  under section 289A.121, subdivision 5. 
310.17     (4) Except as provided in regulations prescribed by the 
310.18  Secretary of the Treasury, the term "listed transaction" means a 
310.19  reportable transaction, as defined in clause (3), that is the 
310.20  same as, or substantially similar to, a transaction specifically 
310.21  identified by the Secretary of the Treasury for purposes of 
310.22  section 6011 of the Internal Revenue Code for federal income tax 
310.23  purposes as a tax avoidance transaction. 
310.24     (d) The penalty imposed by this subdivision is in addition 
310.25  to any penalty imposed under this section. 
310.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
310.27  years beginning after December 31, 2000. 
310.28     Sec. 10.  Minnesota Statutes 2004, section 289A.60, is 
310.29  amended by adding a subdivision to read: 
310.30     Subd. 28.  [REPORTABLE TRANSACTION UNDERSTATEMENT.] (a) If 
310.31  a taxpayer has a reportable transaction understatement for any 
310.32  taxable year, an amount equal to 20 percent of the amount of the 
310.33  understatement must be added to the tax. 
310.34     (b)(1) For purposes of this subdivision, "reportable 
310.35  transaction understatement" means the product of: 
310.36     (i) the amount of the increase, if any, in taxable income 
311.1   that results from a difference between the proper tax treatment 
311.2   of an item to which this section applies and the taxpayer's 
311.3   treatment of that item as shown on the taxpayer's tax return; 
311.4   and 
311.5      (ii) the highest rate of tax imposed on the taxpayer under 
311.6   section 290.06. 
311.7      (2) For purposes of clause (1)(i), any reduction of the 
311.8   excess of deductions allowed for the taxable year over gross 
311.9   income for that year, and any reduction in the amount of capital 
311.10  losses which would, without regard to section 1211 of the 
311.11  Internal Revenue Code, be allowed for that year, must be treated 
311.12  as an increase in taxable income. 
311.13     (c) This subdivision applies to any item that is 
311.14  attributable to: 
311.15     (1) any listed transaction under section 289A.121; and 
311.16     (2) any reportable transaction, other than a listed 
311.17  transaction, if a significant purpose of that transaction is the 
311.18  avoidance or evasion of federal income tax liability.  
311.19     (d) The penalty imposed by this subdivision is in addition 
311.20  to any penalty imposed under this section. 
311.21     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
311.22  years beginning after December 31, 2000. 
311.23     Sec. 11.  Minnesota Statutes 2004, section 289A.60, is 
311.24  amended by adding a subdivision to read: 
311.25     Subd. 29.  [ADDITION TO TAX.] (a) If a taxpayer has been 
311.26  contacted by the commissioner regarding the use of a potentially 
311.27  abusive tax shelter and has a deficiency, there must be added to 
311.28  the tax an amount equal to 100 percent of the interest payable 
311.29  under section 270.75 for the period beginning on the last date 
311.30  prescribed by law for the payment of that tax, determined 
311.31  without regard to extensions, and ending on the date the notice 
311.32  of proposed assessment is mailed. 
311.33     (b) "Potentially abusive tax shelter" means: 
311.34     (1) any tax shelter, as defined in section 6111 of the 
311.35  Internal Revenue Code, for which registration is required under 
311.36  section 289A.121; or 
312.1      (2) any entity, investment plan or arrangement, or other 
312.2   plan or arrangement which is of a type that the Secretary of the 
312.3   Treasury determines by regulations as having a potential for tax 
312.4   avoidance or evasion. 
312.5      (c) The penalty imposed by this subdivision is in addition 
312.6   to any other penalty imposed under this section and to the 
312.7   interest computation for purposes of section 270.75. 
312.8      <b>[EFFECTIVE DATE.]</b> This section is effective for notices of 
312.9   proposed assessments mailed after the day following final 
312.10  enactment. 
312.11     Sec. 12.  Minnesota Statutes 2004, section 289A.60, is 
312.12  amended by adding a subdivision to read: 
312.13     Subd. 30.  [AUTHORITY TO ABATE TAX SHELTER PENALTIES.] (a) 
312.14  Notwithstanding section 270.07, the commissioner may abate all 
312.15  or any portion of any penalty imposed by subdivisions 20, 20a, 
312.16  and 26 to 29 for any violation, only if all of the following 
312.17  apply: 
312.18     (1) the violation is for a reportable transaction, other 
312.19  than a listed transaction, as defined under Code of Federal 
312.20  Regulations, title 26, section 6011-4; 
312.21     (2) the person on whom the penalty is imposed has a history 
312.22  of complying with the requirements of this chapter and chapter 
312.23  290; 
312.24     (3) the violation is due to an unintentional mistake of 
312.25  fact; 
312.26     (4) imposing the penalty would be against equity and good 
312.27  conscience; and 
312.28     (5) abating the penalty would promote compliance with the 
312.29  requirements of chapter 290. 
312.30     (b) The exercise of authority under paragraph (a) is at the 
312.31  sole discretion of the commissioner and may not be delegated.  
312.32  Notwithstanding any other law or rule, a determination under 
312.33  this subdivision may not be reviewed in any administrative or 
312.34  judicial proceeding. 
312.35     Sec. 13.  Minnesota Statutes 2004, section 289A.60, is 
312.36  amended by adding a subdivision to read: 
313.1      Subd. 31.  [INTEREST COMPUTATION.] For an amended return 
313.2   filed after December 31, 2005, and before the taxpayer is 
313.3   contacted by the Internal Revenue Service or the commissioner 
313.4   regarding a potentially abusive tax shelter, then, for taxable 
313.5   years beginning after December 31, 2001, with respect to any 
313.6   understatement of tax related to using reportable transactions 
313.7   as defined in section 289A.121, the taxpayer is subject to 
313.8   interest at a rate of 150 percent of the applicable rate under 
313.9   section 270.75. 
313.10     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
313.11  years beginning after December 31, 2005. 
313.12     Sec. 14.  [VOLUNTARY COMPLIANCE INITIATIVE.] 
313.13     Subdivision 1.  [ESTABLISHMENT.] The commissioner of 
313.14  revenue shall establish and administer a voluntary compliance 
313.15  initiative for taxpayers subject to Minnesota Statutes, section 
313.16  289A.60, subdivision 26, 27, or 28. 
313.17     Subd. 2.  [TIME PERIOD; SCOPE.] (a) The commissioner shall 
313.18  conduct the voluntary compliance initiative from July 1, 2005, 
313.19  to December 31, 2005, under Minnesota Statutes, section 270.07. 
313.20     (b) The voluntary compliance initiative applies to tax 
313.21  liabilities and penalties attributable to an abusive tax 
313.22  avoidance transaction for taxable years beginning before January 
313.23  1, 2005.  An abusive tax avoidance transaction means a listed 
313.24  transaction, a potentially abusive tax shelter, or a reportable 
313.25  transaction as those terms are used in Minnesota Statutes, 
313.26  section 289A.121. 
313.27     Subd. 3.  [ELIGIBILITY.] (a) No person may participate in 
313.28  the voluntary compliance initiative, if: 
313.29     (1) the taxpayer was convicted of a crime in connection 
313.30  with an abusive tax avoidance transaction or transactions; 
313.31     (2) a criminal complaint was filed against the taxpayer in 
313.32  connection with an abusive tax avoidance transaction or 
313.33  transactions; 
313.34     (3) the taxpayer is the subject of a criminal investigation 
313.35  in connection with an abusive tax avoidance transaction or 
313.36  transactions; or 
314.1      (4) the taxpayer was eligible to participate in the 
314.2   Internal Revenue Service's Offshore Voluntary Compliance 
314.3   Initiative, as set forth in Revenue Procedure 2003-11. 
314.4      (b) A person not disqualified under paragraph (a) may 
314.5   participate in the voluntary compliance initiative. 
314.6      Subd. 4.  [ELECTION; COMMISSIONER AUTHORITY.] (a) An 
314.7   eligible taxpayer that meets the requirements of subdivision 3 
314.8   with respect to any taxable year may elect to participate in the 
314.9   voluntary compliance program under either subdivision 5 or 6 for 
314.10  a particular tax avoidance period.  The election must be made 
314.11  separately for each taxable year and in the form and manner 
314.12  prescribed by the commissioner, and once made is irrevocable. 
314.13     (b) The commissioner of revenue may issue forms and 
314.14  instructions and take other actions necessary, including the use 
314.15  of agreements under Minnesota Statutes, section 270.67, to 
314.16  implement the voluntary compliance initiative. 
314.17     Subd. 5.  [PARTICIPATION WITHOUT RIGHT OF APPEAL.] (a) A 
314.18  person participating in the voluntary compliance initiative 
314.19  under this subdivision waives the right to an administrative 
314.20  appeal, to a claim for refund, or to file an action in district 
314.21  court or tax court.  The person participating must: 
314.22     (1) file an amended return for each taxable year for which 
314.23  the taxpayer has filed a tax return using an abusive tax 
314.24  avoidance transaction to underreport the taxpayer's tax 
314.25  liability for the taxable year.  Each amended return must report 
314.26  all income from all sources, without regard to the abusive tax 
314.27  avoidance transactions; and 
314.28     (2) pay taxes and interest due in full, except that the 
314.29  commissioner of revenue may enter into an installment payment 
314.30  agreement under Minnesota Statutes, section 270.67, before the 
314.31  taxpayer files an amended return. 
314.32     (b) The commissioner of revenue shall abate all penalties 
314.33  imposed under Minnesota Statutes, chapter 289A, which could have 
314.34  been assessed in connection with the use of an abusive tax 
314.35  avoidance transaction, for each taxable year for which the 
314.36  taxpayer elects to participate in the voluntary compliance 
315.1   initiative under this subdivision, to the extent those penalties 
315.2   are a result of underreporting of tax liabilities attributable 
315.3   to the use of abusive tax avoidance transactions, for which a 
315.4   participating person files an amended return in compliance with 
315.5   paragraph (a). 
315.6      (c) No criminal action must be brought against a taxpayer 
315.7   for the taxable years reported under the voluntary compliance 
315.8   initiative with respect to the issues for which a taxpayer 
315.9   voluntarily complies under this chapter. 
315.10     (d) A person filing an amended return under this 
315.11  subdivision of the voluntary compliance initiative may not file 
315.12  a claim for refund, an administrative appeal, or an action in 
315.13  district court with regard to the amount of taxes or interest 
315.14  paid with the amended return.  Nothing in this subdivision 
315.15  precludes a taxpayer from filing a claim for credit or refund 
315.16  for the same taxable year in which a tax avoidance transaction 
315.17  was reported if the credit or refund is not attributable to the 
315.18  tax avoidance transaction. 
315.19     Subd. 6.  [PARTICIPATION WITH RIGHT OF APPEAL.] (a) A 
315.20  person participating in the voluntary compliance initiative who 
315.21  does not waive the right to an administrative appeal, a claim 
315.22  for refund, or an action in district court must: 
315.23     (1) file an amended return for each taxable year for which 
315.24  the taxpayer has filed a tax return using an abusive tax 
315.25  avoidance transaction to underreport the taxpayer's tax 
315.26  liability for that taxable year.  Each amended return must 
315.27  report all income from all sources, without regard to the 
315.28  abusive tax avoidance transactions; and 
315.29     (2) pay taxes and interest due in full, except that the 
315.30  commissioner of revenue may enter into an installment payment 
315.31  agreement pursuant to Minnesota Statutes, section 270.67, prior 
315.32  to the taxpayer filing an amended return. 
315.33     (b) The commissioner of revenue shall abate all penalties 
315.34  imposed under Minnesota Statutes, chapter 289A, except for the 
315.35  penalty for substantial understatement of tax liability under 
315.36  Minnesota Statutes, section 289A.60, subdivision 4, determined 
316.1   without regard to paragraph (e) of that section, which could 
316.2   have been assessed in connection with the use of an abusive tax 
316.3   avoidance transaction, for each taxable year for which the 
316.4   taxpayer elects to participate in the voluntary compliance 
316.5   initiative under this subdivision, to the extent those penalties 
316.6   apply to underreporting of tax liabilities attributable to the 
316.7   use of abusive tax avoidance transactions for which a 
316.8   participating person files an amended return in compliance with 
316.9   paragraph (a). 
316.10     (c) No criminal action must be brought against a taxpayer 
316.11  for the taxable years reported under the voluntary compliance 
316.12  initiative with respect to the issues for which a taxpayer 
316.13  voluntarily complies under this chapter. 
316.14     (d) The taxpayer may file a claim for refund, an 
316.15  administrative appeal, or an action in district court only after 
316.16  the earlier of the following occurs: 
316.17     (1) the date the commissioner of revenue takes action on 
316.18  the claim for refund for the taxable year; 
316.19     (2) the later of: 
316.20     (i) 180 days after the date of a final determination by the 
316.21  Internal Revenue Service with respect to the transaction or 
316.22  transactions to which Minnesota Statutes, chapter 290, applies; 
316.23  or 
316.24     (ii) four years after the date the claim for refund was 
316.25  filed, or one year after full payment of all tax was made, 
316.26  including penalty and interest, whichever is later. 
316.27     (e)(1) The taxpayer is subject to the substantial 
316.28  understatement penalty under Minnesota Statutes, section 
316.29  289A.60, subdivision 4.  The penalty may be assessed: 
316.30     (i) when the commissioner of revenue takes action on the 
316.31  claim for refund; or 
316.32     (ii) when a federal determination becomes final for the 
316.33  same issue, in which case the penalty must be assessed, and may 
316.34  not be abated, if the penalty was assessed at the federal level. 
316.35     (2) In determining the amount of the underpayment of tax, 
316.36  Code of Federal Regulations, title 26, section 1.6664-2(c)(2), 
317.1   relating to qualified amended returns, applies.  The 
317.2   underpayment is the difference between the amount of tax on the 
317.3   original return and the correct amount of tax for the taxable 
317.4   year.  The underpayment must not be less than the amount of the 
317.5   claim for refund filed by the taxpayer under paragraph (d) that 
317.6   was denied. 
317.7      (3) The penalty is due and payable upon notice and demand 
317.8   by the commissioner of revenue.  Only after the taxpayer has 
317.9   paid all amounts due, including the penalty, and the claim is 
317.10  denied in whole or in part, may the taxpayer file an appeal 
317.11  under Minnesota Statutes, section 270.07, in conjunction with 
317.12  the appeal filed under paragraph (d). 
317.13     Subd. 7.  [COMMISSIONER ORDERS AND PENALTIES.] After 
317.14  December 31, 2005, the commissioner of revenue may issue an 
317.15  order of assessment within the time period permitted under 
317.16  Minnesota Statutes, section 289A.38, upon an amended return 
317.17  filed under this section for an underreported amount of tax, may 
317.18  impose penalties on an underreported amount of tax on an amended 
317.19  return filed under this chapter, or seek initiation of a 
317.20  criminal action against any person based on any underreported 
317.21  amount of tax on an amended return filed under this chapter. 
317.22     Subd. 8.  [PENALTY RELIEF; EXCEPTION.] For purposes of this 
317.23  section, if the commissioner subsequently determines that the 
317.24  correct amount of Minnesota income tax was not paid for the 
317.25  taxable year for a participant in the voluntary compliance 
317.26  initiative, then the penalty relief under this section does not 
317.27  apply to any portion of the underpayment attributable to a tax 
317.28  avoidance transaction not paid to the state. 
317.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
317.30  following final enactment. 
317.31     Sec. 15.  [APPROPRIATION.] 
317.32     For purposes of administering the voluntary compliance 
317.33  initiative and the tax shelter registration and compliance 
317.34  provisions of this act, $....... is appropriated from the 
317.35  general fund for fiscal year 2006 and $....... for fiscal year 
317.36  2007 to the commissioner of revenue.  $....... is added to the 
318.1   base budget. 
318.2                              ARTICLE 11
318.3                            MISCELLANEOUS 
318.4      Section 1.  [15.60] [PUBLIC SAFETY OFFICERS; AMERICAN 
318.5   FLAG.] 
318.6      (a) A public employer may not forbid a peace officer or 
318.7   firefighter from wearing a patch or pin depicting the flag of 
318.8   the United States of America on the employee's uniform, 
318.9   according to customary and standard flag etiquette.  However, a 
318.10  public employer may limit the size of a flag patch worn on a 
318.11  uniform to no more than three inches by five inches. 
318.12     (b) For purposes of this section: 
318.13     (1) "peace officer" has the meaning given in section 
318.14  626.84, subdivision 1, paragraph (c) or (f); 
318.15     (2) "firefighter" means a person as defined in section 
318.16  299A.41, subdivision 4, clause (3) or (4); and 
318.17     (3) "public employer" has the meaning given in section 
318.18  179A.03, subdivision 15, and also includes a municipal fire 
318.19  department and an independent nonprofit firefighting corporation.
318.20     (c) The commissioner of finance or the commissioner of 
318.21  revenue must suspend disbursement, not to exceed $10,000, of any 
318.22  state appropriation or aid to any public employer whom the 
318.23  commissioner determines is not complying with paragraph (a) 
318.24  until the commissioner determines that the employer is in 
318.25  compliance. 
318.26     Sec. 2.  Minnesota Statutes 2004, section 16D.10, is 
318.27  amended to read: 
318.28     16D.10 [CASE REVIEWER.] 
318.29     Subdivision 1.  [DUTIES.] The commissioner shall make a 
318.30  case reviewer available to debtors.  The reviewer must be 
318.31  available to answer a debtor's questions concerning the 
318.32  collection process and to review the collection activity taken.  
318.33  If the reviewer reasonably believes that the particular action 
318.34  being taken is unreasonable or unfair, the reviewer may make 
318.35  recommendations to the commissioner in regard to the collection 
318.36  action.  
319.1      Subd. 2.  [AUTHORITY TO ISSUE DEBTOR ASSISTANCE ORDER.] On 
319.2   application filed by a debtor with the case reviewer, in the 
319.3   form, manner, and in the time prescribed by the commissioner, 
319.4   and after thorough investigation, the case reviewer may issue a 
319.5   debtor assistance order if, in the determination of the case 
319.6   reviewer, the manner in which the state debt collection laws are 
319.7   being administered is creating or will create an unjust and 
319.8   inequitable result for the debtor.  Debtor assistance orders are 
319.9   governed by the provisions relating to taxpayer assistance 
319.10  orders under section 270.273. 
319.11     Subd. 3.  [TRANSFER OF DUTIES TO TAXPAYER RIGHTS ADVOCATE.] 
319.12  All duties and authority of the case reviewer under subdivisions 
319.13  1 and 2 are transferred to the taxpayer rights advocate. 
319.14     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
319.15  following final enactment. 
319.16     Sec. 3.  Minnesota Statutes 2004, section 270.02, 
319.17  subdivision 3, is amended to read: 
319.18     Subd. 3.  [POWERS, ORGANIZATION, ASSISTANTS.] Subject to 
319.19  the provisions of this chapter and other applicable laws the 
319.20  commissioner shall have power to organize the department with 
319.21  such divisions and other agencies as the commissioner deems 
319.22  necessary and to appoint one deputy commissioner, a department 
319.23  secretary, directors of divisions, and such other officers, 
319.24  employees, and agents as the commissioner may deem necessary to 
319.25  discharge the functions of the department, define the duties of 
319.26  such officers, employees, and agents, and delegate to them any 
319.27  of the commissioner's powers or duties, subject to the 
319.28  commissioner's control and under such conditions as the 
319.29  commissioner may prescribe.  Appointments to exercise delegated 
319.30  power to sign documents which require the signature of the 
319.31  commissioner or a delegate by law shall be by written order 
319.32  filed with the secretary of state.  The delegations of authority 
319.33  granted by the commissioner remain in effect until revoked by 
319.34  the commissioner or a successor commissioner. 
319.35     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
319.36  following final enactment. 
320.1      Sec. 4.  Minnesota Statutes 2004, section 270.30, 
320.2   subdivision 1, is amended to read: 
320.3      Subdivision 1.  [SCOPE.] (a) This section applies to a 
320.4   person who offers, provides, or facilitates the provision of 
320.5   refund anticipation loans, as part of or in connection with the 
320.6   provision of tax preparation services. 
320.7      (b) This section does not apply to: 
320.8      (1) a tax preparer who provides tax preparation services 
320.9   for fewer than six clients in a calendar year; 
320.10     (2) the provision by a person of tax preparation services 
320.11  to a spouse, parent, grandparent, child, or sibling; and 
320.12     (3) the provision of services by an employee for an 
320.13  employer. 
320.14     Sec. 5.  Minnesota Statutes 2004, section 270.30, 
320.15  subdivision 5, is amended to read: 
320.16     Subd. 5.  [ITEMIZED BILL REQUIRED.] A tax preparer must 
320.17  provide an itemized statement of the charges for services, at 
320.18  least separately stating the charges for: 
320.19     (1) return preparation; and 
320.20     (2) electronic filing; and 
320.21     (3) providing or facilitating a refund anticipation loan. 
320.22     Sec. 6.  Minnesota Statutes 2004, section 270.30, is 
320.23  amended by adding a subdivision to read: 
320.24     Subd. 5a.  [NONGAME WILDLIFE CHECKOFF.] A tax preparer must 
320.25  give written notice of the option to contribute $1 or more to 
320.26  the nongame wildlife management account in section 290.431 to 
320.27  corporate clients that file an income tax return and to 
320.28  individual clients who file an income tax return or property tax 
320.29  refund claim form.  This notification must: 
320.30     (1) include information on the nongame wildlife management 
320.31  account, that the contribution may be made by adding to the tax 
320.32  or deducting from the refund that would otherwise be payable by 
320.33  or to that individual or corporation, and that a contribution 
320.34  would be paid into an account established for the management of 
320.35  nongame wildlife; and 
320.36     (2) be included with information sent to the client at the 
321.1   same time as the preliminary worksheets or other documents used 
321.2   in preparing the client's return and must include a line for 
321.3   displaying contributions. 
321.4      <b>[EFFECTIVE DATE.]</b> This section is effective for returns 
321.5   prepared for taxable years beginning after December 31, 2004. 
321.6      Sec. 7.  Minnesota Statutes 2004, section 270.30, 
321.7   subdivision 6, is amended to read: 
321.8      Subd. 6.  [ENFORCEMENT; PENALTIES.] The commissioner may 
321.9   impose an administrative penalty of not more than $1,000 per 
321.10  violation of subdivision 3, 4, or 5.  The commissioner may 
321.11  terminate a tax preparer's authority to transmit returns 
321.12  electronically to the state, if the commissioner determines the 
321.13  tax preparer engaged in a pattern and practice of violating this 
321.14  section.  Imposition of a penalty under this subdivision is 
321.15  subject to the contested case procedure under chapter 14.  The 
321.16  commissioner shall collect the penalty in the same manner as the 
321.17  income tax.  Penalties imposed under this subdivision are public 
321.18  data. 
321.19     Sec. 8.  Minnesota Statutes 2004, section 270.30, is 
321.20  amended by adding a subdivision to read: 
321.21     Subd. 6a.  [EXCHANGE OF DATA; STATE BOARD OF 
321.22  ACCOUNTANCY.] The State Board of Accountancy shall refer to the 
321.23  commissioner complaints it receives about tax preparers who are 
321.24  not subject to the jurisdiction of the State Board of 
321.25  Accountancy and who are alleged to have violated the provisions 
321.26  of subdivisions 3 to 5.  
321.27     Sec. 9.  Minnesota Statutes 2004, section 270.30, is 
321.28  amended by adding a subdivision to read: 
321.29     Subd. 6b.  [EXCHANGE OF DATA; LAWYERS BOARD OF PROFESSIONAL 
321.30  RESPONSIBILITY.] The Lawyers Board of Professional 
321.31  Responsibility may refer to the commissioner complaints it 
321.32  receives about tax preparers who are not subject to its 
321.33  jurisdiction and who are alleged to have violated the provisions 
321.34  of subdivisions 3 to 5. 
321.35     Sec. 10.  Minnesota Statutes 2004, section 270.30, is 
321.36  amended by adding a subdivision to read: 
322.1      Subd. 6c.  [EXCHANGE OF DATA; COMMISSIONER.] The 
322.2   commissioner shall refer complaints about tax preparers who are 
322.3   alleged to have violated the provisions of subdivisions 3 to 5 
322.4   to: 
322.5      (1) the State Board of Accountancy, if the tax preparer is 
322.6   under its jurisdiction; and 
322.7      (2) the Lawyers Board of Professional Responsibility, if 
322.8   the tax preparer is under its jurisdiction. 
322.9      Sec. 11.  Minnesota Statutes 2004, section 270.30, is 
322.10  amended by adding a subdivision to read: 
322.11     Subd. 6d.  [DATA PRIVATE.] Information exchanged on 
322.12  individuals under subdivisions 6a to 6c are private data under 
322.13  section 13.02, subdivision 12, until such time as a penalty is 
322.14  imposed as provided in section 326A.08 or by the Lawyers Board 
322.15  of Professional Responsibility. 
322.16     Sec. 12.  Minnesota Statutes 2004, section 270.30, 
322.17  subdivision 8, is amended to read: 
322.18     Subd. 8.  [EXEMPTIONS; ENFORCEMENT PROVISIONS.] (a) The 
322.19  provisions of subdivisions 6 and 7 this section, except for 
322.20  subdivision 4, do not apply to: 
322.21     (1) an attorney admitted to practice under section 481.01; 
322.22     (2) a certified public accountant holding a certificate 
322.23  under section 326A.04 or a person issued a permit to practice 
322.24  under section 326A.05 or other person who is subject to the 
322.25  jurisdiction of the State Board of Accountancy; 
322.26     (3) a person designated as a registered accounting 
322.27  practitioner under Minnesota Rules, part 1105.6600, or a 
322.28  registered accounting practitioner firm issued a permit under 
322.29  Minnesota Rules, part 1105.7100; 
322.30     (4) an enrolled agent who has passed the special enrollment 
322.31  examination administered by the Internal Revenue Service; and 
322.32     (5) (4) any fiduciary, or the regular employees of a 
322.33  fiduciary, while acting on behalf of the fiduciary estate, the 
322.34  testator, trustor, grantor, or beneficiaries of them; 
322.35     (5) a tax preparer who provides tax preparation services 
322.36  for fewer than six clients in a calendar year; 
323.1      (6) tax preparation services to a spouse, parent, 
323.2   grandparent, child, or sibling of the tax preparer; and 
323.3      (7) the preparation by an employee of the tax return of the 
323.4   employee's employer. 
323.5      Sec. 13.  [270.301] [PUBLICATION OF NAMES OF TAX PREPARERS 
323.6   SUBJECT TO PENALTIES.] 
323.7      Subdivision 1.  [PUBLICATION OF LIST.] Notwithstanding any 
323.8   other law, the commissioner must publish as provided in this 
323.9   section a list or lists of tax preparers subject to penalties. 
323.10     Subd. 2.  [REQUIRED AND EXCLUDED TAX PREPARERS.] (a) 
323.11  Subject to the limitations of paragraph (b), the commissioner 
323.12  must publish lists of tax preparers who have been convicted 
323.13  under section 289A.63. 
323.14     (b) For the purposes of this section, tax preparers are not 
323.15  subject to publication if: 
323.16     (1) an administrative or court action contesting the 
323.17  penalty has been filed or served and is unresolved at the time 
323.18  when notice would be given under subdivision 3; 
323.19     (2) an appeal period to contest the penalty has not 
323.20  expired; or 
323.21     (3) the commissioner has been notified that the tax 
323.22  preparer is deceased. 
323.23     Subd. 3.  [NOTICE TO TAX PREPARER.] (a) At least 30 days 
323.24  before publishing the name of a tax preparer subject to penalty, 
323.25  the commissioner shall mail a written notice to the tax 
323.26  preparer, detailing the amount and nature of each penalty and 
323.27  the intended publication of the information listed in 
323.28  subdivision 4 related to the penalty.  The notice must be mailed 
323.29  by first class and certified mail addressed to the last known 
323.30  address of the tax preparer.  The notice must include 
323.31  information regarding the exceptions listed in subdivision 2, 
323.32  paragraph (b), and must state that the tax preparer's 
323.33  information will not be published if the tax preparer provides 
323.34  information establishing that subdivision 2, paragraph (b), 
323.35  prohibits publication of the tax preparer's name. 
323.36     (b) Thirty days after the notice is mailed and if the tax 
324.1   preparer has not proved to the commissioner that subdivision 2, 
324.2   paragraph (b), prohibits publication, the commissioner may 
324.3   publish in a list of tax preparers subject to penalty the 
324.4   information about the tax preparer that is listed in subdivision 
324.5   4. 
324.6      Subd. 4.  [FORM OF LIST.] The list may be published by any 
324.7   medium or method.  The list must contain the name, associated 
324.8   business name or names, address or addresses, and violation or 
324.9   violations for which a penalty was imposed of each tax preparer 
324.10  subject to penalty. 
324.11     Subd. 5.  [REMOVAL FROM LIST.] The commissioner shall 
324.12  remove the name of a tax preparer from the list of tax preparers 
324.13  published under this section: 
324.14     (1) when the commissioner determines that the name was 
324.15  included on the list in error; 
324.16     (2) within 90 days after the preparer has fully paid all 
324.17  fines imposed, served any suspension, and demonstrated to the 
324.18  satisfaction of the commissioner that the preparer has 
324.19  successfully completed any remedial actions required by the 
324.20  commissioner, the State Board of Accountancy, or the Lawyers 
324.21  Board of Professional Responsibility; or 
324.22     (3) when the commissioner has been notified that the tax 
324.23  preparer is deceased. 
324.24     Subd. 6.  [NAMES PUBLISHED IN ERROR.] If the commissioner 
324.25  publishes a name under subdivision 1 in error, the tax preparer 
324.26  whose name was erroneously published has a right to request a 
324.27  retraction and apology.  If the tax preparer so requests, the 
324.28  commissioner shall publish a retraction and apology 
324.29  acknowledging that the tax preparer's name was published in 
324.30  error.  The retraction and apology must appear in the same 
324.31  medium and the same format as the original list that contained 
324.32  the name listed in error. 
324.33     Subd. 7.  [PAYMENT OF DAMAGES.] Actions against the 
324.34  commissioner of revenue or the state of Minnesota arising out of 
324.35  the implementation of this program must be brought under section 
324.36  270.276. 
325.1      <b>[EFFECTIVE DATE.]</b> The provision of this section requiring 
325.2   the commissioner to publish the names of tax preparers applies 
325.3   only to publishing the names of those tax preparers who commit a 
325.4   crime under section 289A.63 on or after August 1, 2005. 
325.5      Sec. 14.  Minnesota Statutes 2004, section 270.65, is 
325.6   amended to read: 
325.7      270.65 [DATE OF ASSESSMENT; DEFINITION.] 
325.8      For purposes of taxes administered by the commissioner, the 
325.9   term "date of assessment" means the date a liability reported on 
325.10  a return was entered into the records of the commissioner or the 
325.11  date a return should have been filed, whichever is later; or, in 
325.12  the case of taxes determined by the commissioner, "date of 
325.13  assessment" means the date of the order assessing taxes or date 
325.14  of the return made by the commissioner; or, in the case of an 
325.15  amended return filed by the taxpayer, the assessment date is the 
325.16  date additional liability reported on the return, if any, was 
325.17  entered into the records of the commissioner; or, in the case of 
325.18  a consent agreement signed by the taxpayer under section 270.67, 
325.19  subdivision 3, the assessment date is the notice date shown on 
325.20  the agreement; or, in the case of a check from a taxpayer that 
325.21  is dishonored and results in an erroneous refund being given to 
325.22  the taxpayer, remittance of the check is deemed to be an 
325.23  assessment and the "date of assessment" is the date the check 
325.24  was received by the commissioner. 
325.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
325.26  following final enactment. 
325.27     Sec. 15.  Minnesota Statutes 2004, section 270.67, 
325.28  subdivision 4, is amended to read: 
325.29     Subd. 4.  [OFFER-IN-COMPROMISE AND INSTALLMENT PAYMENT 
325.30  PROGRAM.] (a) In implementing the authority provided in 
325.31  subdivision 2 or in sections 8.30 and 16D.15 to accept offers of 
325.32  installment payments or offers-in-compromise of tax liabilities, 
325.33  the commissioner of revenue shall prescribe guidelines for 
325.34  employees of the Department of Revenue to determine whether an 
325.35  offer-in-compromise or an offer to make installment payments is 
325.36  adequate and should be accepted to resolve a dispute.  In 
326.1   prescribing the guidelines, the commissioner shall develop and 
326.2   publish schedules of national and local allowances designed to 
326.3   provide that taxpayers entering into a compromise or payment 
326.4   agreement have an adequate means to provide for basic living 
326.5   expenses.  The guidelines must provide that the taxpayer's 
326.6   ownership interest in a motor vehicle, to the extent of the 
326.7   value allowed in section 550.37, will not be considered as an 
326.8   asset; in the case of an offer related to a joint tax liability 
326.9   of spouses, that value of two motor vehicles must be excluded.  
326.10  The guidelines must provide that employees of the department 
326.11  shall determine, on the basis of the facts and circumstances of 
326.12  each taxpayer, whether the use of the schedules is appropriate 
326.13  and that employees must not use the schedules to the extent the 
326.14  use would result in the taxpayer not having adequate means to 
326.15  provide for basic living expenses.  The guidelines must provide 
326.16  that: 
326.17     (1) an employee of the department shall not reject an 
326.18  offer-in-compromise or an offer to make installment payments 
326.19  from a low-income taxpayer solely on the basis of the amount of 
326.20  the offer; and 
326.21     (2) in the case of an offer-in-compromise which relates 
326.22  only to issues of liability of the taxpayer: 
326.23     (i) the offer must not be rejected solely because the 
326.24  commissioner is unable to locate the taxpayer's return or return 
326.25  information for verification of the liability; and 
326.26     (ii) the taxpayer shall not be required to provide an 
326.27  audited, reviewed, or compiled financial statement. 
326.28     (b) The commissioner shall establish procedures: 
326.29     (1) that require presentation of a counteroffer or a 
326.30  written rejection of the offer by the commissioner if the amount 
326.31  offered by the taxpayer in an offer-in-compromise or an offer to 
326.32  make installment payments is not accepted by the commissioner; 
326.33     (2) for an administrative review of any written rejection 
326.34  of a proposed offer-in-compromise or installment agreement made 
326.35  by a taxpayer under this section before the rejection is 
326.36  communicated to the taxpayer; 
327.1      (3) that allow a taxpayer to request reconsideration of any 
327.2   written rejection of the offer or agreement to the commissioner 
327.3   of revenue to determine whether the rejection is reasonable and 
327.4   appropriate under the circumstances; and 
327.5      (4) that provide for notification to the taxpayer when an 
327.6   offer-in-compromise has been accepted, and issuance of 
327.7   certificates of release of any liens imposed under section 
327.8   270.69 related to the liability which is the subject of the 
327.9   compromise. 
327.10     (c) Each compromise proposal must be accompanied by a 
327.11  nonrefundable payment of $250.  If the compromise proposal is 
327.12  accepted, the payment must be applied to the accepted compromise 
327.13  amount.  If the compromise is rejected, the payment must be 
327.14  applied to the outstanding tax debts of the taxpayer pursuant to 
327.15  section 270.652.  In cases of financial hardship, upon 
327.16  presentation of information establishing an inability to make 
327.17  the $250 payment, the commissioner may waive this requirement. 
327.18     <b>[EFFECTIVE DATE.]</b> This section is effective for offers in 
327.19  compromise submitted after August 31, 2005. 
327.20     Sec. 16.  Minnesota Statutes 2004, section 270.69, 
327.21  subdivision 4, is amended to read: 
327.22     Subd. 4.  [PERIOD OF LIMITATIONS.] The lien imposed by this 
327.23  section shall, notwithstanding any other provision of law to the 
327.24  contrary, be enforceable from the time the lien arises and for 
327.25  ten years from the date of filing the notice of lien, which must 
327.26  be filed by the commissioner within five years after the date of 
327.27  assessment of the tax or final administrative or judicial 
327.28  determination of the assessment.  A notice of lien filed in one 
327.29  county may be transcribed to the secretary of state or to any 
327.30  other county within ten years after the date of its filing, but 
327.31  the transcription shall not extend the period during which the 
327.32  lien is enforceable.  A notice of lien may be renewed by the 
327.33  commissioner before the expiration of the ten-year period for an 
327.34  additional ten years.  The taxpayer must receive written notice 
327.35  of the renewal. 
327.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
328.1   following final enactment. 
328.2      Sec. 17.  Minnesota Statutes 2004, section 270A.03, 
328.3   subdivision 5, is amended to read: 
328.4      Subd. 5.  [DEBT.] "Debt" means a legal obligation of a 
328.5   natural person to pay a fixed and certain amount of money, which 
328.6   equals or exceeds $25 and which is due and payable to a claimant 
328.7   agency.  The term includes criminal fines imposed under section 
328.8   609.10 or 609.125, fines imposed for petty misdemeanors as 
328.9   defined in section 609.02, subdivision 4a, and restitution.  The 
328.10  term also includes the co-payment for the appointment of a 
328.11  district public defender imposed under section 611.17, paragraph 
328.12  (c).  A debt may arise under a contractual or statutory 
328.13  obligation, a court order, or other legal obligation, but need 
328.14  not have been reduced to judgment.  
328.15     A debt includes any legal obligation of a current recipient 
328.16  of assistance which is based on overpayment of an assistance 
328.17  grant where that payment is based on a client waiver or an 
328.18  administrative or judicial finding of an intentional program 
328.19  violation; or where the debt is owed to a program wherein the 
328.20  debtor is not a client at the time notification is provided to 
328.21  initiate recovery under this chapter and the debtor is not a 
328.22  current recipient of food support, transitional child care, or 
328.23  transitional medical assistance. 
328.24     A debt does not include any legal obligation to pay a 
328.25  claimant agency for medical care, including hospitalization if 
328.26  the income of the debtor at the time when the medical care was 
328.27  rendered does not exceed the following amount: 
328.28     (1) for an unmarried debtor, an income of $8,800 or less; 
328.29     (2) for a debtor with one dependent, an income of $11,270 
328.30  or less; 
328.31     (3) for a debtor with two dependents, an income of $13,330 
328.32  or less; 
328.33     (4) for a debtor with three dependents, an income of 
328.34  $15,120 or less; 
328.35     (5) for a debtor with four dependents, an income of $15,950 
328.36  or less; and 
329.1      (6) for a debtor with five or more dependents, an income of 
329.2   $16,630 or less.  
329.3      The income amounts in this subdivision shall be adjusted 
329.4   for inflation for debts incurred in calendar years 2001 and 
329.5   thereafter.  The dollar amount of each income level that applied 
329.6   to debts incurred in the prior year shall be increased in the 
329.7   same manner as provided in section 1(f) of the Internal Revenue 
329.8   Code of 1986, as amended through December 31, 2000, except that 
329.9   for the purposes of this subdivision the percentage increase 
329.10  shall be determined from the year starting September 1, 1999, 
329.11  and ending August 31, 2000, as the base year for adjusting for 
329.12  inflation for debts incurred after December 31, 2000. 
329.13     Debt also includes an agreement to pay a MinnesotaCare 
329.14  premium, regardless of the dollar amount of the premium 
329.15  authorized under section 256L.15, subdivision 1a. 
329.16     Sec. 18.  Minnesota Statutes 2004, section 270A.03, 
329.17  subdivision 7, is amended to read: 
329.18     Subd. 7.  [REFUND.] "Refund" means an individual income tax 
329.19  refund or political contribution refund, pursuant to chapter 
329.20  290, or a property tax credit or refund, pursuant to chapter 
329.21  290A, or a sustainable forest tax payment to a claimant under 
329.22  chapter 290C.  
329.23     For purposes of this chapter, lottery prizes, as set forth 
329.24  in section 349A.08, subdivision 8, and amounts granted to 
329.25  persons by the legislature on the recommendation of the joint 
329.26  senate-house of representatives Subcommittee on Claims shall be 
329.27  treated as refunds. 
329.28     In the case of a joint property tax refund payable to 
329.29  spouses under chapter 290A, the refund shall be considered as 
329.30  belonging to each spouse in the proportion of the total refund 
329.31  that equals each spouse's proportion of the total income 
329.32  determined under section 290A.03, subdivision 3.  In the case of 
329.33  a joint income tax refund under chapter 289A, the refund shall 
329.34  be considered as belonging to each spouse in the proportion of 
329.35  the total refund that equals each spouse's proportion of the 
329.36  total taxable income determined under section 290.01, 
330.1   subdivision 29.  The commissioner shall remit the entire refund 
330.2   to the claimant agency, which shall, upon the request of the 
330.3   spouse who does not owe the debt, determine the amount of the 
330.4   refund belonging to that spouse and refund the amount to that 
330.5   spouse.  For court fines, fees, and surcharges and court-ordered 
330.6   restitution under section 611A.04, subdivision 2, the notice 
330.7   provided by the commissioner of revenue under section 270A.07, 
330.8   subdivision 2, paragraph (b), serves as the appropriate legal 
330.9   notice to the spouse who does not owe the debt. 
330.10     <b>[EFFECTIVE DATE.]</b> This section is effective for political 
330.11  contribution refund claims based on contributions made on or 
330.12  after July 1, 2005. 
330.13     Sec. 19.  Minnesota Statutes 2004, section 289A.08, 
330.14  subdivision 16, is amended to read: 
330.15     Subd. 16.  [TAX REFUND OR RETURN PREPARERS; ELECTRONIC 
330.16  FILING; PAPER FILING FEE IMPOSED.] (a) A "tax refund or return 
330.17  preparer," as defined in section 289A.60, subdivision 13, 
330.18  paragraph (g) (h), who prepared more than 500 100 Minnesota 
330.19  individual income tax returns for the prior calendar year must 
330.20  file all Minnesota individual income tax returns prepared for 
330.21  the current calendar year by electronic means. 
330.22     (b) For tax returns prepared for the tax year beginning in 
330.23  2001, the "500" in paragraph (a) is reduced to 250. 
330.24     (c) For tax returns prepared for tax years beginning after 
330.25  December 31, 2001, the "500" in paragraph (a) is reduced to 100. 
330.26     (d) Paragraph (a) does not apply to a return if the 
330.27  taxpayer has indicated on the return that the taxpayer did not 
330.28  want the return filed by electronic means. 
330.29     (e) (c) For each return that is not filed electronically by 
330.30  a tax refund or return preparer under this subdivision, 
330.31  including returns filed under paragraph (d) (b), a paper filing 
330.32  fee of $5 is imposed upon the preparer.  The fee is collected 
330.33  from the preparer in the same manner as income tax.  The fee 
330.34  does not apply to returns that the commissioner requires to be 
330.35  filed in paper form. 
330.36     Sec. 20.  Minnesota Statutes 2004, section 289A.37, 
331.1   subdivision 5, is amended to read: 
331.2      Subd. 5.  [SUFFICIENCY OF NOTICE.] An order of assessment, 
331.3   sent postage prepaid by United States mail to the taxpayer at 
331.4   the taxpayer's last known address, or sent by electronic mail to 
331.5   the taxpayer's last known electronic mailing address as provided 
331.6   for in section 325L.08, is sufficient even if the taxpayer is 
331.7   deceased or is under a legal disability, or, in the case of a 
331.8   corporation, has terminated its existence, unless the department 
331.9   has been provided with a new address by a party authorized to 
331.10  receive notices of assessment. 
331.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
331.12  following final enactment. 
331.13     Sec. 21.  Minnesota Statutes 2004, section 289A.50, 
331.14  subdivision 1, is amended to read: 
331.15     Subdivision 1.  [GENERAL RIGHT TO REFUND.] (a) Subject to 
331.16  the requirements of this section and section 289A.40, a taxpayer 
331.17  who has paid a tax in excess of the taxes lawfully due and who 
331.18  files a written claim for refund will be refunded or credited 
331.19  the overpayment of the tax determined by the commissioner to be 
331.20  erroneously paid.  
331.21     (b) The claim must specify the name of the taxpayer, the 
331.22  date when and the period for which the tax was paid, the kind of 
331.23  tax paid, the amount of the tax that the taxpayer claims was 
331.24  erroneously paid, the grounds on which a refund is claimed, and 
331.25  other information relative to the payment and in the form 
331.26  required by the commissioner.  An income tax, estate tax, or 
331.27  corporate franchise tax return, or amended return claiming an 
331.28  overpayment constitutes a claim for refund.  
331.29     (c) When, in the course of an examination, and within the 
331.30  time for requesting a refund, the commissioner determines that 
331.31  there has been an overpayment of tax, the commissioner shall 
331.32  refund or credit the overpayment to the taxpayer and no demand 
331.33  is necessary.  If the overpayment exceeds $1, the amount of the 
331.34  overpayment must be refunded to the taxpayer.  If the amount of 
331.35  the overpayment is less than $1, the commissioner is not 
331.36  required to refund.  In these situations, the commissioner does 
332.1   not have to make written findings or serve notice by mail to the 
332.2   taxpayer. 
332.3      (d) If the amount allowable as a credit for withholding, 
332.4   estimated taxes, or dependent care exceeds the tax against which 
332.5   the credit is allowable, the amount of the excess is considered 
332.6   an overpayment.  The refund allowed by section 290.06, 
332.7   subdivision 23, is also considered an overpayment.  The 
332.8   requirements of section 270.10, subdivision 1, do not apply to 
332.9   the refunding of such an overpayment shown on the original 
332.10  return filed by a taxpayer. 
332.11     (e) If the entertainment tax withheld at the source exceeds 
332.12  by $1 or more the taxes, penalties, and interest reported in the 
332.13  return of the entertainment entity or imposed by section 
332.14  290.9201, the excess must be refunded to the entertainment 
332.15  entity.  If the excess is less than $1, the commissioner need 
332.16  not refund that amount. 
332.17     (f) If the surety deposit required for a construction 
332.18  contract exceeds the liability of the out-of-state contractor, 
332.19  the commissioner shall refund the difference to the contractor. 
332.20     (g) An action of the commissioner in refunding the amount 
332.21  of the overpayment does not constitute a determination of the 
332.22  correctness of the return of the taxpayer.  
332.23     (h) There is appropriated from the general fund to the 
332.24  commissioner of revenue the amount necessary to pay refunds 
332.25  allowed under this section. 
332.26     <b>[EFFECTIVE DATE.]</b> This section is effective for political 
332.27  contribution refund claims based on contributions made on or 
332.28  after July 1, 2005. 
332.29     Sec. 22.  Minnesota Statutes 2004, section 289A.60, 
332.30  subdivision 2a, is amended to read: 
332.31     Subd. 2a.  [PENALTIES FOR EXTENDED DELINQUENCY.] (a) If an 
332.32  individual income tax is not paid within 180 days after the date 
332.33  of filing of a return or, in the case of taxes assessed by the 
332.34  commissioner, within 180 days after the assessment date or, if 
332.35  appealed, within 180 days after final resolution of the appeal, 
332.36  an extended delinquency penalty of five percent of the tax 
333.1   remaining unpaid is added to the amount due.  
333.2      (b) If a corporate franchise, fiduciary income, mining 
333.3   company, estate, partnership, S corporation, or nonresident 
333.4   entertainer tax return is not filed within 30 days after written 
333.5   demand for the filing of a delinquent return, an extended 
333.6   delinquency penalty of five percent of the tax not paid prior to 
333.7   the demand is added to the tax, or in the case of an individual 
333.8   income tax return, a minimum penalty of $100 or the five percent 
333.9   penalty is imposed, whichever amount is greater. 
333.10     <b>[EFFECTIVE DATE.]</b> This section is effective for returns 
333.11  originally due on or after August 1, 2005. 
333.12     Sec. 23.  Minnesota Statutes 2004, section 289A.60, 
333.13  subdivision 6, is amended to read: 
333.14     Subd. 6.  [PENALTY FOR FAILURE TO FILE, FALSE OR FRAUDULENT 
333.15  RETURN, EVASION.] If a person, with intent to evade or defeat a 
333.16  tax or payment of tax, fails to file a return, files a false or 
333.17  fraudulent return, or attempts in any other manner to evade or 
333.18  defeat a tax or payment of tax, there is imposed on the person a 
333.19  penalty equal to 50 percent of the tax, less amounts paid by the 
333.20  person on the basis of the false or fraudulent return, if any, 
333.21  due for the period to which the return related.  
333.22     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
333.23  following final enactment. 
333.24     Sec. 24.  Minnesota Statutes 2004, section 289A.60, 
333.25  subdivision 11, is amended to read: 
333.26     Subd. 11.  [PENALTIES RELATING TO INFORMATION REPORTS, 
333.27  WITHHOLDING.] (a) When a person required under section 289A.09, 
333.28  subdivision 2, to give a statement to an employee or payee and a 
333.29  duplicate statement to the commissioner, or to give a 
333.30  reconciliation of the statements and quarterly returns to the 
333.31  commissioner, gives a false or fraudulent statement to an 
333.32  employee or payee or a false or fraudulent duplicate statement 
333.33  or reconciliation of statements and quarterly returns to the 
333.34  commissioner, or fails to give a statement or the reconciliation 
333.35  in the manner, when due, and showing the information required by 
333.36  section 289A.09, subdivision 2, or rules prescribed by the 
334.1   commissioner under that section, that person is liable for a 
334.2   penalty of $50 for an act or failure to act.  The total amount 
334.3   imposed on the delinquent person for failures during a calendar 
334.4   year must not exceed $25,000.  
334.5      (b) In addition to any other penalty provided by law, an 
334.6   employee who gives a withholding exemption certificate or a 
334.7   residency affidavit to an employer that the employee has reason 
334.8   to know contains a materially incorrect statement decreases the 
334.9   amount withheld under section 290.92 and as of the time the 
334.10  certificate or affidavit was given to the employer there was no 
334.11  reasonable basis for the statements in the certificate or 
334.12  affidavit is liable to the commissioner of revenue for a penalty 
334.13  of $500 for each instance.  
334.14     (c) In addition to any other penalty provided by law, an 
334.15  employer who fails to submit a copy of a withholding exemption 
334.16  certificate or a residency affidavit required by section 290.92, 
334.17  subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the 
334.18  commissioner of revenue for a penalty of $50 for each instance.  
334.19     (d) An employer or payor who fails to file an application 
334.20  for a withholding account number, as required by section 290.92, 
334.21  subdivision 24, is liable to the commissioner for a penalty of 
334.22  $100.  
334.23     <b>[EFFECTIVE DATE.]</b> This section is effective for 
334.24  certificates and affidavits given to employers after December 
334.25  31, 2005. 
334.26     Sec. 25.  Minnesota Statutes 2004, section 289A.60, 
334.27  subdivision 13, is amended to read: 
334.28     Subd. 13.  [PENALTIES FOR TAX RETURN PREPARERS.] (a) If an 
334.29  understatement of liability with respect to a return or claim 
334.30  for refund is due to a willful attempt in any manner to 
334.31  understate the liability for a tax by a person who is a tax 
334.32  return preparer with respect to the return or claim, the person 
334.33  shall pay to the commissioner a penalty of $500.  If a part of a 
334.34  property tax refund claim is excessive due to a willful attempt 
334.35  in any manner to overstate the claim for relief allowed under 
334.36  chapter 290A by a person who is a tax refund or return preparer, 
335.1   the person shall pay to the commissioner a penalty of $500 with 
335.2   respect to the claim.  These penalties may not be assessed 
335.3   against the employer of a tax return preparer unless the 
335.4   employer was actively involved in the willful attempt to 
335.5   understate the liability for a tax or to overstate the claim for 
335.6   refund.  These penalties are income tax liabilities and may be 
335.7   assessed at any time as provided in section 289A.38, subdivision 
335.8   5. 
335.9      (b) A civil action in the name of the state of Minnesota 
335.10  may be commenced to enjoin any person who is a tax return 
335.11  preparer doing business in this state from further engaging in 
335.12  any conduct described in paragraph (c).  An action under this 
335.13  paragraph must be brought by the attorney general in the 
335.14  district court for the judicial district of the tax return 
335.15  preparer's residence or principal place of business, or in which 
335.16  the taxpayer with respect to whose tax return the action is 
335.17  brought resides.  The court may exercise its jurisdiction over 
335.18  the action separate and apart from any other action brought by 
335.19  the state of Minnesota against the tax return preparer or any 
335.20  taxpayer. 
335.21     (c) In an action under paragraph (b), if the court finds 
335.22  that a tax return preparer has: 
335.23     (1) engaged in any conduct subject to a civil penalty under 
335.24  section 289A.60 or a criminal penalty under section 289A.63; 
335.25     (2) misrepresented the preparer's eligibility to practice 
335.26  before the Department of Revenue, or otherwise misrepresented 
335.27  the preparer's experience or education as a tax return preparer; 
335.28     (3) guaranteed the payment of any tax refund or the 
335.29  allowance of any tax credit; or 
335.30     (4) engaged in any other fraudulent or deceptive conduct 
335.31  that substantially interferes with the proper administration of 
335.32  state tax law, and injunctive relief is appropriate to prevent 
335.33  the recurrence of that conduct, 
335.34  the court may enjoin the person from further engaging in that 
335.35  conduct. 
335.36     (d) If the court finds that a tax return preparer has 
336.1   continually or repeatedly engaged in conduct described in 
336.2   paragraph (c), and that an injunction prohibiting that conduct 
336.3   would not be sufficient to prevent the person's interference 
336.4   with the proper administration of state tax laws, the court may 
336.5   enjoin the person from acting as a tax return preparer.  The 
336.6   court may not enjoin the employer of a tax return preparer for 
336.7   conduct described in paragraph (c) engaged in by one or more of 
336.8   the employer's employees unless the employer was also actively 
336.9   involved in that conduct. 
336.10     (e) The commissioner may terminate or suspend a tax 
336.11  preparer's authority to transmit returns electronically to the 
336.12  state, if the commissioner determines that the tax preparer has 
336.13  engaged in a pattern and practice of conduct in violation of 
336.14  paragraph (a) of this subdivision or has been convicted under 
336.15  section 289A.63. 
336.16     (f) For purposes of this subdivision, the term 
336.17  "understatement of liability" means an understatement of the net 
336.18  amount payable with respect to a tax imposed by state tax law, 
336.19  or an overstatement of the net amount creditable or refundable 
336.20  with respect to a tax.  The determination of whether or not 
336.21  there is an understatement of liability must be made without 
336.22  regard to any administrative or judicial action involving the 
336.23  taxpayer.  For purposes of this subdivision, the amount 
336.24  determined for underpayment of estimated tax under either 
336.25  section 289A.25 or 289A.26 is not considered an understatement 
336.26  of liability. 
336.27     (f) (g) For purposes of this subdivision, the term 
336.28  "overstatement of claim" means an overstatement of the net 
336.29  amount refundable with respect to a claim for property tax 
336.30  relief provided by chapter 290A.  The determination of whether 
336.31  or not there is an overstatement of a claim must be made without 
336.32  regard to administrative or judicial action involving the 
336.33  claimant. 
336.34     (g) (h) For purposes of this section, the term "tax refund 
336.35  or return preparer" means an individual who prepares for 
336.36  compensation, or who employs one or more individuals to prepare 
337.1   for compensation, a return of tax, or a claim for refund of 
337.2   tax.  The preparation of a substantial part of a return or claim 
337.3   for refund is treated as if it were the preparation of the 
337.4   entire return or claim for refund.  An individual is not 
337.5   considered a tax return preparer merely because the individual: 
337.6      (1) gives typing, reproducing, or other mechanical 
337.7   assistance; 
337.8      (2) prepares a return or claim for refund of the employer, 
337.9   or an officer or employee of the employer, by whom the 
337.10  individual is regularly and continuously employed; 
337.11     (3) prepares a return or claim for refund of any person as 
337.12  a fiduciary for that person; or 
337.13     (4) prepares a claim for refund for a taxpayer in response 
337.14  to a tax order issued to the taxpayer. 
337.15     Sec. 26.  Minnesota Statutes 2004, section 290.01, 
337.16  subdivision 6, is amended to read: 
337.17     Subd. 6.  [TAXPAYER.] The term "taxpayer" means any person 
337.18  or corporation subject to a tax imposed by this chapter.  For 
337.19  purposes of section 290.06, subdivision 23, the term "taxpayer" 
337.20  means an individual eligible to vote in Minnesota under section 
337.21  201.014. 
337.22     <b>[EFFECTIVE DATE.]</b> This section is effective for political 
337.23  contribution refund claims based on contributions that are made 
337.24  on or after July 1, 2005. 
337.25     Sec. 27.  Minnesota Statutes 2004, section 290.92, 
337.26  subdivision 1, is amended to read: 
337.27     Subdivision 1.  [DEFINITIONS.] (1)  [WAGES.] For purposes 
337.28  of this section, the term "wages" means the same as that term is 
337.29  defined in section 3401(a) and (f) of the Internal Revenue Code. 
337.30     (2)  [PAYROLL PERIOD.] For purposes of this section the 
337.31  term "payroll period" means a period for which a payment of 
337.32  wages is ordinarily made to the employee by the employee's 
337.33  employer, and the term "miscellaneous payroll period" means a 
337.34  payroll period other than a daily, weekly, biweekly, 
337.35  semimonthly, monthly, quarterly, semiannual, or annual payroll 
337.36  period. 
338.1      (3)  [EMPLOYEE.] For purposes of this section the term 
338.2   "employee" means any resident individual performing services for 
338.3   an employer, either within or without, or both within and 
338.4   without the state of Minnesota, and every nonresident individual 
338.5   performing services within the state of Minnesota, the 
338.6   performance of which services constitute, establish, and 
338.7   determine the relationship between the parties as that of 
338.8   employer and employee.  As used in the preceding sentence, the 
338.9   term "employee" includes an officer of a corporation, and an 
338.10  officer, employee, or elected official of the United States, a 
338.11  state, or any political subdivision thereof, or the District of 
338.12  Columbia, or any agency or instrumentality of any one or more of 
338.13  the foregoing. 
338.14     (4)  [EMPLOYER.] For purposes of this section the term 
338.15  "employer" means any person, including individuals, fiduciaries, 
338.16  estates, trusts, partnerships, limited liability companies, and 
338.17  corporations transacting business in or deriving any income from 
338.18  sources within the state of Minnesota for whom an individual 
338.19  performs or performed any service, of whatever nature, as the 
338.20  employee of such person, except that if the person for whom the 
338.21  individual performs or performed the services does not have 
338.22  legal control of the payment of the wages for such services, the 
338.23  term "employer," except for purposes of paragraph (1), means the 
338.24  person having legal control of the payment of such wages.  As 
338.25  used in the preceding sentence, the term "employer" includes any 
338.26  corporation, individual, estate, trust, or organization which is 
338.27  exempt from taxation under section 290.05 and further includes, 
338.28  but is not limited to, officers of corporations who have legal 
338.29  control, either individually or jointly with another or others, 
338.30  of the payment of the wages. 
338.31     (5)  [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For 
338.32  purposes of this section, the term "number of withholding 
338.33  exemptions claimed" means the number of withholding exemptions 
338.34  claimed in a withholding exemption certificate in effect under 
338.35  subdivision 5, except that if no such certificate is in effect, 
338.36  the number of withholding exemptions claimed shall be considered 
339.1   to be zero. 
339.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
339.3   following final enactment. 
339.4      Sec. 28.  Minnesota Statutes 2004, section 325D.33, 
339.5   subdivision 6, is amended to read: 
339.6      Subd. 6.  [VIOLATIONS.] If the commissioner determines that 
339.7   a distributor is violating any provision of this chapter, the 
339.8   commissioner must give the distributor a written warning 
339.9   explaining the violation and an explanation of what must be done 
339.10  to comply with this chapter.  Within ten days of issuance of the 
339.11  warning, the distributor must notify the commissioner that the 
339.12  distributor has complied with the commissioner's recommendation 
339.13  or request that the commissioner set the issue for a hearing 
339.14  pursuant to chapter 14.  If a hearing is requested, the hearing 
339.15  shall be scheduled within 20 days of the request and the 
339.16  recommendation of the administrative law judge shall be issued 
339.17  within five working days of the close of the hearing.  The 
339.18  commissioner's final determination shall be issued within five 
339.19  working days of the receipt of the administrative law judge's 
339.20  recommendation.  If the commissioner's final determination is 
339.21  adverse to the distributor and the distributor does not comply 
339.22  within ten days of receipt of the commissioner's final 
339.23  determination, the commissioner may order the distributor to 
339.24  immediately cease the stamping of cigarettes.  As soon as 
339.25  practicable after the order, the commissioner must remove the 
339.26  meter and any unapplied cigarette stamps from the premises of 
339.27  the distributor. 
339.28     If within ten days of issuance of the written warning the 
339.29  distributor has not complied with the commissioner's 
339.30  recommendation or requested a hearing, the commissioner may 
339.31  order the distributor to immediately cease the stamping of 
339.32  cigarettes and remove the meter and unapplied stamps from the 
339.33  distributor's premises. 
339.34     If, within any 12-month period, the commissioner has issued 
339.35  three written warnings to any distributor, even if the 
339.36  distributor has complied within ten days, the commissioner shall 
340.1   notify the distributor of the commissioner's intent to revoke 
340.2   the distributor's license for a continuing course of conduct 
340.3   contrary to this chapter.  For purposes of this paragraph, a 
340.4   written warning that was ultimately resolved by removal of the 
340.5   warning by the commissioner is not deemed to be a warning.  The 
340.6   commissioner must notify the distributor of the date and time of 
340.7   a hearing pursuant to chapter 14 at least 20 days before the 
340.8   hearing is held.  The hearing must provide an opportunity for 
340.9   the distributor to show cause why the license should not be 
340.10  revoked.  If the commissioner revokes a distributor's license, 
340.11  the commissioner shall not issue a new license to that 
340.12  distributor for 180 days. 
340.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
340.14  following final enactment. 
340.15     Sec. 29.  [459.21] [GAMBLING SUBSIDIES; REFERENDUM 
340.16  APPROVAL.] 
340.17     No city or county may provide an exemption from a tax or 
340.18  fee, an abatement of a tax, or fee or any other type of public 
340.19  subsidy to an enterprise engaged in gambling, unless the 
340.20  question of whether to provide the exemption, abatement, or 
340.21  subsidy has been submitted to the voters at a special or general 
340.22  election and a majority of the votes cast on the question are in 
340.23  the affirmative. 
340.24     For purposes of this section, the following terms have the 
340.25  meanings given: 
340.26     (1) "Gambling" means conducting class III gaming as defined 
340.27  in United States Code, title 25, section 2703. 
340.28     (2) "Public subsidy" does not include (i) construction of 
340.29  public infrastructure unless the predominant use of the 
340.30  infrastructure is to serve an enterprise engaged in gambling or 
340.31  (ii) the use, maintenance, or reconstruction (without expansion) 
340.32  of preexisting infrastructure. 
340.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
340.34  following enactment. 
340.35     Sec. 30.  Minnesota Statutes 2004, section 645.44, is 
340.36  amended by adding a subdivision to read: 
341.1      Subd. 19.  [FEE AND TAX.] (a) "Tax" means any fee, charge, 
341.2   exaction, or assessment imposed by a governmental entity on an 
341.3   individual, person, entity, transaction, good, service, or other 
341.4   thing.  It excludes a price that an individual or entity chooses 
341.5   voluntarily to pay in return for receipt of goods or services 
341.6   provided by the governmental entity.  A government good or 
341.7   service does not include access to or the authority to engage in 
341.8   private market transactions with a nongovernmental party, such 
341.9   as licenses to engage in a trade, profession, or business or to 
341.10  improve private property. 
341.11     (b) For purposes of applying the laws of this state, a 
341.12  "fee," "charge," or other similar term that satisfies the 
341.13  functional requirements of paragraph (a) must be treated as a 
341.14  tax for all purposes, regardless of whether the statute or law 
341.15  names or describes it as a tax.  The provisions of this 
341.16  subdivision do not preempt or supersede limitations under 
341.17  statute or law that apply to fees, charges, or assessments. 
341.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
341.19  following final enactment. 
341.20     Sec. 31.  [TAX REFORM COMMISSION.] 
341.21     Subdivision 1.  [COMMISSION ESTABLISHED.] A tax reform 
341.22  action commission is established in the legislative branch to 
341.23  study the Minnesota tax and revenue system and to make 
341.24  recommendations to the legislature. 
341.25     Subd. 2.  [MEMBERSHIP.] (a) The commission consists of 15 
341.26  members, appointed as follows: 
341.27     (1) three members appointed by the governor, two from the 
341.28  executive branch and one from private life; 
341.29     (2) four members appointed by the majority leader of the 
341.30  senate, two members of the senate and two from private life; 
341.31     (3) two members appointed by the minority leader of the 
341.32  senate, one member of the senate and one from private life; 
341.33     (4) four members appointed by the speaker of the house of 
341.34  representatives, two members of the house of representatives and 
341.35  two from private life; and 
341.36     (5) two members appointed by the minority leader of the 
342.1   house of representatives, one member of the house of 
342.2   representatives and one from private life. 
342.3      (b) The appointing authority shall select members who are 
342.4   of recognized standing and distinction and who possess 
342.5   demonstrated capacity to discharge the duties of the 
342.6   commission.  In making appointments, the appointing authorities 
342.7   shall attempt to appoint some individuals to the commission who 
342.8   have special experience or knowledge in taxation, economics, and 
342.9   accounting. 
342.10     (c) The governor shall designate a member of the commission 
342.11  as its chair who shall determine its duties and supervise its 
342.12  staff. 
342.13     (d) The appointing authorities shall appoint members of the 
342.14  commission not more than 30 days after enactment of this 
342.15  section.  Members serve for the life of the commission.  A 
342.16  vacancy in the commission membership does not affect the power 
342.17  of the remaining members to execute the duties of the 
342.18  commission.  A vacancy in commission membership is filled in the 
342.19  same manner in which the original appointment was made. 
342.20     Subd. 3.  [DUTIES; REPORT.] (a) The commission shall study 
342.21  and evaluate the Minnesota state and local tax and revenue 
342.22  system with a goal of making long-term improvements in the 
342.23  system for the citizens of the state, given standard principles 
342.24  of good tax policy and the background of expected demographic 
342.25  and economic changes in the state, nation, and world.  The 
342.26  commission's recommendations must be done on a revenue neutral 
342.27  basis.  In particular, the commission shall examine: 
342.28     (1) the mix of state revenues between tax revenues and fees 
342.29  and charges for services used or benefits received; 
342.30     (2) the implications of likely demographic and economic 
342.31  changes, affecting both (i) the demands for state and local 
342.32  government services and (ii) taxes and other revenues; and 
342.33     (3) the extent to which the existing tax system and the 
342.34  commission's proposal satisfy the following basic tax policy 
342.35  principles: 
342.36     (i) equity or fairness, including measures based on ability 
343.1   to pay, equal treatment of equals, and payment for benefits 
343.2   received; 
343.3      (ii) neutrality or efficiency, the extent to which the 
343.4   effects on private market decisions are minimized; 
343.5      (iii) revenue adequacy, the extent to which the revenues 
343.6   are stable and predictable and grow with increases in income or 
343.7   economic activity; 
343.8      (iv) competitiveness, the extent to which negative effects 
343.9   on the state's attractiveness as a location for investment, 
343.10  working, and living are minimized; 
343.11     (v) simplicity, the extent to which it is easy to 
343.12  understand; 
343.13     (vi) ease of compliance and administration, the extent to 
343.14  which taxpayers can easily comply and the government can easily 
343.15  administer it; and 
343.16     (vii) visibility or accountability, the extent to which the 
343.17  taxes or other charges are clear and apparent to their payers as 
343.18  a cost of government and that the government officials imposing 
343.19  the tax are accountable, through election or otherwise, to the 
343.20  principal payers of the tax. 
343.21     (b) The commission shall report to the legislature as 
343.22  provided in this paragraph.  Each report must include the 
343.23  commission's evaluation of the tax or taxes, its recommendations 
343.24  for reform and improvement of the tax or taxes on a revenue 
343.25  neutral basis, its rationale for the proposed changes, and a 
343.26  draft bill implementing the commission's recommendation for 
343.27  introduction in the legislature.  The reports must be submitted 
343.28  by the following dates: 
343.29     (1) corporate and other business taxation, including the 
343.30  credit for increasing research activities, by July 1, 2007; 
343.31     (2) general sales and motor vehicle sales and special 
343.32  excise taxes by July 1, 2008; 
343.33     (3) individual income taxation by July 1, 2009; and 
343.34     (4) estate, insurance premium, MinnesotaCare, and all other 
343.35  taxes not covered by clauses (1) to (3) by July 1, 2010. 
343.36     Subd. 4.  [PER DIEM AND EXPENSES.] Members of the 
344.1   commission may be compensated and receive reimbursement for 
344.2   expenses, as provided for members of advisory councils under 
344.3   Minnesota Statutes, section 15.059, subdivision 3.  This 
344.4   subdivision does not apply to members of the legislature or 
344.5   state employees. 
344.6      Subd 5.  [STAFF.] The commission may employ staff as it 
344.7   deems appropriate to carry out its duties or use existing 
344.8   legislative and executive branch staff.  All staff are in the 
344.9   unclassified state service.  Legislative staff and the 
344.10  Department of Revenue staff must provide research, bill 
344.11  drafting, and other services to the commission upon its 
344.12  request.  The commission may contract with consultants for 
344.13  research and other services and enter other contracts, as it 
344.14  deems necessary or appropriate to carry out its duties.  These 
344.15  contracts are not subject to the requirements of Minnesota 
344.16  Statutes, chapter 16C. 
344.17     Subd. 6.  [EXPIRATION.] The commission terminates 30 days 
344.18  after transmitting its final report to the legislature under 
344.19  subdivision 3, paragraph (b). 
344.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
344.21  following final enactment. 
344.22     Sec. 32.  [TRANSFER.] 
344.23     On July 1, 2005, the commissioner of finance shall transfer 
344.24  $3,408,000 and any additional amount from the tax relief account 
344.25  under Minnesota Statutes, section 16A.1522, subdivision 4, to 
344.26  the general fund. 
344.27     Sec. 33.  [APPROPRIATION.] 
344.28     (a) $125,000 in fiscal year 2006 and $125,000 in fiscal 
344.29  year 2007 are appropriated from the general fund to the 
344.30  commissioner of revenue to make grants to one or more nonprofit 
344.31  organizations, qualifying under section 501(c)(3) of the 
344.32  Internal Revenue Code of 1986, to coordinate, facilitate, 
344.33  encourage, and aid in the provision of taxpayer assistance 
344.34  services.  This is a onetime appropriation and is not added to 
344.35  the base. 
344.36     (b) "Taxpayer assistance services" mean accounting and tax 
345.1   preparation services provided by volunteers to low-income and 
345.2   disadvantaged Minnesota residents to help them file federal and 
345.3   state income tax returns and Minnesota property tax refund 
345.4   claims and to provide personal representation before the 
345.5   Department of Revenue and Internal Revenue Service. 
345.6      Sec. 34.  [REPEALER.] 
345.7      (a) Minnesota Statutes 2004, section 10A.322, subdivision 
345.8   4, is repealed effective July 1, 2005. 
345.9      (b) Minnesota Statutes 2004, section 16A.1522, subdivision 
345.10  4, is repealed effective July 2, 2005. 
345.11     (c) Minnesota Statutes 2004, section 290.06, subdivision 
345.12  23, is repealed effective for contributions made after June 30, 
345.13  2005.