1.1 	 A bill for an act
1.2 	 relating to financing and operation of government in this state; modifying truth in 
1.3 	taxation provisions and adding a taxpayer satisfaction survey; changing income, 
1.4 	corporate franchise, withholding, estate, property, sales and use, mortgage 
1.5 	registry, health care gross revenues, motor fuels, gambling, cigarette and tobacco 
1.6 	products, occupation, net proceeds, production, liquor, insurance, and other taxes 
1.7 	and tax-related provisions; making technical, clarifying, collection, enforcement, 
1.8 	refund, and administrative changes to certain taxes and tax-related provisions, 
1.9 	tax-forfeited lands, revenue recapture, unfair cigarette sales, state debt collection, 
1.10 	sustainable forest incentive programs, and payments in lieu of taxes; changing 
1.11 	local government aids and credits; providing for determination of population for 
1.12 	certain purposes; updating references to the Internal Revenue Code, changing 
1.13 	property tax exemptions, homesteads, assessment, valuation, classification, class 
1.14 	rates, levies, deferral, review and equalization, appeals, notices and statements, 
1.15 	and distribution provisions; changing rent constituting property taxes and 
1.16 	property tax refunds; requiring state contracts be with vendors registered to 
1.17 	collect use taxes; abolishing the political contribution refund; authorizing local 
1.18 	sales taxes; extending a sales tax expiration; providing for compliance with 
1.19 	streamlined sales tax agreement; changing the taxation of liquor and cigarettes; 
1.20 	authorizing income tax checkoffs; requiring registration of tax shelters and 
1.21 	providing for a voluntary compliance initiative; changing job opportunity 
1.22 	building zones, border city development zones, biotechnology and health 
1.23 	sciences industry zone provisions; setting minimum employee compensation 
1.24 	for qualifying business in a JOBZ; limiting sales tax construction exemption 
1.25 	in job zones to businesses paying prevailing wage; requiring a referendum 
1.26 	for certain subsidies to gambling enterprises; authorizing charges for certain 
1.27 	emergency services; imposing a franchise fee on card clubs; defining the term 
1.28 	"tax"; regulating tax preparers; suspending appropriations or aids to public 
1.29 	employers who prohibit certain employees from wearing a flag on a uniform; 
1.30 	providing for training and conduct of assessors; prohibiting purchases of 
1.31 	tax-forfeited lands by certain local officials; providing for data classification and 
1.32 	exchange of data; establishing a tax reform commission; providing and imposing 
1.33 	powers and duties on the commissioner of revenue and other state agencies and 
1.34 	departments and on certain political subdivisions and certain officials; changing 
1.35 	and imposing penalties; requiring reports; transferring funds; appropriating 
1.36 	money; amending Minnesota Statutes 2004, sections 4A.02; 16C.03, by adding a 
1.37 	subdivision; 16D.10; 168A.05, subdivision 1a; 190.09, subdivision 2; 240.30, 
1.38 	by adding a subdivision; 270.02, subdivision 3; 270.11, subdivision 2; 270.16, 
2.1 	subdivision 2; 270.30, subdivisions 1, 5, 6, 8, by adding subdivisions; 270.65; 
2.2 	270.67, subdivision 4; 270.69, subdivision 4; 270A.03, subdivisions 5, 7; 272.01, 
2.3 	subdivision 2; 272.02, subdivisions 1a, 7, 47, 53, 64, by adding subdivisions; 
2.4 	272.0211, subdivisions 1, 2; 272.0212, subdivisions 1, 2; 272.029, subdivisions 
2.5 	4, 6; 273.055; 273.0755; 273.11, subdivisions 1a, 8, by adding subdivisions; 
2.6 	273.111, by adding a subdivision; 273.123, subdivision 7; 273.124, subdivisions 
2.7 	3, 6, 8, 14, 21; 273.125, subdivision 8; 273.13, subdivisions 22, 23, 25, by 
2.8 	adding a subdivision; 273.1315; 273.1384, subdivision 1; 273.19, subdivision 
2.9 	1a; 273.372; 274.01, subdivision 1; 274.014, subdivisions 2, 3; 274.14; 275.025, 
2.10 	subdivision 4; 275.065, subdivisions 1c, 3, 4, 7, by adding subdivisions; 
2.11 	275.07, subdivisions 1, 4; 276.04, subdivision 2; 276.112; 276A.01, subdivision 
2.12 	7; 282.016; 282.08; 282.15; 282.21; 282.224; 282.301; 287.04; 289A.02, 
2.13 	subdivision 7; 289A.08, subdivisions 1, 3, 7, 13, 16; 289A.18, subdivision 
2.14 	1; 289A.19, subdivision 4; 289A.20, subdivision 2; 289A.31, subdivision 2; 
2.15 	289A.37, subdivision 5; 289A.38, subdivisions 6, 7, by adding subdivisions; 
2.16 	289A.40, subdivision 2, by adding subdivisions; 289A.50, subdivisions 1, 1a; 
2.17 	289A.56, by adding a subdivision; 289A.60, subdivisions 2a, 4, 6, 7, 11, 13, 20, 
2.18 	by adding subdivisions; 290.01, subdivisions 6, 7, 7b, 19, as amended, 19a, 
2.19 	19b, 19c, 19d, 31; 290.032, subdivisions 1, 2; 290.06, subdivisions 2c, 22, by 
2.20 	adding a subdivision; 290.067, subdivisions 1, 2a; 290.0671, subdivisions 1, 1a; 
2.21 	290.0672, subdivisions 1, 2; 290.0674, subdivisions 1, 2; 290.0675, subdivision 
2.22 	1; 290.091, subdivisions 2, 3; 290.0922, subdivision 2; 290.191, subdivisions 
2.23 	2, 3; 290.92, subdivisions 1, 4b; 290A.03, subdivisions 3, 11, 13, 15, by adding 
2.24 	subdivisions; 290A.07, by adding a subdivision; 290A.19; 290B.05, subdivision 
2.25 	3; 290C.05; 290C.10; 291.005, subdivision 1; 291.03, subdivision 1; 295.52, 
2.26 	subdivision 4; 295.53, subdivision 1; 295.582; 295.60, subdivision 3; 296A.22, 
2.27 	by adding a subdivision; 297A.61, subdivisions 3, 4, by adding a subdivision; 
2.28 	297A.64, subdivision 4; 297A.668, subdivisions 1, 5; 297A.67, subdivisions 2, 
2.29 	7, 9, 29, by adding a subdivision; 297A.68, subdivisions 2, 5, 28, 35, 37, 38, 39, 
2.30 	by adding subdivisions; 297A.70, subdivision 10; 297A.71, subdivision 12, by 
2.31 	adding a subdivision; 297A.72, by adding a subdivision; 297A.75, subdivision 
2.32 	1; 297A.87, subdivisions 2, 3; 297A.99, subdivisions 1, 3, 4, 9, by adding 
2.33 	subdivisions; 297E.01, subdivisions 5, 7, by adding subdivisions; 297E.06, 
2.34 	subdivision 2; 297E.07; 297F.08, subdivision 12, by adding a subdivision; 
2.35 	297F.09, subdivisions 1, 2; 297F.14, subdivision 4; 297G.09, by adding a 
2.36 	subdivision; 297I.01, by adding subdivisions; 297I.05, subdivisions 4, 5, by 
2.37 	adding a subdivision; 298.01, subdivisions 3, 4; 298.24, subdivision 1; 298.75, 
2.38 	by adding a subdivision; 325D.33, subdivision 6; 365.43, subdivision 1; 365.431; 
2.39 	366.011; 366.012; 373.45, subdivision 7; 469.169, by adding a subdivision; 
2.40 	469.1735, subdivision 3; 469.176, subdivisions 4l, 7; 469.310, subdivision 11, 
2.41 	by adding a subdivision; 469.315; 469.316; 469.317; 469.319, subdivision 1, by 
2.42 	adding a subdivision; 469.320, subdivision 3; 469.330, subdivision 11; 469.335; 
2.43 	469.337; 469.340, subdivision 1; 473.843, subdivision 5; 473F.02, subdivisions 
2.44 	2, 7; 477A.011, subdivisions 3, 34, 35, 36, 38; 477A.0124, subdivisions 2, 4; 
2.45 	477A.013, subdivisions 8, 9, by adding a subdivision; 477A.016; 477A.03, 
2.46 	subdivisions 2a, 2b; 477A.11, subdivision 4, by adding a subdivision; 477A.12, 
2.47 	subdivisions 1, 2; 477A.14, subdivision 1; 645.44, by adding a subdivision; Laws 
2.48 	1998, chapter 389, article 3, section 42, subdivision 2, as amended; Laws 1998, 
2.49 	chapter 389, article 8, section 43, subdivision 3; Laws 2001, First Special Session 
2.50 	chapter 5, article 3, section 8; Laws 2001, First Special Session chapter 5, article 
2.51 	12, section 95, as amended; Laws 2002, chapter 377, article 3, section 4; Laws 
2.52 	2003, chapter 127, article 5, section 27; Laws 2003, chapter 127, article 5, section 
2.53 	28; Laws 2003, First Special Session chapter 21, article 5, section 13; Laws 
2.54 	2003, First Special Session chapter 21, article 6, section 9; Laws 2005, chapter 
2.55 	43, section 1; proposing coding for new law in Minnesota Statutes, chapters 15; 
2.56 	270; 272; 273; 275; 280; 289A; 290; 290C; 295; 297A; 297F; 373; 459; 473; 
2.57 	repealing Minnesota Statutes 2004, sections 10A.322, subdivision 4; 16A.1522, 
2.58 	subdivision 4; 270.85; 270.88; 272.02, subdivision 65; 273.19, subdivision 
3.1 	5; 273.37, subdivision 3; 274.05; 275.065, subdivisions 5a, 6, 6b, 8; 275.15; 
3.2 	275.61, subdivision 2; 283.07; 290.06, subdivision 23; 297E.12, subdivision 10; 
3.3 	469.1794, subdivision 6; 477A.08; Laws 1975, chapter 287, section 5; Laws 
3.4 	1998, chapter 389, article 3, section 41; Laws 2003, chapter 127, article 9, section 
3.5 	9, subdivision 4; Minnesota Rules, parts 8093.2000; 8093.3000; 8130.0110, 
3.6 	subpart 4; 8130.0200, subparts 5, 6; 8130.0400, subpart 9; 8130.1200, subparts 
3.7 	5, 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1, 2; 8130.4200, 
3.8 	subpart 1; 8130.4400, subpart 3; 8130.5200; 8130.5600, subpart 3; 8130.5800, 
3.9 	subpart 5; 8130.7300, subpart 5; 8130.8800, subpart 4.
3.10 	 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

3.11 	 ARTICLE 1
3.12 	 TAXPAYER SATISFACTION SURVEY

3.13 	 Section 1. [275.063] PROPOSED PROPERTY TAXES; TAXPAYER 
3.14 	SATISFACTION SURVEY; DEFINITIONS.
3.15 		 Subdivision 1.Definitions. For the purposes of this section and section 275.065, 
3.16 	the following definitions apply.
3.17 		 Subd. 2.Budget; counties. For counties, "budget" means total government fund 
3.18 	expenditures, as defined by the state auditor under section 375.169, less any expenditures 
3.19 	for direct payments to recipients or providers for the human service aids listed below:
3.20 	 (1) Minnesota family investment program under chapters 256J and 256K;
3.21 	 (2) medical assistance under sections 256B.041, subdivision 5, and 256B.19, 
3.22 	subdivision 1;
3.23 	 (3) general assistance medical care under section 256D.03, subdivision 6;
3.24 	 (4) general assistance under section 256D.03, subdivision 2;
3.25 	 (5) Minnesota supplemental aid under section 256D.36, subdivision 1;
3.26 	 (6) preadmission screening under section 256B.0911, and alternative care grants 
3.27 	under section 256B.0913;
3.28 	 (7) general assistance medical care claims processing, medical transportation, and 
3.29 	related costs under section 256D.03, subdivision 4;
3.30 	 (8) medical transportation and related costs under section 256B.0625, subdivisions 
3.31 	17 to 18a;
3.32 	 (9) group residential housing under section 256I.05, subdivision 8, transferred from 
3.33 	programs in clauses (4) and (5); or 
3.34 	 (10) any successor programs to those listed in clauses (1) to (9).
3.35 		 Subd. 3.Budget; cities. For cities, "budget" means total government fund 
3.36 	expenditures, as defined by the state auditor under section 471.6965, less any expenditures 
3.37 	for improvements or services that are specially assessed or charged under chapter 429, 
3.38 	430, 435, or the provisions of any other law or charter.
4.1 		 Subd. 4.Population. "Population" of a city means the most recent population as 
4.2 	determined by the state demographer under section 4A.02 or by the Metropolitan Council 
4.3 	under section 477A.011, subdivision 3.
4.4 		 Subd. 5.Property tax levy subject to approval; counties and cities. For a county 
4.5 	or a city, "property tax levy subject to approval" means the jurisdiction's levy excluding 
4.6 	any debt levy and any levy previously approved by the voters.
4.7 		 Subd. 6.Debt levy. "Debt levy" means a levy to:
4.8 	 (1) pay the costs of principal and interest on bonded indebtedness;
4.9 	 (2) pay the costs of principal and interest on certificates of indebtedness issued 
4.10 	for any corporate purpose except:
4.11 	 (i) tax anticipation or aid anticipation certificates of indebtedness;
4.12 	 (ii) certificates of indebtedness issued under sections 298.28 and 298.282;
4.13 	 (iii) certificates of indebtedness used to fund current expenses; or 
4.14 	 (iv) certificates of indebtedness used to fund an insufficiency in tax receipts or 
4.15 	an insufficiency in other revenue sources.
4.16 	 (3) pay another city, town, county, or school district for principal and interest on 
4.17 	general obligation debt; or 
4.18 	 (4) fund payments made to the Minnesota State Armory Building Commission under 
4.19 	section 193.145, subdivision 2, to retire the principal and interest on armory construction 
4.20 	bonds.
4.21 		 Subd. 7.State property tax credits. "State property tax credits" means any credits 
4.22 	received under sections 273.119; 273.123; 273.135; 273.1384; 273.1391; 273.1398, 
4.23 	subdivision 4; 469.171; and 473H.10.
4.24 		 Subd. 8.Jurisdiction subject to taxpayer satisfaction survey. A "jurisdiction 
4.25 	subject to the taxpayer satisfaction survey" means any county or any city with a population 
4.26 	of 500 or greater.

4.27 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
4.28 	subsequent years.

4.29 	 Sec. 2. Minnesota Statutes 2004, section 275.065, subdivision 1c, is amended to read:
4.30 		 Subd. 1c.Levy; shared, merged, consolidated services.  If two or more taxing 
4.31 	authorities are in the process of negotiating an agreement for sharing, merging, or 
4.32 	consolidating services between those taxing authorities at the time the proposed levy is to 
4.33 	be certified under subdivision 1, each taxing authority involved in the negotiation shall 
4.34 	certify its total proposed levy as provided in that subdivision, including a notification to the 
4.35 	county auditor of the specific service involved in the agreement which is not yet finalized.  
5.1 	The affected taxing authorities may amend their proposed levies under subdivision 1 until 
5.2 	October 10 1 for levy amounts relating only to the specific service involved.

5.3 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
5.4 	subsequent years.

5.5 	 Sec. 3. Minnesota Statutes 2004, section 275.065, subdivision 3, is amended to read:
5.6 		 Subd. 3.Notice of proposed property taxes.  (a) The county auditor shall prepare 
5.7 	and the county treasurer shall deliver after November 10 8 and on or before November 
5.8 	24 19 each year, by first class mail to each taxpayer at the address listed on the county's 
5.9 	current year's assessment roll, a notice of proposed property taxes.
5.10 	 (b) The commissioner of revenue shall prescribe the form of the notice. The form 
5.11 	must be in the form prescribed by the commissioner.
5.12 	 (c) The notice must inform taxpayers that it contains the amount of property taxes 
5.13 	each taxing authority proposes to collect for taxes payable the following year.  In the case 
5.14 	of a town, or in the case of the state general tax, the final tax amount will be its proposed 
5.15 	tax unless the town changes its levy at a special town meeting under section 365.52. 
5.16 	In the case of taxing authorities required to hold a public meeting under subdivision 6, 
5.17 	the notice must clearly state that each taxing authority, including regional library districts 
5.18 	established under section 134.201, and including the metropolitan taxing districts as 
5.19 	defined in paragraph (i), but excluding all other special taxing districts and towns, will 
5.20 	hold a public meeting to receive public testimony on the proposed budget and proposed or 
5.21 	final property tax levy, or, in case of a school district, on the current budget and proposed 
5.22 	property tax levy.  It must clearly state the time and place of each taxing authority's 
5.23 	meeting, a telephone number for the taxing authority that taxpayers may call if they have 
5.24 	questions related to the notice, and an address where comments will be received by mail.
5.25 	 (d) The notice must state for each parcel:
5.26 	 (1) the market value of the property as determined under section 273.11, and used 
5.27 	for computing property taxes payable in the following year and for taxes payable in the 
5.28 	current year as each appears in the records of the county assessor on November 1 of the 
5.29 	current year; and, in the case of residential property, whether the property is classified as 
5.30 	homestead or nonhomestead.  The notice must clearly inform taxpayers of the years to 
5.31 	which the market values apply and that the values are final values;.
5.32 	 (2) (e) The items listed below, shown separately by notice must state for each parcel, 
5.33 	for both taxes payable in the current year and the proposed taxes payable in the following 
5.34 	year each of the following tax amounts, net of state property tax credits:county tax, city or 
5.35 	town tax, and state general  tax, net of the residential and agricultural homestead credit 
6.1 	under section 273.1384,voter approved school levy tax, other local school levy tax, and 
6.2 	the sum of the tax amounts for all special taxing districts, the sum of the tax increment tax 
6.3 	on captured tax capacity, if applicable, and the fiscal disparities areawide tax under chapter 
6.4 	276A or 473F, if applicable,and as a the total of tax amount for all taxing authorities:
6.5 	 (i) the actual tax for taxes payable in the current year; and 
6.6 	 (ii) the proposed tax amount.
6.7 	 If the county levy under clause (2) includes an amount for a lake improvement 
6.8 	district as defined under sections 103B.501 to 103B.581, the amount attributable for that 
6.9 	purpose must be separately stated from the remaining county levy amount.
6.10 	 In the case of a town or the state general tax, the final tax shall also be its proposed 
6.11 	tax unless the town changes its levy at a special town meeting under section 365.52.  If a 
6.12 	school district has certified under section 126C.17, subdivision 9, that a referendum will 
6.13 	be held in the school district at the November general election, the county auditor must 
6.14 	note next to the school district's proposed amount that a referendum is pending and that, if 
6.15 	approved by the voters, the tax amount may be higher than shown on the notice.  In the 
6.16 	case of the city of Minneapolis, the levy for the Minneapolis Library Board and the levy 
6.17 	for Minneapolis Park and Recreation shall be listed separately from the remaining amount 
6.18 	of the city's levy.  In the case of the city of St. Paul, the levy for the St. Paul Library 
6.19 	Agency must be listed separately from the remaining amount of the city's levy.  In the 
6.20 	case of a parcel where tax increment or the fiscal disparities areawide tax under chapter 
6.21 	276A or 473F applies, the proposed tax levy on the captured value or the proposed tax 
6.22 	levy on the tax capacity subject to the areawide tax must each be stated separately and 
6.23 	not included in the sum of the special taxing districts; and 
6.24 	 (3) the increase or decrease between the total taxes payable in the current year and 
6.25 	the total proposed taxes, expressed as a percentage.
6.26 	 (f) The notice must state for each parcel the increase or decrease between the total 
6.27 	taxes payable in the current year and the total proposed taxes, expressed as a percentage.
6.28 	 (g) The notice must state for each parcel an estimate of any additional tax that would 
6.29 	apply to the property under any referenda pending at the November general election.  Any 
6.30 	amount shown under this item should be indicated as pending the results of referendum 
6.31 	elections, and shall not be reflected in the total proposed net tax amount.
6.32 	 (h) For purposes of this section, the amount of the tax on homesteads qualifying 
6.33 	under the senior citizens' property tax deferral program under chapter 290B is the total 
6.34 	amount of property tax before subtraction of the deferred property tax amount.
6.35 	 (e) (i) The notice must clearly state that the proposed or final taxes do not include 
6.36 	the following:
7.1 	 (1) special assessments;
7.2 	 (2) levies approved by the voters after the date of the proposed taxes are certified, 
7.3 	including bond referenda and school district levy referenda November general election;
7.4 	 (3) a levy limit increase approved by the voters by the first Tuesday after the first 
7.5 	Monday in November of the levy year as provided under section 275.73;
7.6 	 (4) amounts necessary to pay cleanup or other costs due to a natural disaster 
7.7 	occurring after the date the proposed taxes are certified;
7.8 	 (5) (4) amounts necessary to pay tort judgments against the taxing authority that 
7.9 	become final after the date the proposed taxes are certified; and
7.10 	 (6) (5) the contamination tax imposed on properties which received market value 
7.11 	reductions for contamination.
7.12 	 (f) (j) Except as provided in subdivision 7, failure of the county auditor to prepare or 
7.13 	the county treasurer to deliver the notice as required in this section does not invalidate the 
7.14 	proposed or final tax levy or the taxes payable pursuant to the tax levy.
7.15 	 (g) If the notice the taxpayer receives under this section lists the property as 
7.16 	nonhomestead, and satisfactory documentation is provided to the county assessor by the 
7.17 	applicable deadline, and the property qualifies for the homestead classification in that 
7.18 	assessment year, the assessor shall reclassify the property to homestead for taxes payable 
7.19 	in the following year.
7.20 	 (h) (k) In the case of class 4 residential property used as a residence for lease or 
7.21 	rental periods of 30 days or more, the taxpayer must either: (1) mail or deliver a copy 
7.22 	of the notice of proposed property taxes and the taxpayer satisfaction survey  to each 
7.23 	tenant, renter, or lessee; or .
7.24 	 (2) post a copy of the notice in a conspicuous place on the premises of the property.
7.25 	 The copy of the notice must be mailed or posted by the taxpayer by November 27 22 
7.26 	or within three days of receipt of the notice, whichever is later.  A taxpayer may notify the 
7.27 	county treasurer of the address of the taxpayer, agent, caretaker, or manager of the premises 
7.28 	to which the notice must be mailed in order to fulfill the requirements of this paragraph.
7.29 	 (i) (l) For purposes of this subdivision, subdivisions 5a and 6 section 276.04, 
7.30 	"metropolitan special taxing districts" means the following taxing districts in the 
7.31 	seven-county metropolitan area that levy a property tax for any of the specified purposes 
7.32 	listed below:
7.33 	 (1) Metropolitan Council under section 473.132, 473.167, 473.249, 473.325, 
7.34 	473.446, 473.521, 473.547, or 473.834;
7.35 	 (2) Metropolitan Airports Commission under section 473.667, 473.671, or 473.672; 
7.36 	and
8.1 	 (3) Metropolitan Mosquito Control Commission under section 473.711.
8.2 	 (m) For purposes of this section, any levies made by the regional rail authorities 
8.3 	in the county of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, or Washington under 
8.4 	chapter 398A shall be included with the appropriate county's levy and shall be discussed 
8.5 	at one of that county's public hearing regularly scheduled board meetings.
8.6 	 (n) The governing body of a county, city, or school district may, with the county 
8.7 	auditor's consent, include supplemental information with the statement of proposed 
8.8 	property taxes about the impact of state aid increases or decreases on property tax 
8.9 	increases or decreases and on the level of services provided in the affected jurisdiction. 
8.10 	This supplemental information may include information for the following year, the current 
8.11 	year, and for as many consecutive preceding years as deemed appropriate by the governing 
8.12 	body of the county, city, or school district.  It may include only information regarding:
8.13 	 (1) the impact of inflation as measured by the implicit price deflator for state and 
8.14 	local government purchases;
8.15 	 (2) population growth and decline;
8.16 	 (3) state or federal government action; and 
8.17 	 (4) other financial factors that affect the level of property taxation and local services 
8.18 	that the governing body of the county, city, or school district may deem appropriate to 
8.19 	include.
8.20 	 The information may be presented using tables, written narrative, and graphic 
8.21 	representations and may contain instruction toward further sources of information or 
8.22 	opportunity for comment.
8.23 	 The supplemental information for each jurisdiction must not exceed one side of an 
8.24 	8.5 inch by 11 inch sheet of paper.

8.25 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
8.26 	subsequent years.

8.27 	 Sec. 4. Minnesota Statutes 2004, section 275.065, is amended by adding a subdivision 
8.28 	to read:
8.29 		 Subd. 3b.Taxpayer satisfaction survey. (a) A taxpayer satisfaction survey form 
8.30 	must be attached to or enclosed with each proposed property tax notice under subdivision 
8.31 	3.  The form must include a property description or a code number that allows the property 
8.32 	to be uniquely identified.
8.33 	 (b) The taxpayer satisfaction survey form shall present the following question for 
8.34 	each jurisdiction subject to the taxpayer satisfaction survey:  "Are you satisfied with the 
8.35 	proposed property tax levy for (name of jurisdiction)?"  A space will be provided for the 
9.1 	respondent to answer "Yes" or "No" for each jurisdiction.  The form must also inform the 
9.2 	taxpayer that if the number of responses marked "No" exceeds the criteria specified in 
9.3 	subdivision 3e, a referendum will be held on the question of the increase in the property 
9.4 	tax levy subject to approval unless a recertification is made under subdivision 9 reducing 
9.5 	the levy.
9.6 	 (c) The mailing shall include a non-postage-paid envelope preaddressed to the 
9.7 	agency designated to process survey results.  A taxpayer, including a tenant, renter, or 
9.8 	lessee who is entitled to receive a copy of the notice and survey form under subdivision 3, 
9.9 	paragraph (k), may respond to the survey by returning the completed survey form to the 
9.10 	designated agency by December 1.  The responding taxpayer is responsible for the postage.

9.11 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
9.12 	subsequent years, except that two provisions are first effective for taxes payable in 2007: 
9.13 	the requirement that the survey form include a property description or code number, and 
9.14 	the requirement that the form notify taxpayers that the results of the survey could cause a 
9.15 	referendum election to be held.

9.16 	 Sec. 5. Minnesota Statutes 2004, section 275.065, is amended by adding a subdivision 
9.17 	to read:
9.18 		 Subd. 3c.Taxpayer satisfaction survey additional information. The taxpayer 
9.19 	satisfaction survey form must include the following information for the current year and 
9.20 	for the proposed year, and show the percentage change between the years:
9.21 	 (1) the county government's (i) budget and (ii) property tax levy subject to approval; 
9.22 	and 
9.23 	 (2) if the property is located in a city which is a jurisdiction subject to the taxpayer 
9.24 	satisfaction survey, the city government's (i) budget and (ii) property tax levy subject to 
9.25 	approval.

9.26 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
9.27 	subsequent years.

9.28 	 Sec. 6. Minnesota Statutes 2004, section 275.065, is amended by adding a subdivision 
9.29 	to read:
9.30 		 Subd. 3d.Format of taxpayer satisfaction survey. The commissioner of revenue 
9.31 	shall prescribe the format of the survey form required under subdivisions 3b to 3f and 
9.32 	present the form to the chairs of the house and senate tax committees for review.  The form 
9.33 	must be in the format prescribed by the commissioner.

10.1 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
10.2 	subsequent years.

10.3 	 Sec. 7. Minnesota Statutes 2004, section 275.065, is amended by adding a subdivision 
10.4 	to read:
10.5 		 Subd. 3e.Results of taxpayer satisfaction survey. (a) Each agency designated to 
10.6 	receive taxpayer satisfaction surveys shall verify the authenticity of each form received, to 
10.7 	the extent possible, and tabulate the results of the survey for each taxing jurisdiction.  If 
10.8 	the number of survey responses indicating dissatisfaction with the jurisdiction's proposed 
10.9 	levy exceeds 20 percent of the total number of proposed tax notices distributed in the 
10.10 	jurisdiction, and the proposed property tax levy subject to approval exceeds the property 
10.11 	tax levy subject to approval for taxes payable in the current year, a referendum must be 
10.12 	held on the last Tuesday in January.  By December 8, the agency must announce the 
10.13 	results of the survey for each taxing jurisdiction, including both the number of responses 
10.14 	indicating that they are satisfied with the proposed levy and the number indicating that 
10.15 	they are not satisfied.
10.16 	 (b) If the county auditor determines that a single person or entity owns more than 
10.17 	ten percent of the parcels of property within a jurisdiction subject to taxpayer satisfaction 
10.18 	survey, then the number of responses indicating dissatisfaction with the proposed levy 
10.19 	must exceed the percentage owed by the single person or entity plus 20 percent of the 
10.20 	total number of proposed tax notices distributed in the jurisdiction in order to initiate the 
10.21 	referendum process described in paragraph (a).

10.22 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
10.23 	subsequent years, except that the requirement of an automatic referendum election is 
10.24 	effective beginning with taxes payable in 2007 and subsequent years.

10.25 	 Sec. 8. Minnesota Statutes 2004, section 275.065, is amended by adding a subdivision 
10.26 	to read:
10.27 		 Subd. 3f.Designated agency. For taxpayer satisfaction surveys pertaining to taxes 
10.28 	payable in 2006, the designated agency is the county.  For taxing jurisdictions located in 
10.29 	more than one county, each county shall tabulate the results of the survey for the portion 
10.30 	of the jurisdiction in the county, and forward the results to the jurisdiction's home county 
10.31 	by December 7.  The home county shall make available the survey results for the total 
10.32 	jurisdiction.
11.1 	 By January 1, 2006, and each year thereafter, the commissioner of revenue shall 
11.2 	designate the agency or agencies to receive and process taxpayer satisfaction surveys for 
11.3 	taxes payable in the following year.

11.4 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
11.5 	subsequent years.

11.6 	 Sec. 9. Minnesota Statutes 2004, section 275.065, subdivision 4, is amended to read:
11.7 		 Subd. 4.Costs. If the reasonable cost of The county may apportion the cost of the 
11.8 	county auditor's services and the cost of preparing and mailing the notice and survey 
11.9 	required in this section exceed the amount distributed to the county by the commissioner of 
11.10 	revenue to administer this section, the taxing authority must reimburse the county for the 
11.11 	excess cost.  The excess cost must be apportioned between taxing jurisdictions as follows:
11.12 	 (1) one-third is allocated to the county;
11.13 	 (2) one-third is allocated to cities and towns within the county; and
11.14 	 (3) one-third is allocated to school districts within the county.
11.15 	 The amounts in clause (2) must be further apportioned among the cities and towns 
11.16 	in the proportion that the number of parcels in the city and town bears to the number of 
11.17 	parcels in all the cities and towns within the county.  The amount in clause (3) must be 
11.18 	further apportioned among the school districts in the proportion that the number of parcels 
11.19 	in the school district bears to the number of parcels in all school districts within the county.

11.20 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
11.21 	subsequent years.

11.22 	 Sec. 10. Minnesota Statutes 2004, section 275.065, subdivision 7, is amended to read:
11.23 		 Subd. 7.Certification of compliance.  At the time the taxing authority certifies 
11.24 	its tax levy under section 275.07, it shall certify to the commissioner of revenue its 
11.25 	compliance with this section.  The certification must contain the information required 
11.26 	by the commissioner of revenue to determine compliance with this section.  If the 
11.27 	commissioner determines that the taxing authority has failed to substantially comply with 
11.28 	the requirements of this section, the commissioner of revenue shall notify the county 
11.29 	auditor.  The decision of the commissioner is final.  When fixing rates under section 275.08
11.30 	for a taxing authority that has not complied with this section, the county auditor must use 
11.31 	the taxing authority's previous year's levy, plus any additional amounts necessary to 
11.32 	pay principal and interest on general obligation bonds of the taxing authority for which its 
12.1 	taxing powers have been pledged if the bonds were issued before 1989 fund an increase in 
12.2 	the authority's debt levy for taxes payable in the following year.

12.3 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
12.4 	subsequent years.

12.5 	 Sec. 11. Minnesota Statutes 2004, section 275.065, is amended by adding a subdivision 
12.6 	to read:
12.7 		 Subd. 9.Recertification of proposed levy. By December 15, a jurisdiction subject 
12.8 	to taxpayer satisfaction survey, that has been notified under subdivision 3e that the criteria 
12.9 	for a referendum have been met, may elect to recertify its proposed levy so that the 
12.10 	proposed property tax levy subject to approval is equal to the property tax levy subject to 
12.11 	approval for taxes payable in the current year.  If the jurisdiction recertifies its proposed 
12.12 	levy to the county auditor according to the provisions of this subdivision, the auditor must 
12.13 	cancel the referendum for that jurisdiction.

12.14 	EFFECTIVE DATE. This section is effective for taxes payable in 2007 and 
12.15 	subsequent years.

12.16 	 Sec. 12. Minnesota Statutes 2004, section 275.065, is amended by adding a subdivision 
12.17 	to read:
12.18 		 Subd. 10.Levy approval; referendum. (a) If the designated agency has determined 
12.19 	under subdivision 3e that a referendum is required, the increase in the property tax levy 
12.20 	subject to approval shall not be effective until it has been submitted to the voters at a 
12.21 	special election to be held on the last Tuesday in January, and a majority of votes cast on 
12.22 	the question of approving the levy increase are in the affirmative. The commissioner of 
12.23 	revenue shall prepare the form of the question to be presented at the referendum, which 
12.24 	must reference only the amount of increase in the property tax levy subject to approval.
12.25 	 (b) If the majority of the votes cast on the question are in the affirmative, the proposed 
12.26 	levy shall be certified as the final levy.  If the majority of the votes cast on the question are 
12.27 	in the negative, the levy shall be the property tax levy amount subject to approval for the 
12.28 	previous year, plus the portion of the proposed levy that was not subject to referendum.
12.29 	 (c) A levy approved under this subdivision must be levied against the net tax 
12.30 	capacity of the jurisdiction.

12.31 	EFFECTIVE DATE. This section is effective for taxes payable in 2007 and 
12.32 	subsequent years.

13.1 	 Sec. 13. Minnesota Statutes 2004, section 275.07, subdivision 1, is amended to read:
13.2 		 Subdivision 1.Certification of levy.  (a) Except as provided under paragraph (b), the 
13.3 	taxes voted by cities, counties, school districts, and special districts shall be certified by 
13.4 	the proper authorities to the county auditor on or before five working days after December 
13.5 	20 28 in each year. A jurisdiction whose levy is subject to a referendum under section 
13.6 	275.065, subdivision 10, shall at that time certify two levy amounts, one if the referendum 
13.7 	is successful, and another if the referendum is not successful.  A jurisdiction whose levy is 
13.8 	subject to a referendum must recertify its final levy the day immediately following the 
13.9 	election.A town must certify the levy adopted by the town board to the county auditor by 
13.10 	September 15 each year.  If the town board modifies the levy at a special town meeting 
13.11 	after September 15, the town board must recertify its levy to the county auditor on or 
13.12 	before five working days after December 20 28.  The taxes certified shall be reduced by 
13.13 	the county auditor by the aid received under section 273.1398, subdivision 3.  If a city, 
13.14 	town, county, school district, or special district fails to certify its levy by that date, its levy 
13.15 	shall be the amount levied by it for the preceding year.
13.16 	 (b)(i) The taxes voted by counties under sections 103B.241, 103B.245, and 
13.17 	103B.251 shall be separately certified by the county to the county auditor on or before 
13.18 	five working days after December 20 28 in each year.  The taxes certified shall not be 
13.19 	reduced by the county auditor by the aid received under section 273.1398, subdivision 
13.20 	3.  If a county fails to certify its levy by that date, its levy shall be the amount levied by 
13.21 	it for the preceding year.
13.22 	 (ii) For purposes of the proposed property tax notice under section 275.065 and 
13.23 	the property tax statement under section 276.04, for the first year in which the county 
13.24 	implements the provisions of this paragraph, the county auditor shall reduce the county's 
13.25 	levy for the preceding year to reflect any amount levied for water management purposes 
13.26 	under clause (i) included in the county's levy.

13.27 	EFFECTIVE DATE. This section is effective for taxes payable in 2007 and 
13.28 	subsequent years.

13.29 	 Sec. 14. REPEALER.
 13.30 	 Minnesota Statutes 2004, section 275.065, subdivisions 5a, 6, 6b, and 8, are repealed.

13.31 	 EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
13.32 	subsequent years.

14.1 	 ARTICLE 2
14.2 	 PROPERTY TAXES

14.3 	 Section 1. Minnesota Statutes 2004, section 272.02, subdivision 47, is amended to read:
14.4 		 Subd. 47.Poultry litter biomass generation facility; personal property.
 14.5 	 Notwithstanding subdivision 9, clause (a), attached machinery and other personal property 
14.6 	which is part of an electrical generating facility that meets the requirements of this 
14.7 	subdivision is exempt.  At the time of construction, the facility must:
14.8 	 (1) be designed to utilize poultry litter as a primary fuel source; and
14.9 	 (2) be constructed for the purpose of generating power at the facility that will be sold 
14.10 	pursuant to a contract approved by the Public Utilities Commission in accordance with 
14.11 	the biomass mandate imposed under section 216B.2424.
14.12 	 Construction of the facility must be commenced after January 1, 2003, and before 
14.13 	December 31, 2003 2005.  Property eligible for this exemption does not include electric 
14.14 	transmission lines and interconnections or gas pipelines and interconnections appurtenant 
14.15 	to the property or the facility.

14.16 	EFFECTIVE DATE. This section is effective for taxes levied in 2005, payable 
14.17 	in 2006, and thereafter.

14.18 	 Sec. 2. Minnesota Statutes 2004, section 272.02, subdivision 53, is amended to read:
14.19 		 Subd. 53.Electric generation facility; personal property.  Notwithstanding 
14.20 	subdivision 9, clause (a), attached machinery and other personal property which is part 
14.21 	of a 3.2 megawatt run-of-the-river hydroelectric generation facility and that meets the 
14.22 	requirements of this subdivision is exempt.  At the time of construction, the facility must:
14.23 	 (1) utilize two turbine generators at a dam site existing on March 31, 1994;
14.24 	 (2) be located on publicly owned land and within 1,500 feet of a 13.8 kilovolt 
14.25 	distribution substation; and
14.26 	 (3) be eligible to receive a renewable energy production incentive payment under 
14.27 	section 216C.41.
14.28 	 Construction of the facility must be commenced after January 1, 2002 December 
14.29 	31, 2004, and before January 1, 2005  2007.  Property eligible for this exemption 
14.30 	does not include electric transmission lines and interconnections or gas pipelines and 
14.31 	interconnections appurtenant to the property or the facility.

14.32 	EFFECTIVE DATE. This section is effective for taxes levied in 2005, payable in 
14.33 	2006 and thereafter.

15.1 	 Sec. 3. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
15.2 	to read:
15.3 		 Subd. 68.Electric generation facility personal property. (a) Notwithstanding 
15.4 	subdivision 9, clause (a), and section 453.54, subdivision 20, attached machinery and 
15.5 	other personal property which is part of an electric generation facility that exceeds 150 
15.6 	megawatts of installed capacity and meets the requirements of this subdivision is exempt. 
15.7 	At the time of construction, the facility must:
15.8 	 (1) be designed to utilize natural gas as a primary fuel;
15.9 	 (2) be owned and operated by a municipal power agency as defined in section 
15.10 	453.52, subdivision 8;
15.11 	 (3) have received the certificate of need under section 216B.243;
15.12 	 (4) be located outside the metropolitan area as defined under section 473.121, 
15.13 	subdivision 2; and 
15.14 	 (5) be designed to be a combined-cycle facility, although initially the facility will be 
15.15 	operated as a simple-cycle combustion turbine.
15.16 	 (b) To qualify under this subdivision, an agreement must be negotiated between the 
15.17 	municipal power agency and the host city, for a payment in lieu of property taxes to the 
15.18 	host city.
15.19 	 (c) Construction of the facility must be commenced after January 1, 2004, and 
15.20 	before January 1, 2006.  Property eligible for this exemption does not include electric 
15.21 	transmission lines and interconnections or gas pipelines and interconnections appurtenant 
15.22 	to the property or the facility.

15.23 	EFFECTIVE DATE. This section is effective for assessment year 2005, taxes 
15.24 	payable in 2006, and thereafter.

15.25 	 Sec. 4. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
15.26 	to read:
15.27 		 Subd. 69.Electric generation facility; personal property. (a) Notwithstanding 
15.28 	subdivision 9, clause (a), attached machinery and other personal property which is part of 
15.29 	a simple-cycle combustion-turbine electric generation facility that exceeds 290 megawatts 
15.30 	of installed capacity and that meets the requirements of this subdivision is exempt.  At 
15.31 	the time of construction, the facility must:
15.32 	 (1) be designed to utilize natural gas as a primary fuel;
15.33 	 (2) not be owned by a public utility as defined in section 216B.02, subdivision 4;
15.34 	 (3) be located within 15 miles of the mainline existing interstate natural gas pipeline 
15.35 	and within five miles of an existing electrical transmission substation;
16.1 	 (4) be located outside the metropolitan area as defined under section 473.121, 
16.2 	subdivision 2; and 
16.3 	 (5) be designed to provide peaking capacity energy and ancillary services and have 
16.4 	satisfied all of the requirements under section 216B.243.
16.5 	 (b) Construction of the facility must be commenced after January 1, 2005, and 
16.6 	before January 1, 2009.  Property eligible for this exemption does not include electric 
16.7 	transmission lines and interconnections or gas pipelines and interconnections appurtenant 
16.8 	to the property or the facility.

16.9 	EFFECTIVE DATE. This section is effective for assessment year 2006, taxes 
16.10 	payable in 2007, and thereafter.

16.11 	 Sec. 5. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
16.12 	to read:
16.13 		 Subd. 70.Electric generation facility; personal property. Notwithstanding 
16.14 	subdivision 9, clause (a), attached machinery and other personal property which is part 
16.15 	of an existing simple-cycle, combustion-turbine electric generation facility that exceeds 
16.16 	300 megawatts of installed capacity and that meets the requirements of this subdivision is 
16.17 	exempt.  At the time of the construction, the facility must:
16.18 	 (1) be designed to utilize natural gas as a primary fuel;
16.19 	 (2) be owned by a public utility as defined in section 216B.02, subdivision 4, and be 
16.20 	located at or interconnected with an existing generating plant of the utility;
16.21 	 (3) be designed to provide peaking, emergency backup, or contingency services;
16.22 	 (4) satisfy a resource need identified in an approved integrated resource plan filed 
16.23 	under section 216B.2422; and 
16.24 	 (5) have received, by resolution, the approval from the governing body of the county 
16.25 	and the city for the exemption of personal property under this subdivision.
16.26 	 Construction of the facility expansion must be commenced after January 1, 2004, 
16.27 	and before January 1, 2005.  Property eligible for this exemption does not include electric 
16.28 	transmission lines and interconnections or gas pipelines and interconnections appurtenant 
16.29 	to the property or the facility.

16.30 	EFFECTIVE DATE. This section is effective beginning with assessment year 
16.31 	2005, for taxes payable in 2006 and thereafter.

16.32 	 Sec. 6. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
16.33 	to read:
17.1 		 Subd. 71.Electric generation facility; personal property. (a) Notwithstanding 
17.2 	subdivision 9, clause (a), attached machinery and other personal property which is part of 
17.3 	a simple-cycle combustion-turbine electric generation facility that exceeds 150 megawatts 
17.4 	of installed capacity and that meets the requirements of this subdivision is exempt.  At 
17.5 	the time of construction, the facility must:
17.6 	 (1) utilize natural gas as a primary fuel;
17.7 	 (2) be owned by an electric generation and transmission cooperative;
17.8 	 (3) be located within five miles of parallel existing 12-inch and 16-inch natural gas 
17.9 	pipelines and a 69-kilovolt high-voltage electric transmission line;
17.10 	 (4) be designed to provide peaking, emergency backup, or contingency services;
17.11 	 (5) have received a certificate of need under section 216B.243 demonstrating 
17.12 	demand for its capacity; and 
17.13 	 (6) have received by resolution the approval from the governing body of the county 
17.14 	and township in which the proposed facility is to be located for the exemption of personal 
17.15 	property under this subdivision.
17.16 	 (b) Construction of the facility must be commenced after July 1, 2005, and 
17.17 	before January 1, 2009.  Property eligible for this exemption does not include electric 
17.18 	transmission lines and interconnections or gas pipelines and interconnections appurtenant 
17.19 	to the property or the facility.

17.20 	EFFECTIVE DATE. This section is effective for assessment year 2006 and 
17.21 	thereafter, for taxes payable in 2007 and thereafter.

17.22 	 Sec. 7. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
17.23 	to read:
17.24 		 Subd. 72.Electric generation facility personal property. (a) Notwithstanding 
17.25 	subdivision 9, clause (a), attached machinery and other personal property which is part of 
17.26 	either a simple-cycle, combustion-turbine electric generation facility, or a combined-cycle, 
17.27 	combustion-turbine electric generation facility that does not exceed 325 megawatts of 
17.28 	installed capacity and that meets the requirements of this subdivision is exempt.  At the 
17.29 	time of construction, the facility must:
17.30 	 (1) utilize either a simple-cycle or a combined-cycle combustion-turbine generator 
17.31 	fueled by natural gas;
17.32 	 (2) be connected to an existing 115-kilovolt high-voltage electric transmission line 
17.33 	that is within two miles of the facility;
17.34 	 (3) be located on an underground natural gas storage aquifer;
17.35 	 (4) be designed as either a peaking or intermediate load facility; and 
18.1 	 (5) have received, by resolution, the approval from the governing body of the county 
18.2 	for the exemption of personal property under this subdivision.
18.3 	 (b) Construction of the facility must be commenced after January 1, 2006, and 
18.4 	before January 1, 2008.  Property eligible for this exemption does not include electric 
18.5 	transmission lines and interconnections or gas pipelines and interconnections appurtenant 
18.6 	to the property or the facility.

18.7 	EFFECTIVE DATE. This section is effective for assessment year 2005, taxes 
18.8 	payable in 2006, and thereafter.

18.9 	 Sec. 8. Minnesota Statutes 2004, section 272.0211, subdivision 1, is amended to read:
18.10 		 Subdivision 1.Efficiency determination and certification.  An owner or operator 
18.11 	of a new or existing electric power generation facility, excluding wind energy conversion 
18.12 	systems, may apply to the commissioner of revenue for a market value exclusion on the 
18.13 	property as provided for in this section.  This exclusion shall apply only to the market 
18.14 	value of the equipment of the facility, and shall not apply to the structures and the land 
18.15 	upon which the facility is located.  The commissioner of revenue shall prescribe the forms 
18.16 	and procedures for this application.  Upon receiving the application, the commissioner 
18.17 	of revenue shall request the commissioner of commerce to make a determination of the 
18.18 	efficiency of the applicant's electric power generation facility. In calculating the efficiency 
18.19 	of a facility,The commissioner of commerce shall use a definition of calculate efficiency 
18.20 	which calculates efficiency as the sum of:
18.21 	 (1) the useful electrical power output; plus 
18.22 	 (2) the useful thermal energy output; plus 
18.23 	 (3) the fuel energy of the useful chemical products,
18.24 	 all divided by the total energy input to the facility, expressed as a percentage as the 
18.25 	ratio of useful energy outputs to energy inputs, expressed as a percentage, based on 
18.26 	the performance of the facility's equipment during normal full load operation.  The 
18.27 	commissioner must include in this formula the energy used in any on-site preparation of 
18.28 	materials necessary to convert the materials into the fuel used to generate electricity, 
18.29 	such as a process to gasify petroleum coke.  The commissioner shall use the high Higher 
18.30 	Heating Value (HHV) for all substances in the commissioner's efficiency calculations, 
18.31 	except for wood for fuel in a biomass-eligible project under section 216B.2424; for 
18.32 	these instances, the commissioner shall adjust the heating value to allow for energy 
18.33 	consumed for evaporation of the moisture in the wood.  The applicant shall provide 
18.34 	the commissioner of commerce with whatever information the commissioner deems 
19.1 	necessary to make the determination.  Within 30 days of the receipt of the necessary 
19.2 	information, the commissioner of commerce shall certify the findings of the efficiency 
19.3 	determination to the commissioner of revenue and to the applicant.  The commissioner 
19.4 	of commerce shall determine the efficiency of the facility and certify the findings of 
19.5 	that determination to the commissioner of revenue every two years thereafter from the 
19.6 	date of the original certification.

19.7 	EFFECTIVE DATE. This section is effective for assessment year 2005 and 
19.8 	thereafter, for taxes payable in 2006 and thereafter.

19.9 	 Sec. 9. Minnesota Statutes 2004, section 272.0211, subdivision 2, is amended to read:
19.10 		 Subd. 2.Sliding scale exclusion.  Based upon the efficiency determination provided 
19.11 	by the commissioner of commerce as described in subdivision 1, the commissioner of 
19.12 	revenue shall subtract five eight percent of the taxable market value of the qualifying 
19.13 	property for each percentage point that the efficiency of the specific facility, as determined 
19.14 	by the commissioner of commerce, is above 35 40 percent.  The reduction in taxable 
19.15 	market value shall be reflected in the taxable market value of the facility beginning 
19.16 	with the assessment year immediately following the determination.  For a facility that is 
19.17 	assessed by the county in which the facility is located, the commissioner of revenue 
19.18 	shall certify to the assessor of that county the percentage of the taxable market value of 
19.19 	the facility to be excluded.

19.20 	EFFECTIVE DATE. This section is effective for assessment year 2005 and 
19.21 	thereafter, for taxes payable in 2006 and thereafter.

19.22 	 Sec. 10. [272.0275] PERSONAL PROPERTY USED TO GENERATE 
19.23 	ELECTRICITY; EXEMPTION.
19.24 		 Subdivision 1.New plant construction after january 1, 2005. For a new generating 
19.25 	plant built and placed in service after January 1, 2005, its personal property used to 
19.26 	generate electric power is exempt from property taxation, including under section 453.54, 
19.27 	subdivision 20, if an exemption of generation personal property form, with an attached 
19.28 	siting agreement, is filed with the Department of Revenue.  The form must be signed by 
19.29 	the utility, and the county and city or town where the facility is proposed to be located.
19.30 		 Subd. 2.Existing plant; increase in nameplate capacity.  For a plant existing or 
19.31 	under construction on the day of final enactment of this act, a partial exemption applies 
19.32 	if the nameplate capacity of the plant is increased from that existing on the day of final 
19.33 	enactment of this act, and if an exemption of generation personal property form, with an 
20.1 	attached siting agreement is filed with the Department of Revenue.  The form must be 
20.2 	signed by the utility, and the county and city or town where the facility expansion is 
20.3 	located.  This partial exemption must be computed by taking the increase in megawatts 
20.4 	over the total megawatt nameplate capacity after construction is complete, multiplied by 
20.5 	the market value of all taxable tools, implements, and machinery of the generating plant 
20.6 	as determined by the commissioner of revenue.  The resulting exemption is effective 
20.7 	beginning in the next assessment year.
20.8 		 Subd. 3.In-lieu payment; limitation. If an in-lieu payment or service fee is 
20.9 	negotiated between a facility exempted under this section and the county, city, or town 
20.10 	where the facility is located, the payment or fee in any year may not exceed the property 
20.11 	tax revenue that the jurisdiction would receive from the facility if it were not exempt.
20.12 		 Subd. 4.Definition; applicability. For purposes of this section, "personal property" 
20.13 	means tools, implements, and machinery of the generating plant.  The exemption under this 
20.14 	section does not apply to transformers, transmission lines, distribution lines, or any other 
20.15 	tools, implements, and machinery that are part of an electric substation, wherever located.

20.16 	EFFECTIVE DATE. This section is effective the day following final enactment.

20.17 	 Sec. 11. Minnesota Statutes 2004, section 273.055, is amended to read:
20.18 	 273.055 RESOLUTION TO APPOINT ASSESSOR; TERMINATION OF 
20.19 	LOCAL ASSESSOR'S OFFICE.
20.20 	 The election to provide for the assessment of property by the county assessor as 
20.21 	provided in section 273.052 shall be made by the board of county commissioners by 
20.22 	resolution with at least a two-thirds majority vote.  Such resolution shall be effective at the 
20.23 	second assessment date following the adoption of the resolution.  Notwithstanding any 
20.24 	other provisions contained in any other section of law or charter, the office of all township 
20.25 	and city assessors in such county shall be terminated 90 days before the assessment date at 
20.26 	which the election becomes effective, except that if part of such taxing district is located 
20.27 	in a county not electing to have the county assessor assess all property as provided 
20.28 	in section 273.052, the office will continue but shall apply only to such property in a 
20.29 	nonelecting county.
20.30 	 No township or city assessor in another county shall assess any property in an 
20.31 	electing county, but shall turn over all tax records relating to property to the county assessor 
20.32 	90 days before the assessment date at which the county's election becomes effective.

20.33 	 EFFECTIVE DATE. This section is effective the day following final enactment.

21.1 	 Sec. 12. Minnesota Statutes 2004, section 273.0755, is amended to read:
21.2 	 273.0755 TRAINING AND EDUCATION OF PROPERTY TAX PERSONNEL.
21.3 	 (a) Beginning with the four-year period starting on July 1, 2000, every person 
21.4 	licensed by the state Board of Assessors at the Accredited Minnesota Assessor level or 
21.5 	higher, shall successfully complete a week-long Minnesota laws course sponsored by the 
21.6 	Department of Revenue at least once in every four-year period.  An assessor need not 
21.7 	attend the course if they successfully pass the test for the course.
21.8 	 (b) The commissioner of revenue may require that each county, and each city 
21.9 	for which the city assessor performs the duties of county assessor, have (i) a person 
21.10 	on the assessor's staff who is certified by the Department of Revenue in sales ratio 
21.11 	calculations, (ii) an officer or employee who is certified by the Department of Revenue 
21.12 	in tax calculations, and (iii) an officer or employee who is certified by the Department 
21.13 	of Revenue in the proper preparation of abstracts of assessment. The commissioner of 
21.14 	revenue may require that each county have an officer or employee who is certified by the 
21.15 	Department of Revenue in the proper preparation of abstracts of tax lists.
21.16 	 (c) Beginning with the four-year educational licensing period starting on July 1, 
21.17 	2004, every Minnesota assessor licensed by the State Board of Assessors must attend 
21.18 	and participate in a seminar that focuses on ethics, professional conduct and the need 
21.19 	for standardized assessment practices developed and presented by the commissioner of 
21.20 	revenue.  This requirement must be met at least once in every subsequent four-year period. 
21.21 	This requirement applies to all assessors licensed for one year or more in the four-year 
21.22 	period.

21.23 	 EFFECTIVE DATE. This section is effective the day following final enactment.

21.24 	 Sec. 13. Minnesota Statutes 2004, section 273.11, subdivision 1a, is amended to read:
21.25 		 Subd. 1a.Limited market value.  In the case of all real  property classified as 
21.26 	agricultural homestead or nonhomestead, residential homestead or nonhomestead, timber, 
21.27 	or noncommercial seasonal residential recreational, the assessor shall compare the value 
21.28 	with the taxable portion of the value determined in the preceding assessment, except 
21.29 	that for class 1c resort property for assessment year 2005, the assessor shall determine 
21.30 	the limited market value as provided in subdivision 1b.
21.31 	 For assessment year 2002, the amount of the increase shall not exceed the greater of 
21.32 	(1) ten percent of the value in the preceding assessment, or (2) 15 percent of the difference 
21.33 	between the current assessment and the preceding assessment.
22.1 	 For assessment year 2003, the amount of the increase shall not exceed the greater of 
22.2 	(1) 12 percent of the value in the preceding assessment, or (2) 20 percent of the difference 
22.3 	between the current assessment and the preceding assessment.
22.4 	 For assessment year years 2004, 2005, and 2006, the amount of the increase shall 
22.5 	not exceed the greater of (1) 15 percent of the value in the preceding assessment, or (2) 25 
22.6 	percent of the difference between the current assessment and the preceding assessment.
22.7 	 For assessment year 2005 2007, the amount of the increase shall not exceed the 
22.8 	greater of (1) 15 percent of the value in the preceding assessment, or (2) 33 percent of the 
22.9 	difference between the current assessment and the preceding assessment.
22.10 	 For assessment year 2006 2008, the amount of the increase shall not exceed the 
22.11 	greater of (1) 15 percent of the value in the preceding assessment, or (2) 50 percent of the 
22.12 	difference between the current assessment and the preceding assessment.
22.13 	 This limitation shall not apply to increases in value due to improvements.  For 
22.14 	purposes of this subdivision, the term "assessment" means the value prior to any exclusion 
22.15 	under subdivision 16.
22.16 	 The provisions of this subdivision shall be in effect through assessment year 2006 
22.17 	2008 as provided in this subdivision.
22.18 	 For purposes of the assessment/sales ratio study conducted under section 127A.48, 
22.19 	and the computation of state aids paid under chapters 122A, 123A, 123B, 124D, 125A, 
22.20 	126C, 127A, and 477A, market values and net tax capacities determined under this 
22.21 	subdivision and subdivision 16, shall be used.

22.22 	EFFECTIVE DATE. This section is effective for assessment years 2005 through 
22.23 	2008, for taxes payable in 2006 through 2009.

22.24 	 Sec. 14. Minnesota Statutes 2004, section 273.11, is amended by adding a subdivision 
22.25 	to read:
22.26 		 Subd. 1b.Class 1c resorts; 2005 assessment only. For assessment year 2005, the 
22.27 	valuation on class 1c resort property shall not exceed the greater of (1) 130 percent of the 
22.28 	value of its 2003 assessment, or (2) its value for the 2003 assessment year plus 40 percent 
22.29 	of the difference in value between its 2005 assessment and its 2003 assessment.  The 
22.30 	valuation increase on class 1c resort property for assessment years 2006 and thereafter 
22.31 	shall be determined as provided under subdivision 1a.

22.32 	EFFECTIVE DATE. This section is effective the day following final enactment.

23.1 	 Sec. 15. Minnesota Statutes 2004, section 273.11, is amended by adding a subdivision 
23.2 	to read:
23.3 		 Subd. 21.Valuation exclusion for lead hazard reduction.  Owners of property 
23.4 	classified as class 1a, 1b, 1c, 2a, 4b, or 4bb under section 273.13 may apply for a valuation 
23.5 	exclusion for lead hazard reduction, provided that the property is located in a city which 
23.6 	has authorized valuation exclusions under this subdivision.  A city may by resolution 
23.7 	authorize valuation exclusions under this subdivision and must establish guidelines for 
23.8 	qualifying lead hazard reduction projects and must designate an agency within the city to 
23.9 	issue certificates of completion of qualifying projects.  For purposes of this subdivision, 
23.10 	"lead hazard reduction" has the same meaning as in section 144.9501, subdivision 17.
23.11 	 The property owner must obtain a certificate from the city stating that the project 
23.12 	has been completed and stating the cost incurred by the owner in completing the project. 
23.13 	Only projects originating after April 1, 2004, may qualify for exclusion under this 
23.14 	subdivision.  The property owner shall apply for a valuation exclusion to the assessor on a 
23.15 	form prescribed by the assessor.
23.16 	 A qualifying property is eligible for a valuation exclusion equal to 50 percent of 
23.17 	the actual costs incurred, to a maximum exclusion of $15,000, for a period of five years. 
23.18 	The valuation exclusion shall terminate upon the sale of the property.  If a property owner 
23.19 	applies for exclusion under this subdivision between January 1 and June 30 of any year, 
23.20 	the exclusion shall first apply for taxes payable in the following year.  If a property owner 
23.21 	applies for exclusion under this subdivision between July 1 and December 31 of any year, 
23.22 	the exclusion shall first apply for taxes payable in the second following year.

23.23 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
23.24 	subsequent years.

23.25 	 Sec. 16. Minnesota Statutes 2004, section 273.111, is amended by adding a subdivision 
23.26 	to read:
23.27 		 Subd. 86.Applications; denied by county. Beginning with applications filed for 
23.28 	the 2005 assessment year, all applications for deferment of taxes and assessment under 
23.29 	this section that have been denied by the county shall be forwarded to the commissioner of 
23.30 	revenue by the county assessor within 30 days of denial.  For the purpose of monitoring 
23.31 	compliance with this section, the commissioner of revenue shall compile a report 
23.32 	identifying all denied applications, the reason for the denial and any commissioner action 
23.33 	or recommendation.  This report will be annually submitted to the chairs of the house and 
23.34 	senate tax committees on or before February 1.

24.1 	EFFECTIVE DATE. This section is effective for applications filed after the day 
24.2 	following final enactment.

24.3 	 Sec. 17. Minnesota Statutes 2004, section 273.123, subdivision 7, is amended to read:
24.4 		 Subd. 7.Local option; other property.  The owner of homestead property 
24.5 	not qualifying for an adjustment in valuation pursuant to subdivisions 1 to 5 or of 
24.6 	nonhomestead property may receive a reduction in the amount of taxes payable on the 
24.7 	property for the year in which the destruction occurs and in the following year if:
24.8 	 (a) 50 percent or more of the homestead dwelling or other structure, as established 
24.9 	by the county assessor, is unintentionally or accidentally destroyed or contaminated by 
24.10 	mold and the homestead is uninhabitable or the other structure is not usable;
24.11 	 (b) the owner of the property makes written application to the county assessor as 
24.12 	soon as practical after the damage has occurred; and
24.13 	 (c) the owner of the property makes written application to the county board.
24.14 	 The county board may grant a reduction in the amount of property tax which the 
24.15 	owner must pay on the qualifying property in the year of destruction and in the following 
24.16 	year.  Any reduction in the amount of tax payable which is authorized by county board 
24.17 	action shall be calculated based upon the number of months that the home is uninhabitable 
24.18 	or the other structure is unusable.  The amount of net tax due from the taxpayer shall be 
24.19 	multiplied by a fraction, the numerator of which is the number of months the dwelling 
24.20 	was occupied by that taxpayer, or the number of months the other structure was used by 
24.21 	the taxpayer, and the denominator of which is 12.  For purposes of this subdivision, if a 
24.22 	structure is occupied or used for a fraction of a month, it is considered a month.  "Net tax" 
24.23 	is defined as the amount of tax after the subtraction of all of the state paid property tax 
24.24 	credits.  If application is made following payment of all property taxes due for the year of 
24.25 	destruction, the amount of the reduction granted by the county board shall be refunded to 
24.26 	the taxpayer by the county treasurer as soon as practical.
24.27 	 Any reductions or refunds approved by the county board shall not be subject to 
24.28 	approval by the commissioner of revenue.
24.29 	 The county board may levy in the following year the amount of tax dollars lost to the 
24.30 	county government as a result of the reductions granted pursuant to this subdivision.

24.31 	EFFECTIVE DATE. This section is effective for property taxes payable in 2005 
24.32 	and thereafter.

24.33 	 Sec. 18. Minnesota Statutes 2004, section 273.124, subdivision 14, is amended to read:
25.1 		 Subd. 14.Agricultural homesteads; special provisions.  (a) Real estate of less than 
25.2 	ten acres that is the homestead of its owner must be classified as class 2a under section 
25.3 	273.13, subdivision 23, paragraph (a), if:
25.4 	 (1) the parcel on which the house is located is contiguous on at least two sides to (i) 
25.5 	agricultural land, (ii) land owned or administered by the United States Fish and Wildlife 
25.6 	Service, or (iii) land administered by the Department of Natural Resources on which in 
25.7 	lieu taxes are paid under sections 477A.11 to 477A.14;
25.8 	 (2) its owner also owns a noncontiguous parcel of agricultural land that is at least 
25.9 	20 acres;
25.10 	 (3) the noncontiguous land is located not farther than four townships or cities, or a 
25.11 	combination of townships or cities from the homestead; and
25.12 	 (4) the agricultural use value of the noncontiguous land and farm buildings is equal 
25.13 	to at least 50 percent of the market value of the house, garage, and one acre of land.
25.14 	 Homesteads initially classified as class 2a under the provisions of this paragraph shall 
25.15 	remain classified as class 2a, irrespective of subsequent changes in the use of adjoining 
25.16 	properties, as long as the homestead remains under the same ownership, the owner owns a 
25.17 	noncontiguous parcel of agricultural land that is at least 20 acres, and the agricultural use 
25.18 	value qualifies under clause (4).  Homestead classification under this paragraph is limited 
25.19 	to property that qualified under this paragraph for the 1998 assessment.
25.20 	 (b)(i) Agricultural property consisting of at least 40 acres shall be classified as the 
25.21 	owner's homestead, to the same extent as other agricultural homestead property, if all 
25.22 	of the following criteria are met:
25.23 	 (1) the owner, the owner's spouse, or the son or daughter of the owner or owner's 
25.24 	spouse, or the grandson or granddaughter of the owner or the owner's spouse,is actively 
25.25 	farming the agricultural property, either on the person's own behalf as an individual or 
25.26 	on behalf of a partnership operating a family farm, family farm corporation, joint family 
25.27 	farm venture, or limited liability company of which the person is a partner, shareholder, or 
25.28 	member;
25.29 	 (2) both the owner of the agricultural property and the person who is actively 
25.30 	farming the agricultural property under clause (1), are Minnesota residents;
25.31 	 (3) neither the owner nor the spouse of the owner claims another agricultural 
25.32 	homestead in Minnesota; and
25.33 	 (4) neither the owner nor the person actively farming the property lives farther 
25.34 	than four townships or cities, or a combination of four townships or cities, from the 
25.35 	agricultural property, except that if the owner or the owner's spouse is required to live in 
25.36 	employer-provided housing, the owner or owner's spouse, whichever is actively farming 
26.1 	the agricultural property, may live more than four townships or cities, or combination of 
26.2 	four townships or cities from the agricultural property.
26.3 	 The relationship under this paragraph may be either by blood or marriage.
26.4 	 (ii) Real property held by a trustee under a trust is eligible for agricultural homestead 
26.5 	classification under this paragraph if the qualifications in clause (i) are met, except that 
26.6 	"owner" means the grantor of the trust.
26.7 	 (iii) Property containing the residence of an owner who owns qualified property 
26.8 	under clause (i) shall be classified as part of the owner's agricultural homestead, if that 
26.9 	property is also used for noncommercial storage or drying of agricultural crops.
26.10 	 (c) Noncontiguous land shall be included as part of a homestead under section 
26.11 	273.13, subdivision 23, paragraph (a), only if the homestead is classified as class 2a 
26.12 	and the detached land is located in the same township or city, or not farther than four 
26.13 	townships or cities or combination thereof from the homestead.  Any taxpayer of these 
26.14 	noncontiguous lands must notify the county assessor that the noncontiguous land is part of 
26.15 	the taxpayer's homestead, and, if the homestead is located in another county, the taxpayer 
26.16 	must also notify the assessor of the other county.
26.17 	 (d) Agricultural land used for purposes of a homestead and actively farmed by a 
26.18 	person holding a vested remainder interest in it must be classified as a homestead under 
26.19 	section 273.13, subdivision 23, paragraph (a).  If agricultural land is classified class 2a, 
26.20 	any other dwellings on the land used for purposes of a homestead by persons holding 
26.21 	vested remainder interests who are actively engaged in farming the property, and up to 
26.22 	one acre of the land surrounding each homestead and reasonably necessary for the use of 
26.23 	the dwelling as a home, must also be assessed class 2a.
26.24 	 (e) Agricultural land and buildings that were class 2a homestead property under 
26.25 	section 273.13, subdivision 23, paragraph (a), for the 1997 assessment shall remain 
26.26 	classified as agricultural homesteads for subsequent assessments if:
26.27 	 (1) the property owner abandoned the homestead dwelling located on the agricultural 
26.28 	homestead as a result of the April 1997 floods;
26.29 	 (2) the property is located in the county of Polk, Clay, Kittson, Marshall, Norman, 
26.30 	or Wilkin;
26.31 	 (3) the agricultural land and buildings remain under the same ownership for the 
26.32 	current assessment year as existed for the 1997 assessment year and continue to be used 
26.33 	for agricultural purposes;
26.34 	 (4) the dwelling occupied by the owner is located in Minnesota and is within 30 
26.35 	miles of one of the parcels of agricultural land that is owned by the taxpayer; and
27.1 	 (5) the owner notifies the county assessor that the relocation was due to the 1997 
27.2 	floods, and the owner furnishes the assessor any information deemed necessary by the 
27.3 	assessor in verifying the change in dwelling.  Further notifications to the assessor are not 
27.4 	required if the property continues to meet all the requirements in this paragraph and any 
27.5 	dwellings on the agricultural land remain uninhabited.
27.6 	 (f) Agricultural land and buildings that were class 2a homestead property under 
27.7 	section 273.13, subdivision 23, paragraph (a), for the 1998 assessment shall remain 
27.8 	classified agricultural homesteads for subsequent assessments if:
27.9 	 (1) the property owner abandoned the homestead dwelling located on the agricultural 
27.10 	homestead as a result of damage caused by a March 29, 1998, tornado;
27.11 	 (2) the property is located in the county of Blue Earth, Brown, Cottonwood, 
27.12 	LeSueur, Nicollet, Nobles, or Rice;
27.13 	 (3) the agricultural land and buildings remain under the same ownership for the 
27.14 	current assessment year as existed for the 1998 assessment year;
27.15 	 (4) the dwelling occupied by the owner is located in this state and is within 50 miles 
27.16 	of one of the parcels of agricultural land that is owned by the taxpayer; and
27.17 	 (5) the owner notifies the county assessor that the relocation was due to a March 29, 
27.18 	1998, tornado, and the owner furnishes the assessor any information deemed necessary by 
27.19 	the assessor in verifying the change in homestead dwelling.  For taxes payable in 1999, the 
27.20 	owner must notify the assessor by December 1, 1998.  Further notifications to the assessor 
27.21 	are not required if the property continues to meet all the requirements in this paragraph 
27.22 	and any dwellings on the agricultural land remain uninhabited.
27.23 	 (g) Agricultural property consisting of at least 40 acres of a family farm corporation, 
27.24 	joint family farm venture, family farm limited liability company, or partnership operating 
27.25 	a family farm as described under subdivision 8 shall be classified homestead, to the same 
27.26 	extent as other agricultural homestead property, if all of the following criteria are met:
27.27 	 (1) a shareholder, member, or partner of that entity is actively farming the 
27.28 	agricultural property;
27.29 	 (2) that shareholder, member, or partner who is actively farming the agricultural 
27.30 	property is a Minnesota resident;
27.31 	 (3) neither that shareholder, member, or partner, nor the spouse of that shareholder, 
27.32 	member, or partner claims another agricultural homestead in Minnesota; and
27.33 	 (4) that shareholder, member, or partner does not live farther than four townships or 
27.34 	cities, or a combination of four townships or cities, from the agricultural property.
27.35 	 Homestead treatment applies under this paragraph for property leased to a family 
27.36 	farm corporation, joint farm venture, limited liability company, or partnership operating a 
28.1 	family farm if legal title to the property is in the name of an individual who is a member, 
28.2 	shareholder, or partner in the entity.
28.3 	 (h) To be eligible for the special agricultural homestead under this subdivision, an 
28.4 	initial full application must be submitted to the county assessor where the property is 
28.5 	located. Owners and the persons who are actively farming the property shall be required 
28.6 	to complete only a one-page abbreviated version of the application in each subsequent 
28.7 	year provided that none of the following items have changed since the initial application:
28.8 	 (1) the day-to-day operation, administration, and financial risks remain the same;
28.9 	 (2) the owners and the persons actively farming the property continue to live within 
28.10 	the four townships or city criteria and are Minnesota residents;
28.11 	 (3) the same operator of the agricultural property is listed with the Farm Service 
28.12 	Agency;
28.13 	 (4) a Schedule F or equivalent income tax form was filed for the most recent year;
28.14 	 (5) the property's acreage is unchanged; and
28.15 	 (6) none of the property's acres have been enrolled in a federal or state farm program 
28.16 	since the initial application.
28.17 	 The owners and any persons who are actively farming the property must include 
28.18 	the appropriate Social Security numbers, and sign and date the application.  If any of the 
28.19 	specified information has changed since the full application was filed, the owner must 
28.20 	notify the assessor, and must complete a new application to determine if the property 
28.21 	continues to qualify for the special agricultural homestead.  The commissioner of revenue 
28.22 	shall prepare a standard reapplication form for use by the assessors.

28.23 	EFFECTIVE DATE. This section is effective for assessment year 2005 and 
28.24 	thereafter, for taxes payable in 2006 and thereafter.

28.25 	 Sec. 19. Minnesota Statutes 2004, section 273.125, subdivision 8, is amended to read:
28.26 		 Subd. 8.Manufactured homes; sectional structures.  (a) In this section, 
28.27 	"manufactured home" means a structure transportable in one or more sections, which is 
28.28 	built on a permanent chassis, and designed to be used as a dwelling with or without a 
28.29 	permanent foundation when connected to the required utilities, and contains the plumbing, 
28.30 	heating, air conditioning, and electrical systems in it.  Manufactured home includes any 
28.31 	accessory structure that is an addition or supplement to the manufactured home and, when 
28.32 	installed, becomes a part of the manufactured home.
28.33 	 (b) Except as provided in paragraph (c),a manufactured home that meets each of the 
28.34 	following criteria must be valued and assessed as an improvement to real property, the 
29.1 	appropriate real property classification applies, and the valuation is subject to review and 
29.2 	the taxes payable in the manner provided for real property:
29.3 	 (1) the owner of the unit holds title to the land on which it is situated;
29.4 	 (2) the unit is affixed to the land by a permanent foundation or is installed at its 
29.5 	location in accordance with the Manufactured Home Building Code in sections 327.31
29.6 	to 327.34, and rules adopted under those sections, or is affixed to the land like other real 
29.7 	property in the taxing district; and
29.8 	 (3) the unit is connected to public utilities, has a well and septic tank system, or is 
29.9 	serviced by water and sewer facilities comparable to other real property in the taxing 
29.10 	district.
29.11 	 (c) A manufactured home that meets each of the following criteria must be assessed 
29.12 	at the rate provided by the appropriate real property classification but must be treated as 
29.13 	personal property, and the valuation is subject to review and the taxes payable in the 
29.14 	manner provided in this section:
29.15 	 (1) the owner of the unit is a lessee of the land under the terms of a lease, or the unit 
29.16 	is located in a manufactured home park, campground, or resort;
29.17 	 (2) the unit is affixed to the land by a permanent foundation or is installed at its 
29.18 	location in accordance with the Manufactured Home Building Code contained in sections 
29.19 	327.31 to 327.34, and the rules adopted under those sections, or is affixed to the land like 
29.20 	other real property in the taxing district; and
29.21 	 (3) the unit is connected to public utilities, has a well and septic tank system, or is 
29.22 	serviced by water and sewer facilities comparable to other real property in the taxing 
29.23 	district.
29.24 	 (d) Sectional structures must be valued and assessed as an improvement to real 
29.25 	property if the owner of the structure holds title to the land on which it is located or is a 
29.26 	qualifying lessee of the land under section 273.19.  In this paragraph "sectional structure" 
29.27 	means a building or structural unit that has been in whole or substantial part manufactured 
29.28 	or constructed at an off-site location to be wholly or partially assembled on-site alone or 
29.29 	with other units and attached to a permanent foundation.
29.30 	 (e) The commissioner of revenue may adopt rules under the Administrative 
29.31 	Procedure Act to establish additional criteria for the classification of manufactured homes 
29.32 	and sectional structures under this subdivision.
29.33 	 (f) A storage shed, deck, or similar improvement constructed on property that is 
29.34 	leased or rented as a site for a manufactured home, sectional structure, park trailer, or 
29.35 	travel trailer is taxable as provided in this section.  In the case of property that is leased or 
29.36 	rented as a site for a travel trailer, a storage shed, deck, or similar improvement on the 
30.1 	site that is considered personal property under this paragraph is taxable only if its total 
30.2 	estimated market value is over $500.  The property is taxable as personal property to the 
30.3 	lessee of the site if it is not owned by the owner of the site. The property is taxable as 
30.4 	real estate if it is owned by the owner of the site.  As a condition of permitting the owner 
30.5 	of the manufactured home, sectional structure, park trailer, or travel trailer to construct 
30.6 	improvements on the leased or rented site, the owner of the site must obtain the permanent 
30.7 	home address of the lessee or user of the site.  The site owner must provide the name 
30.8 	and address to the assessor upon request.

30.9 	EFFECTIVE DATE. For purposes of Minnesota Statutes, sections 272.12 and 
30.10 	272.121, this section is effective the day following final enactment.  For all other purposes, 
30.11 	this section is effective beginning with taxes payable in 2006, except that for any property 
30.12 	treated as real property under this section for the 2005 assessment that will be treated as 
30.13 	personal property under this section for the 2006 assessment, an adjustment must be made 
30.14 	to the 2005 assessment roll on or before July 1, 2005, to reflect those changes.

30.15 	 Sec. 20. [273.126] CERTIFICATION OF LOW-INCOME RENTAL PROPERTY.
30.16 		 Subdivision 1.Requirement. Low-income rental property is entitled to 
30.17 	classification as class 4d under section 273.13, subdivision 25, paragraph (e), for a 
30.18 	maximum period of five years if at least 75 percent of the units in the rental housing 
30.19 	property meet any of the following qualifications:
30.20 	 (1) the units are subject to a housing assistance payments contract under Section 8 
30.21 	of the United States Housing Act of 1937, as amended;
30.22 	 (2) the units are rent-restricted and income-restricted units of a qualified low-income 
30.23 	housing project receiving tax credits under section 42(g) of the Internal Revenue Code 
30.24 	of 1986, as amended; or 
30.25 	 (3) the units are financed by the Rural Housing Service of the United States 
30.26 	Department of Agriculture and receive payments under the rental assistance program 
30.27 	pursuant to Section 521(a) of the Housing Act of 1949, as amended.
30.28 		 Subd. 2.Application. (a) Application for certification under this section must 
30.29 	be filed by March 31 of the levy year, or at a later date if the Housing Finance Agency 
30.30 	deems practicable.  The application must be filed with the Housing Finance Agency, 
30.31 	on a form prescribed by the agency, and must contain the information required by the 
30.32 	Housing Finance Agency.
30.33 	 (b) Each application must include:
30.34 	 (1) the property tax identification number;
30.35 	 (2) evidence that the property meets the requirements of subdivision 1; and 
31.1 	 (3) a true and correct copy of the financial statement related to the property.
31.2 	 (c) The Housing Finance Agency may charge an application fee approximately equal 
31.3 	to the costs of processing and reviewing the applications but not to exceed $10 per unit.  If 
31.4 	imposed, the applicant must pay the application fee to the Housing Finance Agency.  The 
31.5 	fee must be deposited in the housing development fund.
31.6 	 (d) An owner of low-income rental property certified under this section must reapply 
31.7 	under this subdivision for certification every five years.
31.8 		 Subd. 3.Certification. By June 1 of each levy year, the Housing Finance Agency 
31.9 	must certify to local assessors the properties that are qualified under this section and the 
31.10 	number of units in the building that qualify.  In making the certification, the Housing 
31.11 	Finance Agency may rely on the application and any other supporting information that the 
31.12 	agency deems necessary from the property owner.

31.13 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
31.14 	subsequent years.

31.15 	 Sec. 21. Minnesota Statutes 2004, section 273.13, subdivision 22, is amended to read:
31.16 		 Subd. 22.Class 1.  (a) Except as provided in subdivision 23 and in paragraphs (b) 
31.17 	and (c), real estate which is residential and used for homestead purposes is class 1a.  In the 
31.18 	case of a duplex or triplex in which one of the units is used for homestead purposes, the 
31.19 	entire property is deemed to be used for homestead purposes.  The market value of class 1a 
31.20 	property must be determined based upon the value of the house, garage, and land.
31.21 	 The first $500,000 of market value of class 1a property has a net class rate of 
31.22 	one percent of its market value; and the market value of class 1a property that exceeds 
31.23 	$500,000 has a class rate of 1.25 percent of its market value.
31.24 	 (b) Class 1b property includes homestead real estate or homestead manufactured 
31.25 	homes used for the purposes of a homestead by
31.26 	 (1) any person who is blind as defined in section 256D.35, or the blind person and 
31.27 	the blind person's spouse; or
31.28 	 (2) any person, hereinafter referred to as "veteran," who:
31.29 	 (i) served in the active military or naval service of the United States; and
31.30 	 (ii) is entitled to compensation under the laws and regulations of the United States 
31.31 	for permanent and total service-connected disability due to the loss, or loss of use, by 
31.32 	reason of amputation, ankylosis, progressive muscular dystrophies, or paralysis, of both 
31.33 	lower extremities, such as to preclude motion without the aid of braces, crutches, canes, or 
31.34 	a wheelchair; and
32.1 	 (iii) has acquired a special housing unit with special fixtures or movable facilities 
32.2 	made necessary by the nature of the veteran's disability, or the surviving spouse of the 
32.3 	deceased veteran for as long as the surviving spouse retains the special housing unit 
32.4 	as a homestead; or
32.5 	 (3) any person who is permanently and totally disabled.
32.6 	 Property is classified and assessed under clause (3) only if the government agency or 
32.7 	income-providing source certifies, upon the request of the homestead occupant, that the 
32.8 	homestead occupant satisfies the disability requirements of this paragraph.
32.9 	 Property is classified and assessed pursuant to clause (1) only if the commissioner of 
32.10 	revenue certifies to the assessor that the homestead occupant satisfies the requirements of 
32.11 	this paragraph.
32.12 	 Permanently and totally disabled for the purpose of this subdivision means a 
32.13 	condition which is permanent in nature and totally incapacitates the person from working 
32.14 	at an occupation which brings the person an income.  The first $32,000 $50,000  market 
32.15 	value of class 1b property has a net class rate of .45 percent of its market value.  The 
32.16 	remaining market value of class 1b property has a class rate using the rates for class 1a or 
32.17 	class 2a property, whichever is appropriate, of similar market value.
32.18 	 (c) Class 1c property is commercial use real property that abuts a lakeshore line and 
32.19 	is devoted to temporary and seasonal residential occupancy for recreational purposes but 
32.20 	not devoted to commercial purposes for more than 250 days in the year preceding the 
32.21 	year of assessment, and that includes a portion used as a homestead by the owner, which 
32.22 	includes a dwelling occupied as a homestead by a shareholder of a corporation that owns 
32.23 	the resort, a partner in a partnership that owns the resort, or a member of a limited liability 
32.24 	company that owns the resort even if the title to the homestead is held by the corporation, 
32.25 	partnership, or limited liability company.  For purposes of this clause, property is devoted 
32.26 	to a commercial purpose on a specific day if any portion of the property, excluding the 
32.27 	portion used exclusively as a homestead, is used for residential occupancy and a fee is 
32.28 	charged for residential occupancy.  The first $500,000 $300,000 of market value of class 
32.29 	1c property has a class rate of one 0.55 percent, and the remaining next $1,500,000 of 
32.30 	market value of class 1c property has a class rate of one percent, with the following 
32.31 	limitation: the area of the property must not exceed 100 feet of lakeshore footage for each 
32.32 	cabin or campsite located on the property up to a total of 800 feet and 500 feet in depth, 
32.33 	measured away from the lakeshore. Any remaining market value is class 4c property.If 
32.34 	any portion of the class 1c resort property is classified as class 4c under subdivision 25, 
32.35 	the entire property must meet the requirements of subdivision 25, paragraph (d), clause 
32.36 	(1), to qualify for class 1c treatment under this paragraph.
33.1 	 (d) Class 1d property includes structures that meet all of the following criteria:
33.2 	 (1) the structure is located on property that is classified as agricultural property under 
33.3 	section 273.13, subdivision 23;
33.4 	 (2) the structure is occupied exclusively by seasonal farm workers during the time 
33.5 	when they work on that farm, and the occupants are not charged rent for the privilege of 
33.6 	occupying the property, provided that use of the structure for storage of farm equipment 
33.7 	and produce does not disqualify the property from classification under this paragraph;
33.8 	 (3) the structure meets all applicable health and safety requirements for the 
33.9 	appropriate season; and
33.10 	 (4) the structure is not salable as residential property because it does not comply 
33.11 	with local ordinances relating to location in relation to streets or roads.
33.12 	 The market value of class 1d property has the same class rates as class 1a property 
33.13 	under paragraph (a).

33.14 	EFFECTIVE DATE. This section is effective for taxes levied in 2005, payable 
33.15 	in 2006, and thereafter.

33.16 	 Sec. 22. Minnesota Statutes 2004, section 273.13, subdivision 23, is amended to read:
33.17 		 Subd. 23.Class 2.  (a) Class 2a property is agricultural land including any 
33.18 	improvements that is homesteaded.  The market value of the house and garage and 
33.19 	immediately surrounding one acre of land has the same class rates as class 1a property 
33.20 	under subdivision 22.  The value of the remaining land including improvements up to and 
33.21 	including $600,000 market value $750,000  has a net class rate of 0.55 percent of market 
33.22 	value.  The remaining property value over $600,000 market value $750,000 has a class 
33.23 	rate of one percent of market value.
33.24 	 (b) Class 2b property is (1) real estate, rural in character and used exclusively for 
33.25 	growing trees for timber, lumber, and wood and wood products; (2) real estate that 
33.26 	is not improved with a structure and is used exclusively for growing trees for timber, 
33.27 	lumber, and wood and wood products, if the owner has participated or is participating in 
33.28 	a cost-sharing program for afforestation, reforestation, or timber stand improvement on 
33.29 	that particular property, administered or coordinated by the commissioner of natural 
33.30 	resources; (3) real estate that is nonhomestead agricultural land; or (4) a landing area or 
33.31 	public access area of a privately owned public use airport.  Class 2b property has a net 
33.32 	class rate of one percent of market value.
33.33 	 (c) Agricultural land as used in this section means contiguous acreage of ten acres or 
33.34 	more, used during the preceding year for agricultural purposes.  "Agricultural purposes" as 
33.35 	used in this section means the raising or cultivation of agricultural products.  "Agricultural 
34.1 	purposes" also includes enrollment in the Reinvest in Minnesota program under sections 
34.2 	103F.501 to 103F.535 or the federal Conservation Reserve Program as contained in Public 
34.3 	Law 99-198 if the property was classified as agricultural (i) under this subdivision for 
34.4 	the assessment year 2002 or (ii) in the year prior to its enrollment.  Contiguous acreage 
34.5 	on the same parcel, or contiguous acreage on an immediately adjacent parcel under the 
34.6 	same ownership, may also qualify as agricultural land, but only if it is pasture, timber, 
34.7 	waste, unusable wild land, or land included in state or federal farm programs.  Agricultural 
34.8 	classification for property shall be determined excluding the house, garage, and 
34.9 	immediately surrounding one acre of land, and shall not be based upon the market value of 
34.10 	any residential structures on the parcel or contiguous parcels under the same ownership.
34.11 	 (d) Real estate, excluding the house, garage, and immediately surrounding one acre 
34.12 	of land, of less than ten acres which is exclusively and intensively used for raising or 
34.13 	cultivating agricultural products, shall be considered as agricultural land.
34.14 	 Land shall be classified as agricultural even if all or a portion of the agricultural use 
34.15 	of that property is the leasing to, or use by another person for agricultural purposes.
34.16 	 Classification under this subdivision is not determinative for qualifying under 
34.17 	section 273.111.
34.18 	 The property classification under this section supersedes, for property tax purposes 
34.19 	only, any locally administered agricultural policies or land use restrictions that define 
34.20 	minimum or maximum farm acreage.
34.21 	 (e) The term "agricultural products" as used in this subdivision includes production 
34.22 	for sale of:
34.23 	 (1) livestock, dairy animals, dairy products, poultry and poultry products, fur-bearing 
34.24 	animals, horticultural and nursery stock, fruit of all kinds, vegetables, forage, grains, 
34.25 	bees, and apiary products by the owner;
34.26 	 (2) fish bred for sale and consumption if the fish breeding occurs on land zoned 
34.27 	for agricultural use;
34.28 	 (3) the commercial boarding of horses if the boarding is done in conjunction with 
34.29 	raising or cultivating agricultural products as defined in clause (1);
34.30 	 (4) property which is owned and operated by nonprofit organizations used for 
34.31 	equestrian activities, excluding racing;
34.32 	 (5) game birds and waterfowl bred and raised for use on a shooting preserve licensed 
34.33 	under section 97A.115;
34.34 	 (6) insects primarily bred to be used as food for animals;
34.35 	 (7) trees, grown for sale as a crop, and not sold for timber, lumber, wood, or wood 
34.36 	products; and
35.1 	 (8) maple syrup taken from trees grown by a person licensed by the Minnesota 
35.2 	Department of Agriculture under chapter 28A as a food processor.
35.3 	 (f) If a parcel used for agricultural purposes is also used for commercial or industrial 
35.4 	purposes, including but not limited to:
35.5 	 (1) wholesale and retail sales;
35.6 	 (2) processing of raw agricultural products or other goods;
35.7 	 (3) warehousing or storage of processed goods; and
35.8 	 (4) office facilities for the support of the activities enumerated in clauses (1), (2), 
35.9 	and (3),
35.10 	 the assessor shall classify the part of the parcel used for agricultural purposes as class 
35.11 	1b, 2a, or 2b, whichever is appropriate, and the remainder in the class appropriate to its 
35.12 	use.  The grading, sorting, and packaging of raw agricultural products for first sale is 
35.13 	considered an agricultural purpose. A greenhouse or other building where horticultural 
35.14 	or nursery products are grown that is also used for the conduct of retail sales must be 
35.15 	classified as agricultural if it is primarily used for the growing of horticultural or nursery 
35.16 	products from seed, cuttings, or roots and occasionally as a showroom for the retail sale of 
35.17 	those products.  Use of a greenhouse or building only for the display of already grown 
35.18 	horticultural or nursery products does not qualify as an agricultural purpose.
35.19 	 The assessor shall determine and list separately on the records the market value of 
35.20 	the homestead dwelling and the one acre of land on which that dwelling is located.  If any 
35.21 	farm buildings or structures are located on this homesteaded acre of land, their market 
35.22 	value shall not be included in this separate determination.
35.23 	 (g) To qualify for classification under paragraph (b), clause (4), a privately owned 
35.24 	public use airport must be licensed as a public airport under section 360.018.  For purposes 
35.25 	of paragraph (b), clause (4), "landing area" means that part of a privately owned public use 
35.26 	airport properly cleared, regularly maintained, and made available to the public for use by 
35.27 	aircraft and includes runways, taxiways, aprons, and sites upon which are situated landing 
35.28 	or navigational aids.  A landing area also includes land underlying both the primary surface 
35.29 	and the approach surfaces that comply with all of the following:
35.30 	 (i) the land is properly cleared and regularly maintained for the primary purposes of 
35.31 	the landing, taking off, and taxiing of aircraft; but that portion of the land that contains 
35.32 	facilities for servicing, repair, or maintenance of aircraft is not included as a landing area;
35.33 	 (ii) the land is part of the airport property; and
35.34 	 (iii) the land is not used for commercial or residential purposes.
35.35 	 The land contained in a landing area under paragraph (b), clause (4), must be described 
35.36 	and certified by the commissioner of transportation.  The certification is effective until 
36.1 	it is modified, or until the airport or landing area no longer meets the requirements of 
36.2 	paragraph (b), clause (4).  For purposes of paragraph (b), clause (4), "public access area" 
36.3 	means property used as an aircraft parking ramp, apron, or storage hangar, or an arrival 
36.4 	and departure building in connection with the airport.

36.5 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
36.6 	thereafter.

36.7 	 Sec. 23. Minnesota Statutes 2004, section 273.13, subdivision 25, is amended to read:
36.8 		 Subd. 25.Class 4.  (a) Class 4a is residential real estate containing four or more 
36.9 	units and used or held for use by the owner or by the tenants or lessees of the owner 
36.10 	as a residence for rental periods of 30 days or more, excluding property qualifying for 
36.11 	class 4d.  Class 4a also includes hospitals licensed under sections 144.50 to 144.56, other 
36.12 	than hospitals exempt under section 272.02, and contiguous property used for hospital 
36.13 	purposes, without regard to whether the property has been platted or subdivided.  The 
36.14 	market value of class 4a property has a class rate of 1.8 percent for taxes payable in 2002, 
36.15 	1.5 percent for taxes payable in 2003, and 1.25 percent for taxes payable in 2004 and 
36.16 	thereafter, except that class 4a property consisting of a structure for which construction 
36.17 	commenced after June 30, 2001, has a class rate of 1.25 percent of market value for 
36.18 	taxes payable in 2003 and subsequent years.
36.19 	 (b) Class 4b includes:
36.20 	 (1) residential real estate containing less than four units that does not qualify as class 
36.21 	4bb, other than seasonal residential recreational property;
36.22 	 (2) manufactured homes not classified under any other provision;
36.23 	 (3) a dwelling, garage, and surrounding one acre of property on a nonhomestead 
36.24 	farm classified under subdivision 23, paragraph (b) containing two or three units; and
36.25 	 (4) unimproved property that is classified residential as determined under subdivision 
36.26 	33.
36.27 	 The market value of class 4b property has a class rate of 1.5 percent for taxes 
36.28 	payable in 2002, and 1.25 percent for taxes payable in 2003 and thereafter.
36.29 	 (c) Class 4bb includes:
36.30 	 (1) nonhomestead residential real estate containing one unit, other than seasonal 
36.31 	residential recreational property; and
36.32 	 (2) a single family dwelling, garage, and surrounding one acre of property on a 
36.33 	nonhomestead farm classified under subdivision 23, paragraph (b).
36.34 	 Class 4bb property has the same class rates as class 1a property under subdivision 22.
37.1 	 Property that has been classified as seasonal residential recreational property at 
37.2 	any time during which it has been owned by the current owner or spouse of the current 
37.3 	owner does not qualify for class 4bb.
37.4 	 (d) Class 4c property includes:
37.5 	 (1) except as provided in subdivision 22, paragraph (c), real property devoted to 
37.6 	temporary and seasonal residential occupancy for recreation purposes, including real 
37.7 	property devoted to temporary and seasonal residential occupancy for recreation purposes 
37.8 	and not devoted to commercial purposes for more than 250 days in the year preceding 
37.9 	the year of assessment.  For purposes of this clause, property is devoted to a commercial 
37.10 	purpose on a specific day if any portion of the property is used for residential occupancy, 
37.11 	and a fee is charged for residential occupancy.  In order for a property to be classified as 
37.12 	class 4c, seasonal residential recreational for commercial purposes, at least 40 percent of 
37.13 	the annual gross lodging receipts related to the property must be from business conducted 
37.14 	during 90 consecutive days and either (i) at least 60 percent of all paid bookings by 
37.15 	lodging guests during the year must be for periods of at least two consecutive nights; or 
37.16 	(ii) at least 20 percent of the annual gross receipts must be from charges for rental of fish 
37.17 	houses, boats and motors, snowmobiles, downhill or cross-country ski equipment, or 
37.18 	charges for marina services, launch services, and guide services, or the sale of bait and 
37.19 	fishing tackle.  For purposes of this determination, a paid booking of five or more nights 
37.20 	shall be counted as two bookings.  Class 4c also includes commercial use real property 
37.21 	used exclusively for recreational purposes in conjunction with class 4c property devoted 
37.22 	to temporary and seasonal residential occupancy for recreational purposes, up to a total 
37.23 	of two acres, provided the property is not devoted to commercial recreational use for 
37.24 	more than 250 days in the year preceding the year of assessment and is located within 
37.25 	two miles of the class 4c property with which it is used.  Class 4c property classified in 
37.26 	this clause also includes the remainder of class 1c resorts provided that the entire property 
37.27 	including that portion of the property classified as class 1c also meets the requirements for 
37.28 	class 4c under this clause; otherwise the entire property is classified as class 3.  Owners 
37.29 	of real property devoted to temporary and seasonal residential occupancy for recreation 
37.30 	purposes and all or a portion of which was devoted to commercial purposes for not more 
37.31 	than 250 days in the year preceding the year of assessment desiring classification as class 
37.32 	1c or 4c, must submit a declaration to the assessor designating the cabins or units occupied 
37.33 	for 250 days or less in the year preceding the year of assessment by January 15 of the 
37.34 	assessment year.  Those cabins or units and a proportionate share of the land on which 
37.35 	they are located will be designated class 1c or 4c as otherwise provided.  The remainder of 
37.36 	the cabins or units and a proportionate share of the land on which they are located will 
38.1 	be designated as class 3a.  The owner of property desiring designation as class 1c or 4c 
38.2 	property must provide guest registers or other records demonstrating that the units for 
38.3 	which class 1c or 4c designation is sought were not occupied for more than 250 days in 
38.4 	the year preceding the assessment if so requested.  The portion of a property operated as 
38.5 	a (1) restaurant, (2) bar, (3) gift shop, and (4) other nonresidential facility operated on a 
38.6 	commercial basis not directly related to temporary and seasonal residential occupancy 
38.7 	for recreation purposes shall not qualify for class 1c or 4c;
38.8 	 (2) qualified property used as a golf course if:
38.9 	 (i) it is open to the public on a daily fee basis.  It may charge membership fees or 
38.10 	dues, but a membership fee may not be required in order to use the property for golfing, 
38.11 	and its green fees for golfing must be comparable to green fees typically charged by 
38.12 	municipal courses; and
38.13 	 (ii) it meets the requirements of section 273.112, subdivision 3, paragraph (d).
38.14 	 A structure used as a clubhouse, restaurant, or place of refreshment in conjunction 
38.15 	with the golf course is classified as class 3a property;
38.16 	 (3) real property up to a maximum of one acre of land owned by a nonprofit 
38.17 	community service oriented organization; provided that the property is not used for a 
38.18 	revenue-producing activity for more than six days in the calendar year preceding the year 
38.19 	of assessment and the property is not used for residential purposes on either a temporary 
38.20 	or permanent basis.  For purposes of this clause, a "nonprofit community service oriented 
38.21 	organization" means any corporation, society, association, foundation, or institution 
38.22 	organized and operated exclusively for charitable, religious, fraternal, civic, or educational 
38.23 	purposes, and which is exempt from federal income taxation pursuant to section 501(c)(3), 
38.24 	(10), or (19) of the Internal Revenue Code of 1986, as amended through December 31, 
38.25 	1990.  For purposes of this clause, "revenue-producing activities" shall include but not be 
38.26 	limited to property or that portion of the property that is used as an on-sale intoxicating 
38.27 	liquor or 3.2 percent malt liquor establishment licensed under chapter 340A, a restaurant 
38.28 	open to the public, bowling alley, a retail store, gambling conducted by organizations 
38.29 	licensed under chapter 349, an insurance business, or office or other space leased or 
38.30 	rented to a lessee who conducts a for-profit enterprise on the premises.  Any portion of 
38.31 	the property which is used for revenue-producing activities for more than six days in the 
38.32 	calendar year preceding the year of assessment shall be assessed as class 3a.  The use of 
38.33 	the property for social events open exclusively to members and their guests for periods of 
38.34 	less than 24 hours, when an admission is not charged nor any revenues are received by the 
38.35 	organization shall not be considered a revenue-producing activity;
39.1 	 (4) postsecondary student housing of not more than one acre of land that is owned by 
39.2 	a nonprofit corporation organized under chapter 317A and is used exclusively by a student 
39.3 	cooperative, sorority, or fraternity for on-campus housing or housing located within two 
39.4 	miles of the border of a college campus;
39.5 	 (5) manufactured home parks as defined in section 327.14, subdivision 3;
39.6 	 (6) real property that is actively and exclusively devoted to indoor fitness, health, 
39.7 	social, recreational, and related uses, is owned and operated by a not-for-profit corporation, 
39.8 	and is located within the metropolitan area as defined in section 473.121, subdivision 2;
39.9 	 (7) a leased or privately owned noncommercial aircraft storage hangar not exempt 
39.10 	under section 272.01, subdivision 2, and the land on which it is located, provided that:
39.11 	 (i) the land is on an airport owned or operated by a city, town, county, Metropolitan 
39.12 	Airports Commission, or group thereof; and
39.13 	 (ii) the land lease, or any ordinance or signed agreement restricting the use of the 
39.14 	leased premise, prohibits commercial activity performed at the hangar.
39.15 	 If a hangar classified under this clause is sold after June 30, 2000, a bill of sale must 
39.16 	be filed by the new owner with the assessor of the county where the property is located 
39.17 	within 60 days of the sale; and 
39.18 	 (8) a privately owned noncommercial aircraft storage hangar not exempt under 
39.19 	section 272.01, subdivision 2, and the land on which it is located, provided that:
39.20 	 (i) the land abuts a public airport; and 
39.21 	 (ii) the owner of the aircraft storage hangar provides the assessor with a signed 
39.22 	agreement restricting the use of the premises, prohibiting commercial use or activity 
39.23 	performed at the hangar; and 
39.24 	 (9) residential real estate, a portion of which is used by the owner for homestead 
39.25 	purposes, and that is also a place of lodging, if all of the following criteria are met:
39.26 	 (i) rooms are provided for rent to transient guests that generally stay for periods 
39.27 	of 14 or fewer days;
39.28 	 (ii) meals are provided to persons who rent rooms, the cost of which is incorporated 
39.29 	in the basic room rate;
39.30 	 (iii) meals are not provided to the general public except for special events on fewer 
39.31 	than seven days in the calendar year preceding the year of the assessment; and
39.32 	 (iv) the owner is the operator of the property.
39.33 	 The market value subject to the 4c classification under this clause is limited to five rental 
39.34 	units.  Any rental units on the property in excess of five, must be valued and assessed as 
39.35 	class 3a.  The portion of the property used for purposes of a homestead by the owner must 
39.36 	be classified as class 1a property under subdivision 22.
40.1 	 Class 4c property has a class rate of 1.5 percent of market value, except that (i) each 
40.2 	parcel of seasonal residential recreational property not used for commercial purposes has 
40.3 	the same class rates as class 4bb property, (ii) manufactured home parks assessed under 
40.4 	clause (5) have the same class rate as class 4b property, (iii) commercial-use seasonal 
40.5 	residential recreational property has a class rate of one percent for the first $500,000 
40.6 	of market value, which includes any market value receiving the one percent rate under 
40.7 	subdivision 22, and 1.25 percent for the remaining market value, (iv) the market value 
40.8 	of property described in clause (4) has a class rate of one percent, (v) the market value 
40.9 	of property described in clauses (2) and (6) has a class rate of 1.25 percent, and (vi) that 
40.10 	portion of the market value of property in clause (8) qualifying for class 4c property 
40.11 	has a class rate of 1.25 percent.
40.12 	 (e) Class 4d property is qualifying low-income rental housing certified to the assessor 
40.13 	by the Housing Finance Agency under section 273.126, subdivision 3.  If only a portion 
40.14 	of the units in the building qualify as low-income rental housing units as certified under 
40.15 	section 273.126, subdivision 3, only the proportion of qualifying units to the total number 
40.16 	of units in the building qualify for class 4d.  The remaining portion of the building shall be 
40.17 	classified by the assessor based upon its use.  Class 4d also includes the same proportion of 
40.18 	land as the qualifying low-income rental housing units are to the total units in the building. 
40.19 	For all properties qualifying as class 4d, the market value determined by the assessor must 
40.20 	be based on the normal approach to value using normal unrestricted rents.
40.21 	 Class 4d property has a class rate of 1.0 percent.

40.22 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
40.23 	subsequent years.

40.24 	 Sec. 24. Minnesota Statutes 2004, section 273.13, is amended by adding a subdivision 
40.25 	to read:
40.26 		 Subd. 34.Homestead of disabled veteran or surviving spouse. (a) The first 
40.27 	$200,000 of market value of property qualifying for homestead classification under 
40.28 	subdivision 22 or 23 is excluded in determining the property's taxable market value if 
40.29 	it serves as the homestead of a military veteran, as defined in section 197.447, who 
40.30 	has a total and permanent service-connected disability.  To qualify for exclusion under 
40.31 	this subdivision, the veteran must have been honorably discharged from the United 
40.32 	States armed forces, as indicated by United States Government Form DD214 or other 
40.33 	official military discharge papers, and must be certified by the United States Veterans 
40.34 	Administration as having a total (100 percent) and permanent service-connected disability.
41.1 	 (b) If a disabled veteran qualifying for a valuation exclusion under paragraph (a) 
41.2 	predeceases the veteran's spouse, and if upon the death of the veteran the spouse holds the 
41.3 	legal or beneficial title to the homestead and permanently resides there, the exclusion shall 
41.4 	carry over to the benefit of the veteran's spouse until such time as the spouse remarries or 
41.5 	sells or otherwise disposes of the property.
41.6 	 (c) In the case of an agricultural homestead, only the portion of the property 
41.7 	consisting of the house and garage and immediately surrounding one acre of land qualifies 
41.8 	for the valuation exclusion under this subdivision.
41.9 	 (d) A property owner attempting to first qualify for a valuation exclusion under this 
41.10 	subdivision must apply to the assessor by July 1 of the assessment year, except that for 
41.11 	assessment year 2005 application may be made until September 1, 2005.  The application 
41.12 	must be accompanied by supporting documentation as required by the assessor.  Once a 
41.13 	property has been accepted for a valuation exclusion under this subdivision, the property 
41.14 	continues to qualify until there is a change in ownership of the property.
41.15 	 (e) The value of any qualifying property in excess of $200,000 must be treated 
41.16 	exactly the same as if the first $200,000 in value had not been excluded, for purposes of 
41.17 	determining the appropriate class rate.  A property qualifying for exclusion under this 
41.18 	subdivision shall not be eligible for the credit under section 273.1384, subdivision 1.

41.19 	EFFECTIVE DATE. This section is effective for assessment year 2005 and 
41.20 	thereafter, for taxes payable in 2006 and thereafter.

41.21 	 Sec. 25. Minnesota Statutes 2004, section 274.01, subdivision 1, is amended to read:
41.22 		 Subdivision 1.Ordinary board; meetings, deadlines, grievances.  (a) The town 
41.23 	board of a town, or the council or other governing body of a city, is the board of appeal 
41.24 	and equalization except (1) in cities whose charters provide for a board of equalization or 
41.25 	(2) in any city or town that has transferred its local board of review power and duties to 
41.26 	the county board as provided in subdivision 3.  The county assessor shall fix a day and 
41.27 	time when the board or the board of equalization shall meet in the assessment districts 
41.28 	of the county.  Notwithstanding any law or city charter to the contrary, a city board of 
41.29 	equalization shall be referred to as a board of appeal and equalization.  On or before 
41.30 	February 15 of each year the assessor shall give written notice of the time to the city or 
41.31 	town clerk.  Notwithstanding the provisions of any charter to the contrary, the meetings 
41.32 	must be held between April 1 and May 31 each year.  The clerk shall give published and 
41.33 	posted notice of the meeting at least ten days before the date of the meeting.
41.34 	 The board shall meet at the office of the clerk to review the assessment and 
41.35 	classification of property in the town or city.  No changes in valuation or classification 
42.1 	which are intended to correct errors in judgment by the county assessor may be made by 
42.2 	the county assessor after the board has adjourned in those cities or towns that hold a 
42.3 	local board of review; however, corrections of errors that are merely clerical in nature or 
42.4 	changes that extend homestead treatment to property are permitted after adjournment until 
42.5 	the tax extension date for that assessment year.  The changes must be fully documented and 
42.6 	maintained in the assessor's office and must be available for review by any person.  A copy 
42.7 	of the changes made during this period in those cities or towns that hold a local board of 
42.8 	review must be sent to the county board no later than December 31 of the assessment year.
42.9 	 (b) The board shall determine whether the taxable property in the town or city has 
42.10 	been properly placed on the list and properly valued by the assessor.  If real or personal 
42.11 	property has been omitted, the board shall place it on the list with its market value, and 
42.12 	correct the assessment so that each tract or lot of real property, and each article, parcel, 
42.13 	or class of personal property, is entered on the assessment list at its market value.  No 
42.14 	assessment of the property of any person may be raised unless the person has been duly 
42.15 	notified of the intent of the board to do so.  On application of any person feeling aggrieved, 
42.16 	the board shall review the assessment or classification, or both, and correct it as appears 
42.17 	just. The board may not make an individual market value adjustment or classification 
42.18 	change that would benefit the property in cases where the owner or other person having 
42.19 	control over the property will not permit the assessor to inspect the property and the 
42.20 	interior of any buildings or structures.
42.21 	 (c) A local board may reduce assessments upon petition of the taxpayer but the total 
42.22 	reductions must not reduce the aggregate assessment made by the county assessor by more 
42.23 	than one percent.  If the total reductions would lower the aggregate assessments made by 
42.24 	the county assessor by more than one percent, none of the adjustments may be made.  The 
42.25 	assessor shall correct any clerical errors or double assessments discovered by the board 
42.26 	without regard to the one percent limitation.
42.27 	 (d) A local board does not have authority to grant an exemption or to order property 
42.28 	removed from the tax rolls.
42.29 	 (e) A majority of the members may act at the meeting, and adjourn from day to day 
42.30 	until they finish hearing the cases presented.  The assessor shall attend, with the assessment 
42.31 	books and papers, and take part in the proceedings, but must not vote.  The county assessor, 
42.32 	or an assistant delegated by the county assessor shall attend the meetings.  The board shall 
42.33 	list separately, on a form appended to the assessment book, all omitted property added 
42.34 	to the list by the board and all items of property increased or decreased, with the market 
42.35 	value of each item of property, added or changed by the board, placed opposite the item.  
42.36 	The county assessor shall enter all changes made by the board in the assessment book.
43.1 	 (f) Except as provided in subdivision 3, if a person fails to appear in person, by 
43.2 	counsel, or by written communication before the board after being duly notified of the 
43.3 	board's intent to raise the assessment of the property, or if a person feeling aggrieved by an 
43.4 	assessment or classification fails to apply for a review of the assessment or classification, 
43.5 	the person may not appear before the county board of appeal and equalization for a review 
43.6 	of the assessment or classification.  This paragraph does not apply if an assessment was 
43.7 	made after the local board meeting, as provided in section 273.01, or if the person can 
43.8 	establish not having received notice of market value at least five days before the local 
43.9 	board meeting.
43.10 	 (g) The local board must complete its work and adjourn within 20 days from the 
43.11 	time of convening stated in the notice of the clerk, unless a longer period is approved by 
43.12 	the commissioner of revenue.  No action taken after that date is valid.  All complaints 
43.13 	about an assessment or classification made after the meeting of the board must be heard 
43.14 	and determined by the county board of equalization.  A nonresident may, at any time, 
43.15 	before the meeting of the board file written objections to an assessment or classification 
43.16 	with the county assessor.  The objections must be presented to the board at its meeting by 
43.17 	the county assessor for its consideration.

43.18 	 Sec. 26. Minnesota Statutes 2004, section 275.025, subdivision 4, is amended to read:
43.19 		 Subd. 4.Apportionment and levy of state general tax.  Ninety-five percent of 
43.20 	the state general tax must be distributed among the counties levied by applying a uniform 
43.21 	rate to each county's all commercial-industrial tax capacity and its five percent of the 
43.22 	state general tax must be levied by applying a uniform rate to all seasonal residential 
43.23 	recreational tax capacity. Within each county, the tax must be levied by applying a uniform 
43.24 	rate against commercial-industrial tax capacity and seasonal residential recreational tax 
43.25 	capacity.On or before October 1 each year, the commissioner of revenue shall certify a 
43.26 	the preliminary state general levy rate rates to each county auditor that must be used to 
43.27 	prepare the notices of proposed property taxes for taxes payable in the following year.  By 
43.28 	January 1 of each year, the commissioner shall certify the final state general levy rate to 
43.29 	each county auditor that shall be used in spreading taxes.

43.30 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
43.31 	thereafter.

43.32 	 Sec. 27. Minnesota Statutes 2004, section 276.04, subdivision 2, is amended to read:
43.33 		 Subd. 2.Contents of tax statements.  (a) The treasurer shall provide for the 
43.34 	printing of the tax statements.  The commissioner of revenue shall prescribe the form 
44.1 	of the property tax statement and its contents.  The statement must contain a tabulated 
44.2 	statement of the dollar amount due to each taxing authority and the amount of the state 
44.3 	tax from the parcel of real property for which a particular tax statement is prepared. The 
44.4 	dollar amounts attributable to the county, the state tax, the voter approved school tax, the 
44.5 	other local school tax, the township or municipality, and the total of the metropolitan 
44.6 	special taxing districts as defined in section 275.065, subdivision 3, paragraph (i), must 
44.7 	be separately stated.  The amounts due all other special taxing districts, if any, may be 
44.8 	aggregated except that any levies made by the regional rail authorities in the county of 
44.9 	Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 398A 
44.10 	shall be listed on a separate line directly under the appropriate county's levy.  If the county 
44.11 	levy under this paragraph includes an amount for a lake improvement district as defined 
44.12 	under sections 103B.501 to 103B.581, the amount attributable for that purpose must be 
44.13 	separately stated from the remaining county levy amount. In the case of Ramsey County, 
44.14 	if the county levy under this paragraph includes an amount for public library service 
44.15 	under section 134.07, the amount attributable for that purpose may be separated from the 
44.16 	remaining county levy amount.The amount of the tax on homesteads qualifying under the 
44.17 	senior citizens' property tax deferral program under chapter 290B is the total amount of 
44.18 	property tax before subtraction of the deferred property tax amount.  The amount of the 
44.19 	tax on contamination value imposed under sections 270.91 to 270.98, if any, must also 
44.20 	be separately stated.  The dollar amounts, including the dollar amount of any special 
44.21 	assessments, may be rounded to the nearest even whole dollar.  For purposes of this section 
44.22 	whole odd-numbered dollars may be adjusted to the next higher even-numbered dollar.  
44.23 	The amount of market value excluded under section 273.11, subdivision 16, if any, must 
44.24 	also be listed on the tax statement.
44.25 	 (b) The property tax statements for manufactured homes and sectional structures 
44.26 	taxed as personal property shall contain the same information that is required on the 
44.27 	tax statements for real property.
44.28 	 (c) Real and personal property tax statements must contain the following information 
44.29 	in the order given in this paragraph. The information must contain the current year tax 
44.30 	information in the right column with the corresponding information for the previous year 
44.31 	in a column on the left:
44.32 	 (1) the property's estimated market value under section 273.11, subdivision 1;
44.33 	 (2) the property's taxable market value after reductions under section 273.11, 
44.34 	subdivisions 1a and 16;
44.35 	 (3) the property's gross tax, calculated by adding the property's total property tax to 
44.36 	the sum of the aids enumerated in clause (4);
45.1 	 (4) a total of the following aids:
45.2 	 (i) education aids payable under chapters 122A, 123A, 123B, 124D, 125A, 126C, 
45.3 	and 127A;
45.4 	 (ii) local government aids for cities, towns, and counties under chapter 477A 
45.5 	sections 477A.011 to 477A.04; and
45.6 	 (iii) disparity reduction aid under section 273.1398;
45.7 	 (5) for homestead residential and agricultural properties, the credits under section 
45.8 	273.1384;
45.9 	 (6) any credits received under sections 273.119; 273.123; 273.135; 273.1391; 
45.10 	273.1398, subdivision 4; 469.171; and 473H.10, except that the amount of credit received 
45.11 	under section 273.135 must be separately stated and identified as "taconite tax relief"; and
45.12 	 (7) the net tax payable in the manner required in paragraph (a).
45.13 	 (d) If the county uses envelopes for mailing property tax statements and if the county 
45.14 	agrees, a taxing district may include a notice with the property tax statement notifying 
45.15 	taxpayers when the taxing district will begin its budget deliberations for the current 
45.16 	year, and encouraging taxpayers to attend the hearings.  If the county allows notices to 
45.17 	be included in the envelope containing the property tax statement, and if more than 
45.18 	one taxing district relative to a given property decides to include a notice with the tax 
45.19 	statement, the county treasurer or auditor must coordinate the process and may combine 
45.20 	the information on a single announcement.
45.21 	 The commissioner of revenue shall certify to the county auditor the actual or 
45.22 	estimated aids enumerated in clause (4) that local governments will receive in the 
45.23 	following year.  The commissioner must certify this amount by January 1 of each year.

45.24 	EFFECTIVE DATE. This section is effective for property tax statements for taxes 
45.25 	payable in 2006 and thereafter.

45.26 	 Sec. 28. [280.44] NOTIFICATION TO HOMESTEAD PROPERTY OWNERS; 
45.27 	TAX DELINQUENCY.
45.28 	 In addition to other notices required under this chapter, the county auditor shall 
45.29 	notify all taxpayers owning homestead property within the county whose real property 
45.30 	taxes on that homestead are currently delinquent and also were delinquent in the preceding 
45.31 	calendar year.  The notification must be mailed sometime between June 1 and August 1 
45.32 	in the year following the second year that property taxes were not paid.  The notification 
45.33 	must contain a telephone number and an e-mail address for the county auditor's office 
45.34 	to aid the taxpayer in contacting the county to discuss any questions relating to the tax 
45.35 	delinquency.  The notification must contain a list of the various assistance programs 
46.1 	and other options that might be available to the taxpayer to pay the delinquent taxes 
46.2 	including, but not limited to, the senior citizens' property tax deferral under chapter 290B, 
46.3 	partial property tax payments, and a confession of judgment under section 279.37.  The 
46.4 	notice must inform the taxpayer of the state-paid property tax refund and the additional 
46.5 	property tax refund under chapter 290A which may be available to the taxpayer once the 
46.6 	delinquent taxes have been satisfied.  The notice must also state the number of years before 
46.7 	the property will forfeit if the taxes are not paid or any installment plan initiated.  For 
46.8 	purposes of this section, "homestead" property means property classified under section 
46.9 	273.13, subdivision 22 or 23, paragraph (a).

46.10 	 EFFECTIVE DATE. This section is effective for property tax delinquencies 
46.11 	beginning January 1, 2006, provided that for calendar year 2006, the county auditor shall 
46.12 	notify the owners of each homestead property in the county that has been delinquent for 
46.13 	two or more years.

46.14 	 Sec. 29. Minnesota Statutes 2004, section 290A.03, subdivision 11, is amended to read:
46.15 		 Subd. 11.Rent constituting property taxes.  "Rent constituting property taxes" 
46.16 	means 19 percent of the gross rent actually paid in cash, or its equivalent, or the portion of 
46.17 	rent  the amount of gross rent actually paid in cash, or its equivalent, which is attributable 
46.18 	(1) to the property tax paid on the unit or (2) to the amount paid in lieu of property taxes, 
46.19 	in any calendar year by a claimant for the right of occupancy of the claimant's Minnesota 
46.20 	homestead in the calendar year, and which rent constitutes the basis, in the succeeding 
46.21 	calendar year of a claim for relief under this chapter by the claimant. The amount of 
46.22 	rent attributable to property taxes paid or payments in lieu made on the unit must be 
46.23 	determined by multiplying the gross rent paid by the claimant for the calendar year for the 
46.24 	unit by a fraction, the numerator of which is the net tax on the property where the unit 
46.25 	is located and the denominator of which is the total scheduled rent.  In no case may the 
46.26 	rent constituting property taxes exceed 50 percent of the gross rent paid by the claimant 
46.27 	during that calendar year. In the case of a claimant who resides in a unit for which (1) 
46.28 	a rent subsidy is paid to, or for, the claimant based on the income of the claimant or the 
46.29 	claimant's family, or (2) a subsidy is paid to a public housing authority that owns or 
46.30 	operates the claimant's rental unit, pursuant to United States Code, title 42, section 1437c, 
46.31 	20 percent of gross rent actually paid in cash or its equivalent shall be the claimant's "rent 
46.32 	constituting property taxes paid."  For purposes of this subdivision, "rent subsidy" does not 
46.33 	include any housing assistance received under the Minnesota family investment program, 
46.34 	general assistance, Minnesota supplemental assistance, supplemental security income, 
46.35 	or similar income maintenance programs.

47.1 	EFFECTIVE DATE. This section is effective for claims based on rent paid in 
47.2 	2005 and following years.

47.3 	 Sec. 30. Minnesota Statutes 2004, section 290A.03, subdivision 13, is amended to read:
47.4 		 Subd. 13.Property taxes payable.  "Property taxes payable" means the property 
47.5 	tax exclusive of special assessments, penalties, and interest payable on a claimant's 
47.6 	homestead after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, 
47.7 	subdivision 2, and any other state paid property tax credits in any calendar year, and 
47.8 	after any refund claimed and allowable under section 290A.04, subdivision 2h, that is 
47.9 	first payable in the year that the property tax is payable.  In the case of a claimant who 
47.10 	makes ground lease payments, "property taxes payable" includes the amount of the 
47.11 	payments directly attributable to the property taxes assessed against the parcel on which 
47.12 	the house is located.  No apportionment or reduction of the "property taxes payable" shall 
47.13 	be required for the use of a portion of the claimant's homestead for a business purpose if 
47.14 	the claimant does not deduct any business depreciation expenses for the use of a portion 
47.15 	of the homestead in the determination of federal adjusted gross income.  For homesteads 
47.16 	which are manufactured homes as defined in section 273.125, subdivision 8, and for 
47.17 	homesteads which are park trailers taxed as manufactured homes under section 168.012, 
47.18 	subdivision 9, "property taxes payable" shall also include 19 percent the amount of the 
47.19 	gross rent paid in the preceding year for the site on which the homestead is located, which 
47.20 	is attributable to the net tax paid on the site.  The amount attributable to property taxes 
47.21 	must be determined by multiplying the net tax on the parcel by a fraction, the numerator 
47.22 	of which is the gross rent paid for the calendar year for the site and the denominator 
47.23 	of which is the gross rent paid for the calendar year for the parcel.  When a homestead 
47.24 	is owned by two or more persons as joint tenants or tenants in common, such tenants 
47.25 	shall determine between them which tenant may claim the property taxes payable on the 
47.26 	homestead.  If they are unable to agree, the matter shall be referred to the commissioner of 
47.27 	revenue whose decision shall be final.  Property taxes are considered payable in the year 
47.28 	prescribed by law for payment of the taxes.
47.29 	 In the case of a claim relating to "property taxes payable," the claimant must have 
47.30 	owned and occupied the homestead on January 2 of the year in which the tax is payable 
47.31 	and (i) the property must have been classified as homestead property pursuant to section 
47.32 	273.124, on or before December 15 of the assessment year to which the "property taxes 
47.33 	payable" relate; or (ii) the claimant must provide documentation from the local assessor 
47.34 	that application for homestead classification has been made on or before December 15 
48.1 	of the year in which the "property taxes payable" were payable and that the assessor has 
48.2 	approved the application.

48.3 	EFFECTIVE DATE. This section is effective for claims based on rent paid in 
48.4 	2005 and following years.

48.5 	 Sec. 31. Minnesota Statutes 2004, section 290A.03, is amended by adding a 
48.6 	subdivision to read:
48.7 		 Subd. 16.Total scheduled rent. "Total scheduled rent" means the sum of the 
48.8 	monthly rents assigned to the residential rental units in the property multiplied by 12.  The 
48.9 	rents must be an arm's-length rental, including garage rents if any, but not including 
48.10 	charges for medical services furnished by the landlord as a part of the rental agreement.  In 
48.11 	determining total scheduled rent, no deduction is allowed for vacant units, uncollected 
48.12 	rent, or reduced cash rents in units occupied by employees or agents of the owner.

48.13 	EFFECTIVE DATE. This section is effective for claims based on rent paid in 
48.14 	2005 and following years.

48.15 	 Sec. 32. Minnesota Statutes 2004, section 290A.03, is amended by adding a 
48.16 	subdivision to read:
48.17 		 Subd. 17.Net tax. "Net tax" means:
48.18 	 (1) the property tax, exclusive of special assessments, interest, and penalties, and 
48.19 	after reduction for any state paid property tax credits as required in subdivision 13 except 
48.20 	for the reduction under section 273.13, subdivisions 22 and 23; or 
48.21 	 (2) the payments made in lieu of ad valorem taxes, including payments of special 
48.22 	assessments imposed in lieu of ad valorem taxes,
48.23 	 for the calendar year in which the rent was paid.  If a portion of the property is occupied 
48.24 	as a homestead or is used for other than rental purposes, the net tax is the amount of tax 
48.25 	reduced by the percentage that the nonrental use comprises of the total square footage of 
48.26 	the building.  If a portion of the property is used for purposes other than for residential 
48.27 	rental and none of the property is occupied as a homestead, the net tax is the amount of the 
48.28 	tax of the parcel multiplied by a fraction, the numerator of which is the net tax capacity of 
48.29 	the residential rental portion and the denominator of which is the total net tax capacity of 
48.30 	the parcel.  If a portion of the property is used for other than rental residential purposes, the 
48.31 	county treasurer shall list on the property tax statement the amount of net tax pertaining to 
48.32 	the rental residential portion of the property.
49.1 	 The amount of the net tax must not be reduced by an abatement or a court-ordered 
49.2 	reduction in the property tax on the property made after the certificate of rent paid has 
49.3 	been provided to the renter.

49.4 	EFFECTIVE DATE. This section is effective for claims based on rent paid in 
49.5 	2005 and following years.

49.6 	 Sec. 33. Minnesota Statutes 2004, section 290A.07, is amended by adding a 
49.7 	subdivision to read:
49.8 		 Subd. 5.Early payment; e-file claims. The commissioner may pay a claim up 
49.9 	to 30 days earlier than the first permitted date under subdivision 2a or 3 if the claim is 
49.10 	submitted by electronic means.

49.11 	EFFECTIVE DATE. This section is effective the day following final enactment.

49.12 	 Sec. 34. Minnesota Statutes 2004, section 290A.19, is amended to read:
49.13 	 290A.19 OWNER OR MANAGING AGENT TO FURNISH RENT 
49.14 	CERTIFICATE.
49.15 	 (a) The owner or managing agent of any property for which rent is paid for 
49.16 	occupancy as a homestead must furnish a certificate of rent paid to a person who is a 
49.17 	renter on December 31, in the form prescribed by the commissioner.  If the renter moves 
49.18 	before December 31, the owner or managing agent may give the certificate to the renter 
49.19 	at the time of moving, or mail the certificate to the forwarding address if an address has 
49.20 	been provided by the renter.  The certificate must be made available to the renter before 
49.21 	February 1 of the year following the year in which the rent was paid.  The owner or 
49.22 	managing agent must retain a duplicate of each certificate or an equivalent record showing 
49.23 	the same information for a period of three years.  The duplicate or other record must 
49.24 	be made available to the commissioner upon request.  For the purposes of this section, 
49.25 	"owner" includes a park owner as defined under section 327C.01, subdivision 6, and 
49.26 	"property" includes a lot as defined under section 327C.01, subdivision 3.
49.27 	 (b) If the owner or managing agent fails to provide the renter with a certificate of 
49.28 	rent constituting property taxes, the commissioner shall allocate the net tax on the building 
49.29 	to the unit on a square footage basis or other appropriate basis as the commissioner 
49.30 	determines.  The renter shall supply the commissioner with a statement from the county 
49.31 	treasurer that gives the amount of property tax on the parcel, the address and property tax 
49.32 	parcel identification number of the property, and the number of units in the building.

50.1 	 EFFECTIVE DATE. This section is effective for claims based on rent paid in 
50.2 	2005 and following years.

50.3 	 Sec. 35. Minnesota Statutes 2004, section 365.43, subdivision 1, is amended to read:
50.4 		 Subdivision 1.levied amount is spending limit total revenue defined.  A town 
50.5 	must not contract debts or spend more money in a year than the taxes levied for the year 
50.6 	its total revenue without a favorable vote of a majority of the town's electors. In this 
50.7 	section, "total revenue" means property taxes payable in that year as well as amounts 
50.8 	received from all other sources and amounts carried forward from the last year.

50.9 	 Sec. 36. Minnesota Statutes 2004, section 365.431, is amended to read:
50.10 	 365.431 AMOUNT VOTED AT MEETING IS TAX LIMIT.
50.11 	 Except as otherwise authorized by law,the tax for town purposes must not be more 
50.12 	than the amount voted to be raised at the annual town meeting.

50.13 	 Sec. 37. Minnesota Statutes 2004, section 366.011, is amended to read:
50.14 	 366.011 CHARGES FOR EMERGENCY SERVICES; COLLECTION.
50.15 	 A town may impose a reasonable service charge for emergency services, including 
50.16 	fire, rescue, medical, and related services provided by the town or contracted for by the 
50.17 	town.  If the service charge remains unpaid 30 days after a notice of delinquency is sent 
50.18 	to the recipient of the service or the recipient's representative or estate, the town or its 
50.19 	contractor on behalf of the town may use any lawful means allowed to a private party for 
50.20 	the collection of an unsecured delinquent debt.  The town may also use the authority of 
50.21 	section 366.012 to collect unpaid service charges of this kind from delinquent recipients of 
50.22 	services who are owners of taxable real property in the town state.
50.23 	 The powers conferred by this section are in addition and supplemental to the powers 
50.24 	conferred by any other law for a town to impose a service charge or assessment for a 
50.25 	service provided by the town or contracted for by the town.

50.26 	 EFFECTIVE DATE. This section is effective the day following final enactment.

50.27 	 Sec. 38. Minnesota Statutes 2004, section 366.012, is amended to read:
50.28 	 366.012 COLLECTION OF UNPAID SERVICE CHARGES.
50.29 	 If a town is authorized to impose a service charge on the owner, lessee, or occupant 
50.30 	of property, or any of them,for a governmental service provided by the town, the town 
50.31 	board may certify to the county auditor of the county in which the recipient of the services 
51.1 	owns real property, on or before October 15 for each year, any unpaid service charges 
51.2 	which shall then be collected together with property taxes levied against the property. The 
51.3 	county auditor shall remit to the town all service charges collected by the auditor on behalf 
51.4 	of the town. A charge may be certified to the auditor only if, on or before September 15, 
51.5 	the town has given written notice to the property owner of its intention to certify the 
51.6 	charge to the auditor. The service charges shall be subject to the same penalties, interest, 
51.7 	and other conditions provided for the collection of property taxes.  This section is in 
51.8 	addition to other law authorizing the collection of unpaid costs and service charges.

51.9 	 EFFECTIVE DATE. This section is effective the day following final enactment.

51.10 	 Sec. 39. [373.251] LEVY FOR NON-COUNTY-OWNED PUBLIC NURSING 
51.11 	HOMES.
51.12 	 (a) If a county with a population of 150,000 or more, according to the 2000 Federal 
51.13 	Census, located outside the metropolitan area as defined in section 473.121, subdivision 
51.14 	2, owns a nursing home that is funded in whole or part with county revenue, the county 
51.15 	must levy an equal amount annually to be distributed to all other nursing homes located 
51.16 	within the county that are owned by governmental units.
51.17 	 (b) The proceeds of the levy authorized by paragraph (a) must be prorated among 
51.18 	the government-owned nursing homes in the proportion that the number of beds in each 
51.19 	of the government-owned nursing homes is to the total number of beds in all of the 
51.20 	government-owned nursing homes in the county.
51.21 	 (c) The levy authorized by paragraph (a) may be levied in addition to all other 
51.22 	county levies authorized by law.

51.23 	 EFFECTIVE DATE. This section is effective for taxes levied in 2006, payable in 
51.24 	2007 and thereafter.

51.25 	 Sec. 40. Minnesota Statutes 2004, section 473F.02, subdivision 2, is amended to read:
51.26 		 Subd. 2.Area.  "Area" means the territory included within the boundaries of Anoka, 
51.27 	Carver, Dakota excluding the city of Northfield, Hennepin, Ramsey, Scott excluding the 
51.28 	city of New Prague, and Washington Counties, excluding lands constituting a major or 
51.29 	an intermediate airport as defined under section 473.625.

51.30 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
51.31 	subsequent years.

51.32 	 Sec. 41. Minnesota Statutes 2004, section 477A.11, subdivision 4, is amended to read:
52.1 		 Subd. 4.Other natural resources land.  "Other natural resources land" means:
52.2 	 (1) any other land presently owned in fee title by the state and administered by the 
52.3 	commissioner, or any tax-forfeited land, other than platted lots within a city or those lands 
52.4 	described under subdivision 3, clause (2), which is owned by the state and administered by 
52.5 	the commissioner or by the county in which it is located; and 
52.6 	 (2) land leased by the state from the United States of America through the United 
52.7 	States Secretary of Agriculture pursuant to Title III of the Bankhead Jones Farm 
52.8 	Tenant Act, which land is commonly referred to as land utilization project land that is 
52.9 	administered by the commissioner.

52.10 	EFFECTIVE DATE. This section is effective for aids paid in calendar year 2006 
52.11 	and thereafter.

52.12 	 Sec. 42. Minnesota Statutes 2004, section 477A.11, is amended by adding a 
52.13 	subdivision to read:
52.14 		 Subd. 5.Land utilization project land. "Land utilization project land" means land 
52.15 	that is leased by the state from the United States through the United States Secretary of 
52.16 	Agriculture according to Title III of the Bankhead Jones Farm Tenant Act and that is 
52.17 	administered by the commissioner.

52.18 	EFFECTIVE DATE. This section is effective for aids paid in calendar year 2006 
52.19 	and thereafter.

52.20 	 Sec. 43. Minnesota Statutes 2004, section 477A.12, subdivision 1, is amended to read:
52.21 		 Subdivision 1.Types of land; payments.  (a) As an offset for expenses incurred 
52.22 	by counties and towns in support of natural resources lands, the following amounts are 
52.23 	annually appropriated to the commissioner of natural resources from the general fund for 
52.24 	transfer to the commissioner of revenue.  The commissioner of revenue shall pay the 
52.25 	transferred funds to counties as required by sections 477A.11 to 477A.145.  The amounts 
52.26 	are:
52.27 	 (1) for acquired natural resources land, $3, as adjusted for inflation under section 
52.28 	477A.145, multiplied by the total number of acres of acquired natural resources land or, 
52.29 	at the county's option three-fourths of one percent of the appraised value of all acquired 
52.30 	natural resources land in the county, whichever is greater;
52.31 	 (2) 75 cents, as adjusted for inflation under section 477A.145, multiplied by the 
52.32 	number of acres of county-administered other natural resources land; and
53.1 	 (3) 75 cents, as adjusted for inflation under section 477A.145, multiplied by the total 
53.2 	number of acres of land utilization project land;
53.3 	 (3) (4) 37.5 cents, as adjusted for inflation under section 477A.145, multiplied by 
53.4 	the number of acres of commissioner-administered other natural resources land located in 
53.5 	each county as of July 1 of each year prior to the payment year.
53.6 	 (b) The amount determined under paragraph (a), clause (1), is payable for land 
53.7 	that is acquired from a private owner and owned by the Department of Transportation 
53.8 	for the purpose of replacing wetland losses caused by transportation projects, but only 
53.9 	if the county contains more than 500 acres of such land at the time the certification is 
53.10 	made under subdivision 2.

53.11 	EFFECTIVE DATE. This section is effective for aids paid in calendar year 2006 
53.12 	and thereafter.

53.13 	 Sec. 44. Minnesota Statutes 2004, section 477A.12, subdivision 2, is amended to read:
53.14 		 Subd. 2.Procedure.  Lands for which payments in lieu are made pursuant to 
53.15 	section 97A.061, subdivision 3, and Laws 1973, chapter 567, shall not be eligible for 
53.16 	payments under this section.  Each county auditor shall certify to the Department of 
53.17 	Natural Resources during July of each year prior to the payment year the number of acres 
53.18 	of county-administered other natural resources land within the county.  The Department of 
53.19 	Natural resources may, in addition to the certification of acreage, require descriptive lists 
53.20 	of land so certified.  The commissioner of natural resources shall determine and certify to 
53.21 	the commissioner of revenue by March 1 of the payment year:
53.22 	 (1) the number of acres and most recent appraised value of acquired natural 
53.23 	resources land within each county;
53.24 	 (2) the number of acres of commissioner-administered natural resources land within 
53.25 	each county; and 
53.26 	 (3) the number of acres of county-administered other natural resources land within 
53.27 	each county, based on the reports filed by each county auditor with the commissioner 
53.28 	of natural resources; and 
53.29 	 (4) the number of acres of land utilization project land within each county.
53.30 	 The commissioner of transportation shall determine and certify to the commissioner 
53.31 	of revenue by March 1 of the payment year the number of acres of land and the appraised 
53.32 	value of the land described in subdivision 1, paragraph (b), but only if it exceeds 500 acres.
53.33 	 The commissioner of revenue shall determine the distributions provided for in this 
53.34 	section using the number of acres and appraised values certified by the commissioner of 
53.35 	natural resources and the commissioner of transportation by March 1 of the payment year.

54.1 	EFFECTIVE DATE. This section is effective for aids paid in calendar year 2006 
54.2 	and thereafter.

54.3 	 Sec. 45. Minnesota Statutes 2004, section 477A.14, subdivision 1, is amended to read:
54.4 		 Subdivision 1.General distribution.  Except as provided in subdivision 2 or in 
54.5 	section 97A.061, subdivision 5, 40 percent of the total payment to the county shall be 
54.6 	deposited in the county general revenue fund to be used to provide property tax levy 
54.7 	reduction.  The remainder shall be distributed by the county in the following priority:
54.8 	 (a) 37.5 cents, as adjusted for inflation under section 477A.145, for each acre 
54.9 	of county-administered other natural resources land shall be deposited in a resource 
54.10 	development fund to be created within the county treasury for use in resource 
54.11 	development, forest management, game and fish habitat improvement, and recreational 
54.12 	development and maintenance of county-administered other natural resources land.  Any 
54.13 	county receiving less than $5,000 annually for the resource development fund may elect to 
54.14 	deposit that amount in the county general revenue fund;
54.15 	 (b) From the funds remaining, within 30 days of receipt of the payment to the county, 
54.16 	the county treasurer shall pay each organized township 30 cents, as adjusted for inflation 
54.17 	under section 477A.145, for each acre of acquired natural resources land and each acre of 
54.18 	land described in section 477A.12, subdivision 1, paragraph (b), and 7.5 cents, as adjusted 
54.19 	for inflation under section 477A.145, for each acre of other natural resources land and each 
54.20 	acre of land utilization project land  located within its boundaries.  Payments for natural 
54.21 	resources lands not located in an organized township shall be deposited in the county 
54.22 	general revenue fund.  Payments to counties and townships pursuant to this paragraph shall 
54.23 	be used to provide property tax levy reduction, except that of the payments for natural 
54.24 	resources lands not located in an organized township, the county may allocate the amount 
54.25 	determined to be necessary for maintenance of roads in unorganized townships.  Provided 
54.26 	that, if the total payment to the county pursuant to section 477A.12 is not sufficient to fully 
54.27 	fund the distribution provided for in this clause, the amount available shall be distributed 
54.28 	to each township and the county general revenue fund on a pro rata basis; and
54.29 	 (c) Any remaining funds shall be deposited in the county general revenue fund.  
54.30 	Provided that, if the distribution to the county general revenue fund exceeds $35,000, the 
54.31 	excess shall be used to provide property tax levy reduction.

54.32 	EFFECTIVE DATE. This section is effective for aids paid in calendar year 2006 
54.33 	and thereafter.

55.1 	 Sec. 46. Laws 1998, chapter 389, article 3, section 42, subdivision 2, as amended by 
55.2 	Laws 2002, chapter 377, article 4, section 24, is amended to read:
55.3 		 Subd. 2.Recapture. (a) Property or any portion thereof qualifying under section 38 
55.4 	is subject to additional taxes if:
55.5 	 (1) ownership of the property is transferred to anyone other than the spouse or 
55.6 	child of the current owner;
55.7 	 (2) the current owner or the spouse or child of the current owner has not conveyed or 
55.8 	entered into a contract before July 1, 2007, to convey for ownership or public easement 
55.9 	rights, (i) a portion of the property to a one or more nonprofit foundation  foundations or 
55.10 	corporation operating corporations; and (ii) a portion of the property to one or more local 
55.11 	governments; and those entities shall separately or jointly operate the property as an art 
55.12 	park providing the services included in section 38, clauses (2) to (5), and may also use 
55.13 	some of the property for other public purposes as determined by the local governments; or
55.14 	 (3) the nonprofit foundation or corporation to which a portion of the property was 
55.15 	transferred ceases to provide the services included in section 38, clauses (2) to (5), earlier 
55.16 	than ten years following the effective date of the conveyance  conveyances or of the 
55.17 	execution of the contract contracts to convey.
55.18 	 (b) The additional taxes are imposed at the earlier of (1) the year following transfer 
55.19 	of ownership to anyone other than the spouse or child of the current owner or a nonprofit 
55.20 	foundation or corporation or local government operating the property as an art park and 
55.21 	used for other public purposes, or (2) for taxes payable in 2008, or (3) in the event the 
55.22 	nonprofit foundation or corporation to which a portion of the property was conveyed 
55.23 	ceases to provide the required services within ten years after the conveyance, for taxes 
55.24 	payable in the year following the year when it ceased to do so.
55.25 	 The county board, with the approval of the city council, shall determine the amount 
55.26 	of the additional taxes due on the portion of property which is no longer utilized as an art 
55.27 	park; provided, however, that the additional taxes are equal to must not be greater than 
55.28 	the difference between the taxes determined on that portion of the property utilized as an 
55.29 	art park under sections 39 and 40 and the amount determined under subdivision 1 for all 
55.30 	years that the property qualified under section 38. The additional taxes must be extended 
55.31 	against the property on the tax list for the current year; provided, however, that No interest 
55.32 	or penalties may be levied on the additional taxes if timely paid amount provided that it is 
55.33 	paid within 30 days of the county's notice.

55.34 	EFFECTIVE DATE. This section is effective March 1, 2005.

56.1 	 Sec. 47. Laws 2001, First Special Session chapter 5, article 3, section 8, the effective 
56.2 	date, is amended to read:

56.3 	 EFFECTIVE DATE. This section is effective for taxes levied in 2002, payable in 
56.4 	2003, through taxes levied in 2007  2009, payable in 2008 2010.

56.5 	 Sec. 48. Laws 2005, chapter 43, section 1, the effective date, if enacted, is amended to 
56.6 	read:

56.7 	 EFFECTIVE DATE. This section is effective for taxes levied in 2005 2004, 
56.8 	payable in 2006 2005, and thereafter.
56.9 	 EFFECTIVE DATE.
56.10 	This section is effective the day following final enactment.
56.11 	

56.12 	 Sec. 49. REPORT; PROPOSED STANDARDIZED ASSESSMENT AND 
56.13 	CLASSIFICATION STANDARDS.
 56.14 	 Recognizing the importance of uniform and professional property tax assessment 
56.15 	practices, the commissioner of revenue, in consultation with appropriate stakeholder 
56.16 	groups shall develop and issue a report to the chairs of the house and senate tax committees 
56.17 	by February 1, 2006.  This report shall contain, but not be limited to, recommendations 
56.18 	and proposed requirements for achieving standardized assessment and classification of 
56.19 	seasonal residential recreational property, residential nonhomestead property, timber and 
56.20 	woodland property, green acres property, seasonal residential recreational commercial and 
56.21 	noncommercial property, and commercial/industrial property.

56.22 	 EFFECTIVE DATE. This section is effective the day following final enactment.

56.23 	 Sec. 50. CODE OF CONDUCT AND ETHICS; ASSESSORS.
 56.24 	 The commissioner of revenue is directed to develop a code of conduct and ethics 
56.25 	for Minnesota assessors to ensure public confidence in property assessment.  The 
56.26 	commissioner shall consult with representatives of the Minnesota Association of Assessing 
56.27 	Officers, the State Board of Assessors, and any other groups that the commissioner deems 
56.28 	appropriate.  The code must include language that promotes fairness and uniformity and 
56.29 	recommends assessment practices that do not promote the perception of a conflict of 
56.30 	interest.  The code must be completed and recommended to the Minnesota State Board of 
56.31 	Assessors for adopting by January 1, 2006.  This code must be presented as part of the 
56.32 	course required by Minnesota Statutes, section 273.0755, paragraph (c).

57.1 	 EFFECTIVE DATE. This section is effective the day following final enactment.

57.2 	 Sec. 51. SCHOOL DEBT SERVICE LEVIES; ALTERNATIVE TAX BASE; 
57.3 	PILOT PROJECT.
 57.4 		 Subdivision 1.Commissioner designation. The commissioner of education may 
57.5 	select up to three school districts to participate in the pilot project under this section.  The 
57.6 	commissioner must notify the selected school districts by July 1, 2005.
57.7 		 Subd. 2.Election by school board. A school board designated by the commissioner 
57.8 	under subdivision 1 may by resolution elect to levy the debt service for a bond issued after 
57.9 	July 1, 2005, and before July 1, 2007, against the alternative net tax capacity of the district, 
57.10 	as defined under subdivision 6, rather than the net tax capacity of the district.  A resolution 
57.11 	to levy against alternative net tax capacity must be passed at an open meeting of the board, 
57.12 	at least 60 days prior to the referendum election.  A district electing to issue bonds with a 
57.13 	levy against alternative net tax capacity must notify the commissioner of that intention in 
57.14 	filing the proposal required by Minnesota Statutes, section 123B.71, subdivision 9.
57.15 		 Subd. 3.Debt service equalization revenue. For the purposes of Minnesota 
57.16 	Statutes, section 123B.53, subdivision 4, debt service equalization revenue for a district 
57.17 	that has issued bonds under an election to levy against alternative net tax capacity is the 
57.18 	same as it would be if the levy were being made against net tax capacity.
57.19 		 Subd. 4.Apportionment of debt service aid. Equalization aid for a district that 
57.20 	has issued bonds under an election to levy against alternative net tax capacity must be 
57.21 	apportioned between the net tax capacity debt service levy and the alternative net tax 
57.22 	capacity debt service levy in the same proportions as eligible debt service revenues 
57.23 	resulting from bonds issued against net tax capacity are to eligible debt service revenues 
57.24 	resulting from bonds issued against alternative net tax capacity.
57.25 		 Subd. 5.Alternative net tax capacity debt service levy.  The eligible debt service 
57.26 	revenues resulting from bonds issued against alternative net tax capacity, minus the debt 
57.27 	service equalization aid apportioned to the alternative net tax capacity levy, must be levied 
57.28 	against the alternative net tax capacity of the district as defined in subdivision 6, and must 
57.29 	be separately certified to the county auditor under Minnesota Statutes, section 275.07.
57.30 		 Subd. 6.Alternative net tax capacity. "Alternative net tax capacity" means the 
57.31 	net tax capacity of all taxable property in a district, as defined in Minnesota Statutes, 
57.32 	section 273.13, except:
57.33 	 (1) the first tier of class 2a property, excluding the portion of class 2a property 
57.34 	consisting of the house, garage, and surrounding one acre of land of an agricultural 
58.1 	homestead, has an alternative net tax capacity equal to 0.14 percent of its taxable market 
58.2 	value;
58.3 	 (2) the upper tier of class 2a property and all other class 2 property has an alternative 
58.4 	net tax capacity equal to 0.25 percent of its taxable market value;
58.5 	 (3) noncommercial class 4c(1) property has an alternative net tax capacity equal to 
58.6 	0.75 percent of its taxable market value;
58.7 	 (4) class 4a and 4b property has an alternative net tax capacity equal to one percent 
58.8 	of its taxable market value;
58.9 	 (5) the first tier of class 3 property has an alternative net tax capacity equal to 1.25
58.10 	percent of its taxable market value; and 
58.11 	 (6) class 5 property and the upper tier of class 3 property has an alternative net tax 
58.12 	capacity equal to 1.5 percent of its taxable market value.

58.13 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
58.14 	thereafter.

58.15 	 Sec. 52. SCHOOL PROPERTY; EXEMPTION 2005 ONLY.
 58.16 	 Notwithstanding Minnesota Statutes, section 272.02, subdivision 38, paragraph 
58.17 	(b), the following property is exempt from taxation for assessment year 2004, for taxes 
58.18 	payable in 2005, if it meets all the following criteria:
58.19 	 (1) is used to provide direct educational instruction for grades 7 through 10;
58.20 	 (2) is located in a city of the first class that has a population greater than 250,000 and 
58.21 	less than 350,000;
58.22 	 (3) was purchased after July 1, 2004, by a nonprofit that is exempt from federal 
58.23 	income tax under section 501(c)(3) of the Internal Revenue Code; and 
58.24 	 (4) is leased and operated by two nonprofit corporations organized under Minnesota 
58.25 	Statutes, chapter 317A.

58.26 	 EFFECTIVE DATE. This section is effective the day following final enactment.

58.27 	 Sec. 53. REPEALER.
 58.28 	 Laws 1998, chapter 389, article 3, section 41, is repealed.

58.29 	 EFFECTIVE DATE. This section is effective the day following final enactment.

59.1 	 ARTICLE 3
59.2 	 PROPERTY TAX AIDS AND CREDITS

59.3 	 Section 1. Minnesota Statutes 2004, section 4A.02, is amended to read:
59.4 	 4A.02 STATE DEMOGRAPHER.
59.5 	 (a) The director shall appoint a state demographer.  The demographer must be 
59.6 	professionally competent in demography and must possess demonstrated ability based 
59.7 	upon past performance.
59.8 	 (b) The demographer shall:
59.9 	 (1) continuously gather and develop demographic data relevant to the state;
59.10 	 (2) design and test methods of research and data collection;
59.11 	 (3) periodically prepare population projections for the state and designated regions 
59.12 	and periodically prepare projections for each county or other political subdivision of the 
59.13 	state as necessary to carry out the purposes of this section;
59.14 	 (4) review, comment on, and prepare analysis of population estimates and 
59.15 	projections made by state agencies, political subdivisions, other states, federal agencies, or 
59.16 	nongovernmental persons, institutions, or commissions;
59.17 	 (5) serve as the state liaison with the United States Bureau of the Census, coordinate 
59.18 	state and federal demographic activities to the fullest extent possible, and aid the 
59.19 	legislature in preparing a census data plan and form for each decennial census;
59.20 	 (6) compile an annual study of population estimates on the basis of county, regional, 
59.21 	or other political or geographical subdivisions as necessary to carry out the purposes of 
59.22 	this section and section 4A.03;
59.23 	 (7) by January 1 of each year, issue a report to the legislature containing an analysis 
59.24 	of the demographic implications of the annual population study and population projections;
59.25 	 (8) prepare maps for all counties in the state, all municipalities with a population 
59.26 	of 10,000 or more, and other municipalities as needed for census purposes, according to 
59.27 	scale and detail recommended by the United States Bureau of the Census, with the maps 
59.28 	of cities showing precinct boundaries;
59.29 	 (9) prepare an estimate of population and of the number of households for each 
59.30 	governmental subdivision for which the Metropolitan Council does not prepare an annual 
59.31 	estimate, and convey the estimates to the governing body of each political subdivision by 
59.32 	May June 1 of each year;
59.33 	 (10) direct, under section 414.01, subdivision 14, and certify population and 
59.34 	household estimates of annexed or detached areas of municipalities or towns after being 
59.35 	notified of the order or letter of approval by the director;
60.1 	 (11) prepare, for any purpose for which a population estimate is required by law 
60.2 	or needed to implement a law, a population estimate of a municipality or town whose 
60.3 	population is affected by action under section 379.02 or 414.01, subdivision 14; and
60.4 	 (12) prepare an estimate of average household size for each statutory or home rule 
60.5 	charter city with a population of 2,500 or more by May June 1 of each year.
60.6 	 (c) A governing body may challenge an estimate made under paragraph (b) by 
60.7 	filing their specific objections in writing with the state demographer by June 10 24.  If 
60.8 	the challenge does not result in an acceptable estimate by June 24, the governing body 
60.9 	may have a special census conducted by the United States Bureau of the Census.  The 
60.10 	political subdivision must notify the state demographer by July 1 of its intent to have the 
60.11 	special census conducted.  The political subdivision must bear all costs of the special 
60.12 	census.  Results of the special census must be received by the state demographer by the 
60.13 	next April 15 to be used in that year's May June 1 estimate to the political subdivision 
60.14 	under paragraph (b).
60.15 	 (d) The state demographer shall certify the estimates of population and household 
60.16 	size to the commissioner of revenue by July 15 each year, including any estimates still 
60.17 	under objection.

60.18 	 EFFECTIVE DATE. This section is effective the day following final enactment.

60.19 	 Sec. 2. Minnesota Statutes 2004, section 273.1384, subdivision 1, is amended to read:
60.20 		 Subdivision 1.Residential homestead market value credit.  Each county auditor 
60.21 	shall determine a homestead credit for each class 1a, 1b, 1c, and 2a homestead property 
60.22 	within the county equal to 0.4 percent of the first $76,000 of market value of the property. 
60.23 	The amount of homestead credit for a homestead may not exceed $304 and is reduced by 
60.24 	minus.09 percent of the market value in excess of $76,000. The credit amount may not be 
60.25 	less than zero.In the case of an agricultural or resort homestead, only the market value of 
60.26 	the house, garage, and immediately surrounding one acre of land is eligible in determining 
60.27 	the property's homestead credit.  In the case of a property which is classified as part 
60.28 	homestead and part nonhomestead, (i) the credit shall apply only to the homestead portion 
60.29 	of the property., but (ii) if a portion of a property is classified as nonhomestead solely 
60.30 	because not all the owners occupy the property, or solely because both spouses do not 
60.31 	occupy the property, the credit amount shall be initially computed as if that nonhomestead 
60.32 	portion were also in the homestead class and then prorated to the owner-occupant's 
60.33 	percentage of ownership or prorated to one-half if both spouses do not occupy the property.

61.1 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
61.2 	thereafter.

61.3 	 Sec. 3. Minnesota Statutes 2004, section 276A.01, subdivision 7, is amended to read:
61.4 		 Subd. 7.Population.  "Population" means the most recent estimate of the population 
61.5 	of a municipality made by the state demographer and filed with the commissioner of 
61.6 	revenue as of July 1 15 of the year in which a municipality's distribution net tax capacity 
61.7 	is calculated.  The state demographer shall annually estimate the population of each 
61.8 	municipality and, in the case of a municipality which is located partly within and partly 
61.9 	without the area, the proportion of the total which resides within the area, and shall file the 
61.10 	estimates with the commissioner of revenue.

61.11 	EFFECTIVE DATE. This section is effective the day following final enactment.

61.12 	 Sec. 4. [473.24] POPULATION ESTIMATES.
61.13 	 (a) The Metropolitan Council shall annually prepare an estimate of population 
61.14 	for each county, city, and town in the metropolitan area and an estimate of the number 
61.15 	of households and average household size for each city in the metropolitan area with a 
61.16 	population of 2,500 or more, and an estimate of population over age 65 for each county in 
61.17 	the metropolitan area, and convey the estimates to the governing body of each county, 
61.18 	city, or town by June 1 each year.  In the case of a city or town that is located partly within 
61.19 	and partly without the metropolitan area, the Metropolitan Council shall estimate the 
61.20 	proportion of the total population and the average size of households that reside within 
61.21 	the area.  The Metropolitan Council may prepare an estimate of the population and of the 
61.22 	average household size for any other political subdivision located in the metropolitan area.
61.23 	 (b) A governing body may challenge an estimate made under this section by 
61.24 	filing its specific objections in writing with the Metropolitan Council by June 24.  If the 
61.25 	challenge does not result in an acceptable estimate, the governing body may have a special 
61.26 	census conducted by the United States Bureau of the Census.  The political subdivision 
61.27 	must notify the Metropolitan Council on or before July 1 of its intent to have the special 
61.28 	census conducted.  The political subdivision must bear all costs of the special census. 
61.29 	Results of the special census must be received by the Metropolitan Council by the next 
61.30 	April 15 to be used in that year's June 1 estimate under this section.  The Metropolitan 
61.31 	Council shall certify the estimates of population and the average household size to the 
61.32 	state demographer and to the commissioner of revenue by July 15 each year, including any 
61.33 	estimates still under objection.

62.1 	 EFFECTIVE DATE. This section is effective the day following final enactment.

62.2 	 Sec. 5. Minnesota Statutes 2004, section 473F.02, subdivision 7, is amended to read:
62.3 		 Subd. 7.Population.  "Population" means the most recent estimate of the population 
62.4 	of a municipality made by the Metropolitan Council under section 473.24and filed 
62.5 	with the commissioner of revenue as of July 1 15 of the year in which a municipality's 
62.6 	distribution net tax capacity is calculated. The council shall annually estimate the 
62.7 	population of each municipality as of a date which it determines and, in the case of a 
62.8 	municipality which is located partly within and partly without the area, the proportion 
62.9 	of the total which resides within the area, and shall promptly thereafter file its estimates 
62.10 	with the commissioner of revenue.

62.11 	EFFECTIVE DATE. This section is effective the day following final enactment.

62.12 	 Sec. 6. Minnesota Statutes 2004, section 477A.011, subdivision 3, is amended to read:
62.13 		 Subd. 3.Population.  "Population" means the population estimated or established 
62.14 	as of July 1 15 in an aid calculation year by the most recent federal census, by a special 
62.15 	census conducted under contract with the United States Bureau of the Census, by a 
62.16 	population estimate made by the Metropolitan Council pursuant to section 473.24, or by a 
62.17 	population estimate of the state demographer made pursuant to section 4A.02, whichever 
62.18 	is the most recent as to the stated date of the count or estimate for the preceding calendar 
62.19 	year, and which has been certified to the commissioner of revenue on or before July 15 
62.20 	of the aid calculation year.  The term "per capita" refers to population as defined by this 
62.21 	subdivision. A revision of an estimate or count is effective for these purposes only if it is 
62.22 	certified to the commissioner on or before July 15 of the aid calculation year.  Clerical 
62.23 	errors in the certification or use of the estimates and counts established as of July 15 in 
62.24 	the aid calculation year are subject to correction within the time periods allowed under 
62.25 	section 477A.014.

62.26 	EFFECTIVE DATE. This section is effective the day following final enactment.

62.27 	 Sec. 7. Minnesota Statutes 2004, section 477A.011, subdivision 34, is amended to read:
62.28 		 Subd. 34.City revenue need.  (a) For a city with a population equal to or greater 
62.29 	than 2,500, "city revenue need" is the sum of (1) 5.0734098 times the pre-1940 housing 
62.30 	percentage; plus (2) 19.141678 times the population decline percentage; plus (3) 
62.31 	2504.06334 times the road accidents factor; plus (4) 355.0547; minus (5) the metropolitan 
62.32 	area factor; minus (6) 49.10638 times the household size.
63.1 	 (b) For a city with a population less than 2,500, "city revenue need" is the sum of 
63.2 	(1) 2.387 times the pre-1940 housing percentage; plus (2) 2.67591 times the commercial 
63.3 	industrial percentage; plus (3) 3.16042 times the population decline percentage; plus (4) 
63.4 	1.206 times the transformed population; minus (5) 62.772.
63.5 	 (c) For a city with a population of 2,500 or more and a population in one of the most 
63.6 	recently available five years that was less than 2,500, "city revenue need" is the sum of (1) 
63.7 	its city revenue need calculated under paragraph (a) multiplied by its transition factor; 
63.8 	plus (2) its city revenue need calculated under the formula in paragraph (b) multiplied 
63.9 	by the difference between one and its transition factor.  For purposes of this paragraph, a 
63.10 	city's "transition factor" is equal to 0.2 multiplied by the number of years that the city's 
63.11 	population estimate has been 2,500 or more.  This provision only applies for aids payable 
63.12 	in calendar years 2006 to 2008 to cities with a 2002 population of less than 2,500.  It 
63.13 	applies to any city for aids payable in 2009 and thereafter.
63.14 	 (d) The city revenue need cannot be less than zero.
63.15 	 (d) (e) For calendar year 2005 and subsequent years, the city revenue need for a city, 
63.16 	as determined in paragraphs (a) to (c) (d), is multiplied by the ratio of the annual implicit 
63.17 	price deflator for government consumption expenditures and gross investment for state 
63.18 	and local governments as prepared by the United States Department of Commerce, for 
63.19 	the most recently available year to the 2003 implicit price deflator for state and local 
63.20 	government purchases.

63.21 	EFFECTIVE DATE. This section is effective beginning with aids payable in 2006.

63.22 	 Sec. 8. Minnesota Statutes 2004, section 477A.011, subdivision 35, is amended to read:
63.23 		 Subd. 35.Tax effort rate.  "Tax effort rate" means the net levy for all cities divided 
63.24 	by the sum of the city net tax capacity for all cities, unless the need increase percentage 
63.25 	determined under section 477A.013, subdivision 8, is 100 percent, in which case the tax 
63.26 	effort rate is the rate needed so that the total aid under section 477A.013, subdivision 9, 
63.27 	equals the total amount available for aid under section 477A.03, after the subtractions in 
63.28 	section 477A.014.  For purposes of this section, "net levy" means the city levy, after all 
63.29 	adjustments, used for calculating the local tax rate under section 275.08 for taxes payable 
63.30 	in the year prior to the aid distribution.  The fiscal disparity distribution levy under chapter 
63.31 	276A or 473F is included in net levy.

63.32 	EFFECTIVE DATE. This section is effective beginning with aids payable in 2006.

63.33 	 Sec. 9. Minnesota Statutes 2004, section 477A.011, subdivision 36, is amended to read:
64.1 		 Subd. 36.City aid base.  (a) Except as otherwise provided in this subdivision, 
64.2 	"city aid base" is zero.
64.3 	 (b) The city aid base for any city with a population less than 500 is increased by 
64.4 	$40,000 for aids payable in calendar year 1995 and thereafter, and the maximum amount 
64.5 	of total aid it may receive under section 477A.013, subdivision 9, paragraph (c), is also 
64.6 	increased by $40,000 for aids payable in calendar year 1995 only, provided that:
64.7 	 (i) the average total tax capacity rate for taxes payable in 1995 exceeds 200 percent;
64.8 	 (ii) the city portion of the tax capacity rate exceeds 100 percent; and
64.9 	 (iii) its city aid base is less than $60 per capita.
64.10 	 (c) The city aid base for a city is increased by $20,000 in 1998 and thereafter and 
64.11 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
64.12 	paragraph (c), is also increased by $20,000 in calendar year 1998 only, provided that:
64.13 	 (i) the city has a population in 1994 of 2,500 or more;
64.14 	 (ii) the city is located in a county, outside of the metropolitan area, which contains a 
64.15 	city of the first class;
64.16 	 (iii) the city's net tax capacity used in calculating its 1996 aid under section 
64.17 	477A.013 is less than $400 per capita; and
64.18 	 (iv) at least four percent of the total net tax capacity, for taxes payable in 1996, of 
64.19 	property located in the city is classified as railroad property.
64.20 	 (d) The city aid base for a city is increased by $200,000 in 1999 and thereafter and 
64.21 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
64.22 	paragraph (c), is also increased by $200,000 in calendar year 1999 only, provided that:
64.23 	 (i) the city was incorporated as a statutory city after December 1, 1993;
64.24 	 (ii) its city aid base does not exceed $5,600; and
64.25 	 (iii) the city had a population in 1996 of 5,000 or more.
64.26 	 (e) The city aid base for a city is increased by $450,000 in 1999 to 2008 and the 
64.27 	maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
64.28 	paragraph (c), is also increased by $450,000 in calendar year 1999 only, provided that:
64.29 	 (i) the city had a population in 1996 of at least 50,000;
64.30 	 (ii) its population had increased by at least 40 percent in the ten-year period ending 
64.31 	in 1996; and
64.32 	 (iii) its city's net tax capacity for aids payable in 1998 is less than $700 per capita.
64.33 	 (f) Beginning in 2004, the city aid base for a city is equal to the sum of its city aid 
64.34 	base in 2003 and the amount of additional aid it was certified to receive under section 
64.35 	477A.06 in 2003.  For 2004 only, the maximum amount of total aid a city may receive 
65.1 	under section 477A.013, subdivision 9, paragraph (c), is also increased by the amount it 
65.2 	was certified to receive under section 477A.06 in 2003.
65.3 	 (g) The city aid base for a city is increased by $150,000 for aids payable in 2000 and 
65.4 	thereafter, and the maximum amount of total aid it may receive under section 477A.013, 
65.5 	subdivision 9, paragraph (c), is also increased by $150,000 in calendar year 2000 only, 
65.6 	provided that:
65.7 	 (1) the city has a population that is greater than 1,000 and less than 2,500;
65.8 	 (2) its commercial and industrial percentage for aids payable in 1999 is greater 
65.9 	than 45 percent; and
65.10 	 (3) the total market value of all commercial and industrial property in the city 
65.11 	for assessment year 1999 is at least 15 percent less than the total market value of all 
65.12 	commercial and industrial property in the city for assessment year 1998.
65.13 	 (h) The city aid base for a city is increased by $200,000 in 2000 and thereafter, and 
65.14 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
65.15 	paragraph (c), is also increased by $200,000 in calendar year 2000 only, provided that:
65.16 	 (1) the city had a population in 1997 of 2,500 or more;
65.17 	 (2) the net tax capacity of the city used in calculating its 1999 aid under section 
65.18 	477A.013 is less than $650 per capita;
65.19 	 (3) the pre-1940 housing percentage of the city used in calculating 1999 aid under 
65.20 	section 477A.013 is greater than 12 percent;
65.21 	 (4) the 1999 local government aid of the city under section 477A.013 is less than 
65.22 	20 percent of the amount that the formula aid of the city would have been if the need 
65.23 	increase percentage was 100 percent; and
65.24 	 (5) the city aid base of the city used in calculating aid under section 477A.013
65.25 	is less than $7 per capita.
65.26 	 (i) The city aid base for a city is increased by $102,000 in 2000 and thereafter, and 
65.27 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
65.28 	paragraph (c), is also increased by $102,000 in calendar year 2000 only, provided that:
65.29 	 (1) the city has a population in 1997 of 2,000 or more;
65.30 	 (2) the net tax capacity of the city used in calculating its 1999 aid under section 
65.31 	477A.013 is less than $455 per capita;
65.32 	 (3) the net levy of the city used in calculating 1999 aid under section 477A.013 is 
65.33 	greater than $195 per capita; and
65.34 	 (4) the 1999 local government aid of the city under section 477A.013 is less than 
65.35 	38 percent of the amount that the formula aid of the city would have been if the need 
65.36 	increase percentage was 100 percent.
66.1 	 (j) The city aid base for a city is increased by $32,000 in 2001 and thereafter, and 
66.2 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
66.3 	paragraph (c), is also increased by $32,000 in calendar year 2001 only, provided that:
66.4 	 (1) the city has a population in 1998 that is greater than 200 but less than 500;
66.5 	 (2) the city's revenue need used in calculating aids payable in 2000 was greater 
66.6 	than $200 per capita;
66.7 	 (3) the city net tax capacity for the city used in calculating aids available in 2000 
66.8 	was equal to or less than $200 per capita;
66.9 	 (4) the city aid base of the city used in calculating aid under section 477A.013
66.10 	is less than $65 per capita; and
66.11 	 (5) the city's formula aid for aids payable in 2000 was greater than zero.
66.12 	 (k) The city aid base for a city is increased by $7,200 in 2001 and thereafter, and 
66.13 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
66.14 	paragraph (c), is also increased by $7,200 in calendar year 2001 only, provided that:
66.15 	 (1) the city had a population in 1998 that is greater than 200 but less than 500;
66.16 	 (2) the city's commercial industrial percentage used in calculating aids payable in 
66.17 	2000 was less than ten percent;
66.18 	 (3) more than 25 percent of the city's population was 60 years old or older according 
66.19 	to the 1990 census;
66.20 	 (4) the city aid base of the city used in calculating aid under section 477A.013
66.21 	is less than $15 per capita; and
66.22 	 (5) the city's formula aid for aids payable in 2000 was greater than zero.
66.23 	 (l) The city aid base for a city is increased by $45,000 in 2001 and thereafter and 
66.24 	by an additional $50,000 in calendar years 2002 to 2011, and the maximum amount of 
66.25 	total aid it may receive under section 477A.013, subdivision 9, paragraph (c), is also 
66.26 	increased by $45,000 in calendar year 2001 only, and by $50,000 in calendar year 2002 
66.27 	only, provided that:
66.28 	 (1) the net tax capacity of the city used in calculating its 2000 aid under section 
66.29 	477A.013 is less than $810 per capita;
66.30 	 (2) the population of the city declined more than two percent between 1988 and 1998;
66.31 	 (3) the net levy of the city used in calculating 2000 aid under section 477A.013 is 
66.32 	greater than $240 per capita; and
66.33 	 (4) the city received less than $36 per capita in aid under section 477A.013, 
66.34 	subdivision 9, for aids payable in 2000.
66.35 	 (m) The city aid base for a city with a population of 10,000 or more which is located 
66.36 	outside of the seven-county metropolitan area is increased in 2002 and thereafter, and the 
67.1 	maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
67.2 	paragraph (b) or (c), is also increased in calendar year 2002 only, by an amount equal to 
67.3 	the lesser of:
67.4 	 (1)(i) the total population of the city, as determined by the United States Bureau of 
67.5 	the Census, in the 2000 census, (ii) minus 5,000, (iii) times 60; or
67.6 	 (2) $2,500,000.
67.7 	 (n) The city aid base is increased by $50,000 in 2002 and thereafter, and the 
67.8 	maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
67.9 	paragraph (c), is also increased by $50,000 in calendar year 2002 only, provided that:
67.10 	 (1) the city is located in the seven-county metropolitan area;
67.11 	 (2) its population in 2000 is between 10,000 and 20,000; and
67.12 	 (3) its commercial industrial percentage, as calculated for city aid payable in 2001, 
67.13 	was greater than 25 percent.
67.14 	 (o) The city aid base for a city is increased by $150,000 in calendar years 2002 
67.15 	to 2011 and the maximum amount of total aid it may receive under section 477A.013, 
67.16 	subdivision 9, paragraph (c), is also increased by $150,000 in calendar year 2002 only, 
67.17 	provided that:
67.18 	 (1) the city had a population of at least 3,000 but no more than 4,000 in 1999;
67.19 	 (2) its home county is located within the seven-county metropolitan area;
67.20 	 (3) its pre-1940 housing percentage is less than 15 percent; and
67.21 	 (4) its city net tax capacity per capita for taxes payable in 2000 is less than $900 
67.22 	per capita.
67.23 	 (p) The city aid base for a city is increased by $200,000 beginning in calendar 
67.24 	year 2003 and the maximum amount of total aid it may receive under section 477A.013, 
67.25 	subdivision 9, paragraph (c), is also increased by $200,000 in calendar year 2003 only, 
67.26 	provided that the city qualified for an increase in homestead and agricultural credit aid 
67.27 	under Laws 1995, chapter 264, article 8, section 18.
67.28 	 (q) The city aid base for a city is increased by $200,000 in 2004 only and the 
67.29 	maximum amount of total aid it may receive under section 477A.013, subdivision 9, is 
67.30 	also increased by $200,000 in calendar year 2004 only, if the city is the site of a nuclear 
67.31 	dry cask storage facility.
67.32 	 (r) The city aid base for a city is increased by $10,000 in 2004 and thereafter and the 
67.33 	maximum total aid it may receive under section 477A.013, subdivision 9, is also increased 
67.34 	by $10,000 in calendar year 2004 only, if the city was included in a federal major disaster 
67.35 	designation issued on April 1, 1998, and its pre-1940 housing stock was decreased by 
67.36 	more than 40 percent between 1990 and 2000.
68.1 	 (s) The city aid base for a city is increased by $25,000 in 2006 and thereafter and the 
68.2 	maximum total aid it may receive under section 477A.013, subdivision 9, is also increased 
68.3 	by $25,000 in calendar year 2006 only if the city had a population in 2003 of at least 1,000 
68.4 	and has a state park for which the city provides rescue services and which comprised at 
68.5 	least 14 percent of the total geographic area included within the city boundaries in 2000.

68.6 	EFFECTIVE DATE. This section is effective for aids payable in 2006 and 
68.7 	thereafter.

68.8 	 Sec. 10. Minnesota Statutes 2004, section 477A.011, subdivision 38, is amended to 
68.9 	read:
68.10 		 Subd. 38.Household size.  "Household size" means the average number of persons 
68.11 	per household in the jurisdiction as most recently estimated and reported by the state 
68.12 	demographer and Metropolitan Council as of July 1 15 of the aid calculation year. A 
68.13 	revision to an estimate or enumeration is effective for these purposes only if it is certified 
68.14 	to the commissioner on or before July 15 of the aid calculation year. Clerical errors in the 
68.15 	certification or use of estimates and counts established as of July 15 in the aid calculation 
68.16 	year are subject to correction within the time periods allowed under section 477A.014.

68.17 	EFFECTIVE DATE. This section is effective the day following final enactment.

68.18 	 Sec. 11. Minnesota Statutes 2004, section 477A.0124, subdivision 2, is amended to 
68.19 	read:
68.20 		 Subd. 2.Definitions.  (a) For the purposes of this section, the following terms 
68.21 	have the meanings given them.
68.22 	 (b) "County program aid" means the sum of "county need aid," "county tax base 
68.23 	equalization aid," and "county transition aid."
68.24 	 (c) "Age-adjusted population" means a county's population multiplied by the county 
68.25 	age index.
68.26 	 (d) "County age index" means the percentage of the population over age 65 within 
68.27 	the county divided by the percentage of the population over age 65 within the state, except 
68.28 	that the age index for any county may not be greater than 1.8 nor less than 0.8.
68.29 	 (e) "Population over age 65" means the population over age 65 established as of 
68.30 	July 1 15 in an aid calculation year by the most recent federal census, by a special census 
68.31 	conducted under contract with the United States Bureau of the Census, by a population 
68.32 	estimate made by the Metropolitan Council, or by a population estimate of the state 
68.33 	demographer made pursuant to section 4A.02, whichever is the most recent as to the stated 
69.1 	date of the count or estimate for the preceding calendar year and which has been certified 
69.2 	to the commissioner of revenue on or before July 15 of the aid calculation year. A revision 
69.3 	to an estimate or count is effective for these purposes only if certified to the commissioner 
69.4 	on or before July 15 of the aid calculation year.  Clerical errors in the certification or use of 
69.5 	estimates and counts established as of July 15 in the aid calculation year are subject to 
69.6 	correction within the time periods allowed under section 477A.014.
69.7 	 (f) "Part I crimes" means the three-year average annual number of Part I crimes 
69.8 	reported for each county by the Department of Public Safety for the most recent years 
69.9 	available. By July 1 of each year, the commissioner of public safety shall certify to the 
69.10 	commissioner of revenue the number of Part I crimes reported for each county for the 
69.11 	three most recent calendar years available.
69.12 	 (g) "Households receiving food stamps" means the average monthly number of 
69.13 	households receiving food stamps for the three most recent years for which data is 
69.14 	available.  By July 1 of each year, the commissioner of human services must certify to the 
69.15 	commissioner of revenue the average monthly number of households in the state and in 
69.16 	each county that receive food stamps, for the three most recent calendar years available.
69.17 	 (h) "County net tax capacity" means the net tax capacity of the county, computed 
69.18 	analogously to city net tax capacity under section 477A.011, subdivision 20.

69.19 	EFFECTIVE DATE. This section is effective the day following final enactment.

69.20 	 Sec. 12. Minnesota Statutes 2004, section 477A.0124, subdivision 4, is amended to 
69.21 	read:
69.22 		 Subd. 4.County tax-base equalization aid.  (a) For 2005 2006 and subsequent 
69.23 	years, the money appropriated to county tax-base equalization aid each calendar year, after 
69.24 	the payment under paragraph (f),shall be apportioned among the counties according to 
69.25 	each county's tax-base equalization aid factor.
69.26 	 (b) A county's tax-base equalization aid factor is equal to the amount by which (i) 
69.27 	$185 times the county's population, exceeds (ii) 9.45 percent of the county's net tax 
69.28 	capacity.
69.29 	 (c) In the case of a county with a population less than 10,000, the factor determined 
69.30 	in paragraph (b) shall be multiplied by a factor of three.
69.31 	 (d) In the case of a county with a population greater than or equal to 10,000, but less 
69.32 	than 12,500, the factor determined in paragraph (b) shall be multiplied by a factor of two.
69.33 	 (e) In the case of a county with a population greater than 500,000, the factor 
69.34 	determined in paragraph (b) shall be multiplied by a factor of 0.25.
70.1 	 (f) Before the money appropriated to county base equalization aid is apportioned 
70.2 	among the counties as provided in paragraph (a), an amount up to $73,259 is allocated 
70.3 	annually to Anoka County and up to $59,664 is annually allocated to Washington County 
70.4 	for the county to pay postretirement costs of health insurance premiums for court 
70.5 	employees.  The allocation under this paragraph is in addition to the allocations under 
70.6 	paragraphs (a) to (e).

70.7 	EFFECTIVE DATE. This section is effective for aids payable in 2006 and 
70.8 	thereafter.

70.9 	 Sec. 13. Minnesota Statutes 2004, section 477A.013, subdivision 8, is amended to read:
70.10 		 Subd. 8.City formula aid.  In calendar year 2004 and subsequent years, the formula 
70.11 	aid for a city is equal to the need increase percentage multiplied by the difference between 
70.12 	(1) the city's revenue need multiplied by its population, and (2) the sum of the city's net 
70.13 	tax capacity multiplied by the tax effort rate, and ;the taconite aids under sections 298.28
70.14 	and 298.282, multiplied by the following percentages:
70.15 	 (i) zero percent for aids payable in 2004;
70.16 	 (ii) 25 percent for aids payable in 2005;
70.17 	 (iii) 50 percent for aids payable in 2006;
70.18 	 (iv) 75 percent for aids payable in 2007; and
70.19 	 (v) 100 percent for aids payable in 2008 and thereafter; and 
70.20 	 for first class cities only, the amount raised by a one-half of one percent local sales and 
70.21 	use tax imposed in the city in the calendar year before the year in which the aid is being 
70.22 	calculated.
70.23 	 No city may have a formula aid amount less than zero.  The need increase percentage 
70.24 	must be the same for all cities.
70.25 	 The applicable need increase percentage must be calculated by the Department of 
70.26 	Revenue so that the total of the aid under subdivision 9 equals the total amount available 
70.27 	for aid under section 477A.03 after the subtraction under section 477A.014, subdivisions 4 
70.28 	and 5. The need increase percentage may not exceed 100 percent.

70.29 	EFFECTIVE DATE. This section is effective beginning with aids payable in 2006.

70.30 	 Sec. 14. Minnesota Statutes 2004, section 477A.013, subdivision 9, is amended to read:
70.31 		 Subd. 9.City aid distribution.  (a) In calendar year 2002 and thereafter, each 
70.32 	city shall receive an aid distribution equal to the sum of (1) the city formula aid under 
70.33 	subdivision 8, and (2) its city aid base.
71.1 	 (b) The aid for a city in calendar year 2004 shall not exceed the amount of its aid in 
71.2 	calendar year 2003 after the reductions under Laws 2003, First Special Session chapter 21, 
71.3 	article 5.
71.4 	 (c) For aids payable in 2005 and thereafter, the total aid for any city shall not exceed 
71.5 	the sum of (1) ten percent of the city's net levy for the year prior to the aid distribution 
71.6 	plus (2) its total aid in the previous year.  For aids payable in 2005 2006 and thereafter, 
71.7 	the total aid for any city with a population of 2,500 or more, except for a city of the first 
71.8 	class located within the seven-county metropolitan area,may not decrease from its total aid 
71.9 	under this section in the previous year by an amount greater than ten percent of its net 
71.10 	levy in the year prior to the aid distribution.
71.11 	 (d) (c) For aids payable in 2004 only, the total aid for a city with a population less 
71.12 	than 2,500 may not be less than the amount it was certified to receive in 2003 minus the 
71.13 	greater of (1) the reduction to this aid payment in 2003 under Laws 2003, First Special 
71.14 	Session chapter 21, article 5, or (2) five percent of its 2003 aid amount.For aids payable in 
71.15 	2005 and thereafter, the total aid for a city with a population less than 2,500 must not be 
71.16 	less than the amount it was certified to receive in the previous year minus five percent 
71.17 	of its 2003 certified aid amount.

71.18 	EFFECTIVE DATE. This section is effective beginning with aids payable in 2006.

71.19 	 Sec. 15. Minnesota Statutes 2004, section 477A.013, is amended by adding a 
71.20 	subdivision to read:
71.21 		 Subd. 10.Levy adjustments for aid decreases. Notwithstanding any local 
71.22 	ordinance or charter provision, a city whose certified aid under subdivision 9 is less than 
71.23 	the amount it received in the previous year under the same subdivision may increase its 
71.24 	levy payable in the same year as the certified aid is paid by an amount equal to the aid 
71.25 	decrease for that year.

71.26 	EFFECTIVE DATE. This section is effective beginning with property tax levies 
71.27 	payable in 2006 and thereafter.

71.28 	 Sec. 16. Minnesota Statutes 2004, section 477A.03, subdivision 2a, is amended to read:
71.29 		 Subd. 2a.Cities.  For aids payable in 2004, the total aids paid under section 
71.30 	477A.013, subdivision 9, are limited to $429,000,000.  For aids payable in 2005 and 
71.31 	thereafter, the total aids paid under section 477A.013, subdivision 9, are increased limited 
71.32 	to $437,052,000. For aids payable in 2006, the total aids paid under section 477A.013, 
71.33 	subdivision 9, is limited to $419,552,000.  For aids payable in 2007 and thereafter, the total 
72.1 	aids paid under section 477A.013, subdivision 9, is limited to $437,052,000 provided that 
72.2 	the taxpayer satisfaction survey in section 275.065 is in effect for property taxes levied in 
72.3 	the year in which the aid is calculated, otherwise the amount is limited to $419,552,000.

72.4 	EFFECTIVE DATE. This section is effective beginning with aids payable in 2006.

72.5 	 Sec. 17. Minnesota Statutes 2004, section 477A.03, subdivision 2b, is amended to read:
72.6 		 Subd. 2b.Counties.  (a) For aids payable in calendar year 2005 and thereafter, 
72.7 	the total aids paid to counties under section 477A.0124, subdivision 3, are limited to 
72.8 	$100,500,000. Each calendar year, $500,000 shall be retained by the commissioner of 
72.9 	revenue to make reimbursements to the commissioner of finance for payments made 
72.10 	under section 611.27. For calendar year 2004, the amount shall be in addition to the 
72.11 	payments authorized under section 477A.0124, subdivision 1.  For calendar year 2005 
72.12 	and subsequent years, the amount shall be deducted from the appropriation under 
72.13 	this paragraph.  The reimbursements shall be to defray the additional costs associated 
72.14 	with court-ordered counsel under section 611.27.  Any retained amounts not used for 
72.15 	reimbursement in a year shall be included in the next distribution of county need aid 
72.16 	that is certified to the county auditors for the purpose of property tax reduction for the 
72.17 	next taxes payable year.
72.18 	 (b) For aids payable in 2005 and thereafter 2006, the total aids under section 
72.19 	477A.0124, subdivision 4, are limited to $105,000,000. For aids payable in 2007 
72.20 	and thereafter, the total aid under section 477A.0124, subdivision 4, is limited to 
72.21 	$105,132,923.The commissioner of finance shall bill the commissioner of revenue 
72.22 	for the cost of preparation of local impact notes as required by section 3.987, not to 
72.23 	exceed $207,000 in fiscal year 2004 and thereafter.  The commissioner of education shall 
72.24 	bill the commissioner of revenue for the cost of preparation of local impact notes for 
72.25 	school districts as required by section 3.987, not to exceed $7,000 in fiscal year 2004 
72.26 	and thereafter.  The commissioner of revenue shall deduct the amounts billed under 
72.27 	this paragraph from the appropriation under this paragraph.  The amounts deducted are 
72.28 	appropriated to the commissioner of finance and the commissioner of education for the 
72.29 	preparation of local impact notes.

72.30 	EFFECTIVE DATE. This section is effective for aids payable in 2007 and 
72.31 	thereafter.

72.32 	 Sec. 18. Laws 2003, First Special Session chapter 21, article 5, section 13, is amended 
72.33 	to read:
73.1 	 Sec. 132004 CITY AID REDUCTIONS.
 73.2 	 The commissioner of revenue shall compute an aid reduction amount for 2004 
73.3 	for each city as provided in this section.
73.4 	 The initial aid reduction amount for each city is the amount by which the city's aid 
73.5 	distribution under Minnesota Statutes, section 477A.013, and related provisions payable 
73.6 	in 2003 exceeds the city's 2004 distribution under those provisions.
73.7 	 The minimum aid reduction amount for a city is the amount of its reduction in 
73.8 	2003 under section 12.  If a city receives an increase to its city aid base under Minnesota 
73.9 	Statutes, section 477A.011, subdivision 36, its minimum aid reduction is reduced by an 
73.10 	equal amount.
73.11 	 The maximum aid reduction amount for a city is an amount equal to 14 percent of 
73.12 	the city's total 2004 levy plus aid revenue base, except that if the city has a city net tax 
73.13 	capacity for aids payable in 2004, as defined in Minnesota Statutes, section 477A.011, 
73.14 	subdivision 20, of $700 per capita or less, the maximum aid reduction shall not exceed an 
73.15 	amount equal to 13 percent of the city's total 2004 levy plus aid revenue base.
73.16 	 If the initial aid reduction amount for a city is less than the minimum aid reduction 
73.17 	amount for that city, the final aid reduction amount for the city is the sum of the initial aid 
73.18 	reduction amount and the lesser of the amount of the city's payable 2004 reimbursement 
73.19 	under Minnesota Statutes, section 273.1384, or the difference between the minimum and 
73.20 	initial aid reduction amounts for the city, and the amount of the final aid reduction in 
73.21 	excess of the initial aid reduction is deducted from the city's reimbursements pursuant 
73.22 	to Minnesota Statutes, section 273.1384.
73.23 	 If the initial aid reduction amount for a city is greater than the maximum aid 
73.24 	reduction amount for the city, the city receives an additional distribution under this section 
73.25 	equal to the result of subtracting the maximum aid reduction amount from the initial aid 
73.26 	reduction amount.  This distribution shall be paid in equal installments in 2004 on the 
73.27 	dates specified in Minnesota Statutes, section 477A.015.  The amount necessary for these 
73.28 	additional distributions is appropriated to the commissioner of revenue from the general 
73.29 	fund in fiscal year 2005.
73.30 	 The initial aid reduction is applied to the city's distribution pursuant to Minnesota 
73.31 	Statutes, section 477A.013, and any aid reduction in excess of the initial aid reduction is 
73.32 	applied to the city's reimbursements pursuant to Minnesota Statutes, section 273.1384.
73.33 	 To the extent that sufficient information is available on each payment date in 2004, 
73.34 	the commissioner of revenue shall pay the reimbursements reduced under this section in 
73.35 	equal installments on the payment dates provided in law.

73.36 	 EFFECTIVE DATE. This section is effective for aids payable in 2004.

74.1 	 Sec. 19. Laws 2003, First Special Session chapter 21, article 6, section 9, is amended 
74.2 	to read:
74.3 	 Sec. 9DEFINITIONS.
 74.4 	 (a) For purposes of sections 9 to 15, the following terms have the meanings given 
74.5 	them in this section.
74.6 	 (b) The 2003 and 2004 "levy plus aid revenue base" for a county is the sum of that 
74.7 	county's certified property tax levy for taxes payable in 2003, plus the sum of the amounts 
74.8 	the county was certified to receive in the designated calendar year as:
74.9 	 (1) homestead and agricultural credit aid under Minnesota Statutes, section 
74.10 	273.1398, subdivision 2, plus any additional aid under section 16, minus the amount 
74.11 	calculated under section 273.1398, subdivision 4a, paragraph (b), for counties in judicial 
74.12 	districts one, three, six, and ten, and 25 percent of the amount calculated under section 
74.13 	273.1398, subdivision 4a, paragraph (b), for counties in judicial districts two and four;
74.14 	 (2) the amount of county manufactured home homestead and agricultural credit aid 
74.15 	computed for the county for payment in 2003 under section 273.166;
74.16 	 (3) criminal justice aid under Minnesota Statutes, section 477A.0121;
74.17 	 (4) family preservation aid under Minnesota Statutes, section 477A.0122;
74.18 	 (5) taconite aids under Minnesota Statutes, sections 298.28 and 298.282, including 
74.19 	any aid which was required to be placed in a special fund for expenditure in the next 
74.20 	succeeding year; and
74.21 	 (6) county program aid under section 477A.0124, exclusive of the attached 
74.22 	machinery aid component.

74.23 	 EFFECTIVE DATE. This section is effective for aids payable in 2004.

74.24 	 Sec. 20. 2005 AND 2006 CITY AID PAYMENTS.
 74.25 	 In 2005 and 2006, market value credit reimbursements for each city payable under 
74.26 	Minnesota Statutes, section 273.1384, are reduced by the dollar amount of the 2003 
74.27 	reduction in market value credit reimbursements for that city due to Laws 2003, First 
74.28 	Special Session chapter 21, article 5, section 12.  No city's 2005 or 2006 market value 
74.29 	credit reimbursements are reduced to less than zero under this section.  To the extent 
74.30 	sufficient information is available on each payment date, the commissioner shall pay the 
74.31 	annual 2005 and 2006 market value credit reimbursement amounts, after reduction under 
74.32 	this section, to cities in equal installments on the dates specified in Minnesota Statutes, 
74.33 	section 273.1384.

74.34 	 EFFECTIVE DATE. This section is effective the day following final enactment.

75.1 	 Sec. 21. COURT AID ADJUSTMENT.
 75.2 	 For aids payable in 2005 only, the amount of court aid paid to Anoka County under 
75.3 	Minnesota Statutes, section 273.1398, subdivision 4a, is increased by $36,630 for aids 
75.4 	payable in 2005 only and the amount paid to Washington County under Minnesota Statutes, 
75.5 	section 273.1398, subdivision 4a, is increased by $29,832 for aids payable in 2005 only.

75.6 	 EFFECTIVE DATE. This section is effective for aids payable in 2005 only.

75.7 	 Sec. 22. SUPREME COURT BUDGET.
 75.8 	 The district courts general fund appropriation is reduced by $66,462 in fiscal year 
75.9 	2006 and $132,923 beginning in fiscal year 2007 to fund the amount transferred to 
75.10 	county tax base equalization aid to fund the payments under Minnesota Statutes, section 
75.11 	477A.0124, subdivision 4, paragraph (f), and section 20.

75.12 	 EFFECTIVE DATE. This section is effective the day following final enactment.

75.13 	 ARTICLE 4
75.14 	 DEPARTMENT OF REVENUE PROPERTY TAXES

75.15 	 Section 1. Minnesota Statutes 2004, section 168A.05, subdivision 1a, is amended to 
75.16 	read:
75.17 		 Subd. 1a.Manufactured home; statement of property tax payment.  In the case 
75.18 	of a manufactured home as defined in section 327.31, subdivision 6, the department shall 
75.19 	not issue a certificate of title unless the application under section 168A.04 is accompanied 
75.20 	with a statement from the county auditor or county treasurer where the manufactured 
75.21 	home is presently located, stating that all manufactured home personal property taxes 
75.22 	levied on the unit in the name of the current owner at the time of transfer have been 
75.23 	paid. For this purpose, manufactured home personal property taxes are treated as levied 
75.24 	on January 1 of the payable year.

75.25 	EFFECTIVE DATE. This section is effective the day following final enactment.

75.26 	 Sec. 2. Minnesota Statutes 2004, section 270.11, subdivision 2, is amended to read:
75.27 		 Subd. 2.County assessor's reports of assessment filed with commissioner.  Each 
75.28 	county assessor shall file by April 1 with the commissioner of revenue a copy of the 
75.29 	abstract that will be acted upon by the local and county boards of review. The abstract 
75.30 	must list the real and personal property in the county itemized by assessment districts.  
75.31 	The assessor of each county in the state shall file with the commissioner, within ten 
76.1 	working days following final action of the local board of review or equalization and within 
76.2 	five days following final action of the county board of equalization, any changes made 
76.3 	by the local or county board.  The information must be filed in the manner prescribed 
76.4 	by the commissioner.  It must be accompanied by a printed or typewritten copy of the 
76.5 	proceedings of the appropriate board.
76.6 	 The final abstract of assessments after adjustments by the State Board of 
76.7 	Equalization and inclusion of any omitted property shall be submitted to the commissioner 
76.8 	of revenue on or before September 1 of each calendar year.  The final abstract must 
76.9 	separately report the captured tax capacity of tax increment financing districts under 
76.10 	section 469.177, subdivision 2, the metropolitan revenue areawide net tax capacity 
76.11 	 contribution value values determined under section sections 276A.05, subdivision 1, and 
76.12 	473F.07, subdivision 1,and the value subject to the power line credit under section 273.42.

76.13 	EFFECTIVE DATE. This section is effective the day following final enactment.

76.14 	 Sec. 3. Minnesota Statutes 2004, section 270.16, subdivision 2, is amended to read:
76.15 		 Subd. 2.Failure to appraise.  When an assessor has failed to properly appraise at 
76.16 	least one-quarter one-fifth of the parcels of property in a district or county as provided 
76.17 	in section 273.01, the commissioner of revenue shall appoint a special assessor and 
76.18 	deputy assessor as necessary and cause a reappraisal to be made of the property due 
76.19 	for reassessment in accordance with law.

76.20 	EFFECTIVE DATE. This section is effective the day following final enactment.

76.21 	 Sec. 4. Minnesota Statutes 2004, section 272.01, subdivision 2, is amended to read:
76.22 		 Subd. 2.Effective date. This section is effective the day following final enactment.

76.23 	 Sec. 5. Minnesota Statutes 2004, section 272.02, subdivision 1a, is amended 
76.24 	to read:
 76.25 		 Subd. 1a.Limitations on exemptions. The exemptions granted by subdivision 1 
76.26 	are subject to the limits contained in the other subdivisions of this section, section 272.025, 
76.27 	or 273.13, subdivision 25, paragraph (c), clause (1) or (2), or paragraph (d), clause (2) 
76.28 	and all other provisions of applicable law.

76.29 	EFFECTIVE DATE. This section is effective the day following final enactment.

76.30 	 Sec. 6. Minnesota Statutes 2004, section 272.02, subdivision 7, is amended to read:
 77.1 		 Subd. 7.Institutions of public charity. Institutions of purely public charity are 
77.2 	exempt except parcels of property containing structures and the structures described in 
77.3 	section 273.13, subdivision 25, paragraph (e), other than those that qualify for exemption 
77.4 	under subdivision 26. In determining whether rental housing property qualifies for 
77.5 	exemption under this subdivision, the following are not gifts or donations to the owner of 
77.6 	the rental housing:
77.7 	 (1) rent assistance provided by the government to or on behalf of tenants; and 
77.8 	 (2) financing assistance or tax credits provided by the government to the owner on 
77.9 	condition that specific units or a specific quantity of units be set aside for persons or 
77.10 	families with certain income characteristics.

77.11 	EFFECTIVE DATE. This section is effective for taxes payable in 2004 and 
77.12 	thereafter.

77.13 	 Sec. 7. Minnesota Statutes 2004, section 272.02, is amended by adding a 
77.14 	subdivision to read:
 77.15 		 Subd. 68.Property subject to taconite production tax or net proceeds tax. (a) 
77.16 	Real and personal property described in section 298.25 is exempt to the extent the tax on 
77.17 	taconite and iron sulphides under section 298.24 is described in section 298.25 as being in 
77.18 	lieu of other taxes on such property.  This exemption applies for taxes payable in each year 
77.19 	that the tax under section 298.24 is payable with respect to such property.
77.20 	 (b) Deposits of mineral, metal, or energy resources the mining of which is subject to 
77.21 	taxation under section 298.015 are exempt.  This exemption applies for taxes payable in 
77.22 	each year that the tax under section 298.015 is payable with respect to such property.

77.23 	EFFECTIVE DATE. This section is effective the day following final enactment.

77.24 	 Sec. 8. Minnesota Statutes 2004, section 272.02, is amended by adding a 
77.25 	subdivision to read:
 77.26 		 Subd. 69.Religious corporations. Personal and real property that a religious 
77.27 	corporation, formed under section 317A.909, necessarily uses for a religious purpose is 
77.28 	exempt to the extent provided in section 317A.909, subdivision 3.

77.29 	EFFECTIVE DATE. This section is effective the day following final enactment.

77.30 	 Sec. 9. Minnesota Statutes 2004, section 272.02, is amended by adding a 
77.31 	subdivision to read:
 78.1 	 Subd. 70.[CHILDREN'S HOMES.] Personal and real property owned by a 
78.2 	corporation formed under section 317A.907 is exempt to the extent provided in section 
78.3 	317A.907, subdivision 7.

78.4 	 EFFECTIVE DATE. This section is effective the day following final enactment.

78.5 	 Sec. 10. Minnesota Statutes 2004, section 272.02, is amended by adding a 
78.6 	subdivision to read:
 78.7 		 Subd. 71.Housing and redevelopment authority and tribal housing authority 
78.8 	property. Property owned by a housing and redevelopment authority described in chapter 
78.9 	469, or by a designated housing authority described in section 469.040, subdivision 5, is 
78.10 	exempt to the extent provided in chapter 469.

78.11 	EFFECTIVE DATE. This section is effective the day following final enactment.

78.12 	 Sec. 11. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
78.13 	to read:
78.14 		 Subd. 72.Property of housing and redevelopment authorities. Property of 
78.15 	projects of housing and redevelopment authorities are exempt to the extent permitted by 
78.16 	sections 469.042, subdivision 1, and 469.043, subdivisions 2 and 5.

78.17 	EFFECTIVE DATE. This section is effective the day following final enactment.

78.18 	 Sec. 12. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
78.19 	to read:
78.20 		 Subd. 73.Property of regional rail authority. Property of a regional rail authority 
78.21 	as defined in chapter 398A is exempt to the extent permitted by section 398A.05.

78.22 	EFFECTIVE DATE. This section is effective the day following final enactment.

78.23 	 Sec. 13. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
78.24 	to read:
78.25 		 Subd. 74.Spirit mountain recreation area authority. Property owned by the 
78.26 	Spirit Mountain Recreation Area Authority is exempt from taxation to the extent provided 
78.27 	in Laws 1973, chapter 327, section 6.

78.28 	 Sec. 14. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
78.29 	to read:
79.1 		 Subd. 75.Installed capacity defined. For purposes of this section, the term 
79.2 	"installed capacity" means generator nameplate capacity.

79.3 	EFFECTIVE DATE. This section is effective the day following final enactment.

79.4 	 Sec. 15. Minnesota Statutes 2004, section 272.029, subdivision 4, is amended to read:
79.5 		 Subd. 4.Reports.  (a) An owner of a wind energy conversion system subject to tax 
79.6 	under subdivision 3 shall file a report with the commissioner of revenue annually on 
79.7 	or before March February 1 detailing the amount of electricity in kilowatt-hours that 
79.8 	was produced by the wind energy conversion system for the previous calendar year.  
79.9 	The commissioner shall prescribe the form of the report.  The report must contain the 
79.10 	information required by the commissioner to determine the tax due to each county under 
79.11 	this section for the current year.  If an owner of a wind energy conversion system subject 
79.12 	to taxation under this section fails to file the report by the due date, the commissioner 
79.13 	of revenue shall determine the tax based upon the nameplate capacity of the system 
79.14 	multiplied by a capacity factor of 40 percent.
79.15 	 (b) On or before March 31 February 28, the commissioner of revenue shall notify 
79.16 	the owner of the wind energy conversion systems of the tax due to each county for the 
79.17 	current year and shall certify to the county auditor of each county in which the systems are 
79.18 	located the tax due from each owner for the current year.

79.19 	EFFECTIVE DATE. This section is effective for reports and certifications due in 
79.20 	2006 and thereafter.

79.21 	 Sec. 16. Minnesota Statutes 2004, section 272.029, subdivision 6, is amended to read:
79.22 		 Subd. 6.Distribution of revenues.  Revenues from the taxes imposed under 
79.23 	subdivision 5 must be part of the settlement between the county treasurer and the 
79.24 	county auditor under section 276.09.  The revenue must be distributed by the county 
79.25 	auditor or the county treasurer to all local taxing jurisdictions in which the wind energy 
79.26 	conversion system is located,as follows:  beginning with distributions in 2006, 80 percent 
79.27 	to counties; 14 percent to cities and townships; and six percent to school districts; and 
79.28 	for distributions occurring in 2004 and 2005 in the same proportion that each of the local 
79.29 	 taxing jurisdiction's current year's net tax capacity based tax rate is to the current year's 
79.30 	total local net tax capacity based rate.

79.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

79.32 	 Sec. 17. Minnesota Statutes 2004, section 273.11, subdivision 8, is amended to read:
80.1 		 Subd. 8.Limited equity cooperative apartments.  For the purposes of this 
80.2 	subdivision, the terms defined in this subdivision have the meanings given them.
80.3 	 A "limited equity cooperative" is a corporation organized under chapter 308A or 
80.4 	308B, which has as its primary purpose the provision of housing and related services to 
80.5 	its members which meets one of the following criteria with respect to the income of its 
80.6 	members:  (1) a minimum of 75 percent of members must have incomes at or less than 
80.7 	90 percent of area median income, (2) a minimum of 40 percent of members must have 
80.8 	incomes at or less than 60 percent of area median income, or (3) a minimum of 20 percent 
80.9 	of members must have incomes at or less than 50 percent of area median income.  For 
80.10 	purposes of this clause, "member income" shall mean the income of a member existing at 
80.11 	the time the member acquires cooperative membership, and median income shall mean 
80.12 	the St. Paul-Minneapolis metropolitan area median income as determined by the United 
80.13 	States Department of Housing and Urban Development.  It must also meet the following 
80.14 	requirements:
80.15 	 (a) The articles of incorporation set the sale price of occupancy entitling cooperative 
80.16 	shares or memberships at no more than a transfer value determined as provided in the 
80.17 	articles. That value may not exceed the sum of the following:
80.18 	 (1) the consideration paid for the membership or shares by the first occupant of the 
80.19 	unit, as shown in the records of the corporation;
80.20 	 (2) the fair market value, as shown in the records of the corporation, of any 
80.21 	improvements to the real property that were installed at the sole expense of the member 
80.22 	with the prior approval of the board of directors;
80.23 	 (3) accumulated interest, or an inflation allowance not to exceed the greater of a ten 
80.24 	percent annual noncompounded increase on the consideration paid for the membership or 
80.25 	share by the first occupant of the unit, or the amount that would have been paid on that 
80.26 	consideration if interest had been paid on it at the rate of the percentage increase in the 
80.27 	revised Consumer Price Index for All Urban Consumers for the Minneapolis-St. Paul 
80.28 	metropolitan area prepared by the United States Department of Labor, provided that the 
80.29 	amount determined pursuant to this clause may not exceed $500 for each year or fraction 
80.30 	of a year the membership or share was owned; plus
80.31 	 (4) real property capital contributions shown in the records of the corporation to 
80.32 	have been paid by the transferor member and previous holders of the same membership, 
80.33 	or of separate memberships that had entitled occupancy to the unit of the member 
80.34 	involved.  These contributions include contributions to a corporate reserve account the 
80.35 	use of which is restricted to real property improvements or acquisitions, contributions to 
80.36 	the corporation which are used for real property improvements or acquisitions, and the 
81.1 	amount of principal amortized by the corporation on its indebtedness due to the financing 
81.2 	of real property acquisition or improvement or the averaging of principal paid by the 
81.3 	corporation over the term of its real property-related indebtedness.
81.4 	 (b) The articles of incorporation require that the board of directors limit the purchase 
81.5 	price of stock or membership interests for new member-occupants or resident shareholders 
81.6 	to an amount which does not exceed the transfer value for the membership or stock as 
81.7 	defined in clause (a).
81.8 	 (c) The articles of incorporation require that the total distribution out of capital to a 
81.9 	member shall not exceed that transfer value.
81.10 	 (d) The articles of incorporation require that upon liquidation of the corporation any 
81.11 	assets remaining after retirement of corporate debts and distribution to members will 
81.12 	be conveyed to a charitable organization described in section 501(c)(3) of the Internal 
81.13 	Revenue Code of 1986, as amended through December 31, 1992, or a public agency.
81.14 	 A "limited equity cooperative apartment" is a dwelling unit owned by a limited 
81.15 	equity cooperative.
81.16 	 "Occupancy entitling cooperative share or membership" is the ownership interest 
81.17 	in a cooperative organization which entitles the holder to an exclusive right to occupy a 
81.18 	dwelling unit owned or leased by the cooperative.
81.19 	 For purposes of taxation, the assessor shall value a unit owned by a limited equity 
81.20 	cooperative at the lesser of its market value or the value determined by capitalizing the net 
81.21 	operating income of a comparable apartment operated on a rental basis at the capitalization 
81.22 	rate used in valuing comparable buildings that are not limited equity cooperatives.  If a 
81.23 	cooperative fails to operate in accordance with the provisions of clauses (a) to (d), the 
81.24 	property shall be subject to additional property taxes in the amount of the difference 
81.25 	between the taxes determined in accordance with this subdivision for the last ten years that 
81.26 	the property had been assessed pursuant to this subdivision and the amount that would 
81.27 	have been paid if the provisions of this subdivision had not applied to it.  The additional 
81.28 	taxes, plus interest at the rate specified in section 549.09, shall be extended against the 
81.29 	property on the tax list for the current year.

81.30 	EFFECTIVE DATE. This section is effective for taxes payable in 2004 and 
81.31 	thereafter.

81.32 	 Sec. 18. Minnesota Statutes 2004, section 273.124, subdivision 3, is amended to read:
81.33 		 Subd. 3.Cooperatives and charitable corporations; homestead and other 
81.34 	property.  (a) When property is owned by a corporation or association organized under 
81.35 	chapter 308A or 308B, and each person who owns a share or shares in the corporation or 
82.1 	association is entitled to occupy a building on the property, or a unit within a building 
82.2 	on the property, the corporation or association may claim homestead treatment for each 
82.3 	dwelling, or for each unit in the case of a building containing several dwelling units, or for 
82.4 	the part of the value of the building occupied by a shareholder.  Each building or unit must 
82.5 	be designated by legal description or number.  The net tax capacity of each building or 
82.6 	unit that qualifies for assessment as a homestead under this subdivision must include not 
82.7 	more than one-half acre of land, if platted, nor more than 80 acres if unplatted.  The net 
82.8 	tax capacity of the property is the sum of the net tax capacities of each of the respective 
82.9 	buildings or units comprising the property, including the net tax capacity of each unit's 
82.10 	or building's proportionate share of the land and any common buildings.  To qualify for 
82.11 	the treatment provided by this subdivision, the corporation or association must be wholly 
82.12 	owned by persons having a right to occupy a building or unit owned by the corporation 
82.13 	or association.  A charitable corporation organized under the laws of Minnesota and not 
82.14 	otherwise exempt thereunder with no outstanding stock qualifies for homestead treatment 
82.15 	with respect to member residents of the dwelling units who have purchased and hold 
82.16 	residential participation warrants entitling them to occupy the units.
82.17 	 (b) To the extent provided in paragraph (a), a cooperative or corporation organized 
82.18 	under chapter 308A may obtain separate assessment and valuation, and separate property 
82.19 	tax statements for each residential homestead, residential nonhomestead, or for each 
82.20 	seasonal residential recreational building or unit not used for commercial purposes.  The 
82.21 	appropriate class rates under section 273.13 shall be applicable as if each building or unit 
82.22 	were a separate tax parcel; provided, however, that the tax parcel which exists at the time 
82.23 	the cooperative or corporation makes application under this subdivision shall be a single 
82.24 	parcel for purposes of property taxes or the enforcement and collection thereof, other than 
82.25 	as provided in paragraph (a) or this paragraph.
82.26 	 (c) A member of a corporation or association may initially obtain the separate 
82.27 	assessment and valuation and separate property tax statements, as provided in paragraph 
82.28 	(b), by applying to the assessor by June 30 of the assessment year.
82.29 	 (d) When a building, or dwelling units within a building, no longer qualify under 
82.30 	paragraph (a) or (b), the current owner must notify the assessor within 30 days.  Failure to 
82.31 	notify the assessor within 30 days shall result in the loss of benefits under paragraph (a) or 
82.32 	(b) for taxes payable in the year that the failure is discovered.  For these purposes, "benefits 
82.33 	under paragraph (a) or (b)" means the difference in the net tax capacity of the building or 
82.34 	units which no longer qualify as computed under paragraph (a) or (b) and as computed 
82.35 	under the otherwise applicable law, times the local tax rate applicable to the building for 
82.36 	that taxes payable year.  Upon discovery of a failure to notify, the assessor shall inform the 
83.1 	auditor of the difference in net tax capacity for the building or buildings in which units no 
83.2 	longer qualify, and the auditor shall calculate the benefits under paragraph (a) or (b).  Such 
83.3 	amount, plus a penalty equal to 100 percent of that amount, shall then be demanded of the 
83.4 	building's owner.  The property owner may appeal the county's determination by serving 
83.5 	copies of a petition for review with county officials as provided in section 278.01 and 
83.6 	filing a proof of service as provided in section 278.01 with the Minnesota Tax Court within 
83.7 	60 days of the date of the notice from the county.  The appeal shall be governed by the Tax 
83.8 	Court procedures provided in chapter 271, for cases relating to the tax laws as defined in 
83.9 	section 271.01, subdivision 5; disregarding sections 273.125, subdivision 5, and 278.03, 
83.10 	but including section 278.05, subdivision 2.  If the amount of the benefits under paragraph 
83.11 	(a) or (b) and penalty are not paid within 60 days, and if no appeal has been filed, the 
83.12 	county auditor shall certify the amount of the benefit and penalty to the succeeding year's 
83.13 	tax list to be collected as part of the property taxes on the affected property.

83.14 	EFFECTIVE DATE. This section is effective for taxes payable in 2004 and 
83.15 	thereafter.

83.16 	 Sec. 19. Minnesota Statutes 2004, section 273.124, subdivision 6, is amended to read:
83.17 		 Subd. 6.Leasehold cooperatives.  When one or more dwellings or one or more 
83.18 	buildings which each contain several dwelling units is owned by a nonprofit corporation 
83.19 	subject to the provisions of chapter 317A and qualifying under section 501(c)(3) or 
83.20 	501(c)(4) of the Internal Revenue Code of 1986, as amended through December 31, 
83.21 	1990, or a limited partnership which corporation or partnership operates the property in 
83.22 	conjunction with a cooperative association, and has received public financing, homestead 
83.23 	treatment may be claimed by the cooperative association on behalf of the members of 
83.24 	the cooperative for each dwelling unit occupied by a member of the cooperative.  The 
83.25 	cooperative association must provide the assessor with the Social Security numbers of 
83.26 	those members.  To qualify for the treatment provided by this subdivision, the following 
83.27 	conditions must be met:
83.28 	 (a) the cooperative association must be organized under chapter 308A or 308B and 
83.29 	all voting members of the board of directors must be resident tenants of the cooperative 
83.30 	and must be elected by the resident tenants of the cooperative;
83.31 	 (b) the cooperative association must have a lease for occupancy of the property for a 
83.32 	term of at least 20 years, which permits the cooperative association, while not in default on 
83.33 	the lease, to participate materially in the management of the property, including material 
83.34 	participation in establishing budgets, setting rent levels, and hiring and supervising a 
83.35 	management agent;
84.1 	 (c) to the extent permitted under state or federal law, the cooperative association 
84.2 	must have a right under a written agreement with the owner to purchase the property if the 
84.3 	owner proposes to sell it; if the cooperative association does not purchase the property it is 
84.4 	offered for sale, the owner may not subsequently sell the property to another purchaser at 
84.5 	a price lower than the price at which it was offered for sale to the cooperative association 
84.6 	unless the cooperative association approves the sale;
84.7 	 (d) a minimum of 40 percent of the cooperative association's members must have 
84.8 	incomes at or less than 60 percent of area median gross income as determined by the 
84.9 	United States Secretary of Housing and Urban Development under section 142(d)(2)(B) 
84.10 	of the Internal Revenue Code of 1986, as amended through December 31, 1991.  For 
84.11 	purposes of this clause, "member income" means the income of a member existing at the 
84.12 	time the member acquires cooperative membership;
84.13 	 (e) if a limited partnership owns the property, it must include as the managing 
84.14 	general partner a nonprofit organization operating under the provisions of chapter 317A 
84.15 	and qualifying under section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, 
84.16 	as amended through December 31, 1990, and the limited partnership agreement must 
84.17 	provide that the managing general partner have sufficient powers so that it materially 
84.18 	participates in the management and control of the limited partnership;
84.19 	 (f) prior to becoming a member of a leasehold cooperative described in this 
84.20 	subdivision, a person must have received notice that (1) describes leasehold cooperative 
84.21 	property in plain language, including but not limited to the effects of classification 
84.22 	under this subdivision on rents, property taxes and tax credits or refunds, and operating 
84.23 	expenses, and (2) states that copies of the articles of incorporation and bylaws of the 
84.24 	cooperative association, the lease between the owner and the cooperative association, a 
84.25 	sample sublease between the cooperative association and a tenant, and, if the owner is a 
84.26 	partnership, a copy of the limited partnership agreement, can be obtained upon written 
84.27 	request at no charge from the owner, and the owner must send or deliver the materials 
84.28 	within seven days after receiving any request;
84.29 	 (g) if a dwelling unit of a building was occupied on the 60th day prior to the date on 
84.30 	which the unit became leasehold cooperative property described in this subdivision, the 
84.31 	notice described in paragraph (f) must have been sent by first class mail to the occupant of 
84.32 	the unit at least 60 days prior to the date on which the unit became leasehold cooperative 
84.33 	property. For purposes of the notice under this paragraph, the copies of the documents 
84.34 	referred to in paragraph (f) may be in proposed version, provided that any subsequent 
84.35 	material alteration of those documents made after the occupant has requested a copy 
84.36 	shall be disclosed to any occupant who has requested a copy of the document.  Copies of 
85.1 	the articles of incorporation and certificate of limited partnership shall be filed with the 
85.2 	secretary of state after the expiration of the 60-day period unless the change to leasehold 
85.3 	cooperative status does not proceed;
85.4 	 (h) the county attorney of the county in which the property is located must certify to 
85.5 	the assessor that the property meets the requirements of this subdivision;
85.6 	 (i) the public financing received must be from at least one of the following sources:
85.7 	 (1) tax increment financing proceeds used for the acquisition or rehabilitation of the 
85.8 	building or interest rate write-downs relating to the acquisition of the building;
85.9 	 (2) government issued bonds exempt from taxes under section 103 of the Internal 
85.10 	Revenue Code of 1986, as amended through December 31, 1991, the proceeds of which 
85.11 	are used for the acquisition or rehabilitation of the building;
85.12 	 (3) programs under section 221(d)(3), 202, or 236, of Title II of the National 
85.13 	Housing Act;
85.14 	 (4) rental housing program funds under Section 8 of the United States Housing 
85.15 	Act of 1937 or the market rate family graduated payment mortgage program funds 
85.16 	administered by the Minnesota Housing Finance Agency that are used for the acquisition 
85.17 	or rehabilitation of the building;
85.18 	 (5) low-income housing credit under section 42 of the Internal Revenue Code of 
85.19 	1986, as amended through December 31, 1991;
85.20 	 (6) public financing provided by a local government used for the acquisition or 
85.21 	rehabilitation of the building, including grants or loans from (i) federal community 
85.22 	development block grants; (ii) HOME block grants; or (iii) residential rental bonds issued 
85.23 	under chapter 474A; or
85.24 	 (7) other rental housing program funds provided by the Minnesota Housing Finance 
85.25 	Agency for the acquisition or rehabilitation of the building;
85.26 	 (j) at the time of the initial request for homestead classification or of any transfer of 
85.27 	ownership of the property, the governing body of the municipality in which the property is 
85.28 	located must hold a public hearing and make the following findings:
85.29 	 (1) that the granting of the homestead treatment of the apartment's units will 
85.30 	facilitate safe, clean, affordable housing for the cooperative members that would otherwise 
85.31 	not be available absent the homestead designation;
85.32 	 (2) that the owner has presented information satisfactory to the governing body 
85.33 	showing that the savings garnered from the homestead designation of the units will be 
85.34 	used to reduce tenant's rents or provide a level of furnishing or maintenance not possible 
85.35 	absent the designation; and
85.36 	 (3) that the requirements of paragraphs (b), (d), and (i) have been met.
86.1 	 Homestead treatment must be afforded to units occupied by members of the 
86.2 	cooperative association and the units must be assessed as provided in subdivision 3, 
86.3 	provided that any unit not so occupied shall be classified and assessed pursuant to the 
86.4 	appropriate class.  No more than three acres of land may, for assessment purposes, 
86.5 	be included with each dwelling unit that qualifies for homestead treatment under this 
86.6 	subdivision.
86.7 	 When dwelling units no longer qualify under this subdivision, the current owner 
86.8 	must notify the assessor within 60 days.  Failure to notify the assessor within 60 days shall 
86.9 	result in the loss of benefits under this subdivision for taxes payable in the year that the 
86.10 	failure is discovered.  For these purposes, "benefits under this subdivision" means the 
86.11 	difference in the net tax capacity of the units which no longer qualify as computed under 
86.12 	this subdivision and as computed under the otherwise applicable law, times the local tax 
86.13 	rate applicable to the building for that taxes payable year.  Upon discovery of a failure to 
86.14 	notify, the assessor shall inform the auditor of the difference in net tax capacity for the 
86.15 	building or buildings in which units no longer qualify, and the auditor shall calculate the 
86.16 	benefits under this subdivision.  Such amount, plus a penalty equal to 100 percent of that 
86.17 	amount, shall then be demanded of the building's owner.  The property owner may appeal 
86.18 	the county's determination by serving copies of a petition for review with county officials 
86.19 	as provided in section 278.01 and filing a proof of service as provided in section 278.01
86.20 	with the Minnesota Tax Court within 60 days of the date of the notice from the county.  
86.21 	The appeal shall be governed by the Tax Court procedures provided in chapter 271, for 
86.22 	cases relating to the tax laws as defined in section 271.01, subdivision 5; disregarding 
86.23 	sections 273.125, subdivision 5, and 278.03, but including section 278.05, subdivision 2.  
86.24 	If the amount of the benefits under this subdivision and penalty are not paid within 60 
86.25 	days, and if no appeal has been filed, the county auditor shall certify the amount of the 
86.26 	benefit and penalty to the succeeding year's tax list to be collected as part of the property 
86.27 	taxes on the affected buildings.

86.28 	EFFECTIVE DATE. This section is effective for taxes payable in 2004 and 
86.29 	thereafter.

86.30 	 Sec. 20. Minnesota Statutes 2004, section 273.124, subdivision 8, is amended to read:
86.31 		 Subd. 8.Homestead owned by or leased to family farm corporation, joint farm 
86.32 	venture, limited liability company, or partnership.  (a) Each family farm corporation, 
86.33 	each ; each joint family farm venture,; and each limited liability company, and each or 
86.34 	partnership operating which operates a family farm;is entitled to class 1b under section 
86.35 	273.13, subdivision 22, paragraph (b), or class 2a assessment for one homestead occupied 
87.1 	by a shareholder, member, or partner thereof who is residing on the land, and actively 
87.2 	engaged in farming of the land owned by the family farm corporation, joint family farm 
87.3 	venture, limited liability company, or partnership operating a family farm. Homestead 
87.4 	treatment applies even if legal title to the property is in the name of the family farm 
87.5 	corporation, joint family farm venture, limited liability company, or partnership operating 
87.6 	the family farm, and not in the name of the person residing on it.
87.7 	 "Family farm corporation," "family farm," and "partnership operating a family 
87.8 	farm" have the meanings given in section 500.24, except that the number of allowable 
87.9 	shareholders, members, or partners under this subdivision shall not exceed 12.  "Limited 
87.10 	liability company" has the meaning contained in sections 322B.03, subdivision 28, and 
87.11 	500.24, subdivision 2, paragraphs (l) and (m).  "Joint family farm venture" means a 
87.12 	cooperative agreement among two or more farm enterprises authorized to operate a family 
87.13 	farm under section 500.24.
87.14 	 (b) In addition to property specified in paragraph (a), any other residences owned 
87.15 	by family farm corporations, joint family farm ventures, limited liability companies, or 
87.16 	partnerships operating a family farm described in paragraph (a) which are located on 
87.17 	agricultural land and occupied as homesteads by its shareholders, members, or partners 
87.18 	who are actively engaged in farming on behalf of that corporation, joint farm venture, 
87.19 	limited liability company, or partnership must also be assessed as class 2a property or 
87.20 	as class 1b property under section 273.13.
87.21 	 (c) Agricultural property that is owned by a member, partner, or shareholder of a 
87.22 	family farm corporation or joint family farm venture, limited liability company operating 
87.23 	a family farm, or by a partnership operating a family farm and leased to the family farm 
87.24 	corporation, limited liability company, or partnership operating a family farm, or joint 
87.25 	farm venture, as defined in paragraph (a), is eligible for classification as class 1b or class 
87.26 	2a under section 273.13, if the owner is actually residing on the property, and is actually 
87.27 	engaged in farming the land on behalf of that corporation, joint farm venture, limited 
87.28 	liability company, or partnership.  This paragraph applies without regard to any legal 
87.29 	possession rights of the family farm corporation, joint family farm venture, limited 
87.30 	liability company, or partnership operating a family farm under the lease.

87.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

87.32 	 Sec. 21. Minnesota Statutes 2004, section 273.124, subdivision 21, is amended to read:
87.33 		 Subd. 21.Trust property; homestead.  Real property held by a trustee under a trust 
87.34 	is eligible for classification as homestead property if:
88.1 	 (1) the grantor or surviving spouse of the grantor of the trust occupies and uses the 
88.2 	property as a homestead;
88.3 	 (2) a relative or surviving relative of the grantor who meets the requirements of 
88.4 	subdivision 1, paragraph (c), in the case of residential real estate; or subdivision 1, 
88.5 	paragraph (d), in the case of agricultural property, occupies and uses the property as 
88.6 	a homestead;
88.7 	 (3) a family farm corporation, joint farm venture, limited liability company, or 
88.8 	partnership operating a family farm rents the property held by a trustee under a trust, and 
88.9 	the grantor, the spouse of the grantor, or the son or daughter of the grantor, who is also a 
88.10 	shareholder, member, or partner of the corporation, joint farm venture, limited liability 
88.11 	company, or partnership occupies and uses the property as a homestead, and  or is actively 
88.12 	farming the property on behalf of the corporation, joint farm venture, limited liability 
88.13 	company, or partnership; or
88.14 	 (4) a person who has received homestead classification for property taxes payable in 
88.15 	2000 on the basis of an unqualified legal right under the terms of the trust agreement to 
88.16 	occupy the property as that person's homestead and who continues to use the property as 
88.17 	a homestead or a person who received the homestead classification for taxes payable in 
88.18 	2005 under clause (3) who does not qualify under clause (3) for taxes payable in 2006 
88.19 	or thereafter but who continues to qualify under clause (3) as it existed for taxes payable 
88.20 	in 2005.
88.21 	 For purposes of this subdivision, "grantor" is defined as the person creating or 
88.22 	establishing a testamentary, inter Vivos, revocable or irrevocable trust by written 
88.23 	instrument or through the exercise of a power of appointment.

88.24 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
88.25 	thereafter.

88.26 	 Sec. 22. Minnesota Statutes 2004, section 273.1315, is amended to read:
88.27 	 273.1315 CERTIFICATION OF 1B PROPERTY.
88.28 	 Any property owner seeking classification and assessment of the owner's homestead 
88.29 	as class 1b property pursuant to section 273.13, subdivision 22, paragraph (b), shall file 
88.30 	with the commissioner of revenue a 1b homestead declaration, on a form prescribed by the 
88.31 	commissioner.  The declaration shall contain the following information:
88.32 	 (a) the information necessary to verify that on or before June 30 of the filing year,the 
88.33 	property owner or the owner's spouse satisfies the requirements of section 273.13, 
88.34 	subdivision 22, paragraph (b), for 1b classification; and
89.1 	 (b) any additional information prescribed by the commissioner.
89.2 	 The declaration must be filed on or before October 1 to be effective for property 
89.3 	taxes payable during the succeeding calendar year.  The declaration and any supplementary 
89.4 	information received from the property owner pursuant to this section shall be subject to 
89.5 	chapter 270B.  If approved by the commissioner, the declaration remains in effect until the 
89.6 	property no longer qualifies under section 273.13, subdivision 22, paragraph (b).  Failure 
89.7 	to notify the commissioner within 30 days that the property no longer qualifies under that 
89.8 	paragraph because of a sale, change in occupancy, or change in the status or condition 
89.9 	of an occupant shall result in the penalty provided in section 273.124, subdivision 13, 
89.10 	computed on the basis of the class 1b benefits for the property, and the property shall lose 
89.11 	its current class 1b classification.
89.12 	 The commissioner shall provide to the assessor on or before November 1 a listing 
89.13 	of the parcels of property qualifying for 1b classification.

89.14 	 EFFECTIVE DATE. This section is effective the day following final enactment.

89.15 	 Sec. 23. Minnesota Statutes 2004, section 273.19, subdivision 1a, is amended to read:
89.16 		 Subd. 1a.Effective date. This section is effective the day following final enactment.

89.17 	 Sec. 24. Minnesota Statutes 2004, section 273.372, is amended to read:
 89.18 	 273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD 
89.19 	VALUATIONS.]
89.20 		 Subdivision 1.Scope. (a) As provided in this section, an appeal by a utility or 
89.21 	railroad company concerning the exemption, valuation, or classification of property 
89.22 	for which the commissioner of revenue has provided the city or county assessor with 
89.23 	valuations by order, or for which the commissioner has recommended values to the city 
89.24 	or county assessor, must be brought against the commissioner in Tax Court or in district 
89.25 	court of the county where the property is located, and not against the county or taxing 
89.26 	district where the property is located.
89.27 	 (b) This section governs administrative appeals and appeals to court of a claim that 
89.28 	utility or railroad operating property has been partially, unfairly, or unequally assessed, 
89.29 	or assessed at a valuation greater than its real or actual value, misclassified, or that the 
89.30 	property is exempt.  This section applies only to property described in sections 270.81, 
89.31 	subdivision 1, 273.33, 273.35, 273.36, and 273.37, and only with regard to taxable net tax 
89.32 	capacities that have been provided to the city or county by the commissioner and which 
89.33 	have not been changed by city or county.  If the taxable net tax capacity being appealed is 
89.34 	not the taxable net tax capacity established by the commissioner, or if the appeal claims 
90.1 	that the tax rate applied against the parcel is incorrect, or that the tax has been paid, this 
90.2 	section does not apply.
90.3 		 Subd. 2.Contents and filing of petition. (a) In all appeals to court that are required 
90.4 	to be brought against the commissioner under this section, the petition initiating the appeal 
90.5 	must be served on the commissioner and must be filed with the Tax Court in Ramsey 
90.6 	County, as provided in paragraph (b) or (c).
90.7 	 (b) If the appeal to court is from an order of the commissioner, it must be 
90.8 	brought under chapter 271, except that when the provisions of this section conflict with 
90.9 	chapter 271, this section prevails.  In addition, the petition must include all the parcels 
90.10 	encompassed by that order which the petitioner claims have been partially, unfairly, 
90.11 	or unequally assessed, assessed at a valuation greater than their real or actual value, 
90.12 	misclassified, or are exempt.  For this purpose, an order of the commissioner is either (1) a 
90.13 	certification or notice of value by the commissioner for property described in subdivision 
90.14 	1, or (2) the final determination by the commissioner of either an administrative appeal 
90.15 	conference or informal administrative appeal described in subdivision 4.
90.16 	 (c) If the appeal is from the exemption, valuation, classification, or tax that results 
90.17 	from implementation of the commissioner's order, certification,or recommendation, it 
90.18 	must be brought under chapter 278, and the provisions in that chapter apply, except that 
90.19 	service shall be on the commissioner only and not on the county local officials specified 
90.20 	in section 278.01, subdivision 1, and if any other provision of this section conflicts with 
90.21 	chapter 278, this section prevails.  In addition, the petition must include either all the utility 
90.22 	parcels or all the railroad parcels in the state in which the petitioner claims an interest and 
90.23 	which the petitioner claims have been partially, unfairly, or unequally assessed, assessed 
90.24 	at a valuation greater than their real or actual value, misclassified, or are exempt. This 
90.25 	provision applies to the property described in sections 273.33, 273.35, 273.36, and 273.37, 
90.26 	but only if the appealed values have remained unchanged from those provided to the 
90.27 	city or county by the commissioner.  If the exemption, valuation, or classification being 
90.28 	appealed has been changed by the city or county, then the action must be brought under 
90.29 	chapter 278 in the county where the property is located and proper service must be made 
90.30 	upon the county officials as specified in section 278.01, subdivision 1.
90.31 		 Subd. 3.Notice. Upon filing of any appeal in court by a utility company or railroad 
90.32 	against the commissioner pursuant to this section, the commissioner shall give notice by 
90.33 	first class mail to the county auditor of each county which would be affected by the appeal 
90.34 	where property included in the petition is located.
90.35 		 Subd. 4.Administrative appeals. (a) Companies that submit the reports under 
90.36 	section 270.82 or 273.371 by the date specified in that section, or by the date specified 
91.1 	by the commissioner in an extension, may appeal administratively to the commissioner 
91.2 	under the procedures in section 270.11, subdivision 6,prior to bringing an action in Tax 
91.3 	Court or in district court , however, instituting an administrative appeal by submitting 
91.4 	a written request with the commissioner does not change or modify for a conference 
91.5 	within ten days after the date of the commissioner's valuation certification or notice to 
91.6 	the company, or by May 15, whichever is earlier.  The commissioner shall conduct the 
91.7 	conference upon the commissioner's entire files and records and such further information 
91.8 	as may be offered.  The conference must be held no later than 20 days after the date 
91.9 	of the commissioner's valuation certification or notice to the company, or by the date 
91.10 	specified by the commissioner in an extension.  Within 60 days after the conference the 
91.11 	commissioner shall make a final determination of the matter and shall notify the company 
91.12 	promptly of the determination.  The conference is not a contested case hearing.
91.13 	 (b) In addition to the opportunity for a conference under paragraph (a), the 
91.14 	commissioner shall make a more informal procedure available to railroad and utility 
91.15 	companies to question values established by the commissioner through certification 
91.16 	or notice.  The availability of the informal procedure does not change or modify the 
91.17 	deadline for requesting a conference under paragraph (a),the deadline in section 271.06 
91.18 	for appealing an order of the commissioner in Tax Court ,or the deadline in section 278.01
91.19 	for filing a property tax claim or objection in Tax Court or district appealing property 
91.20 	taxes in  court.

91.21 	EFFECTIVE DATE. This section is effective September 1, 2005, and thereafter.

91.22 	 Sec. 25. Minnesota Statutes 2004, section 274.014, subdivision 2, is amended to read:
91.23 		 Subd. 2.Appeals and equalization course. By no later than January 1,Beginning 
91.24 	in 2006, and each year thereafter, there must be at least one member at each meeting of 
91.25 	a local board of appeal and equalization who has attended an appeals and equalization 
91.26 	course developed or approved by the commissioner within the last four years, as certified 
91.27 	by the commissioner. The course may be offered in conjunction with a meeting of the 
91.28 	Minnesota League of Cities or the Minnesota Association of Townships.  The course 
91.29 	content must include, but need not be limited to, a review of the handbook developed 
91.30 	by the commissioner under subdivision 1.

91.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

91.32 	 Sec. 26. Minnesota Statutes 2004, section 274.014, subdivision 3, is amended to read:
92.1 		 Subd. 3.Proof of compliance; transfer of duties. (a)  Any city or town that does 
92.2 	not conducts local boards of appeal and equalization meetings must provide proof to the 
92.3 	county assessor by December 1, 2006, and each year thereafter, that it is in compliance 
92.4 	with the requirements of subdivision 2, and that it had .  Beginning in 2006, this notice 
92.5 	must also verify that there was a quorum of voting members at each meeting of the board 
92.6 	of appeal and equalization in the prior current year,.  A city or town that does not comply 
92.7 	with these requirements is deemed to have transferred its board of appeal and equalization 
92.8 	powers to the county under section 274.01, subdivision 3, for beginning with the following 
92.9 	year's assessment and continuing unless the powers are reinstated under paragraph (c).
92.10 	 (b) The county shall notify the taxpayers when the board of appeal and equalization 
92.11 	for a city or town has been transferred to the county under this subdivision and, prior to 
92.12 	the meeting time of the county board of equalization, the county shall make available to 
92.13 	those taxpayers a procedure for a review of the assessments, including, but not limited to, 
92.14 	open book meetings. This alternate review process shall take place in April and May.
92.15 	 (c) A local board whose powers are transferred to the county under this subdivision 
92.16 	may be reinstated by resolution of the governing body of the city or town and upon proof 
92.17 	of compliance with the requirements of subdivision 2.  The resolution and proofs must be 
92.18 	provided to the county assessor by December 1 in order to be effective for the following 
92.19 	year's assessment.

92.20 	EFFECTIVE DATE. This section is effective the day following final enactment.

92.21 	 Sec. 27. Minnesota Statutes 2004, section 274.14, is amended to read:
92.22 	 274.14 LENGTH OF SESSION; RECORD.
92.23 	 The county board of equalization or the special board of equalization appointed 
92.24 	by it shall meet during the last ten meeting days in June.  For this purpose, "meeting 
92.25 	days" are defined as any day of the week excluding Saturday and Sunday. The board may 
92.26 	meet on any ten consecutive meeting days in June, after the second Friday in June, if 
92.27 	.The actual meeting dates are must be contained on the valuation notices mailed to each 
92.28 	property owner in the county under as provided in section 273.121. For this purpose, 
92.29 	"meeting days" is defined as any day of the week excluding Saturday and Sunday.No 
92.30 	action taken by the county board of review after June 30 is valid, except for corrections 
92.31 	permitted in sections 273.01 and 274.01.  The county auditor shall keep an accurate record 
92.32 	of the proceedings and orders of the board.  The record must be published like other 
92.33 	proceedings of county commissioners.  A copy of the published record must be sent to the 
92.34 	commissioner of revenue, with the abstract of assessment required by section 274.16.

93.1 	 EFFECTIVE DATE. This section is effective the day following final enactment.

93.2 	 Sec. 28. Minnesota Statutes 2004, section 275.07, subdivision 1, is amended to read:
93.3 		 Subdivision 1.Certification of levy.  (a) Except as provided under paragraph (b), the 
93.4 	taxes voted by cities, counties, school districts, and special districts shall be certified by 
93.5 	the proper authorities to the county auditor on or before five working days after December 
93.6 	20 in each year.  A town must certify the levy adopted by the town board to the county 
93.7 	auditor by September 15 each year.  If the town board modifies the levy at a special town 
93.8 	meeting after September 15, the town board must recertify its levy to the county auditor 
93.9 	on or before five working days after December 20. The taxes certified shall be reduced 
93.10 	by the county auditor by the aid received under section 273.1398, subdivision 3.If a city, 
93.11 	town, county, school district, or special district fails to certify its levy by that date, its levy 
93.12 	shall be the amount levied by it for the preceding year.
93.13 	 (b)(i) The taxes voted by counties under sections 103B.241, 103B.245, and 103B.251
93.14 	shall be separately certified by the county to the county auditor on or before five working 
93.15 	days after December 20 in each year.  The taxes certified shall not be reduced by the county 
93.16 	auditor by the aid received under section 273.1398, subdivision 3.  If a county fails to 
93.17 	certify its levy by that date, its levy shall be the amount levied by it for the preceding year.
93.18 	 (ii) For purposes of the proposed property tax notice under section 275.065 and 
93.19 	the property tax statement under section 276.04, for the first year in which the county 
93.20 	implements the provisions of this paragraph, the county auditor shall reduce the county's 
93.21 	levy for the preceding year to reflect any amount levied for water management purposes 
93.22 	under clause (i) included in the county's levy.

93.23 	EFFECTIVE DATE. This section is effective the day following final enactment.

93.24 	 Sec. 29. Minnesota Statutes 2004, section 275.07, subdivision 4, is amended to read:
93.25 		 Subd. 4.Report to commissioner.  (a) On or before October 8 of each year, the 
93.26 	county auditor shall report to the commissioner of revenue the proposed levy certified by 
93.27 	local units of government under section 275.065, subdivision 1.  If any taxing authorities 
93.28 	have notified the county auditor that they are in the process of negotiating an agreement for 
93.29 	sharing, merging, or consolidating services but that when the proposed levy was certified 
93.30 	under section 275.065, subdivision 1c, the agreement was not yet finalized, the county 
93.31 	auditor shall supply that information to the commissioner when filing the report under this 
93.32 	section and shall recertify the affected levies as soon as practical after October 10.
94.1 	 (b) On or before January 15 of each year, the county auditor shall report to the 
94.2 	commissioner of revenue the final levy certified by local units of government under 
94.3 	subdivision 1.
94.4 	 (c) The levies must be reported in the manner prescribed by the commissioner. The 
94.5 	reports must show a total levy and the amount of each special levy.

94.6 	EFFECTIVE DATE. This section is effective the day following final enactment.

94.7 	 Sec. 30. Minnesota Statutes 2004, section 276.112, is amended to read:
94.8 	 276.112 STATE PROPERTY TAXES; COUNTY TREASURER.
94.9 	 On or before January 25 each year, for the period ending December 31 of the prior 
94.10 	year, and on or before June 29 28 each year, for the period ending on the most recent 
94.11 	settlement day determined in section 276.09, and on or before December 2 each year, for 
94.12 	the period ending November 20, the county treasurer must make full settlement with 
94.13 	the county auditor according to sections 276.09, 276.10, and 276.111 for all receipts of 
94.14 	state property taxes levied under section 275.025, and must transmit those receipts to the 
94.15 	commissioner of revenue by electronic means.

94.16 	 EFFECTIVE DATE. This section is effective the day following final enactment.

94.17 	 Sec. 31. Minnesota Statutes 2004, section 282.016, is amended to read:
94.18 	 282.016 PROHIBITED PURCHASERS.
94.19 	 No (a) A county auditor, county treasurer, county attorney, court administrator of the 
94.20 	district court, or county assessor or ,supervisor of assessments, or deputy or clerk or an 
94.21 	employee of such officer, and no a commissioner for tax-forfeited lands or an assistant to 
94.22 	such commissioner may , must not become a purchaser, either personally or as an agent 
94.23 	or attorney for another person,of the properties offered for sale under the provisions of 
94.24 	this chapter, either personally, or as agent or attorney for any other person, except that 
94.25 	in the county for which the person performs duties.  A person prohibited from purchasing 
94.26 	property under this section must not directly or indirectly have another person purchase it 
94.27 	on behalf of the prohibited purchaser for the prohibited purchaser's benefit or gain.
94.28 	 (b) Notwithstanding paragraph (a),such officer, deputy, court administrator clerk, or 
94.29 	employee or commissioner for tax-forfeited lands or assistant to such commissioner may 
94.30 	(1) purchase lands owned by that official at the time the state became the absolute owner 
94.31 	thereof or (2) bid upon and purchase forfeited property offered for sale under the alternate 
94.32 	sale procedure described in section 282.01, subdivision 7a.

95.1 	 EFFECTIVE DATE. This section is effective the day following final enactment.

95.2 	 Sec. 32. Minnesota Statutes 2004, section 282.08, is amended to read:
95.3 	 282.08 APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.
95.4 	 The net proceeds from the sale or rental of any parcel of forfeited land, or from the 
95.5 	sale of products from the forfeited land, must be apportioned by the county auditor to the 
95.6 	taxing districts interested in the land, as follows:
95.7 	 (1) the amounts necessary to pay the state general tax levy against the parcel for 
95.8 	taxes payable in the year for which the tax judgment was entered, and for each subsequent 
95.9 	payable year up to and including the year of forfeiture, must be apportioned to the state;
95.10 	 (2) the portion required to pay any amounts included in the appraised value 
95.11 	under section 282.01, subdivision 3, as representing increased value due to any public 
95.12 	improvement made after forfeiture of the parcel to the state, but not exceeding the amount 
95.13 	certified by the clerk of the municipality must be apportioned to the municipal subdivision 
95.14 	entitled to it;
95.15 	 (3) (2) the portion required to pay any amount included in the appraised value under 
95.16 	section 282.019, subdivision 5, representing increased value due to response actions 
95.17 	taken after forfeiture of the parcel to the state, but not exceeding the amount of expenses 
95.18 	certified by the Pollution Control Agency or the commissioner of agriculture, must be 
95.19 	apportioned to the agency or the commissioner of agriculture and deposited in the fund 
95.20 	from which the expenses were paid;
95.21 	 (4) (3) the portion of the remainder required to discharge any special assessment 
95.22 	chargeable against the parcel for drainage or other purpose whether due or deferred at the 
95.23 	time of forfeiture, must be apportioned to the municipal subdivision entitled to it; and
95.24 	 (5) (4) any balance must be apportioned as follows:
95.25 	 (i) The county board may annually by resolution set aside no more than 30 percent 
95.26 	of the receipts remaining to be used for timber development on tax-forfeited land and 
95.27 	dedicated memorial forests, to be expended under the supervision of the county board.  It 
95.28 	must be expended only on projects approved by the commissioner of natural resources.
95.29 	 (ii) The county board may annually by resolution set aside no more than 20 percent 
95.30 	of the receipts remaining to be used for the acquisition and maintenance of county parks 
95.31 	or recreational areas as defined in sections 398.31 to 398.36, to be expended under the 
95.32 	supervision of the county board.
95.33 	 (iii) Any balance remaining must be apportioned as follows:  county, 40 percent; 
95.34 	town or city, 20 percent; and school district, 40 percent, provided, however, that in 
96.1 	unorganized territory that portion which would have accrued to the township must be 
96.2 	administered by the county board of commissioners.

96.3 	 EFFECTIVE DATE. This section is effective the day following final enactment for 
96.4 	state general tax levy amounts payable in 2004 and thereafter.

96.5 	 Sec. 33. Minnesota Statutes 2004, section 282.15, is amended to read:
96.6 	 282.15 SALES OF FORFEITED AGRICULTURAL LANDS.
96.7 	 The sale shall be conducted by the auditor of the county in which the parcels lie.  The 
96.8 	parcels shall be sold to the highest bidder but not for less than the appraised value.  The 
96.9 	sales shall be for cash or on the following terms:  The appraised value of all merchantable 
96.10 	timber on agricultural lands shall be paid for in full at the date of sale.  At least 15 percent 
96.11 	of the purchase price of the land shall be paid in cash at the time of purchase.  The balance 
96.12 	shall be paid in not more than 20 equal annual installments, with interest at a rate equal to 
96.13 	the rate in effect at the time under section 549.09 on the unpaid balance each year.  Both 
96.14 	principal and interest are due and payable on December 31 each year following that in 
96.15 	which the purchase was made.  The purchaser may pay any number of installments of 
96.16 	principal and interest on or before their due date.  When the sale is on terms other than for 
96.17 	cash in full, the purchaser shall receive from the county auditor a contract for deed, in a 
96.18 	form prescribed by the attorney general.  The county auditor shall make a report to the 
96.19 	commissioner of natural resources not more than 30 days after each public sale showing 
96.20 	the lands sold at the sales, and submit a copy of each contract of sale.
96.21 	 All lands sold pursuant to this section shall, on the second day of January following 
96.22 	the date of the sale,must be restored to the tax rolls and become subject to taxation in the 
96.23 	same manner as they were assessed and taxed before becoming the absolute property 
96.24 	of the state for the assessment year determined under section 272.02, subdivision 38, 
96.25 	paragraph (c).

96.26 	 EFFECTIVE DATE. This section is effective for sales occurring on or after July 
96.27 	1, 2005.

96.28 	 Sec. 34. Minnesota Statutes 2004, section 282.21, is amended to read:
96.29 	 282.21 FORM OF CONVEYANCE.
96.30 	 When any sale has been made under sections 282.14 to 282.22,upon payment in full 
96.31 	of the purchase price, appropriate conveyance in fee in such form as may be prescribed by 
96.32 	the attorney general shall be issued by the commissioner of finance to the purchaser or 
97.1 	the purchaser's assigns and this conveyance shall have the force and effect of a patent 
97.2 	from the state.

97.3 	 EFFECTIVE DATE. This section is effective the day following final enactment.

97.4 	 Sec. 35. Minnesota Statutes 2004, section 282.224, is amended to read:
97.5 	 282.224 FORM OF CONVEYANCE.
97.6 	 When any sale has been made under sections 282.221 to 282.226,upon payment in 
97.7 	full of the purchase price,appropriate conveyance in fee, in such form as may be prescribed 
97.8 	by the attorney general, shall be issued by the commissioner of natural resources to the 
97.9 	purchaser or the purchaser's assignee, and the conveyance shall have the force and effect 
97.10 	of a patent from the state.

97.11 	 EFFECTIVE DATE. This section is effective the day following final enactment.

97.12 	 Sec. 36. Minnesota Statutes 2004, section 282.301, is amended to read:
97.13 	 282.301 RECEIPTS FOR PAYMENTS.
97.14 	 When any sale has been made under sections 282.012 and 282.241 to 282.324,the 
97.15 	purchaser shall receive from the county auditor at the time of repurchase a receipt, in such 
97.16 	form as may be prescribed by the attorney general.  When the purchase price of a parcel of 
97.17 	land shall be paid in full, the following facts shall be certified by the county auditor to the 
97.18 	commissioner of revenue of the state of Minnesota:  the description of land, the date of 
97.19 	sale, the name of the purchaser or the purchaser's assignee, and the date when the final 
97.20 	installment of the purchase price was paid.  Upon payment in full of the purchase price, 
97.21 	the purchaser or the assignee shall receive a quitclaim deed from the state, to be executed 
97.22 	by the commissioner of revenue.  The deed must be sent to the county auditor who shall 
97.23 	have it recorded before it is forwarded to the purchaser. Failure to make any payment 
97.24 	herein required shall constitute default and upon such default and cancellation in accord 
97.25 	with section 282.40, the right, title and interest of the purchaser or the purchaser's heirs, 
97.26 	representatives, or assigns in such parcel shall terminate.

97.27 	 EFFECTIVE DATE. This section is effective the day following final enactment.

97.28 	 Sec. 37. Minnesota Statutes 2004, section 290B.05, subdivision 3, is amended to read:
97.29 		 Subd. 3.Calculation of deferred property tax amount.  When final property tax 
97.30 	amounts for the following year have been determined, the county auditor shall calculate 
97.31 	the "deferred property tax amount."  The deferred property tax amount is equal to the 
98.1 	lesser of (1) the maximum allowable deferral for the year; or (2) the difference between 
98.2 	(i) the total amount of property taxes and special assessments levied upon the qualifying 
98.3 	homestead by all taxing jurisdictions and (ii) the maximum property tax amount. Any 
98.4 	special assessments levied by any local unit of government must not be included in the 
98.5 	total tax used to calculate the deferred tax amount.For this purpose "special assessments" 
98.6 	includes any assessment, fee, or other charge that may by law, and which does, appear on 
98.7 	the property tax statement for the property for collection under the laws applicable to the 
98.8 	enforcement of real estate taxes.Any tax attributable to new improvements made to the 
98.9 	property after the initial application has been approved under section 290B.04, subdivision 
98.10 	2, must be excluded when determining any subsequent deferred property tax amount.  
98.11 	The county auditor shall annually, on or before April 15, certify to the commissioner of 
98.12 	revenue the property tax deferral amounts determined under this subdivision by property 
98.13 	and by owner.

98.14 	EFFECTIVE DATE. This section is effective for amounts deferred in 2006 and 
98.15 	thereafter.

98.16 	 Sec. 38. Minnesota Statutes 2004, section 290C.05, is amended to read:
98.17 	 290C.05 ANNUAL CERTIFICATION.
98.18 	 On or before July 1 of each year, beginning with the year after the claimant has 
98.19 	received an approved application, the commissioner shall send each claimant enrolled 
98.20 	under the sustainable forest incentive program a certification form.  The claimant must sign 
98.21 	the certification, attesting that the requirements and conditions for continued enrollment in 
98.22 	the program are currently being met, and must return the signed certification form to the 
98.23 	commissioner by August 15 of that same year. Failure to If the claimant does not return 
98.24 	an annual certification form by the due date shall result in removal of the lands from 
98.25 	the provisions of the sustainable forest incentive program, and the imposition of any 
98.26 	applicable removal penalty , the provisions in section 290C.11 apply. The claimant may 
98.27 	appeal the removal and any associated penalty according to the procedures and within the 
98.28 	time allowed under this chapter.

98.29 	 EFFECTIVE DATE. This section is effective the day following final enactment.

98.30 	 Sec. 39. [290C.055] LENGTH OF COVENANT.
98.31 	 The covenant remains in effect for a minimum of eight years.  If land is removed 
98.32 	from the program before it has been enrolled for four years, the covenant remains in 
98.33 	effect for eight years from the date recorded.
99.1 	 If land that has been enrolled for four years or more is removed from the program 
99.2 	for any reason, there is a waiting period before the covenant terminates.  The covenant 
99.3 	terminates on January 1 of the fifth calendar year that begins after the date that:
99.4 	 (1) the commissioner receives notification from the claimant that the claimant wishes 
99.5 	to remove the land from the program under section 290C.10; or 
99.6 	 (2) the date that the land is removed from the program under section 290C.11.
99.7 	 Notwithstanding the other provisions of this section, the covenant is terminated at 
99.8 	the same time that the land is removed from the program due to acquisition of title or 
99.9 	possession for a public purpose under section 290C.10.

99.10 	 EFFECTIVE DATE. This section is effective the day following final enactment.

99.11 	 Sec. 40. Minnesota Statutes 2004, section 290C.10, is amended to read:
99.12 	 290C.10 WITHDRAWAL PROCEDURES.
99.13 	 An approved claimant under the sustainable forest incentive program for a minimum 
99.14 	of four years may notify the commissioner of the intent to terminate enrollment.  Within 
99.15 	90 days of receipt of notice to terminate enrollment, the commissioner shall inform the 
99.16 	claimant in writing, acknowledging receipt of this notice and indicating the effective date 
99.17 	of termination from the sustainable forest incentive program.  Termination of enrollment 
99.18 	in the sustainable forest incentive program occurs on January 1 of the fifth calendar 
99.19 	year that begins after receipt by the commissioner of the termination notice.  After the 
99.20 	commissioner issues an effective date of termination, a claimant wishing to continue the 
99.21 	land's enrollment in the sustainable forest incentive program beyond the termination 
99.22 	date must apply for enrollment as prescribed in section 290C.04.  A claimant who 
99.23 	withdraws a parcel of land from this program may not reenroll the parcel for a period of 
99.24 	three years.  Within 90 days after the termination date, the commissioner shall execute 
99.25 	and acknowledge a document releasing the land from the covenant required under this 
99.26 	chapter.  The document must be mailed to the claimant and is entitled to be recorded.  
99.27 	The commissioner may allow early withdrawal from the Sustainable Forest Incentive 
99.28 	Act without penalty in cases of condemnation when the state of Minnesota, any local 
99.29 	government unit, or any other entity which has the right of eminent domain acquires 
99.30 	title or possession to the land for a public purpose notwithstanding the provisions of this 
99.31 	section. In the case of such acquisition, the commissioner shall execute and acknowledge 
99.32 	a document releasing the land acquired by the state, local government unit, or other entity 
99.33 	from the covenant.  All other enrolled land must remain in the program.

99.34 	 EFFECTIVE DATE. This section is effective the day following final enactment.

100.1 	 Sec. 41. Minnesota Statutes 2004, section 373.45, subdivision 7, is amended to read:
100.2 		 Subd. 7.Aid reduction for repayment.  (a) Except as provided in paragraph (b), 
100.3 	the commissioner may reduce, by the amount paid by the state under this section on behalf 
100.4 	of the county, plus the interest due on the state payments, the following aids payable 
100.5 	to the county:
100.6 	 (1) homestead and agricultural credit aid and disparity reduction aid payable under 
100.7 	section 273.1398;
100.8 	 (2) county criminal justice aid payable under section 477A.0121; and 
100.9 	 (3) family preservation aid payable under section 477A.0122 county program aid 
100.10 	under section 477A.0124.
100.11 	 The amount of any aid reduction reverts from the appropriate account to the state general 
100.12 	fund.
100.13 	 (b) If, after review of the financial situation of the county, the authority advises the 
100.14 	commissioner that a total reduction of the aids would cause an undue hardship on the 
100.15 	county, the authority, with the approval of the commissioner, may establish a different 
100.16 	schedule for reduction of aids to repay the state.  The amount of aids to be reduced are 
100.17 	decreased by any amounts repaid to the state by the county from other revenue sources.

100.18 	EFFECTIVE DATE. This section is effective for aid payable in 2005 and thereafter.

100.19 	 Sec. 42. Minnesota Statutes 2004, section 469.1735, subdivision 3, is amended to read:
100.20 		 Subd. 3.Transfer authority for property tax.  (a) A city may elect to use all 
100.21 	or part of its allocation under subdivision 2 to reimburse the city or county or both for 
100.22 	property tax reductions under section 272.0212.  To elect this option, the city must notify 
100.23 	the commissioner of revenue by October 1 of each calendar year of the amount of the 
100.24 	property tax reductions for which it seeks reimbursements for taxes payable during the 
100.25 	following current year and the governmental units to which the amounts will be paid.  The 
100.26 	commissioner may require the city to provide information substantiating the amount of the 
100.27 	reductions granted or any other information necessary to administer this provision.  The 
100.28 	commissioner shall pay the reimbursements by December 26 of the taxes payable year.  
100.29 	Any amount transferred under this authority reduces the amount of tax credit certificates 
100.30 	available under subdivisions 1 and 2.
100.31 	 (b) The amount elected by the city under paragraph (a) is appropriated to the 
100.32 	commissioner of revenue from the general fund to reimburse the city or county for 
100.33 	tax reductions under section 272.0212.  The amount appropriated may not exceed the 
101.1 	maximum amounts allocated to a city under subdivision 2, paragraph (b), less the amount 
101.2 	of certificates issued by the city under subdivision 1, and is available until expended.

101.3 	EFFECTIVE DATE. This section is effective for reimbursements of taxes payable 
101.4 	in 2005 and thereafter.

101.5 	 Sec. 43. Laws 2003, chapter 127, article 5, section 27, the effective date, is amended to 
101.6 	read:

101.7 	 EFFECTIVE DATE. This section is effective for taxes payable in 2004 and 
101.8 	thereafter distributions occurring on or after June 10, 2003.

101.9 	 Sec. 44. Laws 2003, chapter 127, article 5, section 28, the effective date, is amended to 
101.10 	read:

101.11 	 EFFECTIVE DATE. This section is effective for taxes payable in 2004 and 
101.12 	thereafter distributions occurring on or after June 10, 2003.

101.13 	 Sec. 45. LINCOLN AND PIPESTONE COUNTIES; TOWN LEVY 
101.14 	ADJUSTMENT FOR WIND ENERGY PRODUCTION TAX.
 101.15 	 Notwithstanding the deadlines in Minnesota Statutes, section 275.07, towns located 
101.16 	in Lincoln or Pipestone County are authorized to adjust their payable 2004 levy for all or a 
101.17 	portion of their estimated wind energy production tax amounts for 2004, as computed by 
101.18 	the commissioner of revenue from reports filed under Minnesota Statutes, section 272.029, 
101.19 	subdivision 4.  The Lincoln and Pipestone County auditors may adjust the payable 2004 
101.20 	levy certifications under Minnesota Statutes, section 275.07, subdivision 1, based upon the 
101.21 	towns that have recertified their levies under this section by March 15, 2004.

101.22 	 EFFECTIVE DATE. This section is effective for taxes payable in 2004.

101.23 	 Sec. 46. REPEALER.
 101.24 	 (a) Minnesota Statutes 2004, sections 273.19, subdivision 5; 274.05; 275.15; 275.61, 
101.25 	subdivision 2; and 283.07, are repealed effective the day following final enactment.
101.26 	 (b) Minnesota Statutes 2004, section 469.1794, subdivision 6, is repealed effective 
101.27 	the day following final enactment and applies to districts for which the request for 
101.28 	certification was made on, before, or after August 1, 1979, and before August 1, 2001.
102.1 	 (c) Laws 1975, chapter 287, section 5, and Laws 2003, chapter 127, article 9, section 
102.2 	9, subdivision 4, are repealed effective without local approval for taxes payable in 2006 
102.3 	and thereafter.
102.4 	 (d) Minnesota Statutes 2004, sections 270.85; 270.88; and 273.37, subdivision 3, 
102.5 	are repealed effective September 1, 2005.

102.6 	 ARTICLE 5
102.7 	 INCOME, CORPORATE FRANCHISE, AND ESTATE TAXES

102.8 	 Section 1. Minnesota Statutes 2004, section 190.09, subdivision 2, is amended to read:
102.9 		 Subd. 2.Mission; efficiency.  It is part of the department's mission that within the 
102.10 	department's resources the adjutant general shall endeavor to:
102.11 	 (1) prevent the waste or unnecessary spending of public money;
102.12 	 (2) use innovative fiscal and human resource practices to manage the state's 
102.13 	resources and operate the department as efficiently as possible;
102.14 	 (3) coordinate the department's activities wherever appropriate with the activities 
102.15 	of other governmental agencies;
102.16 	 (4) use technology where appropriate to increase agency productivity, improve 
102.17 	customer service, increase public access to information about government, and increase 
102.18 	public participation in the business of government;
102.19 	 (5) utilize constructive and cooperative labor-management practices to the extent 
102.20 	otherwise required by chapters 43A and 179A;
102.21 	 (6) report to the legislature on the performance of agency operations and the 
102.22 	accomplishment of agency goals in the agency's biennial budget according to section 
102.23 	16A.10, subdivision 1; and 
102.24 	 (7) recommend to the legislature appropriate changes in law necessary to carry out 
102.25 	the mission and improve the performance of the department; and 
102.26 	 (8) administer checkoff funds as provided in section 290.433.

102.27 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
102.28 	December 31, 2004.

102.29 	 Sec. 2. Minnesota Statutes 2004, section 289A.08, subdivision 1, is amended to read:
102.30 		 Subdivision 1.Generally; individuals.  (a) A taxpayer must file a return for each 
102.31 	taxable year the taxpayer is required to file a return under section 6012 of the Internal 
102.32 	Revenue Code, except that:
103.1 	 (1) an individual who is not a Minnesota resident for any part of the year is not 
103.2 	required to file a Minnesota income tax return if the individual's gross income derived 
103.3 	from Minnesota sources as determined under sections 290.081, paragraph (a), and 290.17, 
103.4 	is less than the filing requirements for a single individual who is a full year resident of 
103.5 	Minnesota; and 
103.6 	 (2) an individual who is a Minnesota resident is not required to file a Minnesota 
103.7 	income tax return if the individual's gross income derived from Minnesota sources as 
103.8 	determined under section 290.17, less the amount of the individual's gross income that 
103.9 	consists of compensation paid to members of the armed forces of the United States 
103.10 	or United Nations for active duty performed outside Minnesota, is less than the filing 
103.11 	requirements for a single individual who is a full-year resident of Minnesota.
103.12 	 (b) The decedent's final income tax return, and other income tax returns for prior 
103.13 	years where the decedent had gross income in excess of the minimum amount at which 
103.14 	an individual is required to file and did not file, must be filed by the decedent's personal 
103.15 	representative, if any.  If there is no personal representative, the return or returns must 
103.16 	be filed by the transferees, as defined in section 289A.38, subdivision 13, who receive 
103.17 	property of the decedent.
103.18 	 (c) The term "gross income," as it is used in this section, has the same meaning 
103.19 	given it in section 290.01, subdivision 20.

103.20 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
103.21 	December 31, 2004.

103.22 	 Sec. 3. Minnesota Statutes 2004, section 289A.08, subdivision 3, is amended to read:
103.23 		 Subd. 3.Corporations.  A corporation that is subject to the state's jurisdiction to tax 
103.24 	under section 290.014, subdivision 5, must file a return, except that a foreign operating 
103.25 	corporation as defined in section 290.01, subdivision 6b, is not required to file a return.  
103.26 	The commissioner shall adopt rules for the filing of one return on behalf of the members 
103.27 	of an affiliated group of corporations that are required to file a combined report.  All 
103.28 	members of an affiliated group that are required to file a combined report must file one 
103.29 	return on behalf of the members of the group under rules adopted by the commissioner. 
103.30 	If a corporation claims on a return that it has paid tax in excess of the amount of taxes 
103.31 	lawfully due, that corporation must include on that return information necessary for 
103.32 	payment of the tax in excess of the amount lawfully due by electronic means.

103.33 	EFFECTIVE DATE. This section is effective for returns filed after December 
103.34 	31, 2005.

104.1 	 Sec. 4. Minnesota Statutes 2004, section 289A.08, subdivision 7, is amended to read:
104.2 		 Subd. 7.Composite income tax returns for nonresident partners, shareholders, 
104.3 	and beneficiaries.  (a) The commissioner may allow a partnership with nonresident 
104.4 	partners to file a composite return and to pay the tax on behalf of nonresident partners who 
104.5 	have no other Minnesota source income.  This composite return must include the names, 
104.6 	addresses, Social Security numbers, income allocation, and tax liability for the nonresident 
104.7 	partners electing to be covered by the composite return.
104.8 	 (b) The computation of a partner's tax liability must be determined by multiplying 
104.9 	the income allocated to that partner by the highest rate used to determine the tax liability 
104.10 	for individuals under section 290.06, subdivision 2c.  Nonbusiness deductions, standard 
104.11 	deductions, or personal exemptions are not allowed.
104.12 	 (c) The partnership must submit a request to use this composite return filing method 
104.13 	for nonresident partners.  The requesting partnership must file a composite return in the 
104.14 	form prescribed by the commissioner of revenue.  The filing of a composite return is 
104.15 	considered a request to use the composite return filing method.
104.16 	 (d) The electing partner must not have any Minnesota source income other than 
104.17 	the income from the partnership and other electing partnerships.  If it is determined that 
104.18 	the electing partner has other Minnesota source income, the inclusion of the income 
104.19 	and tax liability for that partner under this provision will not constitute a return to 
104.20 	satisfy the requirements of subdivision 1.  The tax paid for the individual as part of the 
104.21 	composite return is allowed as a payment of the tax by the individual on the date on 
104.22 	which the composite return payment was made.  If the electing nonresident partner has no 
104.23 	other Minnesota source income, filing of the composite return is a return for purposes of 
104.24 	subdivision 1.
104.25 	 (e) This subdivision does not negate the requirement that an individual pay estimated 
104.26 	tax if the individual's liability would exceed the requirements set forth in section 289A.25.  
104.27 	A composite estimate may, however, be filed in a manner similar to and containing the 
104.28 	information required under paragraph (a).
104.29 	 (f) If an electing partner's share of the partnership's gross income from Minnesota 
104.30 	sources is less than the filing requirements for a nonresident under this subdivision, the tax 
104.31 	liability is zero.  However, a statement showing the partner's share of gross income must 
104.32 	be included as part of the composite return.
104.33 	 (g) The election provided in this subdivision is not only  available to any a partner 
104.34 	other than who has no other Minnesota source income and who is either (1) a full-year 
104.35 	nonresident individual who has no other Minnesota source income or (2) a trust or estate 
105.1 	that does not claim a deduction under either section 651 or 661 of the Internal Revenue 
105.2 	Code.
105.3 	 (h) A corporation defined in section 290.9725 and its nonresident shareholders may 
105.4 	make an election under this paragraph.  The provisions covering the partnership apply to 
105.5 	the corporation and the provisions applying to the partner apply to the shareholder.
105.6 	 (i) Estates and trusts distributing current income only and the nonresident individual 
105.7 	beneficiaries of the estates or trusts may make an election under this paragraph.  The 
105.8 	provisions covering the partnership apply to the estate or trust.  The provisions applying to 
105.9 	the partner apply to the beneficiary.
105.10 	 (j) For the purposes of this subdivision, "income" means the partner's share of 
105.11 	federal adjusted gross income from the partnership modified by the additions provided 
105.12 	in section 290.01, subdivision 19a, clauses (6) and (7), and the subtractions provided in 
105.13 	section 290.01, subdivision 19b, clause (11), to the extent the amount is assignable or 
105.14 	allocable to Minnesota under section 290.17.  The subtraction allowed under section 
105.15 	290.01, subdivision 19b, clause (11), is only allowed on the composite tax computation to 
105.16 	the extent the electing partner would have been allowed the subtraction.

105.17 	EFFECTIVE DATE. This section is effective for tax years beginning after 
105.18 	December 31, 2004.

105.19 	 Sec. 5. Minnesota Statutes 2004, section 289A.08, subdivision 13, is amended to read:
105.20 		 Subd. 13.Long and short forms.  The commissioner shall provide a long form 
105.21 	individual income tax return and may provide a short form individual income tax return.  
105.22 	The returns shall be in a form that is consistent with the provisions of chapter 290, 
105.23 	notwithstanding any other law to the contrary.  The nongame wildlife checkoff provided 
105.24 	in section 290.431 and the dependent care credit provided in section 290.067 must be 
105.25 	included on the short form. The commissioner must provide information on local use 
105.26 	taxes in the individual income tax instruction booklet, including a list of the jurisdictions 
105.27 	with local use taxes.  The commissioner must provide this information in the same section 
105.28 	of the booklet that provides information on the state use tax.

105.29 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
105.30 	December 31, 2004.

105.31 	 Sec. 6. Minnesota Statutes 2004, section 289A.18, subdivision 1, is amended to read:
105.32 		 Subdivision 1.Individual income, fiduciary income, corporate franchise, and 
105.33 	entertainment taxes; partnership and s corporation returns; information returns; 
106.1 	mining company returns.  The returns required to be made under sections 289A.08 and 
106.2 	289A.12 must be filed at the following times:
106.3 	 (1) returns made on the basis of the calendar year must be filed on April 15 following 
106.4 	the close of the calendar year, except that returns of corporations must be filed on March 
106.5 	15 following the close of the calendar year;
106.6 	 (2) returns made on the basis of the fiscal year must be filed on the 15th day of the 
106.7 	fourth month following the close of the fiscal year, except that returns of corporations 
106.8 	must be filed on the 15th day of the third month following the close of the fiscal year;
106.9 	 (3) returns for a fractional part of a year must be filed on the 15th day of the fourth 
106.10 	month following the end of the month in which falls the last day of the period for which 
106.11 	the return is made, except that the returns of corporations must be filed on the 15th day 
106.12 	of the third month following the end of the month tax year of the unitary group in which 
106.13 	falls the last day of the period for which the return is made;
106.14 	 (4) in the case of a final return of a decedent for a fractional part of a year, the return 
106.15 	must be filed on the 15th day of the fourth month following the close of the 12-month 
106.16 	period that began with the first day of that fractional part of a year;
106.17 	 (5) in the case of the return of a cooperative association, returns must be filed on or 
106.18 	before the 15th day of the ninth month following the close of the taxable year;
106.19 	 (6) if a corporation has been divested from a unitary group and files a return for 
106.20 	a fractional part of a year in which it was a member of a unitary business that files a 
106.21 	combined report under section 290.34, subdivision 2, the divested corporation's return 
106.22 	must be filed on the 15th day of the third month following the close of the common 
106.23 	accounting period that includes the fractional year;
106.24 	 (7) returns of entertainment entities must be filed on April 15 following the close of 
106.25 	the calendar year;
106.26 	 (8) returns required to be filed under section 289A.08, subdivision 4, must be filed 
106.27 	on the 15th day of the fifth month following the close of the taxable year;
106.28 	 (9) returns of mining companies must be filed on May 1 following the close of the 
106.29 	calendar year; and
106.30 	 (10) returns required to be filed with the commissioner under section 289A.12, 
106.31 	subdivision 2, 4 to 10, or 14, must be filed within 30 days after being demanded by the 
106.32 	commissioner.

106.33 	EFFECTIVE DATE. This section is effective for fractional years closing after 
106.34 	December 31, 2004.

106.35 	 Sec. 7. Minnesota Statutes 2004, section 289A.19, subdivision 4, is amended to read:
107.1 		 Subd. 4.Estate tax returns. When in the commissioner's judgment good cause 
107.2 	exists, the commissioner may extend the time for filing an estate tax return for not more 
107.3 	than six months. When an extension to file the federal estate tax return has been granted 
107.4 	under section 6081 of the Internal Revenue Code, the time for filing the estate tax return 
107.5 	is extended for that period. If the estate requests an extension to file an estate tax return 
107.6 	within the time provided in section 289A.18, subdivision 3, the commissioner shall extend 
107.7 	the time for filing the estate tax return for six months.

107.8 	EFFECTIVE DATE. This section is effective for estates of decedents dying after 
107.9 	December 31, 2004.

107.10 	 Sec. 8. Minnesota Statutes 2004, section 289A.20, subdivision 2, is amended to read:
107.11 		 Subd. 2.Withholding from wages, entertainer withholding, withholding from 
107.12 	payments to out-of-state contractors, and withholding by partnerships and small 
107.13 	business corporations.  (a) A tax required to be deducted and withheld during the 
107.14 	quarterly period must be paid on or before the last day of the month following the close of 
107.15 	the quarterly period, unless an earlier time for payment is provided.  A tax required to be 
107.16 	deducted and withheld from compensation of an entertainer and from a payment to an 
107.17 	out-of-state contractor must be paid on or before the date the return for such tax must be 
107.18 	filed under section 289A.18, subdivision 2.  Taxes required to be deducted and withheld 
107.19 	by partnerships and ,S corporations, and trusts  must be paid on or before the date the 
107.20 	return must be filed under section 289A.18, subdivision 2a quarterly basis as estimated 
107.21 	taxes under section 289A.25 for partnerships and trusts and under section 289A.26 for S 
107.22 	corporations.
107.23 	 (b) An employer who, during the previous quarter, withheld more than $1,500 of 
107.24 	tax under section 290.92, subdivision 2a or 3, or 290.923, subdivision 2, must deposit tax 
107.25 	withheld under those sections with the commissioner within the time allowed to deposit 
107.26 	the employer's federal withheld employment taxes under Code of Federal Regulations, 
107.27 	title 26, section 31.6302-1, as amended through December 31, 2001, without regard to the 
107.28 	safe harbor or de minimis rules in subparagraph (f) or the one-day rule in subsection (c), 
107.29 	clause (3).  Taxpayers must submit a copy of their federal notice of deposit status to the 
107.30 	commissioner upon request by the commissioner.
107.31 	 (c) The commissioner may prescribe by rule other return periods or deposit 
107.32 	requirements.  In prescribing the reporting period, the commissioner may classify payors 
107.33 	according to the amount of their tax liability and may adopt an appropriate reporting 
107.34 	period for the class that the commissioner judges to be consistent with efficient tax 
107.35 	collection.  In no event will the duration of the reporting period be more than one year.
108.1 	 (d) If less than the correct amount of tax is paid to the commissioner, proper 
108.2 	adjustments with respect to both the tax and the amount to be deducted must be made, 
108.3 	without interest, in the manner and at the times the commissioner prescribes.  If the 
108.4 	underpayment cannot be adjusted, the amount of the underpayment will be assessed and 
108.5 	collected in the manner and at the times the commissioner prescribes.
108.6 	 (e) If the aggregate amount of the tax withheld during a fiscal year ending June 30 
108.7 	under section 290.92, subdivision 2a or 3, is equal to or exceeds the amounts established 
108.8 	for remitting federal withheld taxes pursuant to the regulations promulgated under section 
108.9 	6302(h) of the Internal Revenue Code, the employer must remit each required deposit for 
108.10 	wages paid in the subsequent calendar year by electronic means.
108.11 	 (f) A third-party bulk filer as defined in section 290.92, subdivision 30, paragraph 
108.12 	(a), clause (2), who remits withholding deposits must remit all deposits by electronic 
108.13 	means as provided in paragraph (e), regardless of the aggregate amount of tax withheld 
108.14 	during a fiscal year for all of the employers.

108.15 	EFFECTIVE DATE. This section is effective for tax years beginning after 
108.16 	December 31, 2005.

108.17 	 Sec. 9. Minnesota Statutes 2004, section 289A.31, subdivision 2, is amended to read:
108.18 		 Subd. 2.Joint income tax returns.  (a) If a joint income tax return is made by a 
108.19 	husband and wife, the liability for the tax is joint and several.  A spouse who qualifies for 
108.20 	relief from a liability attributable to an underpayment under section 6015(b) of the Internal 
108.21 	Revenue Code is relieved of the state income tax liability on the underpayment.
108.22 	 (b) In the case of individuals who were a husband and wife prior to the dissolution of 
108.23 	their marriage or their legal separation, or prior to the death of one of the individuals, for 
108.24 	tax liabilities reported on a joint or combined return, the liability of each person is limited 
108.25 	to the proportion of the tax due on the return that equals that person's proportion of the 
108.26 	total tax due if the husband and wife filed separate returns for the taxable year.  This 
108.27 	provision is effective only when the commissioner receives written notice of the marriage 
108.28 	dissolution, legal separation, or death of a spouse from the husband or wife.  No refund 
108.29 	may be claimed by an ex-spouse, legally separated or widowed spouse for any taxes paid 
108.30 	more than 60 days before receipt by the commissioner of the written notice.
108.31 	 (c) A request for calculation of separate liability pursuant to paragraph (b) for taxes 
108.32 	reported on a return must be made within six years after the due date of the return. 
108.33 	For calculation of separate liability for taxes assessed by the commissioner under 
108.34 	section 289A.35 or 289A.37, the request must be made within six years after the date 
109.1 	of assessment.  The commissioner is not required to calculate separate liability if the 
109.2 	remaining unpaid liability for which recalculation is requested is $100 or less.

109.3 	EFFECTIVE DATE. This section is effective for requests for relief made on or 
109.4 	after the day following final enactment.

109.5 	 Sec. 10. Minnesota Statutes 2004, section 289A.38, subdivision 7, is amended to read:
109.6 		 Subd. 7.Federal tax changes.  If the amount of income, items of tax preference, 
109.7 	deductions, or credits for any year of a taxpayer as reported to the Internal Revenue 
109.8 	Service is changed or corrected by the commissioner of Internal Revenue or other officer 
109.9 	of the United States or other competent authority, or where a renegotiation of a contract or 
109.10 	subcontract with the United States results in a change in income, items of tax preference, 
109.11 	deductions, credits, or withholding tax, or, in the case of estate tax, where there are 
109.12 	adjustments to the taxable estate resulting in a change to the credit for state death taxes, 
109.13 	the taxpayer shall report the change or correction or renegotiation results in writing to the 
109.14 	commissioner.  The report must be submitted within 180 days after the final determination 
109.15 	and must be in the form of either an amended Minnesota estate, withholding tax, corporate 
109.16 	franchise tax,or income tax return conceding the accuracy of the federal determination 
109.17 	or a letter detailing how the federal determination is incorrect or does not change the 
109.18 	Minnesota tax.  An amended Minnesota income tax return must be accompanied by an 
109.19 	amended property tax refund return, if necessary.  A taxpayer filing an amended federal 
109.20 	tax return must also file a copy of the amended return with the commissioner of revenue 
109.21 	within 180 days after filing the amended return.

109.22 	EFFECTIVE DATE. This section is effective the day following final enactment.

109.23 	 Sec. 11. Minnesota Statutes 2004, section 289A.50, subdivision 1a, is amended to read:
109.24 		 Subd. 1a.Refund form.  On or before January 1, 2000, the commissioner of 
109.25 	revenue shall prepare and make available to taxpayers a form for filing claims for refund 
109.26 	of taxes paid in excess of the amount due. If the commissioner fails to prepare a form 
109.27 	under this subdivision by January 1, 2000, any claims for refund made after January 1, 
109.28 	2000, and up to ten days after the form is made available to taxpayers are deemed to be 
109.29 	made in compliance with the requirement of the form.The commissioner may require 
109.30 	corporate franchise taxpayers claiming a refund of corporate franchise taxes paid in 
109.31 	excess of the amount lawfully due to include on the claim for refund or amended return 
109.32 	information necessary for payment of the taxes paid in excess of taxes lawfully due by 
109.33 	electronic means.

110.1 	EFFECTIVE DATE. This section is effective for claims for refund filed after 
110.2 	December 31, 2005.

110.3 	 Sec. 12. Minnesota Statutes 2004, section 289A.60, subdivision 13, is amended to read:
110.4 		 Subd. 13.Penalties for tax return preparers.  (a) If an understatement of liability 
110.5 	with respect to a return or claim for refund is due to a reckless disregard of laws and rules 
110.6 	or  willful attempt in any manner to understate the liability for a tax by a person who 
110.7 	is a tax return preparer with respect to the return or claim, the person shall pay to the 
110.8 	commissioner a penalty of $500.  If a part of a property tax refund claim is excessive due 
110.9 	to a reckless disregard or willful attempt in any manner to overstate the claim for relief 
110.10 	allowed under chapter 290A by a person who is a tax refund or return preparer, the person 
110.11 	shall pay to the commissioner a penalty of $500 with respect to the claim.  These penalties 
110.12 	may not be assessed against the employer of a tax return preparer unless the employer was 
110.13 	actively involved in the reckless disregard or  willful attempt to understate the liability for 
110.14 	a tax or to overstate the claim for refund.  These penalties are income tax liabilities and 
110.15 	may be assessed at any time as provided in section 289A.38, subdivision 5.
110.16 	 (b) A civil action in the name of the state of Minnesota may be commenced to 
110.17 	enjoin any person who is a tax return preparer doing business in this state from further 
110.18 	engaging in any conduct described in paragraph (c).  An action under this paragraph 
110.19 	must be brought by the attorney general in the district court for the judicial district of the 
110.20 	tax return preparer's residence or principal place of business, or in which the taxpayer 
110.21 	with respect to whose tax return the action is brought resides.  The court may exercise its 
110.22 	jurisdiction over the action separate and apart from any other action brought by the state 
110.23 	of Minnesota against the tax return preparer or any taxpayer.
110.24 	 (c) In an action under paragraph (b), if the court finds that a tax return preparer has:
110.25 	 (1) engaged in any conduct subject to a civil penalty under section 289A.60 or a 
110.26 	criminal penalty under section 289A.63;
110.27 	 (2) misrepresented the preparer's eligibility to practice before the Department of 
110.28 	Revenue, or otherwise misrepresented the preparer's experience or education as a tax 
110.29 	return preparer;
110.30 	 (3) guaranteed the payment of any tax refund or the allowance of any tax credit; or
110.31 	 (4) engaged in any other fraudulent or deceptive conduct that substantially interferes 
110.32 	with the proper administration of state tax law, and injunctive relief is appropriate to 
110.33 	prevent the recurrence of that conduct,
110.34 	 the court may enjoin the person from further engaging in that conduct.
111.1 	 (d) If the court finds that a tax return preparer has continually or repeatedly engaged 
111.2 	in conduct described in paragraph (c), and that an injunction prohibiting that conduct 
111.3 	would not be sufficient to prevent the person's interference with the proper administration 
111.4 	of state tax laws, the court may enjoin the person from acting as a tax return preparer.  
111.5 	The court may not enjoin the employer of a tax return preparer for conduct described in 
111.6 	paragraph (c) engaged in by one or more of the employer's employees unless the employer 
111.7 	was also actively involved in that conduct.
111.8 	 (e) For purposes of this subdivision, the term "understatement of liability" means 
111.9 	an understatement of the net amount payable with respect to a tax imposed by state tax 
111.10 	law, or an overstatement of the net amount creditable or refundable with respect to a 
111.11 	tax.  The determination of whether or not there is an understatement of liability must be 
111.12 	made without regard to any administrative or judicial action involving the taxpayer.  For 
111.13 	purposes of this subdivision, the amount determined for underpayment of estimated tax 
111.14 	under either section 289A.25 or 289A.26 is not considered an understatement of liability.
111.15 	 (f) For purposes of this subdivision, the term "overstatement of claim" means an 
111.16 	overstatement of the net amount refundable with respect to a claim for property tax relief 
111.17 	provided by chapter 290A.  The determination of whether or not there is an overstatement 
111.18 	of a claim must be made without regard to administrative or judicial action involving 
111.19 	the claimant.
111.20 	 (g) For purposes of this section, the term "tax refund or return preparer" means an 
111.21 	individual who prepares for compensation, or who employs one or more individuals to 
111.22 	prepare for compensation, a return of tax, or a claim for refund of tax.  The preparation of 
111.23 	a substantial part of a return or claim for refund is treated as if it were the preparation of 
111.24 	the entire return or claim for refund.  An individual is not considered a tax return preparer 
111.25 	merely because the individual:
111.26 	 (1) gives typing, reproducing, or other mechanical assistance;
111.27 	 (2) prepares a return or claim for refund of the employer, or an officer or employee 
111.28 	of the employer, by whom the individual is regularly and continuously employed;
111.29 	 (3) prepares a return or claim for refund of any person as a fiduciary for that person; 
111.30 	or
111.31 	 (4) prepares a claim for refund for a taxpayer in response to a tax order issued 
111.32 	to the taxpayer.

111.33 	EFFECTIVE DATE. This section is effective for returns filed after December 
111.34 	31, 2005.

112.1 	 Sec. 13. Minnesota Statutes 2004, section 289A.60, is amended by adding a 
112.2 	subdivision to read:
112.3 		 Subd. 26.Restrictions on taxpayers who improperly claim refundable credits.
 112.4 	(a) If a person claims a credit or refund under section 290.067, 290.0671, 290.0674, or 
112.5 	chapter 290A and the claimed credit or refund is determined to be claimed fraudulently or 
112.6 	with reckless or intentional disregard of the applicable provisions for the credit or refund, 
112.7 	the person is barred from claiming that credit or refund for the disallowance period.
112.8 	 (b) For the purposes of paragraph (a), the "disallowance period" is (1) ten taxable 
112.9 	years from the taxable year the credit or refund is claimed if the credit or refund was 
112.10 	fraudulently claimed; and (2) two taxable years from the taxable year the credit or refund 
112.11 	is claimed if the credit or refund was not fraudulent but was claimed with reckless or 
112.12 	intentional disregard of the applicable provisions.

112.13 	EFFECTIVE DATE. This section is effective for credits or refunds claimed after 
112.14 	December 31, 2005.

112.15 	 Sec. 14. Minnesota Statutes 2004, section 290.01, subdivision 7, is amended to read:
112.16 		 Subd. 7.Resident.  (a) The term "resident" means any individual domiciled in 
112.17 	Minnesota, except that an individual is not a "resident" for the period of time that the 
112.18 	individual is either:
112.19 	 (1) on active duty stationed outside of Minnesota while in the armed forces of the 
112.20 	United States or the United Nations; or 
112.21 	 (2) a "qualified individual" as defined in section 911(d)(1) of the Internal Revenue 
112.22 	Code, if the qualified individual notifies the county within three months of moving out of 
112.23 	the country that homestead status be revoked for the Minnesota residence of the qualified 
112.24 	individual, and the property is not classified as a homestead while the individual remains a 
112.25 	qualified individual.
112.26 	 (b) "Resident" also means any individual domiciled outside the state who maintains 
112.27 	a place of abode in the state and spends in the aggregate more than one-half of the tax 
112.28 	year in Minnesota, unless:
112.29 	 (1) the individual or the spouse of the individual is in the armed forces of the United 
112.30 	States; or
112.31 	 (2) the individual is covered under the reciprocity provisions in section 290.081.
112.32 	 For purposes of this subdivision, presence within the state for any part of a calendar 
112.33 	day constitutes a day spent in the state.  Individuals shall keep adequate records to 
112.34 	substantiate the days spent outside the state.
113.1 	 The term "abode" means a dwelling maintained by an individual, whether or not 
113.2 	owned by the individual and whether or not occupied by the individual, and includes a 
113.3 	dwelling place owned or leased by the individual's spouse.
113.4 	 (c) Neither the commissioner nor any court shall consider charitable contributions 
113.5 	made by an individual within or without the state the following factors in determining if 
113.6 	the individual is domiciled in Minnesota:
113.7 	 (1) charitable contributions made by an individual within or without the state;
113.8 	 (2) the jurisdiction from which an individual's professional licenses were issued;
113.9 	 (3) the location of an individual's union memberships;
113.10 	 (4) the location of accounts or transactions with financial institutions;
113.11 	 (5) the location of the place of worship at which the individual is a member;
113.12 	 (6) the location of business relationships and the place where business is transacted;
113.13 	 (7) the location of social, fraternal, or athletic organizations or clubs, lodges, or 
113.14 	country clubs, in which the individual is a member; and 
113.15 	 (8) statements made to an insurance company, concerning the individual's residence 
113.16 	and on which insurance is based.

113.17 	EFFECTIVE DATE. This section is effective for tax years beginning after 
113.18 	December 31, 2004.

113.19 	 Sec. 15. Minnesota Statutes 2004, section 290.01, subdivision 7b, is amended to read:
113.20 		 Subd. 7b.Resident trust. (a) Resident trust means a trust, except a grantor type 
113.21 	trust, which either (1) was created by a will of a decedent who at death was domiciled in 
113.22 	this state or (2) is an irrevocable trust, the grantor of which was domiciled in this state 
113.23 	at the time the trust became irrevocable.  For the purpose of this subdivision, a trust is 
113.24 	considered irrevocable to the extent the grantor is not treated as the owner thereof under 
113.25 	sections 671 to 678 of the Internal Revenue Code.  The term "grantor type trust" means a 
113.26 	trust where the income or gains of the trust are taxable to the grantor or others treated as 
113.27 	substantial owners under sections 671 to 678 of the Internal Revenue Code.
113.28 	 (b)(1) A trust, other than a grantor type trust, that became irrevocable before January 
113.29 	1, 1996, or that was administered in Minnesota before January 1, 1996, is a resident trust 
113.30 	only if two or more of the following conditions are satisfied:
113.31 	 (i) a majority of the discretionary decisions of the trustees relative to the investment 
113.32 	of trust assets are made in Minnesota;
113.33 	 (ii) a majority of the discretionary decisions of the trustees relative to the 
113.34 	distributions of trust income and principal are made in Minnesota;
114.1 	 (iii) the official books and records of the trust, consisting of the original minutes of 
114.2 	trustee meetings and the original trust instruments, are located in Minnesota.
114.3 	 (2) For purposes of this paragraph, if the trustees delegate decisions and actions to an 
114.4 	agent or custodian, the actions and decisions of the agent or custodian must not be taken 
114.5 	into account in determining whether the trust is administered in Minnesota, if:
114.6 	 (i) the delegation was permitted under the trust agreement;
114.7 	 (ii) the trustees retain the power to revoke the delegation on reasonable notice; and 
114.8 	 (iii) the trustees monitor and evaluate the performance of the agent or custodian on a 
114.9 	regular basis as is reasonably determined by the trustees.

114.10 	EFFECTIVE DATE. This section is effective the day following final enactment.

114.11 	 Sec. 16. Minnesota Statutes 2004, section 290.01, subdivision 19a, is amended to read:
114.12 		 Subd. 19a.Additions to federal taxable income.  For individuals, estates, and 
114.13 	trusts, there shall be added to federal taxable income:
114.14 	 (1)(i) interest income on obligations of any state other than Minnesota or a political 
114.15 	or governmental subdivision, municipality, or governmental agency or instrumentality 
114.16 	of any state other than Minnesota exempt from federal income taxes under the Internal 
114.17 	Revenue Code or any other federal statute; and
114.18 	 (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue 
114.19 	Code, except the portion of the exempt-interest dividends derived from interest income 
114.20 	on obligations of the state of Minnesota or its political or governmental subdivisions, 
114.21 	municipalities, governmental agencies or instrumentalities, but only if the portion of the 
114.22 	exempt-interest dividends from such Minnesota sources paid to all shareholders represents 
114.23 	95 percent or more of the exempt-interest dividends that are paid by the regulated 
114.24 	investment company as defined in section 851(a) of the Internal Revenue Code, or the 
114.25 	fund of the regulated investment company as defined in section 851(g) of the Internal 
114.26 	Revenue Code, making the payment; and
114.27 	 (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal 
114.28 	government described in section 7871(c) of the Internal Revenue Code shall be treated as 
114.29 	interest income on obligations of the state in which the tribe is located;
114.30 	 (2) the amount of income taxes paid or accrued within the taxable year under this 
114.31 	chapter and income the amount of taxes based on net income paid to any other state or to 
114.32 	any province or territory of Canada, to the extent allowed as a deduction under section 
114.33 	63(d) of the Internal Revenue Code, but the addition may not be more than the amount by 
114.34 	which the itemized deductions as allowed under section 63(d) of the Internal Revenue 
114.35 	Code exceeds the amount of the standard deduction as defined in section 63(c) of the 
115.1 	Internal Revenue Code.  For the purpose of this paragraph, the disallowance of itemized 
115.2 	deductions under section 68 of the Internal Revenue Code of 1986, income tax is the last 
115.3 	itemized deduction disallowed;
115.4 	 (3) the capital gain amount of a lump sum distribution to which the special tax under 
115.5 	section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
115.6 	 (4) the amount of income taxes paid or accrued within the taxable year under this 
115.7 	chapter and income taxes based on net income paid to any other state or any province or 
115.8 	territory of Canada, to the extent allowed as a deduction in determining federal adjusted 
115.9 	gross income.  For the purpose of this paragraph, income taxes do not include the taxes 
115.10 	imposed by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 
115.11 	290.9729;
115.12 	 (5) the amount of expense, interest, or taxes disallowed pursuant to section 
115.13 	290.10other than expenses or interest used in computing net interest income for the 
115.14 	subtraction allowed under subdivision 19b, clause (1);
115.15 	 (6) the amount of a partner's pro rata share of net income which does not flow 
115.16 	through to the partner because the partnership elected to pay the tax on the income under 
115.17 	section 6242(a)(2) of the Internal Revenue Code; and
115.18 	 (7) 80 percent of the depreciation deduction allowed under section 168(k) of the 
115.19 	Internal Revenue Code.  For purposes of this clause, if the taxpayer has an activity that 
115.20 	in the taxable year generates a deduction for depreciation under section 168(k) and the 
115.21 	activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 
115.22 	the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 
115.23 	limited to excess of the depreciation claimed by the activity under section 168(k) over the 
115.24 	amount of the loss from the activity that is not allowed in the taxable year.  In succeeding 
115.25 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
115.26 	under section 168(k) is allowed.

115.27 	EFFECTIVE DATE. This section is effective for tax years beginning after 
115.28 	December 31, 2004.

115.29 	 Sec. 17. Minnesota Statutes 2004, section 290.01, subdivision 19b, is amended to read:
115.30 		 Subd. 19b.Subtractions from federal taxable income.  For individuals, estates, 
115.31 	and trusts, there shall be subtracted from federal taxable income:
115.32 	 (1) net interest income on obligations of any authority, commission, or 
115.33 	instrumentality of the United States to the extent includable in taxable income for federal 
115.34 	income tax purposes but exempt from state income tax under the laws of the United States;
116.1 	 (2) if included in federal taxable income, the amount of any overpayment of income 
116.2 	tax to Minnesota or to any other state, for any previous taxable year, whether the amount 
116.3 	is received as a refund or as a credit to another taxable year's income tax liability;
116.4 	 (3) the amount paid to others, less the amount used to claim the credit allowed under 
116.5 	section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten 
116.6 	to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and 
116.7 	transportation of each qualifying child in attending an elementary or secondary school 
116.8 	situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a 
116.9 	resident of this state may legally fulfill the state's compulsory attendance laws, which 
116.10 	is not operated for profit, and which adheres to the provisions of the Civil Rights Act 
116.11 	of 1964 and chapter 363A.  For the purposes of this clause, "tuition" includes fees or 
116.12 	tuition as defined in section 290.0674, subdivision 1, clause (1).  As used in this clause, 
116.13 	"textbooks" includes books and other instructional materials and equipment purchased 
116.14 	or leased for use in elementary and secondary schools in teaching only those subjects 
116.15 	legally and commonly taught in public elementary and secondary schools in this state.  
116.16 	Equipment expenses qualifying for deduction includes expenses as defined and limited in 
116.17 	section 290.0674, subdivision 1, clause (3).  "Textbooks" does not include instructional 
116.18 	books and materials used in the teaching of religious tenets, doctrines, or worship, the 
116.19 	purpose of which is to instill such tenets, doctrines, or worship, nor does it include books 
116.20 	or materials for, or transportation to, extracurricular activities including sporting events, 
116.21 	musical or dramatic events, speech activities, driver's education, or similar programs.  For 
116.22 	purposes of the subtraction provided by this clause, "qualifying child" has the meaning 
116.23 	given in section 32(c)(3) of the Internal Revenue Code;
116.24 	 (4) income as provided under section 290.0802;
116.25 	 (5) to the extent included in federal adjusted gross income, income realized on 
116.26 	disposition of property exempt from tax under section 290.491;
116.27 	 (6) to the extent included in federal taxable income, postservice benefits for youth 
116.28 	community service under section 124D.42 for volunteer service under United States 
116.29 	Code, title 42, sections 12601 to 12604;
116.30 	 (7) to the extent not deducted in determining federal taxable income by an individual 
116.31 	who does not itemize deductions for federal income tax purposes for the taxable year, 
116.32 	an amount equal to 50 percent of the excess of charitable contributions allowable as a 
116.33 	deduction for the taxable year under section 170(a) of the Internal Revenue Code over 
116.34 	$500 ;
117.1 	 (8) (7) for taxable years beginning before January 1, 2008, the amount of the federal 
117.2 	small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
117.3 	which is included in gross income under section 87 of the Internal Revenue Code;
117.4 	 (9) (8) for individuals who are allowed a federal foreign tax credit for taxes that do 
117.5 	not qualify for a credit under section 290.06, subdivision 22, an amount equal to the 
117.6 	carryover of subnational foreign taxes for the taxable year, but not to exceed the total 
117.7 	subnational foreign taxes reported in claiming the foreign tax credit.  For purposes of 
117.8 	this clause, "federal foreign tax credit" means the credit allowed under section 27 of the 
117.9 	Internal Revenue Code, and "carryover of subnational foreign taxes" equals the carryover 
117.10 	allowed under section 904(c) of the Internal Revenue Code minus national level foreign 
117.11 	taxes to the extent they exceed the federal foreign tax credit;
117.12 	 (10) (9) in each of the five tax years immediately following the tax year in which 
117.13 	an addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case 
117.14 	of a shareholder of a corporation that is an S corporation,an amount equal to one-fifth 
117.15 	of the delayed depreciation.  For purposes of this clause, "delayed depreciation" means 
117.16 	the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or 
117.17 	subdivision 19c, clause (15), in the case of a shareholder of an S corporation,minus the 
117.18 	positive value of any net operating loss under section 172 of the Internal Revenue Code 
117.19 	generated for the tax year of the addition.  The resulting delayed depreciation cannot be 
117.20 	less than zero; and 
117.21 	 (11) (10) job opportunity building zone income as provided under section 469.316.;
117.22 	 (11) the amount of compensation paid to members of the Minnesota National Guard 
117.23 	or other reserve components of the United States military for active service performed 
117.24 	in Minnesota, excluding compensation for services performed under the Active Guard 
117.25 	Reserve (AGR) program.  For purposes of this clause, "active service" means (i) state 
117.26 	active service as defined in section 190.05, subdivision 5a, clause (1); (ii) federally 
117.27 	funded state active service as defined in section 190.05, subdivision 5b; or (iii) federal 
117.28 	active service as defined in section 190.05, subdivision 5c, but "active service" excludes 
117.29 	services performed exclusively for purposes of basic combat training, advanced individual 
117.30 	training, annual training, and periodic inactive duty training; special training periodically 
117.31 	made available to reserve members; and service performed in accordance with section 
117.32 	190.08, subdivision 3;
117.33 	 (12) the amount of compensation paid to members of the armed forces of the United 
117.34 	States or United Nations for active duty performed outside Minnesota; and 
117.35 	 (13) to the extent not deducted in computing federal taxable income, an amount, not 
117.36 	to exceed $10,000, equal to qualified expenses related to a qualified donor's donation, 
118.1 	while living, of one or more of the qualified donor's organs to another person for human 
118.2 	organ transplantation.  For purposes of determining the extent to which expenses are 
118.3 	deducted in computing federal taxable income, travel and lodging expenses related to an 
118.4 	organ donation are considered deducted by an individual in determining federal taxable 
118.5 	income to the extent they exceed 7.5 percent of federal adjusted gross income as defined 
118.6 	in section 62 of the Internal Revenue Code.  For purposes of this clause, "organ" means 
118.7 	all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow; 
118.8 	"human organ transplantation" means the medical procedure by which transfer of a human 
118.9 	organ is made from the body of one person to the body of another person; "qualified 
118.10 	expenses" means unreimbursed expenses for both the individual and the qualified donor 
118.11 	for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses 
118.12 	may be subtracted under this clause only once; and "qualified donor" means the individual 
118.13 	or the individual's dependent, as defined in section 152 of the Internal Revenue Code.  An 
118.14 	individual may claim the subtraction in this clause only once for each instance of organ 
118.15 	donation for transplantation during the taxable year in which the human organ donation 
118.16 	and transplantation occurs.

118.17 	EFFECTIVE DATE. The amendment to clause (9) is effective retroactively for tax 
118.18 	years beginning after December 31, 2001. The rest of this section is effective for the tax 
118.19 	years beginning after December 31, 2004.

118.20 	 Sec. 18. Minnesota Statutes 2004, section 290.01, subdivision 19c, is amended to read:
118.21 		 Subd. 19c.Corporations; additions to federal taxable income.  For corporations, 
118.22 	there shall be added to federal taxable income:
118.23 	 (1) the amount of any deduction taken for federal income tax purposes for income, 
118.24 	excise, or franchise taxes based on net income or related minimum taxes, including but not 
118.25 	limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota, 
118.26 	another state, a political subdivision of another state, the District of Columbia, or any 
118.27 	foreign country or possession of the United States;
118.28 	 (2) interest not subject to federal tax upon obligations of:  the United States, its 
118.29 	possessions, its agencies, or its instrumentalities; the state of Minnesota or any other 
118.30 	state, any of its political or governmental subdivisions, any of its municipalities, or any 
118.31 	of its governmental agencies or instrumentalities; the District of Columbia; or Indian 
118.32 	tribal governments;
118.33 	 (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal 
118.34 	Revenue Code;
119.1 	 (4) the amount of any net operating loss deduction taken for federal income tax 
119.2 	purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss 
119.3 	deduction under section 810 of the Internal Revenue Code;
119.4 	 (5) the amount of any special deductions taken for federal income tax purposes 
119.5 	under sections 241 to 247 of the Internal Revenue Code;
119.6 	 (6) losses from the business of mining, as defined in section 290.05, subdivision 1, 
119.7 	clause (a), that are not subject to Minnesota income tax;
119.8 	 (7) the amount of any capital losses deducted for federal income tax purposes under 
119.9 	sections 1211 and 1212 of the Internal Revenue Code;
119.10 	 (8) the exempt foreign trade income of a foreign sales corporation under sections 
119.11 	921(a) and 291 of the Internal Revenue Code;
119.12 	 (9) the amount of percentage depletion deducted under sections 611 through 614 and 
119.13 	291 of the Internal Revenue Code;
119.14 	 (10) for certified pollution control facilities placed in service in a taxable year 
119.15 	beginning before December 31, 1986, and for which amortization deductions were elected 
119.16 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
119.17 	31, 1985, the amount of the amortization deduction allowed in computing federal taxable 
119.18 	income for those facilities;
119.19 	 (11) the amount of any deemed dividend from a foreign operating corporation 
119.20 	determined pursuant to section 290.17, subdivision 4, paragraph (g);
119.21 	 (12) the amount of any environmental tax paid under section 59(a) of the Internal 
119.22 	Revenue Code;
119.23 	 (13) the amount of a partner's pro rata share of net income which does not flow 
119.24 	through to the partner because the partnership elected to pay the tax on the income under 
119.25 	section 6242(a)(2) of the Internal Revenue Code;
119.26 	 (14) (13) the amount of net income excluded under section 114 of the Internal 
119.27 	Revenue Code;
119.28 	 (15) (14) any increase in subpart F income, as defined in section 952(a) of the 
119.29 	Internal Revenue Code, for the taxable year when subpart F income is calculated without 
119.30 	regard to the provisions of section 614 of Public Law 107-147; and
119.31 	 (16) (15) 80 percent of the depreciation deduction allowed under section 168(k) 
119.32 	(1)(A) and (k)(4)(A) of the Internal Revenue Code.  For purposes of this clause, if the 
119.33 	taxpayer has an activity that in the taxable year generates a deduction for depreciation 
119.34 	under section 168(k) (1)(A) and (k)(4)(A) and the activity generates a loss for the taxable 
119.35 	year that the taxpayer is not allowed to claim for the taxable year, "the depreciation 
119.36 	allowed under section 168(k) (1)(A) and (k)(4)(A) " for the taxable year is limited to 
120.1 	excess of the depreciation claimed by the activity under section 168(k) (1)(A) and 
120.2 	(k)(4)(A) over the amount of the loss from the activity that is not allowed in the taxable 
120.3 	year.  In succeeding taxable years when the losses not allowed in the taxable year are 
120.4 	allowed, the depreciation under section 168(k) (1)(A) and (k)(4)(A) is allowed.

120.5 	EFFECTIVE DATE. This section is effective the day following final enactment.

120.6 	 Sec. 19. Minnesota Statutes 2004, section 290.06, subdivision 22, is amended to read:
120.7 		 Subd. 22.Credit for taxes paid to another state.  (a) A taxpayer who is liable for 
120.8 	taxes based on or measured by net income to another state, as provided in paragraphs (b) 
120.9 	through (f), upon income allocated or apportioned to Minnesota, is entitled to a credit for 
120.10 	the tax paid to another state if the tax is actually paid in the taxable year or a subsequent 
120.11 	taxable year.  A taxpayer who is a resident of this state pursuant to section 290.01, 
120.12 	subdivision 7, clause (2) paragraph (b), and who is subject to income tax as a resident in 
120.13 	the state of the individual's domicile is not allowed this credit unless the state of domicile 
120.14 	does not allow a similar credit.
120.15 	 (b) For an individual, estate, or trust, the credit is determined by multiplying the tax 
120.16 	payable under this chapter by the ratio derived by dividing the income subject to tax in the 
120.17 	other state that is also subject to tax in Minnesota while a resident of Minnesota by the 
120.18 	taxpayer's federal adjusted gross income, as defined in section 62 of the Internal Revenue 
120.19 	Code, modified by the addition required by section 290.01, subdivision 19a, clause (1), 
120.20 	and the subtraction allowed by section 290.01, subdivision 19b, clause (1), to the extent 
120.21 	the income is allocated or assigned to Minnesota under sections 290.081 and 290.17.
120.22 	 (c) If the taxpayer is an athletic team that apportions all of its income under section 
120.23 	290.17, subdivision 5, the credit is determined by multiplying the tax payable under this 
120.24 	chapter by the ratio derived from dividing the total net income subject to tax in the other 
120.25 	state by the taxpayer's Minnesota taxable income.
120.26 	 (d) The credit determined under paragraph (b) or (c) shall not exceed the amount of 
120.27 	tax so paid to the other state on the gross income earned within the other state subject to 
120.28 	tax under this chapter, nor shall the allowance of the credit reduce the taxes paid under 
120.29 	this chapter to an amount less than what would be assessed if such income amount was 
120.30 	excluded from taxable net income.
120.31 	 (e) In the case of the tax assessed on a lump sum distribution under section 290.032, 
120.32 	the credit allowed under paragraph (a) is the tax assessed by the other state on the lump 
120.33 	sum distribution that is also subject to tax under section 290.032, and shall not exceed the 
120.34 	tax assessed under section 290.032.  To the extent the total lump sum distribution defined 
120.35 	in section 290.032, subdivision 1, includes lump sum distributions received in prior years 
121.1 	or is all or in part an annuity contract, the reduction to the tax on the lump sum distribution 
121.2 	allowed under section 290.032, subdivision 2, includes tax paid to another state that is 
121.3 	properly apportioned to that distribution.
121.4 	 (f) If a Minnesota resident reported an item of income to Minnesota and is assessed 
121.5 	tax in such other state on that same income after the Minnesota statute of limitations 
121.6 	has expired, the taxpayer shall receive a credit for that year under paragraph (a), 
121.7 	notwithstanding any statute of limitations to the contrary.  The claim for the credit must 
121.8 	be submitted within one year from the date the taxes were paid to the other state.  The 
121.9 	taxpayer must submit sufficient proof to show entitlement to a credit.
121.10 	 (g) For the purposes of this subdivision, a resident shareholder of a corporation 
121.11 	treated as an "S" corporation under section 290.9725, must be considered to have paid 
121.12 	a tax imposed on the shareholder in an amount equal to the shareholder's pro rata share 
121.13 	of any net income tax paid by the S corporation to another state.  For the purposes of the 
121.14 	preceding sentence, the term "net income tax" means any tax imposed on or measured by 
121.15 	a corporation's net income.
121.16 	 (h) For the purposes of this subdivision, a resident partner of an entity taxed as 
121.17 	a partnership under the Internal Revenue Code must be considered to have paid a tax 
121.18 	imposed on the partner in an amount equal to the partner's pro rata share of any net income 
121.19 	tax paid by the partnership to another state. For purposes of the preceding sentence, 
121.20 	the term "net income" tax means any tax imposed on or measured by a partnership's 
121.21 	net income.
121.22 	 (i) For the purposes of this subdivision, "another state":
121.23 	 (1) includes:
121.24 	 (i) the District of Columbia; and
121.25 	 (ii) a province or territory of Canada; but
121.26 	 (2) excludes Puerto Rico and the several territories organized by Congress.
121.27 	 (j) The limitations on the credit in paragraphs (b), (c), and (d), are imposed on a 
121.28 	state by state basis.
121.29 	 (k) For a tax imposed by a province or territory of Canada, the tax for purposes of 
121.30 	this subdivision is the excess of the tax over the amount of the foreign tax credit allowed 
121.31 	under section 27 of the Internal Revenue Code.  In determining the amount of the foreign 
121.32 	tax credit allowed, the net income taxes imposed by Canada on the income are deducted 
121.33 	first.  Any remaining amount of the allowable foreign tax credit reduces the provincial or 
121.34 	territorial tax that qualifies for the credit under this subdivision.

121.35 	EFFECTIVE DATE. This section is effective for tax years beginning after 
121.36 	December 31, 2004.

122.1 	 Sec. 20. Minnesota Statutes 2004, section 290.06, is amended by adding a subdivision 
122.2 	to read:
122.3 		 Subd. 32.Dairy investment credit. (a) A dairy investment credit is allowed against 
122.4 	the tax computed under this chapter equal to the credit amount in the table, based on the 
122.5 	amount paid or incurred by the taxpayer in the tax year and certified by the commissioner 
122.6 	of agriculture under paragraph (f), for qualifying expenditures:
122.7 	 Amount of   qualifying expenditures Credit amount 
122.8 	 up to $500,000 ten percent of                                    qualifying expenditures 
122.9 	 over $500,000, but not $50,000, plus nine percent    more than $600,000 of the amount 
122.10 	of qualified                                    expenditures in excess of                                    $500,000 
122.11 	 over $600,000, but not $59,000, plus seven percent    more than $700,000 of the 
122.12 	amount of qualified                                    expenditures in excess of                                    $600,000 
122.13 	 over $700,000, but not $66,000, plus five percent    more than $800,000 of the amount 
122.14 	of qualified                                    expenditures in excess of                                    $700,000 
122.15 	 over $800,000, but not $71,000, plus three percent    more than $900,000 of the 
122.16 	amount of qualified                                    expenditures in excess of                                    $800,000 
122.17 	 over $900,000, but not $74,000, plus one percent    more than $1,000,000 of the 
122.18 	amount of qualified                                    expenditures in excess of                                    $900,000 
122.19 	 $1,000,000 or more $75,000 
122.20 	 (b) "Qualifying expenditures," for purposes of this subdivision, means the expenses 
122.21 	incurred for dairy animals for the construction or improvement of buildings or facilities, 
122.22 	or the acquisition of equipment, for dairy animal housing, confinement, animal feeding, 
122.23 	milk production, and waste management, including, but not limited to, the following:
122.24 	 (1) freestall barns;
122.25 	 (2) fences;
122.26 	 (3) watering facilities;
122.27 	 (4) feed storage and handling equipment;
122.28 	 (5) milking parlors;
122.29 	 (6) robotic equipment;
122.30 	 (7) scales;
122.31 	 (8) milk storage and cooling facilities;
122.32 	 (9) bulk tanks;
122.33 	 (10) manure handling equipment and storage facilities;
122.34 	 (11) digesters;
122.35 	 (12) equipment used to produce energy;
122.36 	 (13) on-farm processing; and 
123.1 	 (14) development of pasture other than land acquisition.
123.2 	 Qualifying expenditures only include amounts that are capitalized and deducted under 
123.3 	either section 167 or 179 of the Internal Revenue Code in computing federal taxable 
123.4 	income.
123.5 	 (c) The credit is limited to the liability for tax, as computed under this section for 
123.6 	the taxable year for which the credit certificate is issued.  If the amount of the credit 
123.7 	determined under this section for any taxable year exceeds this limitation, the excess is a 
123.8 	dairy investment credit carryover to each of the 15 succeeding taxable years.  The entire 
123.9 	amount of the excess unused credit for the taxable year is carried first to the earliest of the 
123.10 	taxable years to which the credit may be carried and then to each successive year to which 
123.11 	the credit may be carried.  The amount of the unused credit which may be added under 
123.12 	this paragraph shall not exceed the taxpayer's liability for tax less the dairy investment 
123.13 	credit for the taxable year.
123.14 	 (d) For a partnership or S corporation, the maximum amount of the credit applies to 
123.15 	the entity, not the individual partner or shareholder.
123.16 	 (e) To be eligible for the dairy investment credit in this subdivision, a taxpayer must 
123.17 	apply to the commissioner of agriculture for a tax credit certificate.  The application must 
123.18 	be made on forms prescribed by the commissioner of agriculture and must include a 
123.19 	statement of the qualifying expenditures by the taxpayer.
123.20 	 (f) The commissioner of agriculture shall certify credits in the order the forms 
123.21 	required under paragraph (e) are received and approved by the commissioner of 
123.22 	agriculture, until the maximum credit amount for the taxable year has been reached. 
123.23 	The maximum credit amount is $900,000 for tax years beginning after December 31, 
123.24 	2004, and before January 1, 2006; and $1,000,000 per year for tax years beginning after 
123.25 	December 31, 2005.
123.26 	 Any eligible applications for which certificates are not issued in a tax year because 
123.27 	the commissioner of agriculture has issued certificates totaling the maximum credit 
123.28 	amount for that tax year remain eligible for a credit certificate in subsequent tax years, in 
123.29 	the order in which the forms were received by the commissioner of agriculture.

123.30 	EFFECTIVE DATE. This section is effective for assets placed in service in taxable 
123.31 	years beginning after December 31, 2004.

123.32 	 Sec. 21. Minnesota Statutes 2004, section 290.067, subdivision 1, is amended to read:
123.33 		 Subdivision 1.Amount of credit.  (a) A taxpayer may take as a credit against the 
123.34 	tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the 
124.1 	dependent care credit for which the taxpayer is eligible pursuant to the provisions of 
124.2 	section 21 of the Internal Revenue Code subject to the limitations provided in subdivision 
124.3 	2 except that in determining whether the child qualified as a dependent, income received 
124.4 	as a Minnesota family investment program grant or allowance to or on behalf of the child 
124.5 	must not be taken into account in determining whether the child received more than half 
124.6 	of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of 
124.7 	the Internal Revenue Code do not apply.
124.8 	 (b) If a child who has not attained the age of six years at the close of the taxable year 
124.9 	is cared for at a licensed family day care home operated by the child's parent, the taxpayer 
124.10 	is deemed to have paid employment-related expenses.  If the child is 16 months old or 
124.11 	younger at the close of the taxable year, the amount of expenses deemed to have been paid 
124.12 	equals the maximum limit for one qualified individual under section 21(c) and (d) of the 
124.13 	Internal Revenue Code.  If the child is older than 16 months of age but has not attained the 
124.14 	age of six years at the close of the taxable year, the amount of expenses deemed to have 
124.15 	been paid equals the amount the licensee would charge for the care of a child of the same 
124.16 	age for the same number of hours of care.
124.17 	 (c) If a married couple:
124.18 	 (1) has a child who has not attained the age of one year at the close of the taxable 
124.19 	year;
124.20 	 (2) files a joint tax return for the taxable year; and
124.21 	 (3) does not participate in a dependent care assistance program as defined in section 
124.22 	129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid 
124.23 	for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of 
124.24 	(i) the combined earned income of the couple or (ii) the amount of the maximum limit for 
124.25 	one qualified individual under section 21(c) and (d) of the Internal Revenue Code will 
124.26 	be deemed to be the employment related expense paid for that child.  The earned income 
124.27 	limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed 
124.28 	amount.  These deemed amounts apply regardless of whether any employment-related 
124.29 	expenses have been paid.
124.30 	 (d) If the taxpayer is not required and does not file a federal individual income tax 
124.31 	return for the tax year, no credit is allowed for any amount paid to any person unless:
124.32 	 (1) the name, address, and taxpayer identification number of the person are included 
124.33 	on the return claiming the credit; or
124.34 	 (2) if the person is an organization described in section 501(c)(3) of the Internal 
124.35 	Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code, 
124.36 	the name and address of the person are included on the return claiming the credit.
125.1 	 In the case of a failure to provide the information required under the preceding sentence, 
125.2 	the preceding sentence does not apply if it is shown that the taxpayer exercised due 
125.3 	diligence in attempting to provide the information required.
125.4 	 In the case of a nonresident, part-year resident, or a person who has earned income 
125.5 	not subject to tax under this chapter including earned income excluded pursuant to section 
125.6 	290.01, subdivision 19b, clause (11), the credit determined under section 21 of the Internal 
125.7 	Revenue Code must be allocated based on the ratio by which the earned income of the 
125.8 	claimant and the claimant's spouse from Minnesota sources bears to the total earned 
125.9 	income of the claimant and the claimant's spouse.
125.10 	 For residents of Minnesota, the subtractions for military pay under section 290.01, 
125.11 	subdivision 19b, clauses (11) and (12), are not considered "earned income not subject to 
125.12 	tax under this chapter." 

125.13 	 Sec. 22. Minnesota Statutes 2004, section 290.067, subdivision 2a, is amended to read:
125.14 		 Subd. 2a.Income.  (a) For purposes of this section, "income" means the sum of 
125.15 	the following:
125.16 	 (1) federal adjusted gross income as defined in section 62 of the Internal Revenue 
125.17 	Code; and plus 
125.18 	 (2) the sum of the following amounts to the extent not included in clause (1):
125.19 	 (i) all nontaxable income;
125.20 	 (ii) the amount of a passive activity loss that is not disallowed as a result of section 
125.21 	469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity 
125.22 	loss carryover allowed under section 469(b) of the Internal Revenue Code;
125.23 	 (iii) an amount equal to the total of any discharge of qualified farm indebtedness 
125.24 	of a solvent individual excluded from gross income under section 108(g) of the Internal 
125.25 	Revenue Code;
125.26 	 (iv) cash public assistance and relief;
125.27 	 (v) any pension or annuity (including railroad retirement benefits, all payments 
125.28 	received under the federal Social Security Act, supplemental security income, and veterans 
125.29 	benefits), which was not exclusively funded by the claimant or spouse, or which was 
125.30 	funded exclusively by the claimant or spouse and which funding payments were excluded 
125.31 	from federal adjusted gross income in the years when the payments were made;
125.32 	 (vi) interest received from the federal or a state government or any instrumentality 
125.33 	or political subdivision thereof;
125.34 	 (vii) workers' compensation;
125.35 	 (viii) nontaxable strike benefits;
126.1 	 (ix) the gross amounts of payments received in the nature of disability income or 
126.2 	sick pay as a result of accident, sickness, or other disability, whether funded through 
126.3 	insurance or otherwise;
126.4 	 (x) a lump sum distribution under section 402(e)(3) of the Internal Revenue Code;
126.5 	 (xi) contributions made by the claimant to an individual retirement account, 
126.6 	including a qualified voluntary employee contribution; simplified employee pension plan; 
126.7 	self-employed retirement plan; cash or deferred arrangement plan under section 401(k) 
126.8 	of the Internal Revenue Code; or deferred compensation plan under section 457 of the 
126.9 	Internal Revenue Code; and
126.10 	 (xii) nontaxable scholarship or fellowship grants; minus 
126.11 	 (3) in the case of a married couple filing a joint return, the earned income of the 
126.12 	lesser-earning spouse, as defined in section 290.0675, subdivision 1, paragraph (d).
126.13 	 In the case of an individual who files an income tax return on a fiscal year basis, the 
126.14 	term "federal adjusted gross income" means federal adjusted gross income reflected in the 
126.15 	fiscal year ending in the next calendar year.  Federal adjusted gross income may not be 
126.16 	reduced by the amount of a net operating loss carryback or carryforward or a capital loss 
126.17 	carryback or carryforward allowed for the year.
126.18 	 (b) "Income" does not include:
126.19 	 (1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 
126.20 	102;
126.21 	 (2) amounts of any pension or annuity that were exclusively funded by the claimant 
126.22 	or spouse if the funding payments were not excluded from federal adjusted gross income 
126.23 	in the years when the payments were made;
126.24 	 (3) surplus food or other relief in kind supplied by a governmental agency;
126.25 	 (4) relief granted under chapter 290A;
126.26 	 (5) child support payments received under a temporary or final decree of dissolution 
126.27 	or legal separation; and
126.28 	 (6) restitution payments received by eligible individuals and excludable interest as 
126.29 	defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 
126.30 	2001, Public Law 107-16.

126.31 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
126.32 	December 31, 2005.

126.33 	 Sec. 23. Minnesota Statutes 2004, section 290.0671, subdivision 1, is amended to read:
126.34 		 Subdivision 1.Credit allowed.  (a) An individual is allowed a credit against the 
126.35 	tax imposed by this chapter equal to a percentage of earned income.  To receive a credit, 
127.1 	a taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code. 
127.2 	An individual who would have been eligible for a credit under section 32 of the Internal 
127.3 	Revenue Code if the phaseout in section 32(b) were calculated based on the income 
127.4 	thresholds provided in paragraphs (b) through (d) as adjusted in paragraphs (i) through (k) 
127.5 	is also eligible for a credit under this section.
127.6 	 (b) For individuals with no qualifying children, the credit equals 1.9125 percent of 
127.7 	the first $4,620 of earned income.  The credit is reduced by 1.9125 percent of earned 
127.8 	income or modified  adjusted gross income, whichever is greater, in excess of $5,770, 
127.9 	but in no case is the credit less than zero.
127.10 	 (c) For individuals with one qualifying child, the credit equals 8.5 percent of the first 
127.11 	$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than 
127.12 	$13,450. The credit is reduced by 5.73 percent of earned income or modified adjusted 
127.13 	gross income, whichever is greater, in excess of $15,080, but in no case is the credit 
127.14 	less than zero.
127.15 	 (d) For individuals with two or more qualifying children, the credit equals ten 
127.16 	percent of the first $9,720 of earned income and 20 percent of earned income over 
127.17 	$14,860 but less than $16,800.  The credit is reduced by 10.3 percent of earned income 
127.18 	or modified adjusted gross income, whichever is greater, in excess of $17,890, but in no 
127.19 	case is the credit less than zero.
127.20 	 (e) For a nonresident or part-year resident, the credit must be allocated based on the 
127.21 	percentage calculated under section 290.06, subdivision 2c, paragraph (e).
127.22 	 (f) For a person who was a resident for the entire tax year and has earned income 
127.23 	not subject to tax under this chapter, including income excluded under section 290.01, 
127.24 	subdivision 19b, clause (11), the credit must be allocated based on the ratio of federal 
127.25 	adjusted gross income reduced by the earned income not subject to tax under this chapter 
127.26 	over federal adjusted gross income. For purposes of this paragraph, the subtractions 
127.27 	for military pay under section 290.01, subdivision 19b, clauses (11) and (12), are not 
127.28 	considered "earned income not subject to tax under this chapter." 
127.29 	 (g) For tax years beginning after December 31, 2001, and before December 31, 
127.30 	2004, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in 
127.31 	paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by 
127.32 	$1,000 for married taxpayers filing joint returns.
127.33 	 (h) For tax years beginning after December 31, 2004, and before December 31, 
127.34 	2007 2005, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in 
127.35 	paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by 
127.36 	$2,000 for married taxpayers filing joint returns.
128.1 	 (i) For tax years beginning after December 31, 2005, and before December 31, 2007, 
128.2 	the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph 
128.3 	(d), after being adjusted for inflation under subdivision 7, are each increased by the greater 
128.4 	of (i) $2,000 or (ii) the earned income of the lesser-earning spouse, for married taxpayers 
128.5 	filing joint returns.
128.6 	 (i) (j) For tax years beginning after December 31, 2007, and before December 31, 
128.7 	2010, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in 
128.8 	paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by 
128.9 	$3,000 the greater of (i) $3,000 or (ii) the earned income of the lesser-earning spouse,for 
128.10 	married taxpayers filing joint returns.  For tax years beginning after December 31, 
128.11 	2008, and before December 31, 2010,the $3,000 is adjusted annually for inflation under 
128.12 	subdivision 7.
128.13 	 (k) For tax years beginning after December 31, 2010, the $5,770 in paragraph (b), 
128.14 	the $15,080 in paragraph (c), and the $17,890 in paragraph (d), after being adjusted for 
128.15 	inflation under subdivision 7, are each increased by the earned income of the lesser-earning 
128.16 	spouse, for married taxpayers filing joint returns.
128.17 	 (j) (l) The commissioner shall construct tables showing the amount of the credit at 
128.18 	various income levels and make them available to taxpayers.  The tables shall follow 
128.19 	the schedule contained in this subdivision, except that the commissioner may graduate 
128.20 	the transition between income brackets.

128.21 	 Sec. 24. Minnesota Statutes 2004, section 290.0671, subdivision 1a, is amended to 
128.22 	read:
128.23 		 Subd. 1a.Definitions.  For purposes of this section, the terms "qualifying child," and 
128.24 	"earned income," and "adjusted gross income" have the meanings given in section 32(c) of 
128.25 	the Internal Revenue Code, and the term "adjusted gross income" has the meaning given 
128.26 	in section 62 of the Internal Revenue Code.
128.27 	 "Earned income of the lesser-earning spouse" has the meaning given in section 
128.28 	290.0675, subdivision 1, paragraph (d).

128.29 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
128.30 	December 31, 2004.

128.31 	 Sec. 25. Minnesota Statutes 2004, section 290.0672, subdivision 1, is amended to read:
128.32 		 Subdivision 1.Definitions.  (a) For purposes of this section, the following terms 
128.33 	have the meanings given.
128.34 	 (b) "Long-term care insurance" means a policy that:
129.1 	 (1) qualifies for a deduction under section 213 of the Internal Revenue Code, 
129.2 	disregarding the 7.5 percent income test; or meets the requirements given in section 
129.3 	62A.46; or provides similar coverage issued under the laws of another jurisdiction; and
129.4 	 (2) has a lifetime long-term care benefit limit of not less than $100,000; and
129.5 	 (3) has been offered in compliance with the inflation protection requirements of 
129.6 	section 62S.23.
129.7 	 (c) "Qualified beneficiary" means the taxpayer or the taxpayer's spouse.
129.8 	 (d) "Premiums deducted in determining federal taxable income" means the lesser of 
129.9 	(1) long-term care insurance premiums that qualify as deductions under section 213 of 
129.10 	the Internal Revenue Code; and (2) the total amount deductible for medical care under 
129.11 	section 213 of the Internal Revenue Code.

129.12 	EFFECTIVE DATE. This section is effective for tax years beginning after 
129.13 	December 31, 2004.

129.14 	 Sec. 26. Minnesota Statutes 2004, section 290.0672, subdivision 2, is amended to read:
129.15 		 Subd. 2.Credit.  A taxpayer is allowed a credit against the tax imposed by this 
129.16 	chapter for long-term care insurance policy premiums paid during the tax year.  The 
129.17 	credit for each policy equals 25 percent of premiums paid to the extent not deducted in 
129.18 	determining federal taxable income.  A taxpayer may claim a credit for only one policy 
129.19 	for each qualified beneficiary.  A maximum of $100 applies to each qualified beneficiary.  
129.20 	The maximum total credit allowed per year is $200 for married couples filing joint returns 
129.21 	and $100 for all other filers.  For a nonresident or part-year resident, the credit determined 
129.22 	under this section must be allocated based on the percentage calculated under section 
129.23 	290.06, subdivision 2c, paragraph (e).

129.24 	EFFECTIVE DATE. This section is effective for tax years beginning after 
129.25 	December 31, 2004.

129.26 	 Sec. 27. Minnesota Statutes 2004, section 290.0674, subdivision 1, is amended to read:
129.27 		 Subdivision 1.Credit allowed.  An individual is allowed a credit against the 
129.28 	tax imposed by this chapter in an amount equal to 75 percent of the amount paid for 
129.29 	education-related expenses for a qualifying child in kindergarten through grade 12.  For 
129.30 	purposes of this section, "education-related expenses" means:
129.31 	 (1) fees or tuition for instruction by an instructor under section 120A.22, subdivision 
129.32 	10, clause (1), (2), (3), (4), or (5), or a member of the Minnesota Music Teachers 
129.33 	Association, and who is not a lineal ancestor or sibling of the dependent for instruction 
130.1 	outside the regular school day or school year, including tutoring, driver's education 
130.2 	offered as part of school curriculum, regardless of whether it is taken from a public or 
130.3 	private entity or summer camps, in grade or age appropriate curricula that supplement 
130.4 	curricula and instruction available during the regular school year, that assists a dependent 
130.5 	to improve knowledge of core curriculum areas or to expand knowledge and skills under 
130.6 	the graduation rule under section 120B.02, paragraph (e), clauses (1) to (7), (9), and (10) 
130.7 	 required academic standards under section 120B.021, subdivision 1, and the elective 
130.8 	standard under section 120B.022, subdivision 1, clause (2), and that do not include the 
130.9 	teaching of religious tenets, doctrines, or worship, the purpose of which is to instill such 
130.10 	tenets, doctrines, or worship;
130.11 	 (2) expenses for textbooks, including books and other instructional materials and 
130.12 	equipment purchased or leased for use in elementary and secondary schools in teaching 
130.13 	only those subjects legally and commonly taught in public elementary and secondary 
130.14 	schools in this state.  "Textbooks" does not include instructional books and materials 
130.15 	used in the teaching of religious tenets, doctrines, or worship, the purpose of which is 
130.16 	to instill such tenets, doctrines, or worship, nor does it include books or materials for 
130.17 	extracurricular activities including sporting events, musical or dramatic events, speech 
130.18 	activities, driver's education, or similar programs;
130.19 	 (3) a maximum expense of $200 per family for personal computer hardware, 
130.20 	excluding single purpose processors, and educational software that assists a dependent to 
130.21 	improve knowledge of core curriculum areas or to expand knowledge and skills under 
130.22 	the graduation rule under section 120B.02required academic standards under section 
130.23 	120B.021, subdivision 1, and the elective standard under section 120B.022, subdivision 1, 
130.24 	clause (2),purchased for use in the taxpayer's home and not used in a trade or business 
130.25 	regardless of whether the computer is required by the dependent's school; and
130.26 	 (4) the amount paid to others for transportation of a qualifying child attending an 
130.27 	elementary or secondary school situated in Minnesota, North Dakota, South Dakota, Iowa, 
130.28 	or Wisconsin, wherein a resident of this state may legally fulfill the state's compulsory 
130.29 	attendance laws, which is not operated for profit, and which adheres to the provisions of 
130.30 	the Civil Rights Act of 1964 and chapter 363A.
130.31 	 For purposes of this section, "qualifying child" has the meaning given in section 
130.32 	32(c)(3) of the Internal Revenue Code.

130.33 	EFFECTIVE DATE. This section is effective for tax years beginning after 
130.34 	December 31, 2004.

130.35 	 Sec. 28. Minnesota Statutes 2004, section 290.0674, subdivision 2, is amended to read:
131.1 		 Subd. 2.Limitations.  (a) For taxable years beginning after December 31, 2004, 
131.2 	and before January 1, 2006,for claimants with income not greater than $33,500, the 
131.3 	maximum credit allowed for a family is $1,000 per qualifying child and $2,000 per family 
131.4 	multiplied by the number of qualifying children in kindergarten through grade 12 in the 
131.5 	family. No credit is allowed for education-related expenses for claimants with income 
131.6 	greater than $37,500.The maximum credit per child  for families with one qualifying child 
131.7 	in kindergarten through grade 12 is reduced by $1 for each $4 of household income over 
131.8 	$33,500, and the maximum credit per family for families with two or more qualifying 
131.9 	children in kindergarten through grade 12 is reduced by $2 for each $4 of household 
131.10 	income over $33,500, but in no case is the credit less than zero.
131.11 	 (b) For taxable years beginning after December 31, 2005, for claimants with income 
131.12 	not greater than the greater of (i) $33,500 or (ii) 185 percent of the federal poverty 
131.13 	guidelines, the maximum credit allowed for a family is $1,000 multiplied by the number 
131.14 	of qualifying children in the family in grades kindergarten through 12.  The maximum 
131.15 	credit per family is reduced by $1 multiplied by the number of qualifying children in 
131.16 	the family in grades kindergarten through 12 for each $4 of household income over the 
131.17 	greater of (i) $33,500 or (ii) 185 percent of the federal poverty guidelines, but in no case is 
131.18 	the credit less than zero.
131.19 	 (c) For purposes of this section "income" has the meaning given in section 290.067, 
131.20 	subdivision 2a, but disregarding the subtraction in clause (3).  In the case of a married 
131.21 	claimant, a credit is not allowed unless a joint income tax return is filed.  For purposes of 
131.22 	this section "federal poverty guidelines" means the guidelines published in the Federal 
131.23 	Register in the tax year for which the credit is claimed, adjusted for family size.
131.24 	 (b) (d) For a nonresident or part-year resident, the credit determined under 
131.25 	subdivision 1 and the maximum credit amount in paragraph (a) must be allocated using 
131.26 	the percentage calculated in section 290.06, subdivision 2c, paragraph (e).

131.27 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
131.28 	December 31, 2004.

131.29 	 Sec. 29. Minnesota Statutes 2004, section 290.091, subdivision 2, is amended to read:
131.30 		 Subd. 2.Definitions.  For purposes of the tax imposed by this section, the following 
131.31 	terms have the meanings given:
131.32 	 (a) "Alternative minimum taxable income" means the sum of the following for 
131.33 	the taxable year:
131.34 	 (1) the taxpayer's federal alternative minimum taxable income as defined in section 
131.35 	55(b)(2) of the Internal Revenue Code;
132.1 	 (2) the taxpayer's itemized deductions allowed in computing federal alternative 
132.2 	minimum taxable income, but excluding:
132.3 	 (i) the charitable contribution deduction under section 170 of the Internal Revenue 
132.4 	Code:
132.5 	 (A) for taxable years beginning before January 1, 2006,to the extent that the 
132.6 	deduction exceeds 1.0 percent of adjusted gross income, as defined ;
132.7 	 (B) for taxable years beginning after December 31, 2005, to the full extent of the 
132.8 	deduction.
132.9 	 For purposes of this clause, "adjusted gross income" has the meaning given in 
132.10 	section 62 of the Internal Revenue Code;
132.11 	 (ii) the medical expense deduction;
132.12 	 (iii) the casualty, theft, and disaster loss deduction; and
132.13 	 (iv) the impairment-related work expenses of a disabled person;
132.14 	 (3) for depletion allowances computed under section 613A(c) of the Internal 
132.15 	Revenue Code, with respect to each property (as defined in section 614 of the Internal 
132.16 	Revenue Code), to the extent not included in federal alternative minimum taxable income, 
132.17 	the excess of the deduction for depletion allowable under section 611 of the Internal 
132.18 	Revenue Code for the taxable year over the adjusted basis of the property at the end of the 
132.19 	taxable year (determined without regard to the depletion deduction for the taxable year);
132.20 	 (4) to the extent not included in federal alternative minimum taxable income, the 
132.21 	amount of the tax preference for intangible drilling cost under section 57(a)(2) of the 
132.22 	Internal Revenue Code determined without regard to subparagraph (E);
132.23 	 (5) to the extent not included in federal alternative minimum taxable income, the 
132.24 	amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
132.25 	 (6) the amount of addition required by section 290.01, subdivision 19a, clause (7);
132.26 	 less the sum of the amounts determined under the following:
132.27 	 (1) interest income as defined in section 290.01, subdivision 19b, clause (1);
132.28 	 (2) an overpayment of state income tax as provided by section 290.01, subdivision 
132.29 	19b, clause (2), to the extent included in federal alternative minimum taxable income;
132.30 	 (3) the amount of investment interest paid or accrued within the taxable year on 
132.31 	indebtedness to the extent that the amount does not exceed net investment income, as 
132.32 	defined in section 163(d)(4) of the Internal Revenue Code.  Interest does not include 
132.33 	amounts deducted in computing federal adjusted gross income; and
132.34 	 (4) amounts subtracted from federal taxable income as provided by section 290.01, 
132.35 	subdivision 19b, clauses (10) and (11) (9) to (13).
133.1 	 In the case of an estate or trust, alternative minimum taxable income must be 
133.2 	computed as provided in section 59(c) of the Internal Revenue Code.
133.3 	 (b) "Investment interest" means investment interest as defined in section 163(d)(3) 
133.4 	of the Internal Revenue Code.
133.5 	 (c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable 
133.6 	income after subtracting the exemption amount determined under subdivision 3.
133.7 	 (d) "Regular tax" means the tax that would be imposed under this chapter (without 
133.8 	regard to this section and section 290.032), reduced by the sum of the nonrefundable 
133.9 	credits allowed under this chapter.
133.10 	 (e) "Net minimum tax" means the minimum tax imposed by this section.

133.11 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
133.12 	December 31, 2004.

133.13 	 Sec. 30. Minnesota Statutes 2004, section 290.091, subdivision 3, is amended to read:
133.14 		 Subd. 3.Exemption amount. (a) For purposes of computing the alternative 
133.15 	minimum tax, the exemption amount is:
133.16 	 (1) for taxable years beginning before January 1, 2005,the exemption determined 
133.17 	under section 55(d) of the Internal Revenue Code, as amended through December 31, 
133.18 	1992;
133.19 	 (2) for taxable years beginning after December 31, 2004, and before January 1, 
133.20 	2006, $42,000 for married couples filing joint returns; $21,000 for married individuals 
133.21 	filing separate returns, estates, and trusts; and $31,500 for unmarried individuals;
133.22 	 (3) for taxable years beginning after December 31, 2005, and before January 1, 
133.23 	2007, $45,000 for married couples filing joint returns; $22,500 for married individuals 
133.24 	filing separate returns, estates, and trusts; and $33,750 for unmarried individuals; and 
133.25 	 (4) for taxable years beginning after December 31, 2006, and before January 1, 
133.26 	2008, $50,000 for married couples filing joint returns; $25,000 for married individuals 
133.27 	filing separate returns, estates, and trusts; and $37,500 for unmarried individuals.
133.28 	 (b) The exemption amount determined under this subdivision is subject to the phase 
133.29 	out under section 55(d)(3) of the Internal Revenue Code, except that alternative minimum 
133.30 	taxable income as determined under this section must be substituted in the computation 
133.31 	of the phase out under section 55(d)(3).
133.32 	 (c) For taxable years beginning after December 31, 2007, the exemption amount 
133.33 	under paragraph (a), clause (4), must be adjusted for inflation.  The commissioner shall 
133.34 	make the inflation adjustments in accordance with section 1(f) of the Internal Revenue 
133.35 	Code except that for the purposes of this subdivision the percentage increase must be 
134.1 	determined from the year starting September 1, 2006, and ending August 31, 2007, as the 
134.2 	base year for adjusting for inflation for the tax year beginning after December 31, 2007. 
134.3 	The determination of the commissioner under this subdivision is not a rule under the 
134.4 	Administrative Procedure Act.

134.5 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
134.6 	December 31, 2004.

134.7 	 Sec. 31. Minnesota Statutes 2004, section 290.0922, subdivision 2, is amended to read:
134.8 		 Subd. 2.Exemptions.  The following entities are exempt from the tax imposed 
134.9 	by this section:
134.10 	 (1) corporations exempt from tax under section 290.05;
134.11 	 (2) real estate investment trusts;
134.12 	 (3) regulated investment companies or a fund thereof; and
134.13 	 (4) entities having a valid election in effect under section 860D(b) of the Internal 
134.14 	Revenue Code;
134.15 	 (5) town and farmers' mutual insurance companies;
134.16 	 (6) cooperatives organized under chapter 308A or 308B that provide housing 
134.17 	exclusively to persons age 55 and over and are classified as homesteads under section 
134.18 	273.124, subdivision 3; and
134.19 	 (7) an entity, if for the taxable year all of its property is located in a job opportunity 
134.20 	building zone designated under section 469.314 and all of its payroll is a job opportunity 
134.21 	building zone payroll under section 469.310.
134.22 	 Entities not specifically exempted by this subdivision are subject to tax under this 
134.23 	section, notwithstanding section 290.05.

134.24 	EFFECTIVE DATE. This section is effective for tax years beginning after 
134.25 	December 31, 2004.

134.26 	 Sec. 32. Minnesota Statutes 2004, section 290.191, subdivision 2, is amended to read:
134.27 		 Subd. 2.Apportionment formula of general application.  (a) Except for those 
134.28 	trades or businesses required to use a different formula under subdivision 3 or section 
134.29 	290.36, and for those trades or businesses that receive permission to use some other 
134.30 	method under section 290.20 or under subdivision 4, a trade or business required to 
134.31 	apportion its net income must apportion its income to this state on the basis of the 
134.32 	percentage obtained by taking the sum of:
135.1 	 (1) 75 the percent for the sales factor under paragraph (b)  of the percentage which 
135.2 	the sales made within this state in connection with the trade or business during the tax 
135.3 	period are of the total sales wherever made in connection with the trade or business during 
135.4 	the tax period;
135.5 	 (2) 12.5 the percent for the property factor under paragraph (b) of the percentage 
135.6 	which the total tangible property used by the taxpayer in this state in connection with the 
135.7 	trade or business during the tax period is of the total tangible property, wherever located, 
135.8 	used by the taxpayer in connection with the trade or business during the tax period; and
135.9 	 (3) 12.5 the percent for the payroll factor under paragraph (b) of the percentage 
135.10 	which the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor 
135.11 	performed in this state in connection with the trade or business during the tax period are 
135.12 	of the taxpayer's total payrolls paid or incurred in connection with the trade or business 
135.13 	during the tax period.
135.14 	 (b) For purposes of paragraph (a) and subdivision 3, the following percentages apply 
135.15 	for the taxable years specified:
135.16 	 Taxable years Sales factor Property Payroll beginning percent factor factor during 
135.17 	calendar percent percent year     2007 78 11 11     2008 95 2.5 2.5     2009 and later 100 0 0 
135.18 	   calendar years 

135.19 	EFFECTIVE DATE. This section is effective for tax years beginning after 
135.20 	December 31, 2006.

135.21 	 Sec. 33. Minnesota Statutes 2004, section 290.191, subdivision 3, is amended to read:
135.22 		 Subd. 3.Apportionment formula for financial institutions.  Except for an 
135.23 	investment company required to apportion its income under section 290.36, a financial 
135.24 	institution that is required to apportion its net income must apportion its net income to this 
135.25 	state on the basis of the percentage obtained by taking the sum of:
135.26 	 (1) 75 the percent for the sales factor under subdivision 2, paragraph (b),of the 
135.27 	percentage which the receipts from within this state in connection with the trade or 
135.28 	business during the tax period are of the total receipts in connection with the trade or 
135.29 	business during the tax period, from wherever derived;
135.30 	 (2) 12.5 the percent for the property factor under subdivision 2, paragraph (b),of 
135.31 	the percentage which the sum of the total tangible property used by the taxpayer in this 
135.32 	state and the intangible property owned by the taxpayer and attributed to this state in 
135.33 	connection with the trade or business during the tax period is of the sum of the total 
135.34 	tangible property, wherever located, used by the taxpayer and the intangible property 
136.1 	owned by the taxpayer and attributed to all states in connection with the trade or business 
136.2 	during the tax period; and
136.3 	 (3) 12.5 the percent for the payroll factor under subdivision 2, paragraph (b),of the 
136.4 	percentage which the taxpayer's total payrolls paid or incurred in this state or paid in 
136.5 	respect to labor performed in this state in connection with the trade or business during 
136.6 	the tax period are of the taxpayer's total payrolls paid or incurred in connection with 
136.7 	the trade or business during the tax period.

136.8 	EFFECTIVE DATE. This section is effective for tax years beginning after 
136.9 	December 31, 2006.

136.10 	 Sec. 34. [290.433] NATIONAL GUARD AND RESERVES CHECKOFF.
136.11 		 Subdivision 1.Checkoff established. (a) Every individual who files an income tax 
136.12 	return may designate on their original return that $1 or more shall be added to the tax or 
136.13 	deducted from the refund that would otherwise be payable by or to that individual and 
136.14 	paid into a Minnesota military families relief account established in the special revenue 
136.15 	fund.  The commissioner of revenue shall, on the income tax return, notify filers of their 
136.16 	right to designate that a portion of their tax or refund shall be paid into the Minnesota 
136.17 	military families relief account.  Amounts so designated to be paid shall be credited to the 
136.18 	account as returns are processed, in as timely a manner as practical.  All interest earned on 
136.19 	money accrued, gifts to the program, contributions to the program, and reimbursements of 
136.20 	expenditures shall be credited to the account.  All money in the account is appropriated 
136.21 	to the adjutant general of the Department of Military Affairs for the purpose of making 
136.22 	grants as specified in subdivision 2.
136.23 	 (b) The checkoff under this section is subject to removal from the income tax return 
136.24 	as provided in section 290.439, subdivision 2.
136.25 		 Subd. 2.Grants. (a) The adjutant general is authorized to expend any money 
136.26 	appropriated from the Minnesota military families relief account in the special revenue 
136.27 	fund for the purpose of making grants:
136.28 	 (1) directly to eligible individuals; or 
136.29 	 (2) to one or more eligible foundations for the purpose of making grants to eligible 
136.30 	individuals, as provided in this section.
136.31 	 (b) The term, "eligible individual" includes any Minnesota resident who is:
136.32 	 (1) a member of the Minnesota National Guard or other United States armed forces 
136.33 	reserves who has been ordered to federal active service since September 11, 2001, and has 
136.34 	a financial need as a result of that service;
136.35 	 (2) the spouse or dependent child of a person described in clause (1); or 
137.1 	 (3) the surviving spouse or surviving dependent child of a person described in 
137.2 	clause (1).
137.3 	 To be an eligible individual, a person described in clause (2) or (3) must be residing 
137.4 	within the state of Minnesota.
137.5 	 (c) The term "eligible foundation" includes any organization that:
137.6 	 (1) is a tax-exempt organization under section 501(c)(3) of the Internal Revenue 
137.7 	Code;
137.8 	 (2) has articles of incorporation under chapter 317A specifying the purpose of 
137.9 	the organization as including the provision of financial assistance to members of the 
137.10 	Minnesota National Guard and other United States armed forces reserves and their 
137.11 	families and survivors; and 
137.12 	 (3) agrees in writing to distribute any grant money received from the adjutant general 
137.13 	under this section to eligible individuals as defined in this section and in accordance 
137.14 	with any written policies and rules the adjutant general may impose as conditions of the 
137.15 	grant to the foundation.
137.16 	 (d) The maximum grant awarded to an eligible individual in a calendar year with 
137.17 	funds from the Minnesota military families relief account, either through an eligible 
137.18 	institution or directly from the adjutant general, may not exceed $2,000.
137.19 	 (e) The state pledges and agrees with all contributors to the account to use the 
137.20 	contributed funds solely for the purpose of providing assistance to eligible individuals.
137.21 	 (f) The state further agrees that it will not impose additional conditions or restrictions 
137.22 	that will limit or otherwise restrict the ability of the adjutant general to award grants 
137.23 	under this section.
137.24 	 (g) For purposes of this section, the term "federal active service" has the meaning 
137.25 	given in section 190.05, subdivision 5c, but excludes service performed exclusively for 
137.26 	purposes of:
137.27 	 (1) basic combat training, advanced individual training, annual training, and periodic 
137.28 	inactive duty training;
137.29 	 (2) special training periodically made available to reserve members; and 
137.30 	 (3) service performed in accordance with section 190.08, subdivision 3.
137.31 		 Subd. 3.Annual report. The adjutant general must report by February 1, 2007, 
137.32 	and each year thereafter, to the chairs and ranking minority members of the legislative 
137.33 	committees and divisions with jurisdiction over military and veterans' affairs on the 
137.34 	number, amounts, and use of grants issued from the Minnesota military families relief 
137.35 	account in the previous year and on the expenses related to administering the account.

138.1 	EFFECTIVE DATE. This section is effective for income tax returns for taxable 
138.2 	years beginning after December 31, 2004.

138.3 	 Sec. 35. [290.434] PUBLIC SAFETY OFFICER CHECKOFF.
138.4 	 (a) Every individual who files an income tax return may designate on their original 
138.5 	return that $1 or more shall be added to the tax or deducted from the refund that would 
138.6 	otherwise be payable by or to that individual and paid into a public safety officer memorial 
138.7 	and survivor account in the special revenue fund.  The commissioner of revenue shall, on 
138.8 	the income tax return, notify filers of their right to designate that a portion of their tax or 
138.9 	refund shall be paid into the public safety officer memorial and survivor account.  The 
138.10 	sum of the amounts so designated to be paid shall be credited to the account.  The account 
138.11 	may be used by the commissioner of public safety to make grants to public safety officer 
138.12 	associations that assist in building and preserving state memorial monuments, assist the 
138.13 	families of public safety officers killed in the line of duty, award scholarships to surviving 
138.14 	family members, and otherwise provide services relating to public safety officers killed in 
138.15 	the line of duty.  All interest earned on money accrued, gifts to the program, contributions 
138.16 	to the program, and reimbursements of expenditures shall be credited to the account.  All 
138.17 	money in the account is appropriated to the commissioner of public safety for purposes 
138.18 	of this section.
138.19 	 (b) The state pledges and agrees with all contributors to the account to use the 
138.20 	funds contributed solely for the maintenance of public safety officer memorials and for 
138.21 	the benefit of survivors of Minnesota public safety officers killed in the line of duty and 
138.22 	further agrees that it will not impose additional conditions or restrictions that will limit or 
138.23 	otherwise restrict the ability of the commissioner of public safety, in consultation with 
138.24 	the public safety officer memorial and survivor account advisory council, to award grants 
138.25 	from the available funds in the most efficient and effective manner.
138.26 	 (c) The commissioner of public safety must report by January 1, 2004, and each 
138.27 	year thereafter to the chairs and ranking minority members of the legislative committees 
138.28 	and divisions with jurisdiction over criminal justice policy and funding on the number, 
138.29 	amounts, and use of grants issued from the account in the previous year.
138.30 	 (d) A public safety officer memorial and survivor account advisory council is 
138.31 	established to advise the commissioner of public safety on the distribution of grants under 
138.32 	this section. The council must consist of eight members, one from each of the following 
138.33 	organizations:  the Minnesota law enforcement memorial association, the Minnesota police 
138.34 	and peace officers association, the Minnesota chiefs of police association, the Minnesota 
138.35 	sheriffs association, the Minnesota state fire department association, the Minnesota 
139.1 	state fire chiefs association, the Minnesota ambulance association, and the Minnesota 
139.2 	emergency medical services association.  The council member is the executive director 
139.3 	or president of the organization, or that person's designee.  Members must serve without 
139.4 	compensation.  The commissioner must consider the advisory council's recommendations 
139.5 	before awarding grants under this section.
139.6 	 (e) As used in this section, "killed in the line of duty" and "public safety officer" 
139.7 	have the meanings given in section 299A.41.
139.8 	 (f) The checkoff under this section is subject to removal from the income tax return 
139.9 	as provided in section 290.439, subdivision 2.

139.10 	 EFFECTIVE DATE. This section is effective for income tax returns for taxable 
139.11 	years beginning after December 31, 2004.

139.12 	 Sec. 36. [290.435] K-12 EDUCATION, HIGHER EDUCATION, 
139.13 	TRANSPORTATION, HEALTH CARE, NURSING HOME, AND CLEAN WATER 
139.14 	CHECKOFF.
139.15 		 Subdivision 1.Checkoffs. (a) Every individual who files an income tax return may 
139.16 	designate on their original return that $1 or more shall be added to the tax or deducted 
139.17 	from the refund that would otherwise be payable by or to that individual.
139.18 	 (b) The taxpayer shall designate that the added or deducted amount shall be paid into 
139.19 	one or more of the following accounts and used for the stated purpose:
139.20 	 (1) K-12 education, for technology and/or capital improvement grants to school 
139.21 	districts;
139.22 	 (2) higher education, for state assistance to individual students based on student need;
139.23 	 (3) transportation, for local road and bridge funds;
139.24 	 (4) health care, to provide funding for public health care programs;
139.25 	 (5) nursing home assistance, for state reimbursement of nursing home costs; or 
139.26 	 (6) environmental clean water, for grants to cities for wastewater treatment facilities.
139.27 	 (c) The taxpayer may not designate an amount less than $1 to be paid into any of 
139.28 	the accounts.
139.29 		 Subd. 2.Appropriation; special accounts. (a) All amounts designated by 
139.30 	taxpayers to be paid into the K-12 education account under subdivision 1, clause (1), must 
139.31 	be deposited in the state treasury and credited to a special K-12 education account.  Money 
139.32 	in the account is appropriated annually to the commissioner of education to make onetime 
139.33 	grants to school districts for technology or capital improvements.
139.34 	 (b) All amounts designated by taxpayers to be paid into the higher education account 
139.35 	under subdivision 1, clause (2), must be deposited in the state treasury and credited to a 
140.1 	special higher education account.  Money in the account is appropriated annually to the 
140.2 	Minnesota Higher Education Services Office to provide financial assistance to students, 
140.3 	based on financial needs, attending postsecondary educational institutions located in 
140.4 	and operated by this state.
140.5 	 (c) All amounts designated by taxpayers to be paid into the transportation account 
140.6 	under subdivision 1, clause (3), must be deposited in the state treasury and credited to a 
140.7 	special transportation account.  Money in the account is appropriated annually to the 
140.8 	commissioner of transportation for improvements to local roads and bridges.
140.9 	 (d) All amounts designated by taxpayers to be paid into the health care account under 
140.10 	subdivision 1, clause (4), must be deposited in the state treasury and credited to a special 
140.11 	health care account.  Money in the account is appropriated annually to the commissioner 
140.12 	of human services to provide additional funds for adult participation in MinnesotaCare.
140.13 	 (e) All amounts designated by taxpayers to be paid into the nursing home assistance 
140.14 	account under subdivision 1, clause (5), must be deposited in the state treasury and credited 
140.15 	to a special nursing home assistance account.  Money in the account is appropriated 
140.16 	annually to the commissioner of human services to fund a onetime increase in state paid 
140.17 	nursing home reimbursement rates.
140.18 	 (f) All amounts designated by taxpayers to be paid into the environmental clean 
140.19 	water account under subdivision 1, clause (6), must be deposited in the state treasury and 
140.20 	credited to the wastewater infrastructure fund, and annually appropriated to the public 
140.21 	facilities authority to make onetime grants to municipalities for wastewater treatment 
140.22 	facilities.
140.23 	 (g) All amounts appropriated from the special accounts under this section are 
140.24 	onetime appropriations and do not become part of the base level funding for the 2006-2007 
140.25 	biennium.
140.26 	 (h) The checkoffs under this section are subject to removal from the income tax 
140.27 	return as provided in section 290.439, subdivision 2.

140.28 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
140.29 	December 31, 2004.

140.30 	 Sec. 37. [290.439] ADMINISTRATION OF CHECKOFFS.
140.31 		 Subdivision 1.Forms. The commissioner must provide a separate form as part of 
140.32 	the income tax return that lists the nongame wildlife checkoff in section 290.432; the state 
140.33 	election campaign fund checkoff in section 10A.31; the National Guard and Reserves 
140.34 	checkoff in section 290.433; the public safety officer checkoff in section 290.434; and the 
140.35 	education, higher education, transportation, health care, nursing home, and clean water 
141.1 	checkoffs in section 290.435.  The commissioner must provide a single line on form 
141.2 	M-1 for entering the total amount a taxpayer contributes to all the checkoffs listed on 
141.3 	the separate form.
141.4 		 Subd. 2.Removal of checkoffs. The commissioner must annually review usage of 
141.5 	the income tax checkoffs in sections 290.433 to 290.435, and determine the number of 
141.6 	returns making contributions and the total amount contributed to each checkoff, including 
141.7 	each of the separate checkoffs provided in section 290.435.  If any of the checkoffs 
141.8 	subject to review fails, for two consecutive tax years, to obtain contributions of at least 
141.9 	$100,000 from at least eight percent of all returns that make contributions to any of the 
141.10 	checkoffs in sections 10A.31 and 290.433 to 290.435, the commissioner must remove 
141.11 	the checkoff from the checkoff form and submit legislation proposing the repeal of the 
141.12 	checkoff to the legislature.

141.13 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
141.14 	December 31, 2004.

141.15 	 Sec. 38. Minnesota Statutes 2004, section 290.92, subdivision 4b, is amended to read:
141.16 		 Subd. 4b.Withholding by partnerships.  (a) A partnership shall deduct and 
141.17 	withhold a tax as provided in paragraph (b) for nonresident individual partners based on 
141.18 	their distributive shares of partnership income for a taxable year of the partnership.
141.19 	 (b) The amount of tax withheld is determined by multiplying the partner's 
141.20 	distributive share allocable to Minnesota under section 290.17, paid or credited during 
141.21 	the taxable year by the highest rate used to determine the income tax liability for an 
141.22 	individual under section 290.06, subdivision 2c, except that the amount of tax withheld 
141.23 	may be determined by the commissioner if the partner submits a withholding exemption 
141.24 	certificate under subdivision 5.
141.25 	 (c) The commissioner may reduce or abate the tax withheld under this subdivision if 
141.26 	the partnership had reasonable cause to believe that no tax was due under this section.
141.27 	 (d) Notwithstanding paragraph (a), a partnership is not required to deduct and 
141.28 	withhold tax for a nonresident partner if:
141.29 	 (1) the partner elects to have the tax due paid as part of the partnership's composite 
141.30 	return under section 289A.08, subdivision 7;
141.31 	 (2) the partner has Minnesota assignable federal adjusted gross income from the 
141.32 	partnership of less than $1,000; or
141.33 	 (3) the partnership is liquidated or terminated, the income was generated by a 
141.34 	transaction related to the termination or liquidation, and no cash or other property was 
141.35 	distributed in the current or prior taxable year; or 
142.1 	 (4) the distributive shares of partnership income are attributable to:
142.2 	 (i) income required to be recognized because of discharge of indebtedness;
142.3 	 (ii) income recognized because of a sale, exchange, or other disposition of real estate, 
142.4 	depreciable property, or property described in section 179 of the Internal Revenue Code; or
142.5 	 (iii) income recognized on the sale, exchange, or other disposition of any property 
142.6 	that has been the subject of a basis reduction pursuant to section 108, 734, 743, 754, or 
142.7 	1017 of the Internal Revenue Code
142.8 	 to the extent that the income does not include cash received or receivable or, if there 
142.9 	is cash received or receivable, to the extent that the cash is required to be used to pay 
142.10 	indebtedness by the partnership or a secured debt on partnership property; or 
142.11 	 (5) the partnership is a publicly traded partnership, as defined in section 7704(b) of 
142.12 	the Internal Revenue Code.
142.13 	 (e) For purposes of subdivision 6a, and sections 289A.09, subdivision 2, 289A.20, 
142.14 	subdivision 2, paragraph (c), 289A.50, 289A.56, 289A.60, and 289A.63, a partnership is 
142.15 	considered an employer.
142.16 	 (f) To the extent that income is exempt from withholding under paragraph (d), clause 
142.17 	(4), the commissioner has a lien in an amount up to the amount that would be required 
142.18 	to be withheld with respect to the income of the partner attributable to the partnership 
142.19 	interest, but for the application of paragraph (d), clause (4).  The lien arises under section 
142.20 	270.69 from the date of assessment of the tax against the partner, and attaches to that 
142.21 	partner's share of the profits and any other money due or to become due to that partner 
142.22 	in respect of the partnership. Notice of the lien may be sent by mail to the partnership, 
142.23 	without the necessity for recording the lien.  The notice has the force and effect of a levy 
142.24 	under section 270.70, and is enforceable against the partnership in the manner provided 
142.25 	by that section.  Upon payment in full of the liability subsequent to the notice of lien, the 
142.26 	partnership must be notified that the lien has been satisfied.

142.27 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
142.28 	December 31, 2004.

142.29 	 Sec. 39. Minnesota Statutes 2004, section 291.005, subdivision 1, is amended to read:
142.30 		 Subdivision 1.Scope.  Unless the context otherwise clearly requires, the following 
142.31 	terms used in this chapter shall have the following meanings:
142.32 	 (1) "Federal gross estate" means the gross estate of a decedent as valued and 
142.33 	otherwise determined for federal estate tax purposes by federal taxing authorities pursuant 
142.34 	to the provisions of the Internal Revenue Code.
143.1 	 (2) "Minnesota gross estate" means the federal gross estate of a decedent after (a) 
143.2 	excluding therefrom any property included therein which has its situs outside Minnesota, 
143.3 	and (b) including therein any property omitted from the federal gross estate which is 
143.4 	includable therein, has its situs in Minnesota, and was not disclosed to federal taxing 
143.5 	authorities.
143.6 	 (3) "Personal representative" means the executor, administrator or other person 
143.7 	appointed by the court to administer and dispose of the property of the decedent.  If there 
143.8 	is no executor, administrator or other person appointed, qualified, and acting within this 
143.9 	state, then any person in actual or constructive possession of any property having a situs in 
143.10 	this state which is included in the federal gross estate of the decedent shall be deemed 
143.11 	to be a personal representative to the extent of the property and the Minnesota estate tax 
143.12 	due with respect to the property.
143.13 	 (4) "Resident decedent" means an individual whose domicile at the time of death 
143.14 	was in Minnesota.
143.15 	 (5) "Nonresident decedent" means an individual whose domicile at the time of 
143.16 	death was not in Minnesota.
143.17 	 (6) "Situs of property" means, with respect to real property, the state or country in 
143.18 	which it is located; with respect to tangible personal property, the state or country in which 
143.19 	it was normally kept or located at the time of the decedent's death; and with respect to 
143.20 	intangible personal property, the state or country in which the decedent was domiciled 
143.21 	at death.
143.22 	 (7) "Commissioner" means the commissioner of revenue or any person to whom the 
143.23 	commissioner has delegated functions under this chapter.
143.24 	 (8) "Internal Revenue Code" means the United States Internal Revenue Code of 
143.25 	1986, as amended through December 31, 2002 April 15, 2005.
143.26 	 (9) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as 
143.27 	defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of 
143.28 	deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.

143.29 	EFFECTIVE DATE. This section is effective for estates of decedents dying after 
143.30 	December 31, 2004.

143.31 	 Sec. 40. Minnesota Statutes 2004, section 291.03, subdivision 1, is amended to read:
143.32 		 Subdivision 1.Tax amount. (a) The tax imposed shall be an amount equal to the 
143.33 	proportion of the maximum credit for state death taxes computed under section 2011 of the 
143.34 	Internal Revenue Code, as amended through December 31, 2000, for state death taxes but 
143.35 	using Minnesota adjusted taxable estate instead of federal adjusted taxable estate,as the 
144.1 	Minnesota gross estate bears to the value of the federal gross estate.  The tax determined 
144.2 	under this paragraph shall not be greater than the federal estate tax amount computed by 
144.3 	applying the rates and brackets under section 2001 (c) of the Internal Revenue Code after 
144.4 	the allowance of to the Minnesota adjusted gross estate and subtracting the federal credits 
144.5 	credit allowed under section 2010 of the Internal Revenue Code of 1986, as amended 
144.6 	through December 31, 2000.
144.7 	 (b) For the purposes of this section, expenses which are deducted for federal income 
144.8 	tax purposes under section 642(g) of the Internal Revenue Code as amended through 
144.9 	December 31, 2002, are not allowable in computing the tax under this chapter.
144.10 	 (c) The executor may make a qualified terminable interest property election, as 
144.11 	defined in section 2056(b)(7) of the Internal Revenue Code, for purposes of computing the 
144.12 	marital deduction under section 2056 of the Internal Revenue Code for the tax under this 
144.13 	chapter that differs from the amount elected for federal estate tax purposes.  The election 
144.14 	may not exceed the federal election by more than the difference between the applicable 
144.15 	exclusion amount under section 2010(c) of the Internal Revenue Code and under section 
144.16 	2010(c) of the Internal Revenue Code, as amended through December 31, 2000.  The 
144.17 	election must be made on the tax return under this chapter and is irrevocable.  All tax 
144.18 	under this chapter must be determined using the qualified terminable interest election 
144.19 	made on the Minnesota return.  For purposes of applying sections 2044 and 2207A of the 
144.20 	Internal Revenue Code to the computation of the federal and Minnesota gross estates of 
144.21 	the surviving spouse, amounts for which a qualified terminable interest property election 
144.22 	has been made under this section must be treated as though a valid federal qualified 
144.23 	terminable interest property election under section 2056(b)(7) of the Internal Revenue 
144.24 	Code had been made.

144.25 	EFFECTIVE DATE. This section is effective for estates of decedents dying after 
144.26 	December 31, 2004, except paragraph (c) applies for estates of decedents dying after 
144.27 	December 31, 2006.

144.28 	 Sec. 41. Minnesota Statutes 2004, section 298.01, subdivision 3, is amended to read:
144.29 		 Subd. 3.Occupation tax; other ores.  Every person engaged in the business of 
144.30 	mining or producing ores in this state, except iron ore or taconite concentrates, shall pay 
144.31 	an occupation tax to the state of Minnesota as provided in this subdivision.  The tax is 
144.32 	determined in the same manner as the tax imposed by section 290.02, except that sections 
144.33 	290.05, subdivision 1, clause (a), and 290.17, subdivision 4, and 290.191, subdivision 
144.34 	2,do not apply. A person subject to occupation tax under this section shall apportion its net 
144.35 	income on the basis of the percentage obtained by taking the sum of:
145.1 	 (1) 75 percent of the percentage which the sales made within this state in connection 
145.2 	with the trade or business during the tax period are of the total sales wherever made in 
145.3 	connection with the trade or business during the tax period;
145.4 	 (2) 12.5 percent of the percentage which the total tangible property used by the 
145.5 	taxpayer in this state in connection with the trade or business during the tax period is of 
145.6 	the total tangible property, wherever located, used by the taxpayer in connection with the 
145.7 	trade or business during the tax period; and 
145.8 	 (3) 12.5 percent of the percentage which the taxpayer's total payrolls paid or 
145.9 	incurred in this state or paid in respect to labor performed in this state in connection with 
145.10 	the trade or business during the tax period are of the taxpayer's total payrolls paid or 
145.11 	incurred in connection with the trade or business during the tax period.
145.12 	 The tax is in addition to all other taxes.

145.13 	EFFECTIVE DATE. This section is effective for tax years beginning after 
145.14 	December 31, 2006.

145.15 	 Sec. 42. Minnesota Statutes 2004, section 298.01, subdivision 4, is amended to read:
145.16 		 Subd. 4.Occupation tax; iron ore; taconite concentrates.  A person engaged in 
145.17 	the business of mining or producing of iron ore, taconite concentrates or direct reduced ore 
145.18 	in this state shall pay an occupation tax to the state of Minnesota.  The tax is determined 
145.19 	in the same manner as the tax imposed by section 290.02, except that sections 290.05, 
145.20 	subdivision 1, clause (a), and 290.17, subdivision 4, and 290.191, subdivision 2,do not 
145.21 	apply. A person subject to occupation tax under this section shall apportion its net income 
145.22 	on the basis of the percentage obtained by taking the sum of:
145.23 	 (1) 75 percent of the percentage which the sales made within this state in connection 
145.24 	with the trade or business during the tax period are of the total sales wherever made in 
145.25 	connection with the trade or business during the tax period;
145.26 	 (2) 12.5 percent of the percentage which the total tangible property used by the 
145.27 	taxpayer in this state in connection with the trade or business during the tax period is of 
145.28 	the total tangible property, wherever located, used by the taxpayer in connection with the 
145.29 	trade or business during the tax period; and 
145.30 	 (3) 12.5 percent of the percentage which the taxpayer's total payrolls paid or 
145.31 	incurred in this state or paid in respect to labor performed in this state in connection with 
145.32 	the trade or business during the tax period are of the taxpayer's total payrolls paid or 
145.33 	incurred in connection with the trade or business during the tax period.
145.34 	 The tax is in addition to all other taxes.

146.1 	EFFECTIVE DATE. This section is effective for tax years beginning after 
146.2 	December 31, 2006.

146.3 	 Sec. 43. REPEALER.
 146.4 	 Minnesota Rules, parts 8093.2000; and 8093.3000, are repealed effective the day 
146.5 	following final enactment.

146.6 	 ARTICLE 6
146.7 	 FEDERAL UPDATE

146.8 	 Section 1. Minnesota Statutes 2004, section 289A.02, subdivision 7, is amended to 
146.9 	read:
146.10 		 Subd. 7.Internal revenue code.  Unless specifically defined otherwise, "Internal 
146.11 	Revenue Code" means the Internal Revenue Code of 1986, as amended through June 
146.12 	15, 2003 April 15, 2005.

146.13 	EFFECTIVE DATE. This section is effective the day following final enactment.

146.14 	 Sec. 2. Minnesota Statutes 2004, section 290.01, subdivision 19, as amended by Laws 
146.15 	2005, chapter 1, section 1, is amended to read:
146.16 		 Subd. 19.Net income. The term "net income" means the federal taxable income, 
146.17 	as defined in section 63 of the Internal Revenue Code of 1986, as amended through the 
146.18 	date named in this subdivision, incorporating the federal effective dates of changes to the 
146.19 	Internal Revenue Code and any elections made by the taxpayer in accordance with the 
146.20 	Internal Revenue Code in determining federal taxable income for federal income tax 
146.21 	purposes, and with the modifications provided in subdivisions 19a to 19f.
146.22 	 In the case of a regulated investment company or a fund thereof, as defined in section 
146.23 	851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment 
146.24 	company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, 
146.25 	except that:
146.26 	 (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal 
146.27 	Revenue Code does not apply;
146.28 	 (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal 
146.29 	Revenue Code must be applied by allowing a deduction for capital gain dividends and 
146.30 	exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal 
146.31 	Revenue Code; and
147.1 	 (3) the deduction for dividends paid must also be applied in the amount of any 
147.2 	undistributed capital gains which the regulated investment company elects to have treated 
147.3 	as provided in section 852(b)(3)(D) of the Internal Revenue Code.
147.4 	 The net income of a real estate investment trust as defined and limited by section 
147.5 	856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust 
147.6 	taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
147.7 	 The net income of a designated settlement fund as defined in section 468B(d) of 
147.8 	the Internal Revenue Code means the gross income as defined in section 468B(b) of the 
147.9 	Internal Revenue Code.
147.10 	 The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 1402(a), 1403(a), 1443, 
147.11 	1450, 1501(a), 1605, 1611(a), 1612, 1616, 1617, 1704(l), and 1704(m) of the Small 
147.12 	Business Job Protection Act, Public Law 104-188, the provisions of Public Law 104-117, 
147.13 	the provisions of sections 313(a) and (b)(1), 602(a), 913(b), 941, 961, 971, 1001(a) and 
147.14 	(b), 1002, 1003, 1012, 1013, 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 
147.15 	1131(b) and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and 1604(d)(1) of the 
147.16 	Taxpayer Relief Act of 1997, Public Law 105-34, the provisions of section 6010 of the 
147.17 	Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105-206, the 
147.18 	provisions of section 4003 of the Omnibus Consolidated and Emergency Supplemental 
147.19 	Appropriations Act, 1999, Public Law 105-277, and the provisions of section 318 of the 
147.20 	Consolidated Appropriation Act of 2001, Public Law 106-554, shall become effective at 
147.21 	the time they become effective for federal purposes.
147.22 	 The Internal Revenue Code of 1986, as amended through December 31, 1996 April 
147.23 	15, 2005, shall be in effect for taxable years beginning after December 31, 1996.
147.24 	 The provisions of sections 202(a) and (b), 221(a), 225, 312, 313, 913(a), 934, 962, 
147.25 	1004, 1005, 1052, 1063, 1084(a) and (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 
147.26 	1306, 1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 1530, 1601(d), (e), 
147.27 	(f), and (i) and 1602(a), (b), (c), and (e) of the Taxpayer Relief Act of 1997, Public Law 
147.28 	105-34, the provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002, and 7003 of 
147.29 	the Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105-206, 
147.30 	the provisions of section 3001 of the Omnibus Consolidated and Emergency Supplemental 
147.31 	Appropriations Act, 1999, Public Law 105-277, the provisions of section 3001 of the 
147.32 	Miscellaneous Trade and Technical Corrections Act of 1999, Public Law 106-36, and the 
147.33 	provisions of section 316 of the Consolidated Appropriation Act of 2001, Public Law 
147.34 	106-554, shall become effective at the time they become effective for federal purposes.
147.35 	 The Internal Revenue Code of 1986, as amended through December 31, 1997, shall 
147.36 	be in effect for taxable years beginning after December 31, 1997.
148.1 	 The provisions of sections 5002, 6009, 6011, and 7001 of the Internal Revenue 
148.2 	Service Restructuring and Reform Act of 1998, Public Law 105-206, the provisions of 
148.3 	section 9010 of the Transportation Equity Act for the 21st Century, Public Law 105-178, 
148.4 	the provisions of sections 1004, 4002, and 5301 of the Omnibus Consolidation and 
148.5 	Emergency Supplemental Appropriations Act, 1999, Public Law 105-277, the provision 
148.6 	of section 303 of the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law 
148.7 	105-369, the provisions of sections 532, 534, 536, 537, and 538 of the Ticket to Work 
148.8 	and Work Incentives Improvement Act of 1999, Public Law 106-170, the provisions of 
148.9 	the Installment Tax Correction Act of 2000, Public Law 106-573, and the provisions of 
148.10 	section 309 of the Consolidated Appropriation Act of 2001, Public Law 106-554, shall 
148.11 	become effective at the time they become effective for federal purposes.
148.12 	 The Internal Revenue Code of 1986, as amended through December 31, 1998, shall 
148.13 	be in effect for taxable years beginning after December 31, 1998.
148.14 	 The provisions of the FSC Repeal and Extraterritorial Income Exclusion Act of 
148.15 	2000, Public Law 106-519, and the provision of section 412 of the Job Creation and 
148.16 	Worker Assistance Act of 2002, Public Law 107-147, shall become effective at the time 
148.17 	it became effective for federal purposes.
148.18 	 The Internal Revenue Code of 1986, as amended through December 31, 1999, 
148.19 	shall be in effect for taxable years beginning after December 31, 1999.  The provisions 
148.20 	of sections 306 and 401 of the Consolidated Appropriation Act of 2001, Public Law 
148.21 	106-554, and the provision of section 632(b)(2)(A) of the Economic Growth and Tax 
148.22 	Relief Reconciliation Act of 2001, Public Law 107-16, and provisions of sections 101 and 
148.23 	402 of the Job Creation and Worker Assistance Act of 2002, Public Law 107-147, shall 
148.24 	become effective at the same time it became effective for federal purposes.
148.25 	 The Internal Revenue Code of 1986, as amended through December 31, 2000, 
148.26 	shall be in effect for taxable years beginning after December 31, 2000.  The provisions 
148.27 	of sections 659a and 671 of the Economic Growth and Tax Relief Reconciliation Act of 
148.28 	2001, Public Law 107-16, the provisions of sections 104, 105, and 111 of the Victims of 
148.29 	Terrorism Tax Relief Act of 2001, Public Law 107-134, and the provisions of sections 201, 
148.30 	403, 413, and 606 of the Job Creation and Worker Assistance Act of 2002, Public Law 
148.31 	107-147, shall become effective at the same time it became effective for federal purposes.
148.32 	 The Internal Revenue Code of 1986, as amended through March 15, 2002, shall be 
148.33 	in effect for taxable years beginning after December 31, 2001.
148.34 	 The provisions of sections 101 and 102 of the Victims of Terrorism Tax Relief Act 
148.35 	of 2001, Public Law 107-134, shall become effective at the same time it becomes effective 
148.36 	for federal purposes.
149.1 	 The Internal Revenue Code of 1986, as amended through June 15, 2003, shall be in 
149.2 	effect for taxable years beginning after December 31, 2002.  The provisions of section 
149.3 	201 of the Jobs and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if it is 
149.4 	enacted into law, are effective at the same time it became effective for federal purposes. 
149.5 	The provisions of the Act of January 7, 2005, Public Law 109-1, to accelerate the income 
149.6 	tax benefits for charitable cash contributions for the relief of victims of the Indian Ocean 
149.7 	tsunami, are effective at the same time it became effective for federal purposes and apply 
149.8 	to the subtraction under subdivision 19b, clause (7).
149.9 	 Except as otherwise provided, references to the Internal Revenue Code in 
149.10 	subdivisions 19a 19 to 19g 19f mean the code in effect for purposes of determining net 
149.11 	income for the applicable year.

149.12 	EFFECTIVE DATE. This section is effective the day following final enactment.

149.13 	 Sec. 3. Minnesota Statutes 2004, section 290.01, subdivision 19a, is amended to read:
149.14 		 Subd. 19a.Additions to federal taxable income.  For individuals, estates, and 
149.15 	trusts, there shall be added to federal taxable income:
149.16 	 (1)(i) interest income on obligations of any state other than Minnesota or a political 
149.17 	or governmental subdivision, municipality, or governmental agency or instrumentality 
149.18 	of any state other than Minnesota exempt from federal income taxes under the Internal 
149.19 	Revenue Code or any other federal statute; and
149.20 	 (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue 
149.21 	Code, except the portion of the exempt-interest dividends derived from interest income 
149.22 	on obligations of the state of Minnesota or its political or governmental subdivisions, 
149.23 	municipalities, governmental agencies or instrumentalities, but only if the portion of the 
149.24 	exempt-interest dividends from such Minnesota sources paid to all shareholders represents 
149.25 	95 percent or more of the exempt-interest dividends that are paid by the regulated 
149.26 	investment company as defined in section 851(a) of the Internal Revenue Code, or the 
149.27 	fund of the regulated investment company as defined in section 851(g) of the Internal 
149.28 	Revenue Code, making the payment; and
149.29 	 (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal 
149.30 	government described in section 7871(c) of the Internal Revenue Code shall be treated as 
149.31 	interest income on obligations of the state in which the tribe is located;
149.32 	 (2) the amount of income or sales and use taxes paid or accrued within the taxable 
149.33 	year under this chapter and income or sales and use taxes paid to any other state or to any 
149.34 	province or territory of Canada, to the extent allowed as a deduction under section 63(d) of 
149.35 	the Internal Revenue Code, but the addition may not be more than the amount by which the 
150.1 	itemized deductions as allowed under section 63(d) of the Internal Revenue Code exceeds 
150.2 	the amount of (i) the standard deduction as defined in section 63(c) of the Internal Revenue 
150.3 	Code minus (ii) any addition required under clause (10).  For the purpose of this paragraph, 
150.4 	the disallowance of itemized deductions under section 68 of the Internal Revenue Code of 
150.5 	1986, income or sales and use tax is the last itemized deduction disallowed;
150.6 	 (3) the capital gain amount of a lump sum distribution to which the special tax under 
150.7 	section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
150.8 	 (4) the amount of income taxes paid or accrued within the taxable year under this 
150.9 	chapter and income taxes paid to any other state or any province or territory of Canada, 
150.10 	to the extent allowed as a deduction in determining federal adjusted gross income.  For 
150.11 	the purpose of this paragraph, income taxes do not include the taxes imposed by sections 
150.12 	290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
150.13 	 (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10;
150.14 	 (6) the amount of a partner's pro rata share of net income which does not flow 
150.15 	through to the partner because the partnership elected to pay the tax on the income under 
150.16 	section 6242(a)(2) of the Internal Revenue Code; and 
150.17 	 (7) 80 percent of the depreciation deduction allowed under section 168(k) of the 
150.18 	Internal Revenue Code.  For purposes of this clause, if the taxpayer has an activity that 
150.19 	in the taxable year generates a deduction for depreciation under section 168(k) and the 
150.20 	activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 
150.21 	the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 
150.22 	limited to excess of the depreciation claimed by the activity under section 168(k) over the 
150.23 	amount of the loss from the activity that is not allowed in the taxable year.  In succeeding 
150.24 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
150.25 	under section 168(k) is allowed;
150.26 	 (8) 80 percent of the amount by which the deduction allowed by section 179 of the 
150.27 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
150.28 	Revenue Code of 1986, as amended through December 31, 2003;
150.29 	 (9) to the extent deducted in computing federal taxable income, the amount of the 
150.30 	deduction allowable under section 199 of the Internal Revenue Code;
150.31 	 (10) for tax years beginning after December 31, 2006, to the extent deducted in 
150.32 	computing federal taxable income, the amount by which the standard deduction allowed 
150.33 	under section 63(c) of the Internal Revenue Code exceeds the standard deduction 
150.34 	allowable under section 63(c) of the Internal Revenue Code of 1986, as amended through 
150.35 	December 31, 2003; and 
151.1 	 (11) the exclusion allowed under section 139A of the Internal Revenue Code for 
151.2 	federal subsidies for prescription drug plans.

151.3 	EFFECTIVE DATE. This section is effective for tax years beginning after 
151.4 	December 31, 2004, except the changes in clause (2) are effective for tax years beginning 
151.5 	after December 31, 2003.

151.6 	 Sec. 4. Minnesota Statutes 2004, section 290.01, subdivision 19b, is amended to read:
151.7 		 Subd. 19b.Subtractions from federal taxable income.  For individuals, estates, 
151.8 	and trusts, there shall be subtracted from federal taxable income:
151.9 	 (1) interest income on obligations of any authority, commission, or instrumentality 
151.10 	of the United States to the extent includable in taxable income for federal income tax 
151.11 	purposes but exempt from state income tax under the laws of the United States;
151.12 	 (2) if included in federal taxable income, the amount of any overpayment of income 
151.13 	tax to Minnesota or to any other state, for any previous taxable year, whether the amount 
151.14 	is received as a refund or as a credit to another taxable year's income tax liability;
151.15 	 (3) the amount paid to others, less the amount used to claim the credit allowed under 
151.16 	section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten 
151.17 	to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and 
151.18 	transportation of each qualifying child in attending an elementary or secondary school 
151.19 	situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a 
151.20 	resident of this state may legally fulfill the state's compulsory attendance laws, which 
151.21 	is not operated for profit, and which adheres to the provisions of the Civil Rights Act 
151.22 	of 1964 and chapter 363A.  For the purposes of this clause, "tuition" includes fees or 
151.23 	tuition as defined in section 290.0674, subdivision 1, clause (1).  As used in this clause, 
151.24 	"textbooks" includes books and other instructional materials and equipment purchased 
151.25 	or leased for use in elementary and secondary schools in teaching only those subjects 
151.26 	legally and commonly taught in public elementary and secondary schools in this state.  
151.27 	Equipment expenses qualifying for deduction includes expenses as defined and limited in 
151.28 	section 290.0674, subdivision 1, clause (3).  "Textbooks" does not include instructional 
151.29 	books and materials used in the teaching of religious tenets, doctrines, or worship, the 
151.30 	purpose of which is to instill such tenets, doctrines, or worship, nor does it include books 
151.31 	or materials for, or transportation to, extracurricular activities including sporting events, 
151.32 	musical or dramatic events, speech activities, driver's education, or similar programs.  For 
151.33 	purposes of the subtraction provided by this clause, "qualifying child" has the meaning 
151.34 	given in section 32(c)(3) of the Internal Revenue Code;
151.35 	 (4) income as provided under section 290.0802;
152.1 	 (5) to the extent included in federal adjusted gross income, income realized on 
152.2 	disposition of property exempt from tax under section 290.491;
152.3 	 (6) to the extent included in federal taxable income, postservice benefits for youth 
152.4 	community service under section 124D.42 for volunteer service under United States 
152.5 	Code, title 42, sections 12601 to 12604;
152.6 	 (7) to the extent not deducted in determining federal taxable income by an individual 
152.7 	who does not itemize deductions for federal income tax purposes for the taxable year, an 
152.8 	amount equal to 50 percent of the excess of charitable contributions over $500 allowable 
152.9 	as a deduction for the taxable year under section 170(a) of the Internal Revenue Code 
152.10 	over $500 and under the provisions of Public Law 109-1;
152.11 	 (8) for taxable years beginning before January 1, 2008, the amount of the federal 
152.12 	small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
152.13 	which is included in gross income under section 87 of the Internal Revenue Code;
152.14 	 (9) for individuals who are allowed a federal foreign tax credit for taxes that do not 
152.15 	qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover 
152.16 	of subnational foreign taxes for the taxable year, but not to exceed the total subnational 
152.17 	foreign taxes reported in claiming the foreign tax credit.  For purposes of this clause, 
152.18 	"federal foreign tax credit" means the credit allowed under section 27 of the Internal 
152.19 	Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed 
152.20 	under section 904(c) of the Internal Revenue Code minus national level foreign taxes to 
152.21 	the extent they exceed the federal foreign tax credit;
152.22 	 (10) in each of the five tax years immediately following the tax year in which an 
152.23 	addition is required under subdivision 19a, clause (7), an amount equal to one-fifth of 
152.24 	the delayed depreciation.  For purposes of this clause, "delayed depreciation" means the 
152.25 	amount of the addition made by the taxpayer under subdivision 19a, clause (7), minus the 
152.26 	positive value of any net operating loss under section 172 of the Internal Revenue Code 
152.27 	generated for the tax year of the addition.  The resulting delayed depreciation cannot be 
152.28 	less than zero; and 
152.29 	 (11) job opportunity building zone income as provided under section 469.316.;
152.30 	 (12) in each of the five tax years immediately following the tax year in which an 
152.31 	addition is required under subdivision 19a, clause (8), or 19c, clause (17), in the case of 
152.32 	a shareholder of a corporation that is an S corporation, an amount equal to one-fifth of 
152.33 	the addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (17), 
152.34 	in the case of a shareholder of a corporation that is an S corporation, minus the positive 
152.35 	value of any net operating loss under section 172 of the Internal Revenue Code generated 
153.1 	for the tax year of the addition.  If the net operating loss exceeds the addition for the tax 
153.2 	year, a subtraction is not allowed under this clause; and 
153.3 	 (13) to the extent included in federal taxable income, compensation paid to a service 
153.4 	member as defined in United States Code, title 10, section 101(a)(5), for military service 
153.5 	as defined in the Service Member Civil Relief Act, Public Law 108-189, section 101(2).

153.6 	EFFECTIVE DATE. This section is effective for tax years beginning after 
153.7 	December 31, 2004, except the change to clause (7) is effective for tax years beginning 
153.8 	after December 31, 2003.

153.9 	 Sec. 5. Minnesota Statutes 2004, section 290.01, subdivision 19c, is amended to read:
153.10 		 Subd. 19c.Corporations; additions to federal taxable income.  For corporations, 
153.11 	there shall be added to federal taxable income:
153.12 	 (1) the amount of any deduction taken for federal income tax purposes for income, 
153.13 	excise, or franchise taxes based on net income or related minimum taxes, including but not 
153.14 	limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota, 
153.15 	another state, a political subdivision of another state, the District of Columbia, or any 
153.16 	foreign country or possession of the United States;
153.17 	 (2) interest not subject to federal tax upon obligations of:  the United States, its 
153.18 	possessions, its agencies, or its instrumentalities; the state of Minnesota or any other 
153.19 	state, any of its political or governmental subdivisions, any of its municipalities, or any 
153.20 	of its governmental agencies or instrumentalities; the District of Columbia; or Indian 
153.21 	tribal governments;
153.22 	 (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal 
153.23 	Revenue Code;
153.24 	 (4) the amount of any net operating loss deduction taken for federal income tax 
153.25 	purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss 
153.26 	deduction under section 810 of the Internal Revenue Code;
153.27 	 (5) the amount of any special deductions taken for federal income tax purposes 
153.28 	under sections 241 to 247 of the Internal Revenue Code;
153.29 	 (6) losses from the business of mining, as defined in section 290.05, subdivision 1, 
153.30 	clause (a), that are not subject to Minnesota income tax;
153.31 	 (7) the amount of any capital losses deducted for federal income tax purposes under 
153.32 	sections 1211 and 1212 of the Internal Revenue Code;
153.33 	 (8) the exempt foreign trade income of a foreign sales corporation under sections 
153.34 	921(a) and 291 of the Internal Revenue Code;
154.1 	 (9) the amount of percentage depletion deducted under sections 611 through 614 and 
154.2 	291 of the Internal Revenue Code;
154.3 	 (10) for certified pollution control facilities placed in service in a taxable year 
154.4 	beginning before December 31, 1986, and for which amortization deductions were elected 
154.5 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
154.6 	31, 1985, the amount of the amortization deduction allowed in computing federal taxable 
154.7 	income for those facilities;
154.8 	 (11) the amount of any deemed dividend from a foreign operating corporation 
154.9 	determined pursuant to section 290.17, subdivision 4, paragraph (g);
154.10 	 (12) the amount of any environmental tax paid under section 59(a) of the Internal 
154.11 	Revenue Code;
154.12 	 (13) the amount of a partner's pro rata share of net income which does not flow 
154.13 	through to the partner because the partnership elected to pay the tax on the income under 
154.14 	section 6242(a)(2) of the Internal Revenue Code;
154.15 	 (14) the amount of net income excluded under section 114 of the Internal Revenue 
154.16 	Code;
154.17 	 (15) any increase in subpart F income, as defined in section 952(a) of the Internal 
154.18 	Revenue Code, for the taxable year when subpart F income is calculated without regard to 
154.19 	the provisions of section 614 of Public Law 107-147; and 
154.20 	 (16) 80 percent of the depreciation deduction allowed under section 168(k) of the 
154.21 	Internal Revenue Code.  For purposes of this clause, if the taxpayer has an activity that 
154.22 	in the taxable year generates a deduction for depreciation under section 168(k) and the 
154.23 	activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 
154.24 	the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 
154.25 	limited to excess of the depreciation claimed by the activity under section 168(k) over the 
154.26 	amount of the loss from the activity that is not allowed in the taxable year.  In succeeding 
154.27 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
154.28 	under section 168(k) is allowed;
154.29 	 (17) 80 percent of the amount by which the deduction allowed by section 179 of the 
154.30 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
154.31 	Revenue Code of 1986, as amended through December 31, 2003;
154.32 	 (18) to the extent deducted in computing federal taxable income, the amount of the 
154.33 	deduction allowable under section 199 of the Internal Revenue Code; and 
154.34 	 (19) the exclusion allowed under section 139A of the Internal Revenue Code for 
154.35 	federal subsidies for prescription drug plans.

155.1 	EFFECTIVE DATE. This section is effective for tax years beginning after 
155.2 	December 31, 2004.

155.3 	 Sec. 6. Minnesota Statutes 2004, section 290.01, subdivision 19d, is amended to read:
155.4 		 Subd. 19d.Corporations; modifications decreasing federal taxable income.  For 
155.5 	corporations, there shall be subtracted from federal taxable income after the increases 
155.6 	provided in subdivision 19c:
155.7 	 (1) the amount of foreign dividend gross-up added to gross income for federal 
155.8 	income tax purposes under section 78 of the Internal Revenue Code;
155.9 	 (2) the amount of salary expense not allowed for federal income tax purposes due to 
155.10 	claiming the federal jobs credit under section 51 of the Internal Revenue Code;
155.11 	 (3) any dividend (not including any distribution in liquidation) paid within the 
155.12 	taxable year by a national or state bank to the United States, or to any instrumentality of 
155.13 	the United States exempt from federal income taxes, on the preferred stock of the bank 
155.14 	owned by the United States or the instrumentality;
155.15 	 (4) amounts disallowed for intangible drilling costs due to differences between 
155.16 	this chapter and the Internal Revenue Code in taxable years beginning before January 
155.17 	1, 1987, as follows:
155.18 	 (i) to the extent the disallowed costs are represented by physical property, an amount 
155.19 	equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09, 
155.20 	subdivision 7, subject to the modifications contained in subdivision 19e; and
155.21 	 (ii) to the extent the disallowed costs are not represented by physical property, an 
155.22 	amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section 
155.23 	290.09, subdivision 8;
155.24 	 (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the 
155.25 	Internal Revenue Code, except that:
155.26 	 (i) for capital losses incurred in taxable years beginning after December 31, 1986, 
155.27 	capital loss carrybacks shall not be allowed;
155.28 	 (ii) for capital losses incurred in taxable years beginning after December 31, 1986, 
155.29 	a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be 
155.30 	allowed;
155.31 	 (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a 
155.32 	capital loss carryback to each of the three taxable years preceding the loss year, subject to 
155.33 	the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
155.34 	 (iv) for capital losses incurred in taxable years beginning before January 1, 1987, 
155.35 	a capital loss carryover to each of the five taxable years succeeding the loss year to the 
156.1 	extent such loss was not used in a prior taxable year and subject to the provisions of 
156.2 	Minnesota Statutes 1986, section 290.16, shall be allowed;
156.3 	 (6) an amount for interest and expenses relating to income not taxable for federal 
156.4 	income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and 
156.5 	expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or 
156.6 	291 of the Internal Revenue Code in computing federal taxable income;
156.7 	 (7) in the case of mines, oil and gas wells, other natural deposits, and timber for 
156.8 	which percentage depletion was disallowed pursuant to subdivision 19c, clause (11), a 
156.9 	reasonable allowance for depletion based on actual cost.  In the case of leases the deduction 
156.10 	must be apportioned between the lessor and lessee in accordance with rules prescribed 
156.11 	by the commissioner.  In the case of property held in trust, the allowable deduction must 
156.12 	be apportioned between the income beneficiaries and the trustee in accordance with the 
156.13 	pertinent provisions of the trust, or if there is no provision in the instrument, on the basis 
156.14 	of the trust's income allocable to each;
156.15 	 (8) for certified pollution control facilities placed in service in a taxable year 
156.16 	beginning before December 31, 1986, and for which amortization deductions were elected 
156.17 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
156.18 	31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes 
156.19 	1986, section 290.09, subdivision 7;
156.20 	 (9) amounts included in federal taxable income that are due to refunds of income, 
156.21 	excise, or franchise taxes based on net income or related minimum taxes paid by the 
156.22 	corporation to Minnesota, another state, a political subdivision of another state, the 
156.23 	District of Columbia, or a foreign country or possession of the United States to the extent 
156.24 	that the taxes were added to federal taxable income under section 290.01, subdivision 19c, 
156.25 	clause (1), in a prior taxable year;
156.26 	 (10) 80 percent of royalties, fees, or other like income accrued or received from a 
156.27 	foreign operating corporation or a foreign corporation which is part of the same unitary 
156.28 	business as the receiving corporation;
156.29 	 (11) income or gains from the business of mining as defined in section 290.05, 
156.30 	subdivision 1, clause (a), that are not subject to Minnesota franchise tax;
156.31 	 (12) the amount of handicap access expenditures in the taxable year which are not 
156.32 	allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
156.33 	 (13) the amount of qualified research expenses not allowed for federal income tax 
156.34 	purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that 
156.35 	the amount exceeds the amount of the credit allowed under section 290.068;
157.1 	 (14) the amount of salary expenses not allowed for federal income tax purposes due 
157.2 	to claiming the Indian employment credit under section 45A(a) of the Internal Revenue 
157.3 	Code;
157.4 	 (15) the amount of any refund of environmental taxes paid under section 59A of the 
157.5 	Internal Revenue Code;
157.6 	 (16) for taxable years beginning before January 1, 2008, the amount of the federal 
157.7 	small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
157.8 	which is included in gross income under section 87 of the Internal Revenue Code;
157.9 	 (17) for a corporation whose foreign sales corporation, as defined in section 922 
157.10 	of the Internal Revenue Code, constituted a foreign operating corporation during any 
157.11 	taxable year ending before January 1, 1995, and a return was filed by August 15, 1996, 
157.12 	claiming the deduction under section 290.21, subdivision 4, for income received from 
157.13 	the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of 
157.14 	income excluded under section 114 of the Internal Revenue Code, provided the income is 
157.15 	not income of a foreign operating company;
157.16 	 (18) any decrease in subpart F income, as defined in section 952(a) of the Internal 
157.17 	Revenue Code, for the taxable year when subpart F income is calculated without regard to 
157.18 	the provisions of section 614 of Public Law 107-147; and 
157.19 	 (19) in each of the five tax years immediately following the tax year in which an 
157.20 	addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of 
157.21 	the delayed depreciation.  For purposes of this clause, "delayed depreciation" means the 
157.22 	amount of the addition made by the taxpayer under subdivision 19c, clause (16).  The 
157.23 	resulting delayed depreciation cannot be less than zero; and 
157.24 	 (20) in each of the five tax years immediately following the tax year in which an 
157.25 	addition is required under subdivision 19c, clause (17), an amount equal to one-fifth of the 
157.26 	amount of the addition.

157.27 	EFFECTIVE DATE. This section is effective for tax years beginning after 
157.28 	December 31, 2004.

157.29 	 Sec. 7. Minnesota Statutes 2004, section 290.01, subdivision 31, is amended to read:
157.30 		 Subd. 31.Internal revenue code.  Unless specifically defined otherwise, "Internal 
157.31 	Revenue Code" means the Internal Revenue Code of 1986, as amended through June 
157.32 	15, 2003 April 15, 2005.

158.1 	EFFECTIVE DATE. This section is effective the day following final enactment 
158.2 	except the changes incorporated by federal changes are effective at the same times as the 
158.3 	changes were effective for federal purposes.

158.4 	 Sec. 8. Minnesota Statutes 2004, section 290.032, subdivision 1, is amended to read:
158.5 		 Subdivision 1.Imposition.  There is hereby imposed as an addition to the annual 
158.6 	income tax for a taxable year of a taxpayer in the classes described in section 290.03 a 
158.7 	tax with respect to any distribution received by such taxpayer that is treated as a lump 
158.8 	sum distribution under section 402(d) of the Internal Revenue Code 1401(c)(2) of the 
158.9 	Small Business Job Protection Act, Public Law 104-188 and that is subject to tax for such 
158.10 	taxable year under section 402(d) of the Internal Revenue Code 1401(c)(2) of the Small 
158.11 	Business Job Protection Act, Public Law 104-188.

158.12 	EFFECTIVE DATE. This section is effective for tax years beginning after 
158.13 	December 31, 1999.

158.14 	 Sec. 9. Minnesota Statutes 2004, section 290.032, subdivision 2, is amended to read:
158.15 		 Subd. 2.Computation.  The amount of tax imposed by subdivision 1 shall be 
158.16 	computed in the same way as the tax imposed under section 402(d) of the Internal Revenue 
158.17 	Code of 1986, as amended through December 31, 1995, except that the initial separate tax 
158.18 	shall be an amount equal to five times the tax which would be imposed by section 290.06, 
158.19 	subdivision 2c, if the recipient was an unmarried individual, and the taxable net income 
158.20 	was an amount equal to one-fifth of the excess of
158.21 	 (i) the total taxable amount of the lump sum distribution for the year, over
158.22 	 (ii) the minimum distribution allowance, and except that references in section 
158.23 	402(d) of the Internal Revenue Code of 1986, as amended through December 31, 1995,to 
158.24 	paragraph (1)(A) thereof shall instead be references to subdivision 1, and the excess, if 
158.25 	any, of the subtraction base amount over federal taxable income for a qualified individual 
158.26 	as provided under section 290.0802, subdivision 2.

158.27 	EFFECTIVE DATE. This section is effective for tax years beginning after 
158.28 	December 31, 1999.

158.29 	 Sec. 10. Minnesota Statutes 2004, section 290.06, subdivision 2c, is amended to read:
158.30 		 Subd. 2c.Schedules of rates for individuals, estates, and trusts.  (a) The income 
158.31 	taxes imposed by this chapter upon married individuals filing joint returns and surviving 
159.1 	spouses as defined in section 2(a) of the Internal Revenue Code must be computed by 
159.2 	applying to their taxable net income the following schedule of rates:
159.3 	 (1) On the first $25,680, 5.35 percent;
159.4 	 (2) On all over $25,680, but not over $102,030, 7.05 percent;
159.5 	 (3) On all over $102,030, 7.85 percent.
159.6 	 Married individuals filing separate returns, estates, and trusts must compute their 
159.7 	income tax by applying the above rates to their taxable income, except that the income 
159.8 	brackets will be one-half of the above amounts.
159.9 	 (b) The income taxes imposed by this chapter upon unmarried individuals must be 
159.10 	computed by applying to taxable net income the following schedule of rates:
159.11 	 (1) On the first $17,570, 5.35 percent;
159.12 	 (2) On all over $17,570, but not over $57,710, 7.05 percent;
159.13 	 (3) On all over $57,710, 7.85 percent.
159.14 	 (c) The income taxes imposed by this chapter upon unmarried individuals qualifying 
159.15 	as a head of household as defined in section 2(b) of the Internal Revenue Code must be 
159.16 	computed by applying to taxable net income the following schedule of rates:
159.17 	 (1) On the first $21,630, 5.35 percent;
159.18 	 (2) On all over $21,630, but not over $86,910, 7.05 percent;
159.19 	 (3) On all over $86,910, 7.85 percent.
159.20 	 (d) In lieu of a tax computed according to the rates set forth in this subdivision, the 
159.21 	tax of any individual taxpayer whose taxable net income for the taxable year is less than 
159.22 	an amount determined by the commissioner must be computed in accordance with tables 
159.23 	prepared and issued by the commissioner of revenue based on income brackets of not 
159.24 	more than $100.  The amount of tax for each bracket shall be computed at the rates set 
159.25 	forth in this subdivision, provided that the commissioner may disregard a fractional part of 
159.26 	a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
159.27 	 (e) An individual who is not a Minnesota resident for the entire year must compute 
159.28 	the individual's Minnesota income tax as provided in this subdivision.  After the 
159.29 	application of the nonrefundable credits provided in this chapter, the tax liability must 
159.30 	then be multiplied by a fraction in which:
159.31 	 (1) the numerator is the individual's Minnesota source federal adjusted gross income 
159.32 	as defined in section 62 of the Internal Revenue Code and increased by the additions 
159.33 	required under section 290.01, subdivision 19a, clauses (1), (5), and  (6), (7), (8), and 
159.34 	(9),and reduced by the subtraction under section 290.01, subdivision 19b, clause (11), and 
159.35 	the Minnesota assignable portion of the subtraction for United States government interest 
159.36 	under section 290.01, subdivision 19b, clause (1), and the subtractions under clauses (10), 
160.1 	(11), (12), and (13),after applying the allocation and assignability provisions of section 
160.2 	290.081, clause (a), or 290.17; and
160.3 	 (2) the denominator is the individual's federal adjusted gross income as defined in 
160.4 	section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in 
160.5 	section 290.01, subdivision 19a, clauses (1), (5), and (6), (7), (8), and (9),and reduced by 
160.6 	the amounts specified in section 290.01, subdivision 19b, clauses (1) and , (10),(11), 
160.7 	(12), and (13).

160.8 	EFFECTIVE DATE. This section is effective for tax years beginning after 
160.9 	December 31, 2004.

160.10 	 Sec. 11. Minnesota Statutes 2004, section 290.067, subdivision 1, is amended to read:
160.11 		 Subdivision 1.Amount of credit.  (a) A taxpayer may take as a credit against the 
160.12 	tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the 
160.13 	dependent care credit for which the taxpayer is eligible pursuant to the provisions of 
160.14 	section 21 of the Internal Revenue Code subject to the limitations provided in subdivision 
160.15 	2 except that in determining whether the child qualified as a dependent, income received 
160.16 	as a Minnesota family investment program grant or allowance to or on behalf of the child 
160.17 	must not be taken into account in determining whether the child received more than half 
160.18 	of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of 
160.19 	the Internal Revenue Code do not apply.
160.20 	 (b) If a child who has not attained the age of six years at the close of the taxable year 
160.21 	is cared for at a licensed family day care home operated by the child's parent, the taxpayer 
160.22 	is deemed to have paid employment-related expenses.  If the child is 16 months old or 
160.23 	younger at the close of the taxable year, the amount of expenses deemed to have been paid 
160.24 	equals the maximum limit for one qualified individual under section 21(c) and (d) of the 
160.25 	Internal Revenue Code.  If the child is older than 16 months of age but has not attained the 
160.26 	age of six years at the close of the taxable year, the amount of expenses deemed to have 
160.27 	been paid equals the amount the licensee would charge for the care of a child of the same 
160.28 	age for the same number of hours of care.
160.29 	 (c) If a married couple:
160.30 	 (1) has a child who has not attained the age of one year at the close of the taxable 
160.31 	year;
160.32 	 (2) files a joint tax return for the taxable year; and
160.33 	 (3) does not participate in a dependent care assistance program as defined in section 
160.34 	129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid 
160.35 	for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of 
161.1 	(i) the combined earned income of the couple or (ii) the amount of the maximum limit for 
161.2 	one qualified individual under section 21(c) and (d) of the Internal Revenue Code will 
161.3 	be deemed to be the employment related expense paid for that child.  The earned income 
161.4 	limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed 
161.5 	amount.  These deemed amounts apply regardless of whether any employment-related 
161.6 	expenses have been paid.
161.7 	 (d) If the taxpayer is not required and does not file a federal individual income tax 
161.8 	return for the tax year, no credit is allowed for any amount paid to any person unless:
161.9 	 (1) the name, address, and taxpayer identification number of the person are included 
161.10 	on the return claiming the credit; or
161.11 	 (2) if the person is an organization described in section 501(c)(3) of the Internal 
161.12 	Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code, 
161.13 	the name and address of the person are included on the return claiming the credit.
161.14 	 In the case of a failure to provide the information required under the preceding sentence, 
161.15 	the preceding sentence does not apply if it is shown that the taxpayer exercised due 
161.16 	diligence in attempting to provide the information required.
161.17 	 In the case of a nonresident, part-year resident, or a person who has earned income 
161.18 	not subject to tax under this chapter including earned income excluded pursuant to section 
161.19 	290.01, subdivision 19b, clause (11), the credit determined under section 21 of the Internal 
161.20 	Revenue Code must be allocated based on the ratio by which the earned income of the 
161.21 	claimant and the claimant's spouse from Minnesota sources bears to the total earned 
161.22 	income of the claimant and the claimant's spouse.
161.23 	 For residents of Minnesota, the exclusion of combat pay under section 112 of the 
161.24 	Internal Revenue Code is not considered "earned income not subject to tax under this 
161.25 	chapter." 

161.26 	EFFECTIVE DATE. This section is effective for tax years beginning after 
161.27 	December 31, 2003.

161.28 	 Sec. 12. Minnesota Statutes 2004, section 290.067, subdivision 2a, is amended to read:
161.29 		 Subd. 2a.Income.  (a) For purposes of this section, "income" means the sum of 
161.30 	the following:
161.31 	 (1) federal adjusted gross income as defined in section 62 of the Internal Revenue 
161.32 	Code; and
161.33 	 (2) the sum of the following amounts to the extent not included in clause (1):
161.34 	 (i) all nontaxable income;
162.1 	 (ii) the amount of a passive activity loss that is not disallowed as a result of section 
162.2 	469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity 
162.3 	loss carryover allowed under section 469(b) of the Internal Revenue Code;
162.4 	 (iii) an amount equal to the total of any discharge of qualified farm indebtedness 
162.5 	of a solvent individual excluded from gross income under section 108(g) of the Internal 
162.6 	Revenue Code;
162.7 	 (iv) cash public assistance and relief;
162.8 	 (v) any pension or annuity (including railroad retirement benefits, all payments 
162.9 	received under the federal Social Security Act, supplemental security income, and veterans 
162.10 	benefits), which was not exclusively funded by the claimant or spouse, or which was 
162.11 	funded exclusively by the claimant or spouse and which funding payments were excluded 
162.12 	from federal adjusted gross income in the years when the payments were made;
162.13 	 (vi) interest received from the federal or a state government or any instrumentality 
162.14 	or political subdivision thereof;
162.15 	 (vii) workers' compensation;
162.16 	 (viii) nontaxable strike benefits;
162.17 	 (ix) the gross amounts of payments received in the nature of disability income or 
162.18 	sick pay as a result of accident, sickness, or other disability, whether funded through 
162.19 	insurance or otherwise;
162.20 	 (x) a lump sum distribution under section 402(e)(3) of the Internal Revenue Code 
162.21 	of 1986, as amended through December 31, 1995;
162.22 	 (xi) contributions made by the claimant to an individual retirement account, 
162.23 	including a qualified voluntary employee contribution; simplified employee pension plan; 
162.24 	self-employed retirement plan; cash or deferred arrangement plan under section 401(k) 
162.25 	of the Internal Revenue Code; or deferred compensation plan under section 457 of the 
162.26 	Internal Revenue Code; and 
162.27 	 (xii) nontaxable scholarship or fellowship grants;
162.28 	 (xiii) the amount of deduction allowed under section 199 of the Internal Revenue 
162.29 	Code; and 
162.30 	 (xiv) the amount of deduction allowed under section 220 or 223 of the Internal 
162.31 	Revenue Code.
162.32 	 In the case of an individual who files an income tax return on a fiscal year basis, the 
162.33 	term "federal adjusted gross income" means federal adjusted gross income reflected in the 
162.34 	fiscal year ending in the next calendar year.  Federal adjusted gross income may not be 
162.35 	reduced by the amount of a net operating loss carryback or carryforward or a capital loss 
162.36 	carryback or carryforward allowed for the year.
163.1 	 (b) "Income" does not include:
163.2 	 (1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 
163.3 	102;
163.4 	 (2) amounts of any pension or annuity that were exclusively funded by the claimant 
163.5 	or spouse if the funding payments were not excluded from federal adjusted gross income 
163.6 	in the years when the payments were made;
163.7 	 (3) surplus food or other relief in kind supplied by a governmental agency;
163.8 	 (4) relief granted under chapter 290A;
163.9 	 (5) child support payments received under a temporary or final decree of dissolution 
163.10 	or legal separation; and
163.11 	 (6) restitution payments received by eligible individuals and excludable interest as 
163.12 	defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 
163.13 	2001, Public Law 107-16.

163.14 	EFFECTIVE DATE. This section is effective for tax years beginning after 
163.15 	December 31, 2003.

163.16 	 Sec. 13. Minnesota Statutes 2004, section 290.0671, subdivision 1, is amended to read:
163.17 		 Subdivision 1.Credit allowed.  (a) An individual is allowed a credit against the tax 
163.18 	imposed by this chapter equal to a percentage of earned income.  To receive a credit, a 
163.19 	taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.
163.20 	 (b) For individuals with no qualifying children, the credit equals 1.9125 percent of 
163.21 	the first $4,620 of earned income.  The credit is reduced by 1.9125 percent of earned 
163.22 	income or modified adjusted gross income, whichever is greater, in excess of $5,770, 
163.23 	but in no case is the credit less than zero.
163.24 	 (c) For individuals with one qualifying child, the credit equals 8.5 percent of the first 
163.25 	$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than 
163.26 	$13,450. The credit is reduced by 5.73 percent of earned income or modified adjusted 
163.27 	gross income, whichever is greater, in excess of $15,080, but in no case is the credit 
163.28 	less than zero.
163.29 	 (d) For individuals with two or more qualifying children, the credit equals ten 
163.30 	percent of the first $9,720 of earned income and 20 percent of earned income over 
163.31 	$14,860 but less than $16,800.  The credit is reduced by 10.3 percent of earned income 
163.32 	or modified adjusted gross income, whichever is greater, in excess of $17,890, but in no 
163.33 	case is the credit less than zero.
163.34 	 (e) For a nonresident or part-year resident, the credit must be allocated based on the 
163.35 	percentage calculated under section 290.06, subdivision 2c, paragraph (e).
164.1 	 (f) For a person who was a resident for the entire tax year and has earned income 
164.2 	not subject to tax under this chapter, including income excluded under section 290.01, 
164.3 	subdivision 19b, clause (11), the credit must be allocated based on the ratio of federal 
164.4 	adjusted gross income reduced by the earned income not subject to tax under this chapter 
164.5 	over federal adjusted gross income. For the purposes of this paragraph, the exclusion of 
164.6 	combat pay under section 112 of the Internal Revenue Code is not considered "earned 
164.7 	income not subject to tax under this chapter." 
164.8 	 (g) For tax years beginning after December 31, 2001, and before December 31, 
164.9 	2004, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in 
164.10 	paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by 
164.11 	$1,000 for married taxpayers filing joint returns.
164.12 	 (h) For tax years beginning after December 31, 2004, and before December 31, 
164.13 	2007, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in 
164.14 	paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by 
164.15 	$2,000 for married taxpayers filing joint returns.
164.16 	 (i) For tax years beginning after December 31, 2007, and before December 31, 2010, 
164.17 	the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph 
164.18 	(d), after being adjusted for inflation under subdivision 7, are each increased by $3,000 for 
164.19 	married taxpayers filing joint returns. For tax years beginning after December 31, 2008, 
164.20 	the $3,000 is adjusted annually for inflation under subdivision 7.
164.21 	 (j) The commissioner shall construct tables showing the amount of the credit at 
164.22 	various income levels and make them available to taxpayers.  The tables shall follow 
164.23 	the schedule contained in this subdivision, except that the commissioner may graduate 
164.24 	the transition between income brackets.

164.25 	EFFECTIVE DATE. This section is effective for tax years beginning after 
164.26 	December 31, 2003.

164.27 	 Sec. 14. Minnesota Statutes 2004, section 290.0675, subdivision 1, is amended to read:
164.28 		 Subdivision 1.Definitions.  (a) For purposes of this section the following terms 
164.29 	have the meanings given.
164.30 	 (b) "Earned income" means the sum of the following, to the extent included in 
164.31 	Minnesota taxable income:
164.32 	 (1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
164.33 	 (2) income received from a retirement pension, profit-sharing, stock bonus, or 
164.34 	annuity plan; and
165.1 	 (3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue 
165.2 	Code.
165.3 	 (c) "Taxable income" means net income as defined in section 290.01, subdivision 19.
165.4 	 (d) "Earned income of lesser-earning spouse" means the earned income of the spouse 
165.5 	with the lesser amount of earned income as defined in paragraph (b) for the taxable year 
165.6 	minus the sum of (i) the amount for one exemption under section 151(d) of the Internal 
165.7 	Revenue Code and (ii) one-half the amount of the standard deduction under section 
165.8 	63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition required 
165.9 	under section 290.01, subdivision 19a, clause (10).

165.10 	EFFECTIVE DATE. This section is effective for tax years beginning after 
165.11 	December 31, 2004.

165.12 	 Sec. 15. Minnesota Statutes 2004, section 290.091, subdivision 2, is amended to read:
165.13 		 Subd. 2.Definitions.  For purposes of the tax imposed by this section, the following 
165.14 	terms have the meanings given:
165.15 	 (a) "Alternative minimum taxable income" means the sum of the following for 
165.16 	the taxable year:
165.17 	 (1) the taxpayer's federal alternative minimum taxable income as defined in section 
165.18 	55(b)(2) of the Internal Revenue Code;
165.19 	 (2) the taxpayer's itemized deductions allowed in computing federal alternative 
165.20 	minimum taxable income, but excluding:
165.21 	 (i) the charitable contribution deduction under section 170 of the Internal Revenue 
165.22 	Code to the extent that the deduction exceeds 1.0 percent of adjusted gross income, as 
165.23 	defined in section 62 of the Internal Revenue Code;
165.24 	 (ii) the medical expense deduction;
165.25 	 (iii) the casualty, theft, and disaster loss deduction; and
165.26 	 (iv) the impairment-related work expenses of a disabled person;
165.27 	 (3) for depletion allowances computed under section 613A(c) of the Internal 
165.28 	Revenue Code, with respect to each property (as defined in section 614 of the Internal 
165.29 	Revenue Code), to the extent not included in federal alternative minimum taxable income, 
165.30 	the excess of the deduction for depletion allowable under section 611 of the Internal 
165.31 	Revenue Code for the taxable year over the adjusted basis of the property at the end of the 
165.32 	taxable year (determined without regard to the depletion deduction for the taxable year);
165.33 	 (4) to the extent not included in federal alternative minimum taxable income, the 
165.34 	amount of the tax preference for intangible drilling cost under section 57(a)(2) of the 
165.35 	Internal Revenue Code determined without regard to subparagraph (E);
166.1 	 (5) to the extent not included in federal alternative minimum taxable income, the 
166.2 	amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
166.3 	 (6) the amount of addition required by section 290.01, subdivision 19a, clause 
166.4 	clauses (7), (8), and (9);
166.5 	 less the sum of the amounts determined under the following:
166.6 	 (1) interest income as defined in section 290.01, subdivision 19b, clause (1);
166.7 	 (2) an overpayment of state income tax as provided by section 290.01, subdivision 
166.8 	19b, clause (2), to the extent included in federal alternative minimum taxable income;
166.9 	 (3) the amount of investment interest paid or accrued within the taxable year on 
166.10 	indebtedness to the extent that the amount does not exceed net investment income, as 
166.11 	defined in section 163(d)(4) of the Internal Revenue Code.  Interest does not include 
166.12 	amounts deducted in computing federal adjusted gross income; and
166.13 	 (4) amounts subtracted from federal taxable income as provided by section 290.01, 
166.14 	subdivision 19b, clauses (10) and , (11), (12), and (13).
166.15 	 In the case of an estate or trust, alternative minimum taxable income must be 
166.16 	computed as provided in section 59(c) of the Internal Revenue Code.
166.17 	 (b) "Investment interest" means investment interest as defined in section 163(d)(3) 
166.18 	of the Internal Revenue Code.
166.19 	 (c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable 
166.20 	income after subtracting the exemption amount determined under subdivision 3.
166.21 	 (d) "Regular tax" means the tax that would be imposed under this chapter (without 
166.22 	regard to this section and section 290.032), reduced by the sum of the nonrefundable 
166.23 	credits allowed under this chapter.
166.24 	 (e) "Net minimum tax" means the minimum tax imposed by this section.

166.25 	EFFECTIVE DATE. This section is effective for tax years beginning after 
166.26 	December 31, 2004.

166.27 	 Sec. 16. Minnesota Statutes 2004, section 290A.03, subdivision 3, is amended to read:
166.28 		 Subd. 3.Income.  (1) "Income" means the sum of the following:
166.29 	 (a) federal adjusted gross income as defined in the Internal Revenue Code; and
166.30 	 (b) the sum of the following amounts to the extent not included in clause (a):
166.31 	 (i) all nontaxable income;
166.32 	 (ii) the amount of a passive activity loss that is not disallowed as a result of section 
166.33 	469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity 
166.34 	loss carryover allowed under section 469(b) of the Internal Revenue Code;
167.1 	 (iii) an amount equal to the total of any discharge of qualified farm indebtedness 
167.2 	of a solvent individual excluded from gross income under section 108(g) of the Internal 
167.3 	Revenue Code;
167.4 	 (iv) cash public assistance and relief;
167.5 	 (v) any pension or annuity (including railroad retirement benefits, all payments 
167.6 	received under the federal Social Security Act, supplemental security income, and veterans 
167.7 	benefits), which was not exclusively funded by the claimant or spouse, or which was 
167.8 	funded exclusively by the claimant or spouse and which funding payments were excluded 
167.9 	from federal adjusted gross income in the years when the payments were made;
167.10 	 (vi) interest received from the federal or a state government or any instrumentality 
167.11 	or political subdivision thereof;
167.12 	 (vii) workers' compensation;
167.13 	 (viii) nontaxable strike benefits;
167.14 	 (ix) the gross amounts of payments received in the nature of disability income or 
167.15 	sick pay as a result of accident, sickness, or other disability, whether funded through 
167.16 	insurance or otherwise;
167.17 	 (x) a lump sum distribution under section 402(e)(3) of the Internal Revenue Code 
167.18 	of 1986, as amended through December 31, 1995;
167.19 	 (xi) contributions made by the claimant to an individual retirement account, 
167.20 	including a qualified voluntary employee contribution; simplified employee pension plan; 
167.21 	self-employed retirement plan; cash or deferred arrangement plan under section 401(k) 
167.22 	of the Internal Revenue Code; or deferred compensation plan under section 457 of the 
167.23 	Internal Revenue Code; and 
167.24 	 (xii) nontaxable scholarship or fellowship grants;
167.25 	 (xiii) the amount of deduction allowed under section 199 of the Internal Revenue 
167.26 	Code; and 
167.27 	 (xiv) the amount of deduction allowed under section 220 or 223 of the Internal 
167.28 	Revenue Code.
167.29 	 In the case of an individual who files an income tax return on a fiscal year basis, the 
167.30 	term "federal adjusted gross income" shall mean federal adjusted gross income reflected 
167.31 	in the fiscal year ending in the calendar year.  Federal adjusted gross income shall not be 
167.32 	reduced by the amount of a net operating loss carryback or carryforward or a capital loss 
167.33 	carryback or carryforward allowed for the year.
167.34 	 (2) "Income" does not include:
167.35 	 (a) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 
167.36 	102;
168.1 	 (b) amounts of any pension or annuity which was exclusively funded by the claimant 
168.2 	or spouse and which funding payments were not excluded from federal adjusted gross 
168.3 	income in the years when the payments were made;
168.4 	 (c) surplus food or other relief in kind supplied by a governmental agency;
168.5 	 (d) relief granted under this chapter;
168.6 	 (e) child support payments received under a temporary or final decree of dissolution 
168.7 	or legal separation; or
168.8 	 (f) restitution payments received by eligible individuals and excludable interest as 
168.9 	defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 
168.10 	2001, Public Law 107-16.
168.11 	 (3) The sum of the following amounts may be subtracted from income:
168.12 	 (a) for the claimant's first dependent, the exemption amount multiplied by 1.4;
168.13 	 (b) for the claimant's second dependent, the exemption amount multiplied by 1.3;
168.14 	 (c) for the claimant's third dependent, the exemption amount multiplied by 1.2;
168.15 	 (d) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;
168.16 	 (e) for the claimant's fifth dependent, the exemption amount; and
168.17 	 (f) if the claimant or claimant's spouse was disabled or attained the age of 65 on 
168.18 	or before December 31 of the year for which the taxes were levied or rent paid, the 
168.19 	exemption amount.
168.20 	 For purposes of this subdivision, the "exemption amount" means the exemption 
168.21 	amount under section 151(d) of the Internal Revenue Code for the taxable year for which 
168.22 	the income is reported.

168.23 	EFFECTIVE DATE. This section is effective for property tax refunds based on 
168.24 	household income for 2004 and thereafter.

168.25 	 Sec. 17. Minnesota Statutes 2004, section 290A.03, subdivision 15, is amended to read:
168.26 		 Subd. 15.Internal revenue code.  "Internal Revenue Code" means the Internal 
168.27 	Revenue Code of 1986, as amended through June 15, 2003 April 15, 2005.

168.28 	EFFECTIVE DATE. This section is effective for property tax refunds based on 
168.29 	property taxes payable on or after December 31, 2004, and rent paid on or after December 
168.30 	31, 2003.

169.1 	 ARTICLE 7
169.2 	 SALES AND USE TAXES

169.3 	 Section 1. Minnesota Statutes 2004, section 16C.03, is amended by adding a 
169.4 	subdivision to read:
169.5 		 Subd. 18.Contracts with foreign vendors. (a) The commissioner and other 
169.6 	agencies to which this section applies and the legislative branch of government shall, 
169.7 	subject to paragraph (d), cancel a contract for goods or services from a vendor or an 
169.8 	affiliate of a vendor or suspend or debar a vendor or an affiliate of a vendor from future 
169.9 	contracts upon notification from the commissioner of revenue that the vendor or an 
169.10 	affiliate of the vendor has not registered to collect the sales and use tax imposed under 
169.11 	chapter 297A on its sales in Minnesota or to a destination in Minnesota.  This subdivision 
169.12 	shall not apply to state colleges and universities, the courts, and any agency in the judicial 
169.13 	branch of government.  For purposes of this subdivision, the term "affiliate" means any 
169.14 	person or entity that is controlled by, or is under common control of, a vendor through 
169.15 	stock ownership or other affiliation.
169.16 	 (b) Beginning January 1, 2006, each vendor or affiliate of a vendor selling goods or 
169.17 	services, subject to tax under chapter 297A, to an agency or the legislature must provide 
169.18 	its Minnesota sales and use tax business identification number, upon request, to show that 
169.19 	the vendor is registered to collect Minnesota sales or use tax.
169.20 	 (c) The commissioner of revenue shall periodically provide to the commissioner 
169.21 	and the legislative branch a list of vendors who have not registered to collect Minnesota 
169.22 	sales and use tax and who are subject to being suspended or debarred as vendors or having 
169.23 	their contracts canceled.
169.24 	 (d) The provisions of this subdivision may be waived by the commissioner or the 
169.25 	legislative branch when the vendor is the single source of such goods or services, in the 
169.26 	event of an emergency, or when it is in the best interests of the state as determined by the 
169.27 	commissioner in consultation with the commissioner of revenue.  Such consultation is not 
169.28 	a disclosure violation under chapter 270B.

169.29 	EFFECTIVE DATE. This section is effective for all contracts entered into after 
169.30 	December 31, 2005.

169.31 	 Sec. 2. Minnesota Statutes 2004, section 289A.38, subdivision 6, is amended to read:
170.1 		 Subd. 6.Omission in excess of 25 percent.  Additional taxes may be assessed 
170.2 	within 6-1/2 years after the due date of the return or the date the return was filed, 
170.3 	whichever is later, if:
170.4 	 (1) the taxpayer omits from gross income an amount properly includable in it that is 
170.5 	in excess of 25 percent of the amount of gross income stated in the return;
170.6 	 (2) the taxpayer omits from a sales, use,or withholding tax return an amount of taxes 
170.7 	in excess of 25 percent of the taxes reported in the return; or
170.8 	 (3) the taxpayer omits from the gross estate assets in excess of 25 percent of the 
170.9 	gross estate reported in the return.

170.10 	EFFECTIVE DATE. This section is effective the day following final enactment.

170.11 	 Sec. 3. Minnesota Statutes 2004, section 289A.38, is amended by adding a subdivision 
170.12 	to read:
170.13 		 Subd. 15.Purchaser filed refund claims. If a purchaser refund claim is filed 
170.14 	under section 289A.50, subdivision 2a, and the basis for the claim is that the purchaser 
170.15 	was improperly charged tax on an improvement to real property or on the purchase of 
170.16 	nontaxable services, sales or use tax may be assessed for the cost of materials used to 
170.17 	make the real property improvement or to perform the nontaxable service.  The assessment 
170.18 	may be made against the person making the improvement to real property or the sale of 
170.19 	nontaxable services, within the period prescribed in subdivision 1, or within one year after 
170.20 	the date of the refund order, whichever is later.

170.21 	EFFECTIVE DATE. This section is effective for purchaser refund claims filed 
170.22 	on or after July 1, 2005.

170.23 	 Sec. 4. Minnesota Statutes 2004, section 289A.40, subdivision 2, is amended to read:
170.24 		 Subd. 2.Bad debt loss.  If a claim relates to an overpayment because of a failure to 
170.25 	deduct a loss due to a bad debt or to a security becoming worthless, the claim is considered 
170.26 	timely if filed within seven years from the date prescribed for the filing of the return.  A 
170.27 	claim relating to an overpayment of taxes under chapter 297A must be filed within 3-1/2 
170.28 	years from the date prescribed for filing the return, plus any extensions granted for filing 
170.29 	the return, but only if filed within the extended time.  The refund or credit is limited to 
170.30 	the amount of overpayment attributable to the loss.  "Bad debt" for purposes of this 
170.31 	subdivision, has the same meaning as that term is used in United States Code, title 26, 
170.32 	section 166, except that for a claim relating to an overpayment of taxes under chapter 
170.33 	297A the following are excluded from the calculation of bad debt:  financing charges 
171.1 	or interest; sales or use taxes charged on the purchase price; uncollectible amounts on 
171.2 	property that remain in the possession of the seller until the full purchase price is paid; 
171.3 	expenses incurred in attempting to collect any debt; and repossessed property.

171.4 	EFFECTIVE DATE. For claims relating to an overpayment of taxes under chapter 
171.5 	297A, this section is effective for sales and purchases made on or after January 1, 2004; 
171.6 	for all other bad debts or claims, this section is effective on or after July 1, 2003.

171.7 	 Sec. 5. Minnesota Statutes 2004, section 289A.40, is amended by adding a subdivision 
171.8 	to read:
171.9 		 Subd. 4.Purchaser filed refund claims. A claim for refund of taxes paid on a 
171.10 	transaction not subject to tax under chapter 297A, where the purchaser may apply directly 
171.11 	to the commissioner under section 289A.50, subdivision 2a, must be filed within 3-1/2 
171.12 	years from the 20th day of the month following the month of the invoice date for the 
171.13 	purchase.

171.14 	EFFECTIVE DATE. This section is effective for claims filed on or after the day 
171.15 	following final enactment.

171.16 	 Sec. 6. Minnesota Statutes 2004, section 289A.40, is amended by adding a subdivision 
171.17 	to read:
171.18 		 Subd. 5.Capital equipment refund claims. A claim for refund for taxes paid 
171.19 	under chapter 297A on capital equipment must be filed within 3-1/2 years from the 20th 
171.20 	day of the month following the month of the invoice date for the purchase of the capital 
171.21 	equipment.  A claim for refund for taxes imposed on capital equipment under section 
171.22 	297A.63 must be filed within 3-1/2 years from the date prescribed for filing the return, 
171.23 	or one year from the date of an order assessing tax under section 289A.37, subdivision 
171.24 	1, upon payment in full of the tax, penalties, and interest shown on the order, whichever 
171.25 	period expires later.

171.26 	EFFECTIVE DATE. This section is effective for claims filed on or after the day 
171.27 	following final enactment.

171.28 	 Sec. 7. Minnesota Statutes 2004, section 297A.61, subdivision 3, is amended to read:
171.29 		 Subd. 3.Sale and purchase.  (a) "Sale" and "purchase" include, but are not limited 
171.30 	to, each of the transactions listed in this subdivision.
171.31 	 (b) Sale and purchase include:
172.1 	 (1) any transfer of title or possession, or both, of tangible personal property, whether 
172.2 	absolutely or conditionally, for a consideration in money or by exchange or barter; and
172.3 	 (2) the leasing of or the granting of a license to use or consume, for a consideration 
172.4 	in money or by exchange or barter, tangible personal property, other than a manufactured 
172.5 	home used for residential purposes for a continuous period of 30 days or more.
172.6 	 (c) Sale and purchase include the production, fabrication, printing, or processing of 
172.7 	tangible personal property for a consideration for consumers who furnish either directly or 
172.8 	indirectly the materials used in the production, fabrication, printing, or processing.
172.9 	 (d) Sale and purchase include the preparing for a consideration of food.  
172.10 	Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited 
172.11 	to, the following:
172.12 	 (1) prepared food sold by the retailer;
172.13 	 (2) soft drinks;
172.14 	 (3) candy; and 
172.15 	 (4) dietary supplements; and 
172.16 	 (5) all food sold through vending machines, except milk.
172.17 	 (e) A sale and a purchase includes the furnishing for a consideration of electricity, 
172.18 	gas, water, or steam for use or consumption within this state.
172.19 	 (f) A sale and a purchase includes the transfer for a consideration of prewritten 
172.20 	computer software whether delivered electronically, by load and leave, or otherwise.
172.21 	 (g) A sale and a purchase includes the furnishing for a consideration of the following 
172.22 	services:
172.23 	 (1) the privilege of admission to places of amusement, recreational areas, or athletic 
172.24 	events, and the making available of amusement devices, tanning facilities, reducing 
172.25 	salons, steam baths, turkish baths, health clubs, and spas or athletic facilities;
172.26 	 (2) lodging and related services by a hotel, rooming house, resort, campground, 
172.27 	motel, or trailer camp and the granting of any similar license to use real property in a 
172.28 	specific facility, other than the renting or leasing of it for a continuous period of 30 days 
172.29 	or more under an enforceable written agreement that may not be terminated without 
172.30 	prior notice;
172.31 	 (3) nonresidential parking services, whether on a contractual, hourly, or other 
172.32 	periodic basis, except for parking at a meter;
172.33 	 (4) the granting of membership in a club, association, or other organization if:
172.34 	 (i) the club, association, or other organization makes available for the use of its 
172.35 	members sports and athletic facilities, without regard to whether a separate charge is 
172.36 	assessed for use of the facilities; and
173.1 	 (ii) use of the sports and athletic facility is not made available to the general public 
173.2 	on the same basis as it is made available to members.
173.3 	 Granting of membership means both onetime initiation fees and periodic membership 
173.4 	dues.  Sports and athletic facilities include golf courses; tennis, racquetball, handball, and 
173.5 	squash courts; basketball and volleyball facilities; running tracks; exercise equipment; 
173.6 	swimming pools; and other similar athletic or sports facilities;
173.7 	 (5) delivery of aggregate materials and concrete block by a third party if the delivery 
173.8 	would be subject to the sales tax if provided by the seller of the aggregate material or 
173.9 	concrete block; and
173.10 	 (6) services as provided in this clause:
173.11 	 (i) laundry and dry cleaning services including cleaning, pressing, repairing, altering, 
173.12 	and storing clothes, linen services and supply, cleaning and blocking hats, and carpet, 
173.13 	drapery, upholstery, and industrial cleaning.  Laundry and dry cleaning services do not 
173.14 	include services provided by coin operated facilities operated by the customer;
173.15 	 (ii) motor vehicle washing, waxing, and cleaning services, including services 
173.16 	provided by coin operated facilities operated by the customer, and rustproofing, 
173.17 	undercoating, and towing of motor vehicles;
173.18 	 (iii) building and residential cleaning, maintenance, and disinfecting and 
173.19 	exterminating services;
173.20 	 (iv) detective, security, burglar, fire alarm, and armored car services; but not 
173.21 	including services performed within the jurisdiction they serve by off-duty licensed peace 
173.22 	officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit 
173.23 	organization for monitoring and electronic surveillance of persons placed on in-home 
173.24 	detention pursuant to court order or under the direction of the Minnesota Department 
173.25 	of Corrections;
173.26 	 (v) pet grooming services;
173.27 	 (vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting 
173.28 	and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor 
173.29 	plant care; tree, bush, shrub, and stump removal, except when performed as part of a land 
173.30 	clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for 
173.31 	public utility lines. Services performed under a construction contract for the installation of 
173.32 	shrubbery, plants, sod, trees, bushes, and similar items are not taxable;
173.33 	 (vii) massages, except when provided by a licensed health care facility or 
173.34 	professional or upon written referral from a licensed health care facility or professional for 
173.35 	treatment of illness, injury, or disease; and
174.1 	 (viii) the furnishing of lodging, board, and care services for animals in kennels and 
174.2 	other similar arrangements, but excluding veterinary and horse boarding services.
174.3 	 In applying the provisions of this chapter, the terms "tangible personal property" 
174.4 	and "sales at retail" include taxable services listed in clause (6), items (i) to (vi) and 
174.5 	(viii), and the provision of these taxable services, unless specifically provided otherwise.  
174.6 	Services performed by an employee for an employer are not taxable.  Services performed 
174.7 	by a partnership or association for another partnership or association are not taxable if 
174.8 	one of the entities owns or controls more than 80 percent of the voting power of the 
174.9 	equity interest in the other entity.  Services performed between members of an affiliated 
174.10 	group of corporations are not taxable. For purposes of the preceding sentence, "affiliated 
174.11 	group of corporations" includes those entities that would be classified as members of an 
174.12 	affiliated group under United States Code, title 26, section 1504, and that are eligible to 
174.13 	file a consolidated tax return for federal income tax purposes.
174.14 	 (h) A sale and a purchase includes the furnishing for a consideration of tangible 
174.15 	personal property or taxable services by the United States or any of its agencies or 
174.16 	instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political 
174.17 	subdivisions.
174.18 	 (i) A sale and a purchase includes the furnishing for a consideration of 
174.19 	telecommunications services, including cable television services and direct satellite 
174.20 	services. Telecommunications services are taxed to the extent allowed under federal law.
174.21 	 (j) A sale and a purchase includes the furnishing for a consideration of installation if 
174.22 	the installation charges would be subject to the sales tax if the installation were provided 
174.23 	by the seller of the item being installed.
174.24 	 (k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer 
174.25 	to a customer when (1) the vehicle is rented by the customer for a consideration, or (2) 
174.26 	the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section 
174.27 	65B.29, subdivision 1, clause (1).

174.28 	EFFECTIVE DATE. This section is effective the day following final enactment 
174.29 	except that the amendment to paragraph (d), clause (5), is effective for sales made after 
174.30 	June 30, 2005, and the amendment to paragraph (g), clause (6)(vi), is effective for sales 
174.31 	and purchases made after October 28, 2002, but for land clearing contracts entered into 
174.32 	after October 28, 2002, no refunds may be claimed under Minnesota Statutes, section 
174.33 	289A.50, for sales taxes collected and remitted to the state on the land clearing contracts.

174.34 	 Sec. 8. Minnesota Statutes 2004, section 297A.61, subdivision 4, is amended to read:
175.1 		 Subd. 4.Retail sale.  (a) A "retail sale" means any sale, lease, or rental for any 
175.2 	purpose,other than resale, sublease, or subrent of items by the purchaser in the normal 
175.3 	course of business as defined in subdivision 21.
175.4 	 (b) A sale of property used by the owner only by leasing it to others or by holding it 
175.5 	in an effort to lease it, and put to no use by the owner other than resale after the lease or 
175.6 	effort to lease, is a sale of property for resale.
175.7 	 (c) A sale of master computer software that is purchased and used to make copies for 
175.8 	sale or lease is a sale of property for resale.
175.9 	 (d) A sale of building materials, supplies, and equipment to owners, contractors, 
175.10 	subcontractors, or builders for the erection of buildings or the alteration, repair, or 
175.11 	improvement of real property is a retail sale in whatever quantity sold, whether the sale is 
175.12 	for purposes of resale in the form of real property or otherwise.
175.13 	 (e) A sale of carpeting, linoleum, or similar floor covering to a person who provides 
175.14 	for installation of the floor covering is a retail sale and not a sale for resale since a sale 
175.15 	of floor covering which includes installation is a contract for the improvement of real 
175.16 	property.
175.17 	 (f) A sale of shrubbery, plants, sod, trees, and similar items to a person who provides 
175.18 	for installation of the items is a retail sale and not a sale for resale since a sale of 
175.19 	shrubbery, plants, sod, trees, and similar items that includes installation is a contract for 
175.20 	the improvement of real property.
175.21 	 (g) A sale of tangible personal property that is awarded as prizes is a retail sale and 
175.22 	is not considered a sale of property for resale.
175.23 	 (h) A sale of tangible personal property utilized or employed in the furnishing or 
175.24 	providing of services under subdivision 3, paragraph (g), clause (1), including, but not 
175.25 	limited to, property given as promotional items, is a retail sale and is not considered a 
175.26 	sale of property for resale.
175.27 	 (i) A sale of tangible personal property used in conducting lawful gambling under 
175.28 	chapter 349 or the state lottery under chapter 349A, including, but not limited to, property 
175.29 	given as promotional items, is a retail sale and is not considered a sale of property for 
175.30 	resale.
175.31 	 (j) A sale of machines, equipment, or devices that are used to furnish, provide, or 
175.32 	dispense goods or services, including, but not limited to, coin-operated devices, is a retail 
175.33 	sale and is not considered a sale of property for resale.
175.34 	 (k) In the case of a lease, a retail sale occurs (1) when an obligation to make a lease 
175.35 	payment becomes due under the terms of the agreement or the trade practices of the 
175.36 	lessor or (2) in the case of a lease of a motor vehicle, as defined in section 297B.01, 
176.1 	subdivision 5, but excluding vehicles with a manufacturer's gross vehicle weight rating 
176.2 	greater than 11,000 pounds and rentals of vehicles for not more than 28 days, at the time 
176.3 	the lease is executed.
176.4 	 (l) In the case of a conditional sales contract, a retail sale occurs upon the transfer of 
176.5 	title or possession of the tangible personal property.

176.6 	EFFECTIVE DATE. This section is effective the day following final enactment, 
176.7 	except that the amendments to paragraph (k) are effective for leases entered into after 
176.8 	September 30, 2005.

176.9 	 Sec. 9. Minnesota Statutes 2004, section 297A.61, is amended by adding a subdivision 
176.10 	to read:
176.11 		 Subd. 37.Personal rapid transit system. "Personal rapid transit system" means a 
176.12 	transportation system of small, computer-controlled vehicles, transporting one to three 
176.13 	passengers on elevated guideways in a transportation network operating on demand and 
176.14 	nonstop directly to any stations in the network.

176.15 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
176.16 	June 30, 2005.

176.17 	 Sec. 10. Minnesota Statutes 2004, section 297A.64, subdivision 4, is amended to read:
176.18 		 Subd. 4.Exemptions.  (a) The tax and the fee imposed by this section do not apply 
176.19 	to a lease or rental of (1) a vehicle to be used by the lessee to provide a licensed taxi 
176.20 	service; (2) a hearse or limousine used in connection with a burial or funeral service; or 
176.21 	(3) a van designed or adapted primarily for transporting property rather than passengers. 
176.22 	The tax and the fee imposed under this section do not apply when the lease or rental of a 
176.23 	vehicle is exempt from the tax imposed under section 297A.62, subdivision 1.
176.24 	 (b) The lessor may elect not to charge the fee imposed in subdivision 2 if in the 
176.25 	previous calendar year the lessor had no more than 20 vehicles available for lease that 
176.26 	would have been subject to tax under this section, or no more than $50,000 in gross 
176.27 	receipts that would have been subject to tax under this section.

176.28 	EFFECTIVE DATE. This section is effective the day following final enactment.

176.29 	 Sec. 11. Minnesota Statutes 2004, section 297A.668, subdivision 1, is amended to read:
176.30 		 Subdivision 1. applicability.  The provisions of this section apply regardless of the 
176.31 	characterization of a product as tangible personal property, a digital good, or a service; but 
176.32 	do not apply to telecommunications services,or the sales of motor vehicles, watercraft, 
177.1 	aircraft, modular homes, manufactured homes, or mobile homes.  These provisions only 
177.2 	apply to determine a seller's obligation to pay or collect and remit a sales or use tax with 
177.3 	respect to the seller's sale of a product.  These provisions do not affect the obligation of a 
177.4 	seller as purchaser to remit tax on the use of the product.

177.5 	EFFECTIVE DATE. This section is effective the day following final enactment.

177.6 	 Sec. 12. Minnesota Statutes 2004, section 297A.668, subdivision 5, is amended to read:
177.7 		 Subd. 5.Transportation equipment.  (a) The retail sale, including lease or rental, 
177.8 	of transportation equipment shall be sourced the same as a retail sale in accordance 
177.9 	with the provisions of subdivision 2, notwithstanding the exclusion of lease or rental in 
177.10 	subdivision 2.
177.11 	 (b) "Transportation equipment" means any of the following:
177.12 	 (1) locomotives and railcars that are utilized for the carriage of persons or property 
177.13 	in interstate commerce; and/or 
177.14 	 (2) trucks and truck-tractors with a gross vehicle weight rating (GVWR) of 10,001 
177.15 	pounds or greater, trailers, semitrailers, or passenger buses that are:
177.16 	 (i) registered through the international registration plan; and
177.17 	 (ii) operated under authority of a carrier authorized and certified by the United States 
177.18 	Department of Transportation or another federal authority to engage in the carriage of 
177.19 	persons or property in interstate commerce;
177.20 	 (3) aircraft that are operated by air carriers authorized and certificated by the United 
177.21 	States Department of Transportation or another federal or a foreign authority to engage in 
177.22 	the carriage of persons or property in interstate commerce; or 
177.23 	 (4) containers designed for use on and component parts attached or secured on the 
177.24 	transportation equipment described in items (1) through (3).

177.25 	EFFECTIVE DATE. This section is effective for sales and purchases made on 
177.26 	or after January 1, 2004.

177.27 	 Sec. 13. Minnesota Statutes 2004, section 297A.67, subdivision 2, is amended to read:
177.28 		 Subd. 2.Food and food ingredients. Except as otherwise provided in this 
177.29 	subdivision,food and food ingredients are exempt.  For purposes of this subdivision, "food" 
177.30 	and "food ingredients" mean substances, whether in liquid, concentrated, solid, frozen, 
177.31 	dried, or dehydrated form, that are sold for ingestion or chewing by humans and are 
177.32 	consumed for their taste or nutritional value.  Food and food ingredients exempt under this 
177.33 	subdivision do not include candy, soft drinks, food sold through vending machines, dietary 
178.1 	supplements,and prepared foods.  Food and food ingredients do not include alcoholic 
178.2 	beverages, dietary supplements,and tobacco.  For purposes of this subdivision, "alcoholic 
178.3 	beverages" means beverages that are suitable for human consumption and contain one-half 
178.4 	of one percent or more of alcohol by volume.  For purposes of this subdivision, "tobacco" 
178.5 	means cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco.  
178.6 	For purposes of this subdivision, "dietary supplements" means any product, other than 
178.7 	tobacco, intended to supplement the diet that:
178.8 	 (1) contains one or more of the following dietary ingredients:
178.9 	 (i) a vitamin;
178.10 	 (ii) a mineral;
178.11 	 (iii) an herb or other botanical;
178.12 	 (iv) an amino acid;
178.13 	 (v) a dietary substance for use by humans to supplement the diet by increasing the 
178.14 	total dietary intake; and
178.15 	 (vi) a concentrate, metabolite, constituent, extract, or combination of any ingredient 
178.16 	described in items (i) to (v);
178.17 	 (2) is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid 
178.18 	form, or if not intended for ingestion in such form, is not represented as conventional food 
178.19 	and is not represented for use as a sole item of a meal or of the diet; and
178.20 	 (3) is required to be labeled as a dietary supplement, identifiable by the supplement 
178.21 	facts box found on the label and as required pursuant to Code of Federal Regulations, 
178.22 	title 21, section 101.36.

178.23 	EFFECTIVE DATE. This section is effective for sales made on or after the day 
178.24 	following final enactment.

178.25 	 Sec. 14. Minnesota Statutes 2004, section 297A.67, subdivision 7, is amended to read:
178.26 		 Subd. 7.medicines drugs; medical devices.  (a) Prescribed Sales of the following 
178.27 	drugs and medical devices are exempt:
178.28 	 (1) drugs and medicine, and insulin, intended for internal or external use, in the 
178.29 	cure, mitigation, treatment, or prevention of illness or disease in human beings are 
178.30 	exempt. "Prescribed drugs and medicine" includes use, including  over-the-counter drugs 
178.31 	or medicine prescribed by a licensed health care professional.
178.32 	 (b) Nonprescription medicines consisting principally (determined by the weight 
178.33 	of all ingredients) of analgesics that are approved by the United States Food and Drug 
178.34 	Administration for internal use by human beings are exempt.  For purposes of this 
178.35 	subdivision, "principally" means greater than 50 percent analgesics by weight.
179.1 	 (c) Prescription glasses, hospital beds, fever thermometers, reusable ;
179.2 	 (2) single-use finger-pricking devices for the extraction of blood, blood glucose 
179.3 	monitoring machines,and other single-use devices and single-use diagnostic agents used 
179.4 	in diagnosing, monitoring, or treating diabetes, and therapeutic and ;
179.5 	 (3) insulin and medical oxygen for human use, regardless of whether prescribed 
179.6 	or sold over the counter;
179.7 	 (4) prosthetic devices are exempt.  "Therapeutic devices" means devices that are 
179.8 	attached or applied to the human body to cure, heal, or alleviate injury, illness, or disease, 
179.9 	either directly or by administering a curative agent.  "Prosthetic devices" means devices 
179.10 	that replace injured, diseased, or missing parts of the human body, either temporarily or 
179.11 	permanently ;
179.12 	 (5) durable medical equipment for home use only;
179.13 	 (6) mobility enhancing equipment; and 
179.14 	 (7) prescription corrective eyeglasses.
179.15 	 (b) For purposes of this subdivision:
179.16 	 (1) "Drug" means a compound, substance, or preparation, and any component of 
179.17 	a compound, substance, or preparation, other than food and food ingredients, dietary 
179.18 	supplements, or alcoholic beverages that is:
179.19 	 (i) recognized in the official United States Pharmacopoeia, official Homeopathic 
179.20 	Pharmacopoeia of the United States, or official National Formulary, and supplement 
179.21 	to any of them;
179.22 	 (ii) intended for use in the diagnosis, cure, mitigation, treatment, or prevention 
179.23 	of disease; or 
179.24 	 (iii) intended to affect the structure or any function of the body.
179.25 	 (2) "Durable medical equipment" means equipment, including repair and 
179.26 	replacement parts, but not including mobility enhancing equipment, that:
179.27 	 (i) can withstand repeated use;
179.28 	 (ii) is primarily and customarily used to serve a medical purpose;
179.29 	 (iii) generally is not useful to a person in the absence of illness or injury; and 
179.30 	 (iv) is not worn in or on the body.
179.31 	 (3) "Mobility enhancing equipment" means equipment, including repair and 
179.32 	replacement parts, but not including durable medical equipment, that:
179.33 	 (i) is primarily and customarily used to provide or increase the ability to move from 
179.34 	one place to another and that is appropriate for use either in a home or a motor vehicle;
179.35 	 (ii) is not generally used by persons with normal mobility; and 
180.1 	 (iii) does not include any motor vehicle or equipment on a motor vehicle normally 
180.2 	provided by a motor vehicle manufacturer.
180.3 	 (4) "Over-the-counter drug" means a drug that contains a label that identifies the 
180.4 	product as a drug as required by Code of Federal Regulations, title 21, section 201.66.  The 
180.5 	label must include a "drug facts" panel or a statement of the active ingredients with a list of 
180.6 	those ingredients contained in the compound, substance, or preparation.  Over-the-counter 
180.7 	drugs do not include grooming and hygiene products, regardless of whether they otherwise 
180.8 	meet the definition.  "Grooming and hygiene products" are soaps, cleaning solutions, 
180.9 	shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and sunscreens.
180.10 	 (5) "Prescribed" and "prescription" means a direction in the form of an order, 
180.11 	formula, or recipe issued in any form of oral, written, electronic, or other means of 
180.12 	transmission by a duly licensed health care professional.
180.13 	 (6) "Prosthetic device" means a replacement, corrective, or supportive device, 
180.14 	including repair and replacement parts, worn on or in the body to:
180.15 	 (i) artificially replace a missing portion of the body;
180.16 	 (ii) prevent or correct physical deformity or malfunction; or 
180.17 	 (iii) support a weak or deformed portion of the body.
180.18 	 Prosthetic device does not include corrective eyeglasses.

180.19 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
180.20 	June 30, 2005.

180.21 	 Sec. 15. Minnesota Statutes 2004, section 297A.67, subdivision 9, is amended to read:
180.22 		 Subd. 9.Baby products. (a) Products such as lotion, creams, ointments, oil, 
180.23 	powder, or shampoo, and other articles designed for application to the hair or skin of 
180.24 	babies are exempt.
180.25 	 (b) Baby bottles and nipples, pacifiers, teething rings, thumb sucking 
180.26 	preventatives,and infant syringes are exempt.

180.27 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
180.28 	June 30, 2005.

180.29 	 Sec. 16. Minnesota Statutes 2004, section 297A.67, subdivision 29, is amended to read:
180.30 		 Subd. 29.solar energy efficient products. (a) A residential lighting fixture or a 
180.31 	compact fluorescent bulb is exempt if it has an energy star label.
180.32 	 (b) The following products are exempt if they have an energyguide label that 
180.33 	indicates that the product meets or exceeds the standards listed below:
181.1 	 (1) an electric heat pump hot water heater with an energy factor of at least 1.9;
181.2 	 (2) a natural gas water heater with an energy factor of at least 0.62;
181.3 	 (3) a propane gas or fuel oil water heater with an energy factor of at least 0.62;
181.4 	 (4) a natural gas furnace with an annual fuel utilization efficiency greater than 92 
181.5 	percent; and 
181.6 	 (5) a propane gas or fuel oil furnace with an annual fuel utilization efficiency 
181.7 	greater than 92 percent.
181.8 	 (c) A photovoltaic device solar energy system, as defined in section 216C.06, 
181.9 	subdivision 17,is exempt. For purposes of this subdivision, "photovoltaic device" means 
181.10 	a solid-state electrical device, such as a solar module, that converts light directly into 
181.11 	direct current electricity of voltage-current characteristics that are a function of the 
181.12 	characteristics of the light source and the materials in and design of the device. A "solar 
181.13 	module" is a photovoltaic device that produces a specified power output under defined test 
181.14 	conditions, usually composed of groups of solar cells connected in series, in parallel, or 
181.15 	in series-parallel combinations.
181.16 	 (d) For purposes of this subdivision, "energy star label" means the label granted 
181.17 	to certain products that meet United States Environmental Protection Agency and 
181.18 	United States Department of Energy criteria for energy efficiency.  For purposes of this 
181.19 	subdivision, "energyguide label" means the label that the United States Federal Trade 
181.20 	Commissioner requires manufacturers to apply to certain appliances under United States 
181.21 	Code, title 16, part 305.

181.22 	EFFECTIVE DATE. This section is effective for sales and purchases made on 
181.23 	or after August 1, 2005.

181.24 	 Sec. 17. Minnesota Statutes 2004, section 297A.67, is amended by adding a 
181.25 	subdivision to read:
181.26 		 Subd. 32.Cigarettes. Cigarettes upon which a tax has been imposed under section 
181.27 	297F.25 are exempt.

181.28 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
181.29 	July 31, 2005.

181.30 	 Sec. 18. Minnesota Statutes 2004, section 297A.68, subdivision 2, is amended to read:
181.31 		 Subd. 2.Materials consumed in industrial production.  (a) Materials stored, used, 
181.32 	or consumed in industrial production of personal property intended to be sold ultimately at 
181.33 	retail are exempt, whether or not the item so used becomes an ingredient or constituent 
182.1 	part of the property produced. Materials that qualify for this exemption include, but 
182.2 	are not limited to, the following:
182.3 	 (1) chemicals, including chemicals used for cleaning food processing machinery 
182.4 	and equipment;
182.5 	 (2) materials, including chemicals, fuels, and electricity purchased by persons 
182.6 	engaged in industrial production to treat waste generated as a result of the production 
182.7 	process;
182.8 	 (3) fuels, electricity, gas, and steam used or consumed in the production process, 
182.9 	except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt 
182.10 	if (i) it is in excess of the average climate control or lighting for the production area, and 
182.11 	(ii) it is necessary to produce that particular product;
182.12 	 (4) petroleum products and lubricants;
182.13 	 (5) packaging materials, including returnable containers used in packaging food 
182.14 	and beverage products;
182.15 	 (6) accessory tools, equipment, and other items that are separate detachable units 
182.16 	with an ordinary useful life of less than 12 months used in producing a direct effect upon 
182.17 	the product; and
182.18 	 (7) the following materials, tools, and equipment used in metalcasting:  crucibles, 
182.19 	thermocouple protection sheaths and tubes, stalk tubes, refractory materials, molten metal 
182.20 	filters and filter boxes, degassing lances, and base blocks.
182.21 	 (b) This exemption does not include:
182.22 	 (1) machinery, equipment, implements, tools, accessories, appliances, contrivances 
182.23 	and furniture and fixtures, except those listed in paragraph (a), clause (6); and
182.24 	 (2) petroleum and special fuels used in producing or generating power for propelling 
182.25 	ready-mixed concrete trucks on the public highways of this state.
182.26 	 (c) Industrial production includes, but is not limited to, research, development, 
182.27 	design or production of any tangible personal property, manufacturing, processing (other 
182.28 	than by restaurants and consumers) of agricultural products (whether vegetable or animal), 
182.29 	commercial fishing, refining, smelting, reducing, brewing, distilling, printing, mining, 
182.30 	quarrying, lumbering, generating electricity, the production of road building materials, 
182.31 	and the research, development, design, or production of computer software.  Industrial 
182.32 	production does not include painting, cleaning, repairing or similar processing of property 
182.33 	except as part of the original manufacturing process.
182.34 	 (d) Industrial production does not include:
182.35 	 (1) the furnishing of services listed in section 297A.61, subdivision 3, paragraph (g), 
182.36 	clause (6), items (i) to (vi) and (viii); or 
183.1 	 (2) the transportation, transmission, or distribution of petroleum, liquefied gas, 
183.2 	natural gas, water, or steam, in, by, or through pipes, lines, tanks, mains, or other means of 
183.3 	transporting those products.  For purposes of this paragraph, "transportation, transmission, 
183.4 	or distribution" does not include blending of petroleum or biodiesel fuel as defined 
183.5 	in section 239.77.

183.6 	EFFECTIVE DATE. This section is effective the day following final enactment, 
183.7 	except that the provision in paragraph (d) is effective for sales and purchases made after 
183.8 	June 30, 2005.

183.9 	 Sec. 19. Minnesota Statutes 2004, section 297A.68, subdivision 5, is amended to read:
183.10 		 Subd. 5.Capital equipment.  (a) Capital equipment is exempt.  The tax must be 
183.11 	imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and 
183.12 	then refunded in the manner provided in section 297A.75, unless:
183.13 	 (1) the purchaser qualifies as a small business as defined in section 645.445, 
183.14 	subdivision 2, paragraphs (a) to (c);
183.15 	 (2) the business is located in the state; and 
183.16 	 (3) the purchaser provides an exemption certificate as required in section 297A.72, 
183.17 	subdivision 3.
183.18 	 "Capital equipment" means machinery and equipment purchased or leased, and used 
183.19 	in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining, 
183.20 	or refining tangible personal property to be sold ultimately at retail if the machinery and 
183.21 	equipment are essential to the integrated production process of manufacturing, fabricating, 
183.22 	mining, or refining.  Capital equipment also includes machinery and equipment used 
183.23 	primarily to electronically transmit results retrieved by a customer of an on-line 
183.24 	computerized data retrieval system.
183.25 	 (b) Capital equipment includes, but is not limited to:
183.26 	 (1) machinery and equipment used to operate, control, or regulate the production 
183.27 	equipment;
183.28 	 (2) machinery and equipment used for research and development, design, quality 
183.29 	control, and testing activities;
183.30 	 (3) environmental control devices that are used to maintain conditions such as 
183.31 	temperature, humidity, light, or air pressure when those conditions are essential to and are 
183.32 	part of the production process;
183.33 	 (4) materials and supplies used to construct and install machinery or equipment;
183.34 	 (5) repair and replacement parts, including accessories, whether purchased as spare 
183.35 	parts, repair parts, or as upgrades or modifications to machinery or equipment;
184.1 	 (6) materials used for foundations that support machinery or equipment;
184.2 	 (7) materials used to construct and install special purpose buildings used in the 
184.3 	production process;
184.4 	 (8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed 
184.5 	as part of the delivery process regardless if mounted on a chassis, repair parts for 
184.6 	ready-mixed concrete trucks,and leases of ready-mixed concrete trucks; and
184.7 	 (9) machinery or equipment used for research, development, design, or production 
184.8 	of computer software.
184.9 	 (c) Capital equipment does not include the following:
184.10 	 (1) motor vehicles taxed under chapter 297B;
184.11 	 (2) machinery or equipment used to receive or store raw materials;
184.12 	 (3) building materials, except for materials included in paragraph (b), clauses (6) 
184.13 	and (7);
184.14 	 (4) machinery or equipment used for nonproduction purposes, including, but not 
184.15 	limited to, the following:  plant security, fire prevention, first aid, and hospital stations; 
184.16 	support operations or administration; pollution control; and plant cleaning, disposal of 
184.17 	scrap and waste, plant communications, space heating, cooling, lighting, or safety;
184.18 	 (5) farm machinery and aquaculture production equipment as defined by section 
184.19 	297A.61, subdivisions 12 and 13;
184.20 	 (6) machinery or equipment purchased and installed by a contractor as part of an 
184.21 	improvement to real property; or 
184.22 	 (7) machinery and equipment used by restaurants in the furnishing, preparing, or 
184.23 	serving of prepared foods as defined in section 297A.61, subdivision 31;
184.24 	 (8) machinery and equipment used to furnish the services listed in section 297A.61, 
184.25 	subdivision 3, paragraph (g), clause (6), items (i) to (vi) and (viii);
184.26 	 (9) machinery or equipment used in the transportation, transmission, or distribution 
184.27 	of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines, 
184.28 	tanks, mains, or other means of transporting those products. This clause does not apply to 
184.29 	machinery or equipment used to blend petroleum or biodiesel fuel as defined in section 
184.30 	239.77; or 
184.31 	 (10) any other item that is not essential to the integrated process of manufacturing, 
184.32 	fabricating, mining, or refining.
184.33 	 (d) For purposes of this subdivision:
184.34 	 (1) "Equipment" means independent devices or tools separate from machinery but 
184.35 	essential to an integrated production process, including computers and computer software, 
184.36 	used in operating, controlling, or regulating machinery and equipment; and any subunit or 
185.1 	assembly comprising a component of any machinery or accessory or attachment parts of 
185.2 	machinery, such as tools, dies, jigs, patterns, and molds.
185.3 	 (2) "Fabricating" means to make, build, create, produce, or assemble components or 
185.4 	property to work in a new or different manner.
185.5 	 (3) "Integrated production process" means a process or series of operations through 
185.6 	which tangible personal property is manufactured, fabricated, mined, or refined.  For 
185.7 	purposes of this clause, (i) manufacturing begins with the removal of raw materials 
185.8 	from inventory and ends when the last process prior to loading for shipment has been 
185.9 	completed; (ii) fabricating begins with the removal from storage or inventory of the 
185.10 	property to be assembled, processed, altered, or modified and ends with the creation 
185.11 	or production of the new or changed product; (iii) mining begins with the removal of 
185.12 	overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and 
185.13 	ends when the last process before stockpiling is completed; and (iv) refining begins with 
185.14 	the removal from inventory or storage of a natural resource and ends with the conversion 
185.15 	of the item to its completed form.
185.16 	 (4) "Machinery" means mechanical, electronic, or electrical devices, including 
185.17 	computers and computer software, that are purchased or constructed to be used for the 
185.18 	activities set forth in paragraph (a), beginning with the removal of raw materials from 
185.19 	inventory through completion of the product, including packaging of the product.
185.20 	 (5) "Machinery and equipment used for pollution control" means machinery and 
185.21 	equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity 
185.22 	described in paragraph (a).
185.23 	 (6) "Manufacturing" means an operation or series of operations where raw materials 
185.24 	are changed in form, composition, or condition by machinery and equipment and which 
185.25 	results in the production of a new article of tangible personal property.  For purposes of 
185.26 	this subdivision, "manufacturing" includes the generation of electricity or steam to be 
185.27 	sold at retail.
185.28 	 (7) "Mining" means the extraction of minerals, ores, stone, or peat.
185.29 	 (8) "On-line data retrieval system" means a system whose cumulation of information 
185.30 	is equally available and accessible to all its customers.
185.31 	 (9) "Primarily" means machinery and equipment used 50 percent or more of the time 
185.32 	in an activity described in paragraph (a).
185.33 	 (10) "Refining" means the process of converting a natural resource to an intermediate 
185.34 	or finished product, including the treatment of water to be sold at retail.

185.35 	EFFECTIVE DATE. This section is effective the day following final enactment, 
185.36 	except that the second sentence in paragraph (a) is effective for sales and purchases made 
186.1 	after December 31, 2005, and paragraph (c), clause (9), is effective for sales and purchases 
186.2 	made after June 30, 2005.

186.3 	 Sec. 20. Minnesota Statutes 2004, section 297A.68, subdivision 28, is amended to read:
186.4 		 Subd. 28.Medical supplies.  Medical supplies purchased by a licensed health care 
186.5 	facility or licensed health care professional to provide medical treatment to residents or 
186.6 	patients are exempt.  The exemption does not apply to durable  medical equipment or 
186.7 	components of durable medical equipment, laboratory supplies, radiological supplies, and 
186.8 	other items used in providing medical services.  For purposes of this subdivision, "medical 
186.9 	supplies" means adhesive and nonadhesive bandages, gauze pads and strips, cotton 
186.10 	applicators, antiseptics, nonprescription drugs,eye solution, and other similar supplies 
186.11 	used directly on the resident or patient in providing medical services.

186.12 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
186.13 	June 30, 2005.

186.14 	 Sec. 21. Minnesota Statutes 2004, section 297A.68, subdivision 35, is amended to read:
186.15 		 Subd. 35.Telecommunications equipment.  (a) Telecommunications machinery 
186.16 	and equipment purchased or leased for use directly by a telecommunications service 
186.17 	provider primarily in the provision of telecommunications services that are ultimately to 
186.18 	be sold at retail are exempt, regardless of whether purchased by the owner, a contractor, 
186.19 	or a subcontractor.
186.20 	 (b) For purposes of this subdivision, "telecommunications machinery and 
186.21 	equipment" includes, but is not limited to:
186.22 	 (1) machinery, equipment, and fixtures utilized in receiving, initiating, 
186.23 	amplifying, processing, transmitting, retransmitting, recording, switching, or monitoring 
186.24 	telecommunications services, such as computers, transformers, amplifiers, routers, 
186.25 	bridges, repeaters, multiplexers, and other items performing comparable functions;
186.26 	 (2) machinery, equipment, and fixtures used in the transportation of 
186.27 	telecommunications services, radio transmitters and receivers, satellite equipment, 
186.28 	microwave equipment, and other transporting media, but not wire, cable, fiber, poles, 
186.29 	or conduit;
186.30 	 (3) ancillary machinery, equipment, and fixtures that regulate, control, protect, or 
186.31 	enable the machinery in clauses (1) and (2) to accomplish its intended function, such as 
186.32 	auxiliary power supply, test equipment, towers, heating, ventilating, and air conditioning 
186.33 	equipment necessary to the operation of the telecommunications equipment; and software 
186.34 	necessary to the operation of the telecommunications equipment; and
187.1 	 (4) repair and replacement parts, including accessories, whether purchased as spare 
187.2 	parts, repair parts, or as upgrades or modifications to qualified machinery or equipment.
187.3 	 (c) For purposes of this subdivision, "telecommunications services" means 
187.4 	telecommunications services as defined in section 297A.61, subdivision 24, paragraph 
187.5 	paragraphs (a), only  (c), and (d).

187.6 	EFFECTIVE DATE. This section is effective the day following final enactment.

187.7 	 Sec. 22. Minnesota Statutes 2004, section 297A.68, subdivision 39, is amended to read:
187.8 		 Subd. 39.Preexisting bids or contracts.  (a) The sale of tangible personal property 
187.9 	or services is exempt from tax or a tax rate increase for a period of six months from 
187.10 	the effective date of the law change that results in the imposition of the tax or the tax 
187.11 	rate increase under this chapter if:
187.12 	 (1) the act imposing the tax or increasing the tax rate  does not have transitional 
187.13 	effective date language for existing construction contracts and construction bids; and
187.14 	 (2) the requirements of paragraph (b) are met.
187.15 	 (b) A sale is tax exempt under paragraph (a) if it meets the requirements of either 
187.16 	clause (1) or (2):
187.17 	 (1) For a construction contract:
187.18 	 (i) the goods or services sold must be used for the performance of a bona fide written 
187.19 	lump sum or fixed price construction contract;
187.20 	 (ii) the contract must be entered into before the date the goods or services become 
187.21 	subject to the sales tax or the tax rate was increased;
187.22 	 (iii) the contract must not provide for allocation of future taxes; and
187.23 	 (iv) for each qualifying contract the contractor must give the seller documentation 
187.24 	of the contract on which an exemption is to be claimed.
187.25 	 (2) For a construction bid:
187.26 	 (i) the goods or services sold must be used pursuant to an obligation of a bid or bids;
187.27 	 (ii) the bid or bids must be submitted and accepted before the date the goods or 
187.28 	services became subject to the sales tax or the tax rate was increased;
187.29 	 (iii) the bid or bids must not be able to be withdrawn, modified, or changed without 
187.30 	forfeiting a bond; and
187.31 	 (iv) for each qualifying bid, the contractor must give the seller documentation of the 
187.32 	bid on which an exemption is to be claimed.

187.33 	EFFECTIVE DATE. This section is effective the day following final enactment.

188.1 	 Sec. 23. Minnesota Statutes 2004, section 297A.68, is amended by adding a 
188.2 	subdivision to read:
188.3 		 Subd. 40.Land clearing. Tree, bush, shrub, and stump removal are exempt when 
188.4 	sold to contractors or subcontractors as part of a land clearing contract.  For purposes 
188.5 	of this subdivision, "land clearing contract" means a contract for the removal of trees, 
188.6 	bushes, and shrubs, including the removal of roots and stumps, to develop a site.  This 
188.7 	exemption does not apply to land clearing of a portion of a site to allow for remodeling, 
188.8 	improvement, or expansion of an existing structure.

188.9 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
188.10 	October 28, 2002, but for land clearing contracts entered into after October 28, 2002, 
188.11 	no refunds may be claimed under Minnesota Statutes, section 289A.50, for sales taxes 
188.12 	collected and remitted to the state on the land clearing contracts.

188.13 	 Sec. 24. Minnesota Statutes 2004, section 297A.68, is amended by adding a 
188.14 	subdivision to read:
188.15 		 Subd. 41.Personal rapid transit system. (a) Machinery, equipment, and supplies 
188.16 	purchased or leased, and used by the purchaser or lessee in this state directly in the 
188.17 	provision of a personal rapid transit system as defined in section 297A.61, subdivision 
188.18 	37, which provides service to the public on a regular and continuing basis, are exempt, 
188.19 	provided that the system is operated independent of any government subsidies. Machinery, 
188.20 	equipment, and supplies that qualify for this exemption include, but are not limited to, 
188.21 	the following:
188.22 	 (1) vehicles, guideways, and related parts used directly in the transit system;
188.23 	 (2) computers and equipment used primarily for operating, controlling, and 
188.24 	regulating the system;
188.25 	 (3) machinery, equipment, furniture, and fixtures necessary for the functioning 
188.26 	of system stations;
188.27 	 (4) machinery, equipment, implements, tools, and supplies used to maintain vehicles, 
188.28 	guideways, and stations; and 
188.29 	 (5) electricity and other fuels used in the provision of the transit service, including 
188.30 	heating, cooling, and lighting of system stations.
188.31 	 (b) This exemption does not include machinery, equipment, and supplies used for 
188.32 	nonproduction purposes such as operations support and administration.

188.33 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
188.34 	June 30, 2005.

189.1 	 Sec. 25. Minnesota Statutes 2004, section 297A.70, subdivision 10, is amended to read:
189.2 		 Subd. 10.Nonprofit tickets or admissions.  (a) Tickets or admissions to an event 
189.3 	are exempt if all the gross receipts are recorded as such, in accordance with generally 
189.4 	accepted accounting principles, on the books of one or more organizations whose primary 
189.5 	mission is to provide an opportunity for citizens of the state to participate in the creation, 
189.6 	performance, or appreciation of the arts, and provided that each organization is:
189.7 	 (1) an organization described in section 501(c)(3) of the Internal Revenue Code in 
189.8 	which voluntary contributions make up at least the following percent of the organization's 
189.9 	annual revenue in its most recently completed 12-month fiscal year, or in the current year 
189.10 	if the organization has not completed a 12-month fiscal year:
189.11 	 (i) for sales made after July 31, 2001, and before July 1, 2002, for the organization's 
189.12 	fiscal year completed in calendar year 2000, three percent;
189.13 	 (ii) for sales made on or after July 1, 2002, and on or before June 30, 2003, for the 
189.14 	organization's fiscal year completed in calendar year 2001, three percent;
189.15 	 (iii) for sales made on or after July 1, 2003, and on or before June 30, 2004, for the 
189.16 	organization's fiscal year completed in calendar year 2002, four percent; and
189.17 	 (iv) for sales made in each 12-month period, beginning on July 1, 2004, and each 
189.18 	subsequent year, for the organization's fiscal year completed in the preceding calendar 
189.19 	year, five percent;
189.20 	 (2) a municipal board that promotes cultural and arts activities; or
189.21 	 (3) the University of Minnesota, a state college and university, or a private nonprofit 
189.22 	college or university  provided that the event is held at a university-owned facility owned 
189.23 	by the educational institution holding the event.
189.24 	 The exemption only applies if the entire proceeds, after reasonable expenses, are used 
189.25 	solely to provide opportunities for citizens of the state to participate in the creation, 
189.26 	performance, or appreciation of the arts.
189.27 	 (b) Tickets or admissions to the premises of the Minnesota Zoological Garden are 
189.28 	exempt, provided that the exemption under this paragraph does not apply to tickets or 
189.29 	admissions to performances or events held on the premises unless the performance or 
189.30 	event is sponsored and conducted exclusively by the Minnesota Zoological Board or 
189.31 	employees of the Minnesota Zoological Garden.

189.32 	EFFECTIVE DATE. This section is effective for tickets and admissions to events 
189.33 	held on or after July 1, 2005, but does not apply to events for which sales of tickets or 
189.34 	admissions were made prior to July 1, 2005.

190.1 	 Sec. 26. Minnesota Statutes 2004, section 297A.71, subdivision 12, is amended to read:
190.2 		 Subd. 12.Chair lifts, ramps, elevators. Chair lifts, ramps, and Elevators and 
190.3 	building materials used to install or construct them chair lifts, ramps, and elevators are 
190.4 	exempt, if they are authorized by a physician and installed in or attached to the owner's 
190.5 	homestead.  The tax must be imposed and collected as if the rate under section 297A.62, 
190.6 	subdivision 1, applied and then refunded in the manner provided in section 297A.75.

190.7 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
190.8 	June 30, 2005.

190.9 	 Sec. 27. Minnesota Statutes 2004, section 297A.71, is amended by adding a 
190.10 	subdivision to read:
190.11 		 Subd. 33.Personal rapid transit system. Materials, equipment, and supplies 
190.12 	used in the construction, expansion, or improvement of a personal rapid transit system 
190.13 	as defined in section 297A.61, subdivision 37, which provides service to the public on a 
190.14 	regular and continuing basis, are exempt, provided that the system is operated independent 
190.15 	of any government subsidies.

190.16 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
190.17 	June 30, 2005.

190.18 	 Sec. 28. Minnesota Statutes 2004, section 297A.72, is amended by adding a 
190.19 	subdivision to read:
190.20 		 Subd. 3.Exemption certificate for small businesses. A small business, as defined 
190.21 	in section 645.455, subdivision 2, paragraphs (a) to (c), that is located in the state may 
190.22 	apply to the commissioner for an exemption certificate to purchase exempt capital 
190.23 	equipment without paying the sales tax at the time of the sale.  The business must provide 
190.24 	information required by the commissioner to verify that it meets the definition of small 
190.25 	business in the preceding calendar year, or in the case of a new business, that it will meet 
190.26 	the definition in the first full year of operations.  A decision by the commissioner on 
190.27 	whether a business qualifies for this exemption is final.  The exemption certificate must 
190.28 	be in the form and meet the requirements imposed under this chapter and chapter 289A 
190.29 	on other sales and use tax exemption certificates, but it shall only be in effect for two 
190.30 	years from the date of issuance.

190.31 	EFFECTIVE DATE. This section is effective for applications submitted to the 
190.32 	commissioner of revenue after July 1, 2005.

191.1 	 Sec. 29. Minnesota Statutes 2004, section 297A.75, subdivision 1, is amended to read:
191.2 		 Subdivision 1.Tax collected.  The tax on the gross receipts from the sale of the 
191.3 	following exempt items must be imposed and collected as if the sale were taxable and the 
191.4 	rate under section 297A.62, subdivision 1, applied.  The exempt items include:
191.5 	 (1) capital equipment exempt under section 297A.68, subdivision 5;
191.6 	 (2) building materials for an agricultural processing facility exempt under section 
191.7 	297A.71, subdivision 13;
191.8 	 (3) building materials for mineral production facilities exempt under section 
191.9 	297A.71, subdivision 14;
191.10 	 (4) building materials for correctional facilities under section 297A.71, subdivision 
191.11 	3;
191.12 	 (5) building materials used in a residence for disabled veterans exempt under section 
191.13 	297A.71, subdivision 11;
191.14 	 (6) chair lifts, ramps,elevators,and associated building materials exempt under 
191.15 	section 297A.71, subdivision 12;
191.16 	 (7) building materials for the Long Lake Conservation Center exempt under section 
191.17 	297A.71, subdivision 17;
191.18 	 (8) materials, supplies, fixtures, furnishings, and equipment for a county law 
191.19 	enforcement and family service center under section 297A.71, subdivision 26; and
191.20 	 (9) materials and supplies for qualified low-income housing under section 297A.71, 
191.21 	subdivision 23.

191.22 	EFFECTIVE DATE. This section is effective for sales and purchases made after 
191.23 	June 30, 2005.

191.24 	 Sec. 30. [297A.82] MOTOR VEHICLE LEASES.
191.25 		 Subdivision 1.Motor vehicle lease price; payment. (a) In the case of a lease of a 
191.26 	motor vehicle as provided in section 297A.61, subdivision 4, paragraph (k), clause (2), the 
191.27 	tax is imposed on the total amount to be paid by the lessee under the lease agreement.  The 
191.28 	lessor shall collect the tax in full at the time the lease is executed or, if the tax is included 
191.29 	in the lease and the lease is assigned, the tax is due from the original lessor at the time the 
191.30 	lease is assigned.  The total amount to be paid by the lessee under the lease agreement 
191.31 	equals the agreed-upon value of the vehicle less manufacturer's rebates, the stated residual 
191.32 	value of the leased vehicle, and the total value allowed for a vehicle owned by the lessee 
191.33 	taken in trade by the lessor, plus the price of any taxable goods and services included in 
191.34 	the lease and the rent charge as provided by Code of Federal Regulations, title 12, section 
191.35 	213.4, excluding any rent charge related to the capitalization of the tax.
192.1 	 (b) If the total amount paid by the lessee for use of the leased vehicle includes 
192.2 	amounts that are not calculated at the time the lease is executed, the tax is imposed and 
192.3 	must be collected by the lessor at the time the amounts are paid by the lessee.  In the case 
192.4 	of a lease which by its terms may be renewed, the sales tax is due and payable on the 
192.5 	total amount to be paid during the initial term of the lease, and then for each subsequent 
192.6 	renewal period on the total amount to be paid during the renewal period.
192.7 	 (c) If a lease is canceled or rescinded on or before 90 days of its execution or if a 
192.8 	vehicle is returned to the manufacturer under section 325F.665, the lessor may file a claim 
192.9 	for a refund of the total tax paid minus the amount of tax due for the period the vehicle is 
192.10 	used by the lessee.
192.11 	 (d) If a lessee's obligation to make payments on a lease is canceled more than 90 days 
192.12 	after its execution, a credit is allowed against sales tax or motor vehicles sales tax due on a 
192.13 	subsequent lease or purchase of a motor vehicle if that lease or purchase is consummated 
192.14 	within 30 days of the date the prior lease was canceled.  The amount of the credit is equal 
192.15 	to (1) the sales tax paid at the inception of the lease, multiplied by (2) the ratio of the 
192.16 	number of full months remaining in the lease at the time of termination compared to the 
192.17 	term of the lease used in calculating sales tax paid at the inception of the lease.
192.18 		 Subd. 2.Lease originating in another state. When the lease of a motor vehicle 
192.19 	as defined in section 297A.61, subdivision 4, paragraph (k), clause (2), originates in 
192.20 	another state, the sales tax under subdivision 1 shall be calculated by the lessor on the total 
192.21 	amount that is due under the lease agreement after the vehicle is required to be registered 
192.22 	in Minnesota.  If the total amount to be paid by the lessee under the lease agreement has 
192.23 	already been subjected to tax by another state, a credit for taxes paid in the other state is 
192.24 	allowed as provided in section 297A.80.

192.25 	EFFECTIVE DATE. Subdivision 1 of this section is effective for leases entered 
192.26 	into after September 30, 2005. Subdivision 2 of this section is effective for vehicles 
192.27 	registering in Minnesota after September 30, 2005.

192.28 	 Sec. 31. Minnesota Statutes 2004, section 297A.87, subdivision 2, is amended to read:
192.29 		 Subd. 2.Seller's permit or alternate statement.  (a) The operator of an event 
192.30 	under subdivision 1 shall obtain one of the following from a person who wishes to do 
192.31 	business as a seller at the event:
192.32 	 (1) evidence that the person holds a valid seller's permit under section 297A.84; or 
192.33 	 (2) a written statement that the person is not offering for sale any item that is taxable 
192.34 	under this chapter; or 
193.1 	 (3) a written statement that this is the only selling event that the person will be 
193.2 	participating in for that calendar year, that the person will be participating for three or 
193.3 	fewer days, and that the person will make less than $500 in total sales at the event.  The 
193.4 	written statement shall include the person's name, address, and telephone number.
193.5 	 (b) The operator shall require the evidence or statement as a prerequisite to 
193.6 	participating in the event as a seller.

193.7 	EFFECTIVE DATE. This section is effective for selling events occurring after 
193.8 	June 15, 2005.

193.9 	 Sec. 32. Minnesota Statutes 2004, section 297A.87, subdivision 3, is amended to read:
193.10 		 Subd. 3.Occasional sale provisions not applicable under limited circumstances.
 193.11 	 The isolated and occasional sale provisions provision under section 297A.67, subdivision 
193.12 	23, or applies, provided that the seller only participates for three or fewer days in one 
193.13 	event per calendar year, makes $500 or less in sales at the event, and provides the written 
193.14 	statement required in subdivision 2, paragraph (a), clause (3).  The isolated and occasional 
193.15 	sales provision under section 297A.68, subdivision 25, do does not apply to a seller at an 
193.16 	event under this section.

193.17 	EFFECTIVE DATE. This section is effective for selling events occurring after 
193.18 	June 15, 2005.

193.19 	 Sec. 33. [297A.981] LOCAL SALES TAXES; CERTAIN CITIES OF THE FIRST 
193.20 	CLASS.
193.21 		 Subdivision 1.General authority; certain cities. (a) Notwithstanding sections 
193.22 	297A.99 and 477A.016, or any other contrary provision of law, ordinance, or charter, a 
193.23 	city of the first class located in the seven-county metropolitan area may impose a local 
193.24 	sales tax of one-half of one percent on sale transactions taxable under this chapter that 
193.25 	occur within the city.  The tax base is the same as defined in section 297A.99, subdivision 
193.26 	4.  This tax is in addition to any other local sales tax imposed under other general or 
193.27 	special law and must not be included when calculating sales tax limits imposed under 
193.28 	other law, ordinance, or charter.
193.29 		 Subd. 2.Use tax. If the city imposes the tax authorized in subdivision 1, a 
193.30 	compensating use tax also applies, at the same rate as the sales tax, on the use, storage, 
193.31 	distribution, or consumption of tangible personal property or taxable services.
194.1 		 Subd. 3.Use of revenues. (a) Revenues received from taxes imposed under 
194.2 	subdivisions 1 and 2, minus the reasonable costs of collection, may be used by the city for 
194.3 	any purpose for which the city is authorized to make expenditures.
194.4 		 Subd. 4.Collection; enforcement; administration. A tax imposed under this 
194.5 	section shall be administered, collected, and enforced by the commissioner of revenue 
194.6 	as provided for under section 297A.99, subdivision 9.  The commissioner shall remit the 
194.7 	proceeds, minus refunds and the costs of collection, as provided for in section 297A.99, 
194.8 	subdivision 11.
194.9 	 Subd. 5.  [LOCAL APPROVAL.] The question of imposing the local sales tax 
194.10 	must be submitted to the voters at a general or a special election held for this purpose. 
194.11 	If the majority of the votes cast on the question are in the affirmative, the tax shall be 
194.12 	imposed on the first day of the next calendar quarter beginning at least 30 days after 
194.13 	the day of local approval.

194.14 	EFFECTIVE DATE. This section is effective July 1, 2005.

194.15 	 Sec. 34. Minnesota Statutes 2004, section 297A.99, subdivision 1, is amended to read:
194.16 		 Subdivision 1.Authorization; scope.  (a) A political subdivision of this state may 
194.17 	impose a general sales tax if permitted by special law or if the political subdivision enacted 
194.18 	and imposed the tax before the effective date of section 477A.016 and its predecessor 
194.19 	provision, or if the tax is allowed under section 297A.981 or subdivision 1a.
194.20 	 (b) This section governs the imposition of a general sales tax by the political 
194.21 	subdivision.  The provisions of this section preempt the provisions of any special law:
194.22 	 (1) enacted before June 2, 1997, or
194.23 	 (2) enacted on or after June 2, 1997, that does not explicitly exempt the special law 
194.24 	provision from this section's rules by reference.
194.25 	 (c) This section does not apply to or preempt a sales tax on motor vehicles or a 
194.26 	special excise tax on motor vehicles.

194.27 	EFFECTIVE DATE. This section is effective for local sales taxes for which the 
194.28 	authorizing referendum is held after June 30, 2005.

194.29 	 Sec. 35. Minnesota Statutes 2004, section 297A.99, is amended by adding a 
194.30 	subdivision to read:
194.31 		 Subd. 1a.General authority; certain cities. (a) A city or a group of cities acting 
194.32 	under a joint powers agreement, may impose a local sales tax of one-half of one percent 
194.33 	without authorization under a special law provided that:
195.1 	 (1) the city or cities are located outside of the metropolitan counties, as defined in 
195.2 	section 473.121, subdivision 4;
195.3 	 (2) imposition of the tax is approved by the voters of each city pursuant to 
195.4 	subdivision 3, paragraph (a);
195.5 	 (3) all the conditions for adoption, use, and termination of the tax contained in this 
195.6 	subdivision and subdivisions 3 to 12 are met;
195.7 	 (4) if the tax is imposed by a group of cities, the cities shall be within five miles 
195.8 	of each other; and 
195.9 	 (5) imposition of tax under this authority would not increase the total local tax 
195.10 	imposed in the city to a rate greater than one-half of one percent.
195.11 	 (b) The proceeds of a tax imposed under this subdivision must be dedicated 
195.12 	exclusively to pay for specific regional capital projects that provide benefit to persons 
195.13 	outside of the city boundaries, as defined in paragraph (c), as well as to the city, and is 
195.14 	approved by the voters in the authorizing referendum.  No proceeds may be used for 
195.15 	normal maintenance or operating costs of a facility.  The proceeds may be used to pay for 
195.16 	collecting and administering the tax, to pay all or part of the capital and administrative 
195.17 	costs of the development, design, acquisition, construction, expansion, and improvement, 
195.18 	and to secure and pay debt service on bonds or other obligations issued to finance capital 
195.19 	costs of any of the following regional projects:
195.20 	 (1) regional convention or civic center;
195.21 	 (2) regional airport;
195.22 	 (3) regional public libraries, regional history centers, and performing arts centers;
195.23 	 (4) parks, trails, regional recreational centers, and open space;
195.24 	 (5) flood control and protection;
195.25 	 (6) regional wastewater project to mitigate surface or groundwater pollution;
195.26 	 (7) regional government center or jail owned and operated by two or more local 
195.27 	government jurisdictions;
195.28 	 (8) lake improvement projects included in a watershed plan;
195.29 	 (9) overpasses, arterial and collector roads, or bridges, on, adjacent to, or connecting 
195.30 	to a Minnesota state highway; or 
195.31 	 (10) railroad overpasses or crossing safety improvements where the road is adjacent 
195.32 	to or connecting to a Minnesota state highway.
195.33 	 (c) A capital project is considered to be a "regional capital project that provides 
195.34 	benefits to persons outside the city boundaries" if it meets one of the following criteria:
195.35 	 (1) the project is one of the projects listed in paragraph (b), clauses (8) to (10);
196.1 	 (2) the project is funded by more than one city under a joint powers agreement and 
196.2 	no more than 80 percent of the revenues for the project will be provided by one city;
196.3 	 (3) at least 20 percent of the direct users of the facility, except for a convention or 
196.4 	civic center, will be persons from outside of the city; or 
196.5 	 (4) at least 20 percent of the benefit derived from the project will accrue to persons 
196.6 	residing or businesses located outside of the city boundaries.
196.7 	 (d) At least three months prior to holding a referendum to impose the tax, a city must 
196.8 	provide to the commissioner of revenue a resolution approved by the city that shows that 
196.9 	the tax will fund a project that meets the requirements of paragraphs (a) to (c), the date 
196.10 	on which the referendum will be held, the maximum amount raised by the tax that may 
196.11 	be used for the specified project, excluding issuance and interest costs for any related 
196.12 	bonds, and the maximum time that the tax may be imposed.  The commissioner shall 
196.13 	certify that the requirements under this subdivision are met and the city shall provide any 
196.14 	additional information the commissioner requests in order to make that determination. 
196.15 	The commissioner's decision is final.
196.16 	 (e) The question put to the voters at the referendum authorizing the vote must include 
196.17 	information on the specific project to be funded by the proceeds of the tax, the maximum 
196.18 	amount of sales tax revenues that will be used to fund each project, not including any 
196.19 	issuance and interest costs for related bonds, and the maximum length of time that the tax 
196.20 	will be imposed.  The referendum must also include a statement that the sales tax revenues 
196.21 	are pledged to pay for the specific capital improvement but the improvement costs and any 
196.22 	related bonds are a general obligation of the political subdivision and will be guaranteed 
196.23 	by the political subdivision's property tax levy.  If the referendum is not held on the date 
196.24 	contained in the resolution, the authority for imposing the tax expires.
196.25 	 (f) A city may hold a referendum for more than one project at the same election 
196.26 	provided that:
196.27 	 (1) all the requirements under this subdivision are met by each project;
196.28 	 (2) the question, with information on amount to be raised and the years needed to 
196.29 	raise the amount, is stated separately for each project; and 
196.30 	 (3) the total amount needed to fund all projects listed on the ballot does not 
196.31 	exceed the amount of revenue that can be raised by the imposition of the tax under this 
196.32 	subdivision in a 12-year period.
196.33 	 (g) A city may issue general obligation bonds to pay the costs of projects specified 
196.34 	in the referendum authorizing imposition of the tax.  The approval of the question under 
196.35 	paragraph (e) meets the requirement for elector approval for issuance of bonds under 
196.36 	section 475.58, subdivision 1.  The debt represented by the bonds must not be included in 
197.1 	computing any debt limitations applicable to the city, and the levy of taxes required by 
197.2 	section 475.61 to pay the principal or any interest on the bonds must not be subject to any 
197.3 	levy limitations or be included in computing or applying any levy limitation to the city.
197.4 	 (h) The tax, if enacted, expires when the specified revenue has been raised or the 
197.5 	maximum time in which the tax is in effect under the resolution is reached, whichever 
197.6 	is sooner. Any tax imposed under this subdivision must expire no later than 12 years 
197.7 	after imposition.  The governing board of the city may, by ordinance, terminate the tax at 
197.8 	an earlier date.
197.9 	 (i) Except as specifically authorized by this section, a city must not use public funds 
197.10 	to prepare or disseminate material regarding the passage of a ballot question under section 
197.11 	297A.99, subdivision 1a, including but not limited to billboards or other signs, newspaper 
197.12 	advertising, advertising messages broadcast on radio or television, programming on cable 
197.13 	television, except for any legal requirements regarding notice of election.  A city may 
197.14 	allow meetings in a public building of proponents of a question involving imposing a local 
197.15 	sales tax under section 297A.99, subdivision 1a, if opponents of the question who so 
197.16 	request are allowed to meet in a public building on similar terms to those applicable to 
197.17 	the proponents.  A city must not allow proponents or opponents of a ballot question on 
197.18 	imposition of a local sales tax under section 297A.99, subdivision 1a, to place campaign 
197.19 	signs on public property.

197.20 	EFFECTIVE DATE. This section is effective for local sales taxes for which the 
197.21 	authorizing referendum is held after June 30, 2004.  If the authorizing referendum was 
197.22 	held prior to July 1, 2005, the three month prior notice to the commissioner contained 
197.23 	in paragraph (d) shall not apply, but the commissioner must still certify that all other 
197.24 	provisions of this subdivision are met before the tax may be imposed.

197.25 	 Sec. 36. Minnesota Statutes 2004, section 297A.99, subdivision 3, is amended to read:
197.26 		 Subd. 3.Requirements for adoption, use, termination.  (a) Imposition of a local 
197.27 	sales tax is subject to approval by voters of the political subdivision at a general election.
197.28 	 (b) The proceeds of the tax must be dedicated exclusively to payment of the cost of a 
197.29 	specific capital improvement which is designated at least 90 days before the referendum 
197.30 	on imposition of the tax is conducted.
197.31 	 (c) The tax must terminate after the improvement designated under paragraph (b) 
197.32 	has been completed.
197.33 	 (d) After a sales tax imposed by a political subdivision has expired or been 
197.34 	terminated, the political subdivision is prohibited from imposing a local sales tax for a 
198.1 	period of one year.  Notwithstanding subdivision 13, this paragraph applies to all local 
198.2 	sales taxes in effect at the time of or imposed after May 26, 1999.

198.3 	EFFECTIVE DATE. This section is effective July 1, 2005.

198.4 	 Sec. 37. Minnesota Statutes 2004, section 297A.99, subdivision 4, is amended to read:
198.5 		 Subd. 4.Tax base.  (a) The tax applies to sales taxable under this chapter that occur 
198.6 	within the political subdivision.
198.7 	 (b) Taxable goods or services are subject to a political subdivision's sales tax, if 
198.8 	they are performed either:
198.9 	 (1) within the political subdivision, or 
198.10 	 (2) partly within and partly without the political subdivision and more of the service 
198.11 	is performed within the political subdivision, based on the cost of performance sourced 
198.12 	to the political subdivision pursuant to section 297A.668.

198.13 	EFFECTIVE DATE. This section is effective for sales made on or after January 
198.14 	1, 2004.

198.15 	 Sec. 38. Minnesota Statutes 2004, section 297A.99, subdivision 9, is amended to read:
198.16 		 Subd. 9.Enforcement; collection; and administration.  (a) The commissioner of 
198.17 	revenue shall collect the taxes subject to this section.  The commissioner may collect the 
198.18 	tax with the state sales and use tax.  All taxes under this section are subject to the same 
198.19 	penalties, interest, and enforcement provisions as apply to the state sales and use tax.
198.20 	 (b) A request for a refund of state sales tax paid in excess of the amount of tax 
198.21 	legally due includes a request for a refund of the political subdivision taxes paid on the 
198.22 	goods or services.  The commissioner shall refund to the taxpayer the full amount of the 
198.23 	political subdivision taxes paid on exempt sales or use.
198.24 	 (c) A political subdivision shall incur a legal debt to the state for refunds of local 
198.25 	sales taxes made by the commissioner after a tax has terminated when the amount of 
198.26 	the refunds exceeds the amount of local sales taxes collected for but not remitted to the 
198.27 	political subdivision.  The commissioner of revenue shall deduct the amount of the debt 
198.28 	from the next payment scheduled to be made to the political subdivision under section 
198.29 	273.1384, 273.1398, or sections 477A.011 to 477A.014. The commissioner shall deposit 
198.30 	the money in the state treasury and credit it to the general fund.

198.31 	EFFECTIVE DATE. This section is effective for all refunds made on or after the 
198.32 	day following final enactment.

199.1 	 Sec. 39. Minnesota Statutes 2004, section 297A.99, is amended by adding a 
199.2 	subdivision to read:
199.3 		 Subd. 12a.Notification of use tax. Any city or county imposing a local sales and 
199.4 	use tax, which maintains an official web site, must display on its main home page a notice 
199.5 	that residents and businesses in the city or county may owe a local use tax on purchases of 
199.6 	goods and services made outside of the city or county limits.  The notice must provide 
199.7 	information, including a link to any relevant Department of Revenue Web site, on how 
199.8 	the taxpayer may get information and forms necessary for calculating and paying the 
199.9 	tax.  If the city or county provides and bills for sewer, water, garbage collection, or other 
199.10 	public utility services, the billing statement must also include a notice that residents and 
199.11 	businesses may owe a local use tax on purchases made outside of the city or county limits 
199.12 	and provide information on how the taxpayer may get information and forms necessary 
199.13 	for calculating and paying the tax.

199.14 	EFFECTIVE DATE. This section is effective January 1, 2006.

199.15 	 Sec. 40. Minnesota Statutes 2004, section 477A.016, is amended to read:
199.16 	 477A.016 NEW TAXES PROHIBITED.
199.17 	 No county, city, town or other taxing authority shall increase a present tax or impose 
199.18 	a new tax on sales or income, except as provided in section 297A.981 or section 297A.99, 
199.19 	subdivision 1a.

199.20 	 EFFECTIVE DATE. This section is effective July 1, 2005.

199.21 	 Sec. 41. Laws 1998, chapter 389, article 8, section 43, subdivision 3, is amended to 
199.22 	read:
199.23 		 Subd. 3.Use of revenues. Revenues received from the taxes authorized by 
199.24 	subdivisions 1 and 2 must be used by the city to pay for the cost of collecting and 
199.25 	administering the taxes and to pay for the following projects:
199.26 	 (1) transportation infrastructure improvements including both highway and airport 
199.27 	improvements;
199.28 	 (2) improvements to the civic center complex;
199.29 	 (3) a municipal water, sewer, and storm sewer project necessary to improve regional 
199.30 	ground water quality; and
199.31 	 (4) construction of a regional recreation and sports center and associated other 
199.32 	facilities available for both community and student use, located at or adjacent to the 
199.33 	Rochester center.
200.1 	 The total amount of capital expenditures or bonds for these projects that may be paid from 
200.2 	the revenues raised from the taxes authorized in this section may not exceed $71,500,000. 
200.3 	The total amount of capital expenditures or bonds for the project in clause (4) that may be 
200.4 	paid from the revenues raised from the taxes authorized in this section may not exceed 
200.5 	$20,000,000.
200.6 	 [EFFECTIVE DATE; LOCAL APPROVAL.]This section is effective the day 
200.7 	after the governing body of Rochester and its chief clerical officer timely complete their 
200.8 	compliance with Minnesota Statutes, section 645.021, subdivisions 2 and 3.

200.9 	 Sec. 42. Laws 2001, First Special Session chapter 5, article 12, section 95, as amended 
200.10 	by Laws 2002, chapter 377, article 3, section 24, and Laws 2003, First Special Session 
200.11 	chapter 21, article 8, section 15, is amended to read:
200.12 	 Sec. 95REPEALER.
 200.13 	 (a) Minnesota Statutes 2000, sections 297A.61, subdivision 16; 297A.68, 
200.14 	subdivision 21; and 297A.71, subdivision 2, are repealed effective for sales and purchases 
200.15 	occurring after June 30, 2001, except that the repeal of section 297A.61, subdivision 16, 
200.16 	paragraph (d), is effective for sales and purchases occurring after July 31, 2001.
200.17 	 (b) Minnesota Statutes 2000, sections section 297A.62, subdivision 2, and 297A.64, 
200.18 	subdivision 1, are is repealed effective for sales and purchases made after December 
200.19 	31, 2005.
200.20 	 (c) Minnesota Statutes 2000, section 297A.71, subdivision 15, is repealed effective 
200.21 	for sales and purchases made after June 30, 2002.
200.22 	 (d) Minnesota Statutes 2000, section 297A.71, subdivision 16, is repealed effective 
200.23 	for sales and purchases occurring after December 31, 2002.

200.24 	 EFFECTIVE DATE. This section is effective the day following final enactment.

200.25 	 Sec. 43. Laws 2002, chapter 377, article 3, section 4, the effective date, is amended to 
200.26 	read:

200.27 	 EFFECTIVE DATE. With the exception of clause (2), item (ii),This section is 
200.28 	effective for sales and purchases made after June 30, 2002. Clause (2), item (ii), is 
200.29 	effective for sales and purchases made after June 30, 2002, and before January 1, 2006.

200.30 	 Sec. 44. CITY OF MANKATO; LOCAL SALES TAX EXPIRATION DATE.
 200.31 	 Notwithstanding any other provision of law or municipal charter to the contrary, 
200.32 	the city of Mankato may by resolution extend the imposition of the taxes imposed under 
201.1 	Laws 1991, chapter 291, article 8, section 27, subdivisions 1 and 2, as needed to pay off 
201.2 	existing bonds but no later than December 31, 2018.  The proceeds of the tax must be used 
201.3 	only to pay off previously issued bonds authorized under Laws 1991, chapter 291, article 
201.4 	8, section 27, and Laws 1996, chapter 471, article 2, section 25, and for renovations and 
201.5 	capital improvements of the original projects funded by the sales tax under these laws.

201.6 	 EFFECTIVE DATE. This section is effective the day after compliance by the city 
201.7 	of Mankato with Minnesota Statutes, section 645.021, subdivision 3.

201.8 	 Sec. 45. ST. CLOUD AREA CITIES; SALES AND USE TAX AUTHORIZED.
 201.9 		 Subdivision 1.Sales and use tax authorized. Notwithstanding Minnesota Statutes, 
201.10 	sections 297A.99, subdivision 3, paragraph (d), and 477A.016, or any other provision of 
201.11 	law, ordinance, or city charter, the following cities may, by ordinance, impose a sales and 
201.12 	use tax of one-half of one percent for the purposes specified in subdivision 2:
201.13 	 (1) the city of St. Cloud, pursuant to the approval of the city voters at the general 
201.14 	election held on November 2, 2004;
201.15 	 (2) the city of St. Joseph, pursuant to the approval of the city voters at the general 
201.16 	election on November 2, 2004;
201.17 	 (3) the city of Waite Park, pursuant to the approval of the city voters at the general 
201.18 	election held on November 4, 2003;
201.19 	 (4) the city of Sartell, pursuant to the approval of the voters of that city at the general 
201.20 	election held on November 2, 1999; and 
201.21 	 (5) the city of St. Augusta, pursuant to the approval of the voters of that city at 
201.22 	the next general election.
201.23 	 The provisions of Minnesota Statutes, section 297A.99, except subdivision 3, 
201.24 	paragraph (d), govern the imposition, administration, collection, and enforcement of the 
201.25 	tax authorized under this section, unless specifically provided for otherwise in another 
201.26 	subdivision.
201.27 		 Subd. 2.Use of revenues. (a) Revenues received from the tax authorized by 
201.28 	subdivision 1 by the city of St. Cloud must be used for the cost of collecting and 
201.29 	administering the tax and to pay all or part of the capital or administrative costs of the 
201.30 	development, acquisition, construction, improvement, and securing and paying debt 
201.31 	service on bonds or other obligations issued to finance the following regional projects as 
201.32 	approved by the voters and specifically detailed in the referendum authorizing the tax:
201.33 	 (1) St. Cloud Regional Airport;
201.34 	 (2) regional transportation improvements;
201.35 	 (3) community and aquatics centers;
202.1 	 (4) regional public libraries; and 
202.2 	 (5) acquisition and improvement of regional park land and open space.
202.3 	 (b) Revenues received from the tax authorized by subdivision 1 by the cities of Waite 
202.4 	Park, Sartell, and St. Augusta must be used for the cost of collecting and administering 
202.5 	the tax and to pay all or part of the capital or administrative costs of the development, 
202.6 	acquisition, construction, improvement, and securing and paying debt service on bonds 
202.7 	or other obligations issued to fund the projects specifically approved by the voters at the 
202.8 	referendum authorizing the tax.  The portion of revenues from the city going to fund the 
202.9 	regional airport or regional library located in the city of St. Cloud will be as required 
202.10 	under the applicable joint powers agreement.
202.11 	 (c) The use of revenues received from the taxes authorized in subdivision 1 for 
202.12 	projects allowed under paragraphs (a) and (b) are limited to the amount authorized for 
202.13 	each project under the enabling referendum.
202.14 	 Subd. 3.[ST. CLOUD BONDING AUTHORIZED.] (a) The city of St. Cloud may 
202.15 	issue general obligation bonds of up to $30,000,000 to pay for the costs of the regional 
202.16 	public library pursuant to the approval of the projects by the city voters at the election 
202.17 	held on November 2, 2004.
202.18 	 (b) Each city may issue general obligation bonds for another project authorized 
202.19 	under subdivision 2 without separate bonding approval at a referendum only if the 
202.20 	issuance of bonds for that project was included in the authorizing question.  The amount of 
202.21 	bonds issued for a project is limited to the maximum amount of local sales tax revenues 
202.22 	that may be spent on the project under the authorizing question.
202.23 	 (c) The debt represented by the bonds authorized under this subdivision must not be 
202.24 	included in computing any debt limitations applicable to the city, and the levy of taxes 
202.25 	required by Minnesota Statutes, section 475.61, to pay the principal or any interest on the 
202.26 	bonds must not be subject to any levy limitations or be included in computing or applying 
202.27 	any levy limitation applicable to the city.
202.28 		 Subd. 4.Termination of tax. (a) The tax imposed in the cities of St. Joseph and 
202.29 	St. Cloud under subdivision 1 expires when the city council determines that sufficient 
202.30 	funds have been collected from the tax to retire or redeem the bonds and obligations 
202.31 	authorized under subdivision 2, paragraph (a), but no later than 11 years after the date 
202.32 	the tax is first imposed.
202.33 	 (b) The tax imposed in the city of Waite Park expires July 1, 2007.  Any funds 
202.34 	remaining after completion of the projects specified in subdivision 2 and retirement or 
202.35 	redemption of the bonds may be placed in the general fund of the city.  The tax imposed in 
202.36 	the city of St. Augusta expires five years after it is first imposed.  Any funds remaining after 
203.1 	completion of the projects specified in subdivision 2 and retirement or redemption of the 
203.2 	bonds may be placed in the general fund of the city. Each tax imposed under subdivision 1 
203.3 	may expire at an earlier time if the city so determines by ordinance.  The cities may extend 
203.4 	the tax beyond the dates in this paragraph upon additional approval of the voters at a 
203.5 	subsequent referendum. The tax may not be extended beyond the number of years allowed 
203.6 	in paragraph (a).  The tax imposed in the city of Sartell expires December 31, 2006.

203.7 	EFFECTIVE DATE. This section is effective for the city that approves it the day 
203.8 	after compliance by the governing body of each city with Minnesota Statutes, section 
203.9 	645.021, subdivision 3, for sales and purchases made on and after January 1, 2006. 
203.10 	Spending may not occur for the purposes authorized in subdivision 2 nor may bonds be 
203.11 	issued under subdivision 3 until January 1, 2006.

203.12 	 Sec. 46. CITY OF BEMIDJI; LOCAL SALES TAX.
 203.13 	 Notwithstanding Minnesota Statutes, sections 297A.99 and 477A.03, or any other 
203.14 	provision of law, ordinance, or charter to the contrary, the city of Bemidji may impose a 
203.15 	sales tax pursuant to the approval of the city voters at a general election on November 5, 
203.16 	2002.  Revenues from the tax must be used for the cost of collecting and administering 
203.17 	the tax and to pay all or part of the capital and administrative costs of the acquisition, 
203.18 	construction, improvement, and development of parks and trails within the city, as 
203.19 	provided for in the city of Bemidji's parks, open space, and trail system plan, adopted by 
203.20 	the Bemidji city council on November 21, 2001.  Authorized expenses include, but are not 
203.21 	limited to, acquiring property, paying construction expenses related to the development of 
203.22 	these facilities and improvements, and securing and paying any debt service on bonds or 
203.23 	other obligations issued to finance acquisition, construction, improvement, or development 
203.24 	of parks and trails within the city of Bemidji.  All other provisions of section 297A.99
203.25 	not in conflict with the provisions of this section shall apply to the imposition, collection, 
203.26 	administration, and use of revenues from this tax.

203.27 	 EFFECTIVE DATE. This section is effective the day after compliance by the city 
203.28 	of Bemidji with Minnesota Statutes, section 645.021, subdivision 3.

203.29 	 Sec. 47. CITY OF ROCHESTER; LOCAL SALES TAX EXPIRATION DATE.
 203.30 	 Notwithstanding Minnesota Statutes, section 297A.99, or any other provision of law 
203.31 	or municipal charter to the contrary, the city of Rochester may by resolution extend the 
203.32 	taxes imposed under Laws 1998, chapter 389, article 8, section 43, until December 31, 
203.33 	2014.  This extension of the imposition of taxes shall occur notwithstanding either of the 
204.1 	total amount limitations on capital expenditures or bonds specified in Laws 1998, chapter 
204.2 	389, article 8, section 43.  The proceeds of the tax must be used for the purposes authorized 
204.3 	under that law and for regional highway infrastructure improvements jointly undertaken 
204.4 	with Olmsted County.  The city and the county may issue general obligation bonds for the 
204.5 	purposes authorized under this section.  The county may issue general obligation bonds 
204.6 	in an amount not exceeding the amount of sales tax revenue anticipated to be received 
204.7 	from the city.  The city may issue additional general obligation bonds, above the amount 
204.8 	allowed under Laws 1988, chapter 389, article 8, section 43, equal to the difference 
204.9 	between the amount of additional local sales tax raised under this section and the amount 
204.10 	anticipated to be given to the county.  No election is required for the issuance of bonds 
204.11 	under this subdivision, other than the election held by the city on June 23, 1998.  The 
204.12 	bonds shall not be included as net debt of the city or the county.

204.13 	 EFFECTIVE DATE. This section is effective the day after compliance by the city 
204.14 	of Rochester with Minnesota Statutes, section 645.021, subdivisions 2 and 3.

204.15 	 Sec. 48. REPEALER.
 204.16 	 Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200, subparts 5 and 6; 
204.17 	8130.0400, subpart 9; 8130.1200, subparts 5 and 6; 8130.2900; 8130.3100, subpart 1; 
204.18 	8130.4000, subparts 1 and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200; 
204.19 	8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 5; and 8130.8800, 
204.20 	subpart 4, are repealed.

204.21 	 EFFECTIVE DATE. This section is effective the day following final enactment.

204.22 	 ARTICLE 8
204.23 	 SPECIAL TAXES AND FEES

204.24 	 Section 1. Minnesota Statutes 2004, section 240.30, is amended by adding a 
204.25 	subdivision to read:
204.26 		 Subd. 11.Franchise fee. As a condition of operating a card club under this section, 
204.27 	the licensee must pay a fee to the commission equal to 15 percent of the gross revenues, 
204.28 	less any refunds, for charges imposed under subdivision 4.  Payment, collection, and 
204.29 	administration of the fee must be made in the same manner and under the terms provided 
204.30 	under section 240.15 for the tax on pari-mutuel pools.  The commission shall deposit all of 
204.31 	the revenues from the fee in the state treasury and amounts deposited must be credited 
204.32 	to the general fund.  The amount of the fee under this subdivision does not reduce the 
204.33 	obligation to set aside revenues from the card club under section 240.135.

205.1 	EFFECTIVE DATE. This section is effective for charges and revenues received 
205.2 	after June 30, 2005.

205.3 	 Sec. 2. Minnesota Statutes 2004, section 287.04, is amended to read:
205.4 	 287.04 EXEMPTIONS.
205.5 	 The tax imposed by section 287.035 does not apply to:
205.6 	 (a) A decree of marriage dissolution or an instrument made pursuant to it.
205.7 	 (b) A mortgage given to correct a misdescription of the mortgaged property.
205.8 	 (c) A mortgage or other instrument that adds additional security for the same debt 
205.9 	for which mortgage registry tax has been paid.
205.10 	 (d) A contract for the conveyance of any interest in real property, including a 
205.11 	contract for deed.
205.12 	 (e) A mortgage secured by real property subject to the minerals production tax of 
205.13 	sections 298.24 to 298.28.
205.14 	 (f) The principal amount of a mortgage loan made under a low and moderate 
205.15 	income or other affordable housing program, if the mortgagee is a federal, state, or local 
205.16 	government agency.
205.17 	 (g) Mortgages granted by fraternal benefit societies subject to section 64B.24.
205.18 	 (h) A mortgage amendment or extension, as defined in section 287.01.
205.19 	 (i) An agricultural mortgage if the proceeds of the loan secured by the mortgage are 
205.20 	used to acquire or improve real property classified under section 273.13, subdivision 23, 
205.21 	paragraph (a), or (b), clause (1), (2), or (3).
205.22 	 (j) A mortgage on an armory building as set forth in section 193.147.

205.23 	 EFFECTIVE DATE. This section is effective the day following final enactment.

205.24 	 Sec. 3. Minnesota Statutes 2004, section 295.52, subdivision 4, is amended to read:
205.25 		 Subd. 4.Use tax; prescription drugs.  (a) A person that receives prescription drugs 
205.26 	for resale or use in Minnesota, other than from a wholesale drug distributor that is subject 
205.27 	to tax under subdivision 3, is subject to a tax equal to the price paid to the wholesale drug 
205.28 	distributor multiplied by the tax percentage specified in this section.  Liability for the tax is 
205.29 	incurred when prescription drugs are received or delivered in Minnesota by the person.
205.30 	 (b) A person that receives prescription drugs for use in Minnesota from a nonresident 
205.31 	pharmacy required to be registered under section 151.19 is subject to a tax equal to 
205.32 	the price paid by the nonresident pharmacy to the wholesale drug distributor or the 
205.33 	price received by the nonresident pharmacy, whichever is lower, multiplied by the tax 
206.1 	percentage specified in this section.  Liability for the tax is incurred when prescription 
206.2 	drugs are received in Minnesota by the person.
206.3 	 (c) A tax imposed under this subdivision does not apply to purchases by an 
206.4 	individual for personal use or consumption.

206.5 	EFFECTIVE DATE. This section is effective for purchases made after June 30, 
206.6 	2005.

206.7 	 Sec. 4. Minnesota Statutes 2004, section 295.53, subdivision 1, is amended to read:
206.8 		 Subdivision 1.Exemptions.  (a) The following payments are excluded from the 
206.9 	gross revenues subject to the hospital, surgical center, or health care provider taxes under 
206.10 	sections 295.50 to 295.59:
206.11 	 (1) payments received for services provided under the Medicare program, including 
206.12 	payments received from the government, and organizations governed by sections 1833 
206.13 	and 1876 of title XVIII of the federal Social Security Act, United States Code, title 42, 
206.14 	section 1395, and enrollee deductibles, coinsurance, and co-payments, whether paid by the 
206.15 	Medicare enrollee or by a Medicare supplemental coverage as defined in section 62A.011, 
206.16 	subdivision 3, clause (10), or by Medicaid payments under title XIX of the federal Social 
206.17 	Security Act. Payments for services not covered by Medicare are taxable;
206.18 	 (2) payments received for home health care services;
206.19 	 (3) payments received from hospitals or surgical centers for goods and services on 
206.20 	which liability for tax is imposed under section 295.52 or the source of funds for the 
206.21 	payment is exempt under clause (1), (7), (10), or (14);
206.22 	 (4) payments received from health care providers for goods and services on which 
206.23 	liability for tax is imposed under this chapter or the source of funds for the payment is 
206.24 	exempt under clause (1), (7), (10), or (14);
206.25 	 (5) amounts paid for legend drugs, other than nutritional products, to a wholesale 
206.26 	drug distributor who is subject to tax under section 295.52, subdivision 3, reduced by 
206.27 	reimbursements received for legend drugs otherwise exempt under this chapter;
206.28 	 (6) payments received by a health care provider or the wholly owned subsidiary of a 
206.29 	health care provider for care provided outside Minnesota;
206.30 	 (7) payments received from the chemical dependency fund under chapter 254B;
206.31 	 (8) payments received in the nature of charitable donations that are not designated 
206.32 	for providing patient services to a specific individual or group;
206.33 	 (9) payments received for providing patient services incurred through a formal 
206.34 	program of health care research conducted in conformity with federal regulations 
207.1 	governing research on human subjects.  Payments received from patients or from other 
207.2 	persons paying on behalf of the patients are subject to tax;
207.3 	 (10) payments received from any governmental agency for services benefiting the 
207.4 	public, not including payments made by the government in its capacity as an employer 
207.5 	or insurer or payments made by the government for services provided under general 
207.6 	assistance medical care, the MinnesotaCare program, or the medical assistance program 
207.7 	governed by title XIX of the federal Social Security Act, United States Code, title 42, 
207.8 	sections 1396 to 1396v;
207.9 	 (11) government payments received by the commissioner of human services for 
207.10 	state-operated services;
207.11 	 (12) payments received by a health care provider for hearing aids and related 
207.12 	equipment or prescription eyewear delivered outside of Minnesota;
207.13 	 (13) payments received by an educational institution from student tuition, student 
207.14 	activity fees, health care service fees, government appropriations, donations, or grants, and 
207.15 	for services identified in and provided under an individualized education plan as defined in 
207.16 	section 256B.0625 or Code of Federal Regulations, chapter 34, section 300.340(a).  Fee 
207.17 	for service payments and payments for extended coverage are taxable; and 
207.18 	 (14) payments received under the federal Employees Health Benefits Act, United 
207.19 	States Code, title 5, section 8909(f), as amended by the Omnibus Reconciliation Act of 
207.20 	1990. Enrollee deductibles, coinsurance, and co-payments are subject to tax; and 
207.21 	 (15) payments received under the federal Tricare program, Code of Federal 
207.22 	Regulations, title 32, section 199.17(a)(7). Enrollee deductibles, coinsurance, and 
207.23 	co-payments are subject to tax.
207.24 	 (b) Payments received by wholesale drug distributors for legend drugs sold directly 
207.25 	to veterinarians or veterinary bulk purchasing organizations are excluded from the gross 
207.26 	revenues subject to the wholesale drug distributor tax under sections 295.50 to 295.59.

207.27 	EFFECTIVE DATE. The change made to paragraph (a), clause (14), of this section 
207.28 	is effective for enrollee deductibles, coinsurance, and co-payments received under the 
207.29 	federal Employees Health Benefits Act on or after the day following final enactment. 
207.30 	Paragraph (a), clause (15), is effective for gross revenues received under the federal 
207.31 	Tricare program after December 31, 2004.

207.32 	 Sec. 5. Minnesota Statutes 2004, section 295.582, is amended to read:
207.33 	 295.582 AUTHORITY.
208.1 		 Subdivision 1.Transfer to third-party purchasers. (a) A hospital, surgical center, 
208.2 	or health care provider that is subject to a tax under section 295.52, or a pharmacy 
208.3 	that has paid additional expense transferred under this section by a wholesale drug 
208.4 	distributor, may transfer additional expense generated by section 295.52 obligations on 
208.5 	to all third-party contracts for the purchase of health care services on behalf of a patient 
208.6 	or consumer.  The additional expense transferred to the third-party purchaser must not 
208.7 	exceed the tax percentage specified in section 295.52 multiplied against the gross revenues 
208.8 	received under the third-party contract, and the tax percentage specified in section 
208.9 	295.52 multiplied against co-payments and deductibles paid by the individual patient or 
208.10 	consumer. A health care provider who chooses to transfer the tax specified in section 
208.11 	295.52 may itemize the tax on patient billings.The expense must not be generated on 
208.12 	revenues derived from payments that are excluded from the tax under section 295.53.  All 
208.13 	third-party purchasers of health care services including, but not limited to, third-party 
208.14 	purchasers regulated under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79, 
208.15 	or 79A, or under section 471.61 or 471.617, and a pharmacy benefits manager must pay 
208.16 	the transferred expense in addition to any payments due under existing contracts with the 
208.17 	hospital, surgical center, pharmacy, or health care provider, to the extent allowed under 
208.18 	federal law.  A third-party purchaser of health care services includes, but is not limited to, 
208.19 	a health carrier or community integrated service network that pays for health care services 
208.20 	on behalf of patients or that reimburses, indemnifies, compensates, or otherwise insures 
208.21 	patients for health care services and for purposes of this section, a pharmacy benefits 
208.22 	manager means an entity that performs pharmacy benefits management.  A third-party 
208.23 	purchaser shall comply with this section regardless of whether the third-party purchaser 
208.24 	is a for-profit, not-for-profit, or nonprofit entity or whether the health care provider has 
208.25 	chosen to itemize the tax on patient billings.  If the third-party purchaser's contract limits 
208.26 	provider payment to a specified amount, such as an usual and customary fee schedule, 
208.27 	the third-party purchaser must still pay the tax transferred or itemized by a health care 
208.28 	provider based upon the contractual fee.  A third-party purchaser is also responsible for 
208.29 	reimbursing providers for the percentage tax levied on co-payments or deductibles paid by 
208.30 	the insured.  A wholesale drug distributor may transfer additional expense generated by 
208.31 	section 295.52 obligations to entities that purchase from the wholesaler, and the entities 
208.32 	must pay the additional expense.  Nothing in this section limits the ability of a hospital, 
208.33 	surgical center, pharmacy, wholesale drug distributor, or health care provider to recover all 
208.34 	or part of the section 295.52 obligation by other methods, including increasing fees or 
208.35 	charges. Nothing in this section prohibits a pharmacy from passing on additional fees or 
208.36 	charges to a pharmacy benefits manager.
209.1 	 (b) Each third-party purchaser regulated under any chapter cited in paragraph 
209.2 	(a) shall include with its annual renewal for certification of authority or licensure 
209.3 	documentation indicating compliance with paragraph (a). The documentation must 
209.4 	include information relating to a third-party purchaser's means for compliance with 
209.5 	paragraph (a) for health care providers who itemize the tax on patient billings.
209.6 	 (c) Any hospital, surgical center, or health care provider subject to a tax under 
209.7 	section 295.52 or a pharmacy that has paid additional expense transferred under this 
209.8 	section by a wholesale drug distributor may file a complaint with the commissioner 
209.9 	responsible for regulating the third-party purchaser if at any time the third-party purchaser 
209.10 	fails to comply with paragraph (a).
209.11 	 (d) If the commissioner responsible for regulating the third-party purchaser finds 
209.12 	at any time that the third-party purchaser has not complied with paragraph (a), the 
209.13 	commissioner may take enforcement action against a third-party purchaser which is 
209.14 	subject to the commissioner's regulatory jurisdiction and which does not allow a hospital, 
209.15 	surgical center, pharmacy, or provider to pass-through the tax.  The commissioner may 
209.16 	by order fine or censure the third-party purchaser or revoke or suspend the certificate 
209.17 	of authority or license of the third-party purchaser to do business in this state if the 
209.18 	commissioner finds that the third-party purchaser has not complied with this section.  The 
209.19 	third-party purchaser may appeal the commissioner's order through a contested case 
209.20 	hearing in accordance with chapter 14.
209.21 		 Subd. 2.Wholesale drug distributor tax; agreement. A contracting agreement 
209.22 	between a health plan company or a pharmacy benefits manager and a resident or 
209.23 	nonresident pharmacy registered under chapter 151, may not prohibit:
209.24 	 (1) a pharmacy that has paid additional expense transferred under this section by a 
209.25 	wholesale drug distributor from exercising its option under this section to transfer such 
209.26 	additional expenses generated by the section 295.52 obligations on to the health plan 
209.27 	company, a pharmacy benefits manager, or a third-party purchaser; or 
209.28 	 (2) a pharmacy that is subject to tax under section 295.52, subdivision 4, from 
209.29 	exercising its option under this section to recover all or part of the section 295.52
209.30 	obligations from the health plan company, a pharmacy benefits manager, or a third-party 
209.31 	purchaser by other methods, including increasing fees or charges.

209.32 	 Sec. 6. Minnesota Statutes 2004, section 295.60, subdivision 3, is amended to read:
209.33 		 Subd. 3.Payment.  (a) Each furrier shall make estimated payments of the taxes for 
209.34 	the calendar year in quarterly installments to the commissioner by April 15, July 15, 
209.35 	October 15, and January 15 of the following calendar year.
210.1 	 (b) Estimated tax payments are not required if:
210.2 	 (1) the tax for the current calendar year is less than $500; or
210.3 	 (2) the tax for the previous calendar year is less than $500, if the taxpayer had a tax 
210.4 	liability and was doing business the entire year.
210.5 	 (c) Underpayment of estimated installments bear interest at the rate specified in 
210.6 	section 270.75, from the due date of the payment until paid or until the due date of the 
210.7 	annual return, whichever comes first.  An underpayment of an estimated installment is 
210.8 	the difference between the amount paid and the lesser of (1) 90 percent of one-quarter 
210.9 	of the tax for the calendar year the tax for the actual gross revenues received during the 
210.10 	quarter, or (2) one-quarter of the total tax for the previous calendar year if the taxpayer 
210.11 	had a tax liability and was doing business the entire year.

210.12 	EFFECTIVE DATE. This section is effective for gross revenues received after 
210.13 	December 31, 2004.

210.14 	 Sec. 7. [295.75] LIQUOR GROSS RECEIPTS TAX.
210.15 		 Subdivision 1.Definitions. (a) For purposes of this section, the following terms 
210.16 	have the meanings given.
210.17 	 (b) "Commissioner" means the commissioner of revenue.
210.18 	 (c) "Gross receipts" means the total amount received, in money or by barter or 
210.19 	exchange, for all liquor sales at retail as measured by the sales price, but does not include 
210.20 	any taxes imposed directly on the consumer that are separately stated on the invoice, bill 
210.21 	of sale, or similar document given to the purchaser.
210.22 	 (d) "Liquor" means:
210.23 	 (1) intoxicating liquor, as defined in section 340A.101, subdivision 14;
210.24 	 (2) beverage containing intoxicating liquor; and 
210.25 	 (3) 3.2 percent malt liquor, as defined in section 340A.101, subdivision 19, when 
210.26 	sold at an on-sale or off-sale municipal liquor store or other establishment licensed to sell 
210.27 	any type of intoxicating liquor.
210.28 	 (e) "Liquor retailer" means a retailer that sells liquor.
210.29 	 (f) "Retail sale" has the meaning given in section 297A.61, subdivision 4.
210.30 		 Subd. 2.Gross receipts tax imposed. A tax is imposed on each liquor retailer equal 
210.31 	to 2.5 percent of gross receipts from retail sales in Minnesota of liquor.
210.32 		 Subd. 3.Use tax imposed; credit for taxes paid. (a) A person that receives liquor 
210.33 	for use or storage in Minnesota, other than from a liquor retailer that paid the tax under 
210.34 	subdivision 2, is subject to tax at the rate imposed under subdivision 2.  Liability for the 
210.35 	tax is incurred when the person has possession of the liquor in Minnesota.  The tax must 
211.1 	be remitted to the commissioner in the same manner prescribed for the taxes imposed 
211.2 	under chapter 297A.
211.3 	 (b) A person that has paid taxes to another jurisdiction on the same transaction and 
211.4 	is subject to tax under this section is entitled to a credit for the tax legally due and paid 
211.5 	to another jurisdiction to the extent of the lesser of (1) the tax actually paid to the other 
211.6 	jurisdiction, or (2) the amount of tax imposed by Minnesota on the transaction subject to 
211.7 	tax in the other jurisdiction.
211.8 		 Subd. 4.Tax collection required. A liquor retailer with nexus in Minnesota, who 
211.9 	is not subject to tax under subdivision 2, is required to collect the tax imposed under 
211.10 	subdivision 3 from the purchaser of the liquor and give the purchaser a receipt for the 
211.11 	tax paid.  The tax collected must be remitted to the commissioner in the same manner 
211.12 	prescribed for the taxes imposed under chapter 297A.
211.13 		 Subd. 5.Taxes paid to another jurisdiction; credit. A liquor retailer that has 
211.14 	paid taxes to another jurisdiction measured by gross receipts and is subject to tax under 
211.15 	this section on the same gross receipts is entitled to a credit for the tax legally due and 
211.16 	paid to another jurisdiction to the extent of the lesser of (1) the tax actually paid to the 
211.17 	other jurisdiction, or (2) the amount of tax imposed by Minnesota on the gross receipts 
211.18 	subject to tax in the other taxing jurisdictions.
211.19 		 Subd. 6.Exemptions. All of the exemptions applicable to the taxes imposed under 
211.20 	chapter 297A are applicable to the taxes imposed under this section.
211.21 		 Subd. 7.Sourcing of sales. All of the provisions of section 297A.668 apply to 
211.22 	the taxes imposed by this section.
211.23 		 Subd. 8.Payment; reporting. A liquor retailer shall report the tax on a return 
211.24 	prescribed by the commissioner of revenue, and shall remit the tax with the return.  The 
211.25 	return and the tax must be filed and paid using the filing cycle and due dates provided for 
211.26 	taxes imposed under chapter 297A.
211.27 		 Subd. 9.Administration. Unless specifically provided otherwise by this section, 
211.28 	the audit, assessment, refund, penalty, interest, enforcement, collection remedies, appeal, 
211.29 	and administrative provisions of chapters 270 and 289A that are applicable to taxes 
211.30 	imposed under chapter 297A apply to taxes imposed under this section.
211.31 		 Subd. 10.Interest on overpayments. Interest must be paid on an overpayment 
211.32 	refunded or credited to the taxpayer from the date of payment of the tax until the date the 
211.33 	refund is paid or credited.  For purposes of this subdivision, the date of payment is the due 
211.34 	date of the return or the date of actual payment of the tax, whichever is later.
212.1 		 Subd. 11.Deposit of revenues. The commissioner shall deposit all revenues, 
212.2 	including penalties and interest, derived from the tax imposed by this section in the 
212.3 	general fund.

212.4 	EFFECTIVE DATE. This section is effective for sales and purchases occurring on 
212.5 	or after January 1, 2006.

212.6 	 Sec. 8. Minnesota Statutes 2004, section 296A.22, is amended by adding a subdivision 
212.7 	to read:
212.8 		 Subd. 9.Abatement of penalty. (a) The commissioner may by written order 
212.9 	abate any penalty imposed under this section, if in the commissioner's opinion there is 
212.10 	reasonable cause to do so.
212.11 	 (b) A request for abatement of penalty must be filed with the commissioner within 
212.12 	60 days of the date the notice stating that a penalty has been imposed was mailed to the 
212.13 	taxpayer's last known address.
212.14 	 (c) If the commissioner issues an order denying a request for abatement of penalty, 
212.15 	the taxpayer may file an administrative appeal as provided in section 296A.25 or appeal to 
212.16 	Tax Court as provided in section 271.06.  If the commissioner does not issue an order on 
212.17 	the abatement request within 60 days from the date the request is received, the taxpayer 
212.18 	may appeal to Tax Court as provided in section 271.06.

212.19 	EFFECTIVE DATE. This section is effective for penalties imposed on or after the 
212.20 	day following final enactment.

212.21 	 Sec. 9. Minnesota Statutes 2004, section 297E.01, subdivision 5, is amended to read:
212.22 		 Subd. 5.Distributor.  "Distributor" means a distributor as defined in section 349.12, 
212.23 	subdivision 11, or a person or linked bingo game provider who markets, sells, or provides 
212.24 	gambling product to a person or entity for resale or use at the retail level.

212.25 	EFFECTIVE DATE. This section is effective the day following final enactment.

212.26 	 Sec. 10. Minnesota Statutes 2004, section 297E.01, subdivision 7, is amended to read:
212.27 		 Subd. 7.Gambling product.  "Gambling product" means bingo hard cards, bingo 
212.28 	paper, or sheets, or linked bingo paper sheets; pull-tabs; tipboards; paddletickets and 
212.29 	paddleticket cards; raffle tickets; or any other ticket, card, board, placard, device, or token 
212.30 	that represents a chance, for which consideration is paid, to win a prize.

212.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

213.1 	 Sec. 11. Minnesota Statutes 2004, section 297E.01, is amended by adding a subdivision 
213.2 	to read:
213.3 		 Subd. 9a.Linked bingo game. "Linked bingo game" means a bingo game played at 
213.4 	two or more locations where licensed organizations are authorized to conduct bingo, when 
213.5 	there is a common prize pool and a common selection of numbers or symbols conducted 
213.6 	at one location, and when the results of the selection are transmitted to all participating 
213.7 	locations by satellite, telephone, or other means by a linked bingo game provider.

213.8 	EFFECTIVE DATE. This section is effective the day following final enactment.

213.9 	 Sec. 12. Minnesota Statutes 2004, section 297E.01, is amended by adding a subdivision 
213.10 	to read:
213.11 		 Subd. 9b.Linked bingo game provider. "Linked bingo game provider" means any 
213.12 	person who provides the means to link bingo prizes in a linked bingo game, who provides 
213.13 	linked bingo paper sheets to the participating organizations, who provides linked bingo 
213.14 	prize management, and who provides the linked bingo game system.

213.15 	EFFECTIVE DATE. This section is effective the day following final enactment.

213.16 	 Sec. 13. Minnesota Statutes 2004, section 297E.06, subdivision 2, is amended to read:
213.17 		 Subd. 2.Business records.  An organization shall maintain records supporting the 
213.18 	gambling activity reported to the commissioner.  Records include, but are not limited 
213.19 	to, the following items:
213.20 	 (1) all winning and unsold tickets, cards, or stubs for pull-tab, tipboard, paddlewheel, 
213.21 	and raffle games;
213.22 	 (2) all reports and statements, including checker's records, for each bingo occasion;
213.23 	 (3) all cash journals and ledgers, deposit slips, register tapes, and bank statements 
213.24 	supporting gambling activity receipts;
213.25 	 (4) all invoices that represent purchases of gambling product;
213.26 	 (5) all canceled checks or copies of substitute checks as defined in Public Law 
213.27 	108-100, section 3, check recorders, journals and ledgers, vouchers, invoices, bank 
213.28 	statements, and other documents supporting gambling activity expenditures; and
213.29 	 (6) all organizational meeting minutes.
213.30 	 All records required to be kept by this section must be preserved by the organization 
213.31 	for at least 3-1/2 years and may be inspected by the commissioner of revenue at any 
213.32 	reasonable time without notice or a search warrant.

213.33 	EFFECTIVE DATE. This section is effective July 1, 2005.

214.1 	 Sec. 14. Minnesota Statutes 2004, section 297E.07, is amended to read:
214.2 	 297E.07 INSPECTION RIGHTS.
214.3 	 At any reasonable time, without notice and without a search warrant, the 
214.4 	commissioner may enter a place of business of a manufacturer, distributor, or organization, 
214.5 	or linked bingo game provider; any site from which pull-tabs or tipboards or other 
214.6 	gambling equipment or gambling product are being manufactured, stored, or sold; or 
214.7 	any site at which lawful gambling is being conducted, and inspect the premises, books, 
214.8 	records, and other documents required to be kept under this chapter to determine whether 
214.9 	or not this chapter is being fully complied with.  If the commissioner is denied free access 
214.10 	to or is hindered or interfered with in making an inspection of the place of business, 
214.11 	books, or records, the permit of the distributor may be revoked by the commissioner, 
214.12 	and the license of the manufacturer, the distributor, or the organization, or linked bingo 
214.13 	game provider may be revoked by the board.

214.14 	 EFFECTIVE DATE. This section is effective the day following final enactment.

214.15 	 Sec. 15. Minnesota Statutes 2004, section 297F.08, subdivision 12, is amended to read:
214.16 		 Subd. 12.Cigarettes in interstate commerce.  (a) A person may not transport or 
214.17 	cause to be transported from this state cigarettes for sale in another state without first 
214.18 	affixing to the cigarettes the stamp required by the state in which the cigarettes are to be 
214.19 	sold or paying any other excise tax on the cigarettes imposed by the state in which the 
214.20 	cigarettes are to be sold.
214.21 	 (b) A person may not affix to cigarettes the stamp required by another state or pay 
214.22 	any other excise tax on the cigarettes imposed by another state if the other state prohibits 
214.23 	stamps from being affixed to the cigarettes, prohibits the payment of any other excise tax 
214.24 	on the cigarettes, or prohibits the sale of the cigarettes.
214.25 	 (c) Not later than 15 days after the end of each calendar quarter, a person who 
214.26 	transports or causes to be transported from this state cigarettes for sale in another state 
214.27 	shall submit to the commissioner a report identifying the quantity and style of each brand 
214.28 	of the cigarettes transported or caused to be transported in the preceding calendar quarter, 
214.29 	and the name and address of each recipient of the cigarettes. This reporting requirement 
214.30 	only applies to cigarettes manufactured by companies that are not original or subsequent 
214.31 	participating manufacturers in the Master Settlement Agreement with other states.
214.32 	 (d) For purposes of this section, "person" has the meaning given in section 297F.01, 
214.33 	subdivision 12.  Person does not include any common or contract carrier, or public 
214.34 	warehouse that is not owned, in whole or in part, directly or indirectly by such person, 
215.1 	and does not include a manufacturer that has entered into is an original or subsequent 
215.2 	participating manufacturer in the Master Settlement Agreement with other states.

215.3 	EFFECTIVE DATE. This section is effective the day following final enactment.

215.4 	 Sec. 16. Minnesota Statutes 2004, section 297F.08, is amended by adding a subdivision 
215.5 	to read:
215.6 		 Subd. 13.Bond. The commissioner may require the furnishing of a corporate 
215.7 	surety bond or a certified check in an amount suitable to guarantee payment of the tax 
215.8 	stamps purchased by a distributor.  The bond or certified check may be required when the 
215.9 	commissioner determines that a distributor is (1) delinquent in the filing of any return 
215.10 	required under this chapter, or (2) delinquent in the payment of any uncontested tax 
215.11 	liability under this chapter.  The distributor shall furnish the bond or certified check for a 
215.12 	period of two years, after which, if the distributor has not been delinquent in the filing of 
215.13 	any returns required under this chapter, or delinquent in the paying of any tax under this 
215.14 	chapter, a bond or certified check is no longer required.  The commissioner at any time 
215.15 	may apply the bond or certified check to any unpaid taxes or fees, including interest and 
215.16 	penalties, owed to the department by the distributor.

215.17 	EFFECTIVE DATE. This section is effective the day following final enactment.

215.18 	 Sec. 17. Minnesota Statutes 2004, section 297F.09, subdivision 1, is amended to read:
215.19 		 Subdivision 1.Monthly return; cigarette distributor.  On or before the 18th day 
215.20 	of each calendar month, a distributor with a place of business in this state shall file a 
215.21 	return with the commissioner showing the quantity of cigarettes manufactured or brought 
215.22 	in from outside the state or purchased during the preceding calendar month and the 
215.23 	quantity of cigarettes sold or otherwise disposed of in this state and outside this state 
215.24 	during that month.  A licensed distributor outside this state shall in like manner file a 
215.25 	return showing the quantity of cigarettes shipped or transported into this state during the 
215.26 	preceding calendar month.  Returns must be made in the form and manner prescribed by 
215.27 	the commissioner and must contain any other information required by the commissioner.  
215.28 	The return must be accompanied by a remittance for the full unpaid tax liability shown 
215.29 	by it. The return for the May liability and 85 percent of the estimated June liability is 
215.30 	due on the date payment of the tax is due.For distributors subject to the accelerated tax 
215.31 	payment requirements in subdivision 10, the return for the May liability is due two 
215.32 	business days before June 30th of the year and the return for the June liability is due on or 
215.33 	before August 18th of the year.

216.1 	EFFECTIVE DATE. This section is effective the day following final enactment.

216.2 	 Sec. 18. Minnesota Statutes 2004, section 297F.09, subdivision 2, is amended to read:
216.3 		 Subd. 2.Monthly return; tobacco products distributor.  On or before the 18th 
216.4 	day of each calendar month, a distributor with a place of business in this state shall file 
216.5 	a return with the commissioner showing the quantity and wholesale sales price of each 
216.6 	tobacco product:
216.7 	 (1) brought, or caused to be brought, into this state for sale; and
216.8 	 (2) made, manufactured, or fabricated in this state for sale in this state, during the 
216.9 	preceding calendar month.
216.10 	 Every licensed distributor outside this state shall in like manner file a return showing the 
216.11 	quantity and wholesale sales price of each tobacco product shipped or transported to 
216.12 	retailers in this state to be sold by those retailers, during the preceding calendar month.  
216.13 	Returns must be made in the form and manner prescribed by the commissioner and 
216.14 	must contain any other information required by the commissioner.  The return must be 
216.15 	accompanied by a remittance for the full tax liability shown. The return for the May 
216.16 	liability and 85 percent of the estimated June liability is due on the date payment of the tax 
216.17 	is due.For distributors subject to the accelerated tax payment requirements in subdivision 
216.18 	10, the return for the May liability is due two business days before June 30th of the year 
216.19 	and the return for the June liability is due on or before August 18th of the year.

216.20 	EFFECTIVE DATE. This section is effective the day following final enactment.

216.21 	 Sec. 19. Minnesota Statutes 2004, section 297F.14, subdivision 4, is amended to read:
216.22 		 Subd. 4.Bad debt. The commissioner may adopt rules providing a refund of the 
216.23 	tax paid under this chapter if the tax paid qualifies as a bad debt under section 166(a) 
216.24 	of the Internal Revenue Code.For any reporting period, a taxpayer may offset against 
216.25 	taxes payable under this chapter the amount of taxes previously paid under this chapter 
216.26 	that is attributable to a bad debt.  The taxes must have been included in a transaction the 
216.27 	consideration for which was a debt owed to the taxpayer and which became uncollectible, 
216.28 	but only in proportion to the portion of debt that became uncollectible.  To qualify for offset 
216.29 	under this subdivision, the debt must have qualified as a bad debt under section 166(a) 
216.30 	of the Internal Revenue Code.  The taxpayer may claim the offset within the time period 
216.31 	prescribed in section 297F.17, subdivision 6.  If the taxpayer is no longer liable for taxes 
216.32 	imposed under this chapter, the commissioner shall refund to the taxpayer the amount of 
216.33 	the taxes attributable to the bad debt.  Any recovery of the tax claimed as a refund or credit 
217.1 	must be reported to the commissioner on the tax return for the month in which the recovery 
217.2 	is made.  If the taxpayer is no longer required to file returns under this chapter, the taxpayer 
217.3 	must reimburse the commissioner for tax recovered in the month following the recovery.

217.4 	EFFECTIVE DATE. This section is effective for claims filed on or after July 
217.5 	1, 2005.

217.6 	 Sec. 20. [297F.25] CIGARETTE SALES TAX.
217.7 		 Subdivision 1.Imposition. A tax is imposed on distributors on the sale of cigarettes 
217.8 	by a cigarette distributor to a retailer or cigarette subjobber for resale in this state.  The tax 
217.9 	is equal to 6.5 percent of the weighted average retail price.  The weighted average retail 
217.10 	price must be expressed in cents per pack when rounded to the nearest one-tenth of a cent. 
217.11 	The weighted average retail price must be determined annually, with new rates published 
217.12 	by May 1, and effective for sales on or after August 1.  The weighted average retail price 
217.13 	must be established by surveying cigarette retailers statewide in a manner and time 
217.14 	determined by the commissioner.  The determination of the commissioner pursuant to this 
217.15 	subdivision is not a "rule" and is not subject to the Administrative Procedure Act contained 
217.16 	in chapter 14.  As of August 1, 2005, the tax is 20 cents per pack of 20 cigarettes. For 
217.17 	packs of cigarettes with other than 20 cigarettes, the tax must be adjusted proportionally.
217.18 		 Subd. 2.Payment. Each taxpayer must remit payments of the taxes to the 
217.19 	commissioner on the same dates prescribed under section 297F.09, subdivision 1, for 
217.20 	cigarette tax returns, including the accelerated remittance of the June liability.
217.21 		 Subd. 3.Return. A taxpayer must file a return with the commissioner on the 
217.22 	same dates prescribed under section 297F.09, subdivision 1, for cigarette tax returns. 
217.23 	Notwithstanding any other provisions of this chapter, the tax due on the return is based 
217.24 	upon actual stamps purchased during the reporting period.
217.25 		 Subd. 4.Form of return. The return must contain the information and be in the 
217.26 	form prescribed by the commissioner.
217.27 		 Subd. 5.Tax as debt. The tax that is required to be paid by the distributor is a debt 
217.28 	from the retailer or cigarette subjobber to the distributor recoverable at law in the same 
217.29 	manner as other debts.  A cigarette retailer or subjobber must pay the tax imposed under 
217.30 	subdivision 1 to the distributor before the 12th day of the month following the month in 
217.31 	which the cigarettes were purchased from the distributor.
217.32 		 Subd. 6.Sales tax stamp. Payment of the tax imposed under section 297F.05 and 
217.33 	by this section must be evidenced by a dual-purpose single stamp affixed to each package.
218.1 		 Subd. 7.Administration. The stamping, audit, assessment, interest, penalty, appeal, 
218.2 	refund, and collection provisions applicable to the taxes imposed under this chapter apply 
218.3 	to taxes imposed under this section.
218.4 		 Subd. 8.Deposit of revenues. Notwithstanding the provisions of section 297F.10, 
218.5 	the commissioner shall deposit all revenues, including penalties and interest, derived from 
218.6 	the tax imposed by this section, in the general fund.

218.7 	EFFECTIVE DATE. This section is effective for all sales made on or after August 
218.8 	1, 2005.

218.9 	 Sec. 21. Minnesota Statutes 2004, section 297G.09, is amended by adding a 
218.10 	subdivision to read:
218.11 		 Subd. 9.Quarterly and annual payments and returns. (a) If a manufacturer, 
218.12 	wholesaler, brewer, or importer has an average liquor tax liability equal to or less than $500 
218.13 	per month in any quarter of a calendar year, and has substantially complied with the state 
218.14 	tax laws during the preceding four calendar quarters, the manufacturer, wholesaler, brewer, 
218.15 	or importer may request authorization to file and pay the taxes quarterly in subsequent 
218.16 	calendar quarters.  The authorization remains in effect during the period in which the 
218.17 	manufacturer's, wholesaler's, brewer's, or importer's quarterly returns reflect liquor tax 
218.18 	liabilities of less than $1,500 and there is continued compliance with state tax laws.
218.19 	 (b) If a manufacturer, wholesaler, brewer, or importer has an average liquor tax 
218.20 	liability equal to or less than $100 per month during a calendar year, and has substantially 
218.21 	complied with the state tax laws during that period, the manufacturer, wholesaler, brewer, 
218.22 	or importer may request authorization to file and pay the taxes annually in subsequent 
218.23 	years.  The authorization remains in effect during the period in which the manufacturer's, 
218.24 	wholesaler's, brewer's, or importer's annual returns reflect liquor tax liabilities of less 
218.25 	than $1,200 and there is continued compliance with state tax laws.
218.26 	 (c) The commissioner may also grant quarterly or annual filing and payment 
218.27 	authorizations to manufacturers, wholesalers, brewers, or importers if the commissioner 
218.28 	concludes that the manufacturer's, wholesaler's, brewer's, or importer's future tax 
218.29 	liabilities will be less than the monthly totals identified in paragraphs (a) and (b).  An 
218.30 	authorization granted under this paragraph is subject to the same conditions as an 
218.31 	authorization granted under paragraphs (a) and (b).
218.32 	 (d) The annual tax return and payments must be filed and paid on or before the 18th 
218.33 	day of January following the calendar year.  The quarterly returns and payments must be 
218.34 	filed and paid on or before April 18 for the quarter ending March 31, on or before July 18 
219.1 	for the quarter ending June 30, on or before October 18 for the quarter ending September 
219.2 	30, and on or before January 18 for the quarter ending December 31.

219.3 	EFFECTIVE DATE. This section is effective for tax returns and payments due on 
219.4 	or after January 1, 2006.

219.5 	 Sec. 22. Minnesota Statutes 2004, section 297I.01, is amended by adding a subdivision 
219.6 	to read:
219.7 		 Subd. 6a.Direct business. (a) "Direct business" means all insurance provided 
219.8 	by an insurance company or its agents, and specifically includes stop-loss insurance 
219.9 	purchased in connection with a self-insurance plan for employee health benefits or for 
219.10 	other purposes, but excludes:
219.11 	 (1) reinsurance in which an insurance company assumes the liability of another 
219.12 	insurance company; and 
219.13 	 (2) self-insurance.
219.14 	 (b) For purposes of this subdivision, an insurance company includes a nonprofit 
219.15 	health service corporation, health maintenance organization, and community integrated 
219.16 	service network.

219.17 	EFFECTIVE DATE. This section is effective for insurance premiums received 
219.18 	after December 31, 2005.

219.19 	 Sec. 23. Minnesota Statutes 2004, section 297I.01, is amended by adding a subdivision 
219.20 	to read:
219.21 		 Subd. 13a.Reinsurance. "Reinsurance" is insurance whereby an insurance 
219.22 	company, for a consideration, agrees to indemnify another insurance company against 
219.23 	all or part of the loss which the latter may sustain under the policy or policies which 
219.24 	it has issued.

219.25 	EFFECTIVE DATE. This section is effective the day following final enactment.

219.26 	 Sec. 24. Minnesota Statutes 2004, section 297I.05, subdivision 4, is amended to read:
219.27 		 Subd. 4.Mutual property and casualty companies with total assets less than 
219.28 	$1,600,000,000 on december 31, 1989.  A tax is imposed on mutual property and casualty 
219.29 	companies that had total assets greater than $5,000,000 at the end of the calendar year 
219.30 	but that had total assets less than $1,600,000,000 on December 31, 1989.  The rate of 
219.31 	tax is equal to:
220.1 	 (1) two percent of gross premiums less return premiums on all direct business 
220.2 	received by the insurer or agents of the insurer in Minnesota the tax under subdivision 14 
220.3 	for life insurance, in cash or otherwise, during the year; and
220.4 	 (2) 1.26 percent of gross premiums less return premiums on all other direct business 
220.5 	received by the insurer or agents of the insurer in Minnesota, in cash or otherwise, during 
220.6 	the year.

220.7 	EFFECTIVE DATE. This section is effective for premiums received after 
220.8 	December 31, 2007.

220.9 	 Sec. 25. Minnesota Statutes 2004, section 297I.05, subdivision 5, is amended to read:
220.10 		 Subd. 5.Health maintenance organizations, nonprofit health service plan 
220.11 	corporations, and community integrated service networks.  (a) Health maintenance 
220.12 	organizations, community integrated service networks, and nonprofit health care service 
220.13 	plan corporations are exempt from the tax imposed under this section for premiums 
220.14 	received in calendar years 2001 to 2003.
220.15 	 (b) For calendar years after 2003,A tax is imposed on health maintenance 
220.16 	organizations, community integrated service networks, and nonprofit health care service 
220.17 	plan corporations. The rate of tax is equal to one percent of gross premiums less return 
220.18 	premiums on all direct business received by the organization, network, or corporation or 
220.19 	its agents in Minnesota, in cash or otherwise,in the calendar year.
220.20 	 (c) In approving the premium rates as required in sections 62L.08, subdivision 8, 
220.21 	and 62A.65, subdivision 3, the commissioners of health and commerce shall ensure that 
220.22 	any exemption from tax as described in paragraph (a) is reflected in the premium rate.
220.23 	 (d) (b) The commissioner shall deposit all revenues, including penalties and interest, 
220.24 	collected under this chapter from health maintenance organizations, community integrated 
220.25 	service networks, and nonprofit health service plan corporations in the health care access 
220.26 	fund.  Refunds of overpayments of tax imposed by this subdivision must be paid from 
220.27 	the health care access fund.  There is annually appropriated from the health care access 
220.28 	fund to the commissioner the amount necessary to make any refunds of the tax imposed 
220.29 	under this subdivision.

220.30 	EFFECTIVE DATE. This section is effective January 1, 2005.

220.31 	 Sec. 26. Minnesota Statutes 2004, section 297I.05, is amended by adding a subdivision 
220.32 	to read:
221.1 		 Subd. 14.Life insurance. A tax is imposed on life insurance.  The rate of the 
221.2 	tax equals 1.5 percent of gross premiums less return premiums on all direct business 
221.3 	received by the insurer or agents of the insurer in Minnesota for life insurance, in cash or 
221.4 	otherwise, during the year.

221.5 	EFFECTIVE DATE. This section is effective for premiums received after 
221.6 	December 31, 2007.

221.7 	 Sec. 27. Minnesota Statutes 2004, section 298.24, subdivision 1, is amended to read:
221.8 		 Subdivision 1.Effective date. This section is effective for direct reduced ore 
221.9 	produced after the day following final enactment.

221.10 	 Sec. 28. Minnesota Statutes 2004, section 298.75, is amended by adding a 
221.11 	subdivision to read:
 221.12 		 Subd. 10.Tax may be imposed, cass county. (a) If Cass County does not impose 
221.13 	a tax under this section, the town of Sylvan in Cass County may impose the aggregate 
221.14 	materials tax under this section.
221.15 	 (b) For purposes of exercising the powers contained in this section, the "town" is 
221.16 	deemed to be the "county." 
221.17 	 (c) All provisions in this section apply to the town of Sylvan, except that in lieu of 
221.18 	the distribution of the tax proceeds under subdivision 7, all proceeds of the tax must 
221.19 	be retained by the town.
221.20 	 (d) If Cass County imposes an aggregate materials tax under this section, the tax 
221.21 	imposed by the town of Sylvan under this subdivision is repealed on the effective date 
221.22 	of the Cass County tax.

221.23 	EFFECTIVE DATE. This section is effective the day after the governing body of 
221.24 	the town of Sylvan and its chief clerical officer comply with Minnesota Statutes, section 
221.25 	645.021, subdivisions 2 and 3.

221.26 	 Sec. 29. Minnesota Statutes 2004, section 473.843, subdivision 5, is amended 
221.27 	to read:
 221.28 		 Subd. 5.Penalties; enforcement. The audit, penalty, and enforcement provisions 
221.29 	applicable to corporate franchise taxes imposed under chapter 290 apply to the fees 
221.30 	imposed under this section.  The commissioner of revenue shall administer the provisions.

221.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

222.1 	 Sec. 30. [FLOOR STOCKS TAX.]
 222.2 		 Subdivision 1.Cigarettes. A floor stocks cigarette sales tax is imposed on every 
222.3 	person engaged in the business in this state as a distributor, retailer, subjobber, vendor, 
222.4 	manufacturer, or manufacturer's representative of cigarettes, on the stamped cigarettes and 
222.5 	unaffixed stamps in the person's possession or under the person's control at 12:01 a.m. on 
222.6 	August 1, 2005.  The tax is imposed at the rate of 20 cents per pack of 20 cigarettes.  For 
222.7 	packs of cigarettes with other than 20 cigarettes, the tax shall be adjusted proportionally.
222.8 	 Each distributor, by August 10, 2005, shall file a return with the commissioner, in the 
222.9 	form the commissioner prescribes, showing the stamped cigarettes and unaffixed stamps 
222.10 	on hand at 12:01 a.m. on August 1, 2005, and the amount of tax due on the cigarettes and 
222.11 	unaffixed stamps.  The tax imposed by this section is due and payable by September 7, 
222.12 	2005, and after that date bears interest at the rate of one percent a month.
222.13 	 Each retailer, subjobber, vendor, manufacturer, or manufacturer's representative, by 
222.14 	August 10, 2005, shall file a return with the commissioner, in the form the commissioner 
222.15 	prescribes, showing the cigarettes on hand at 12:01 a.m. on August 1, 2005, and the 
222.16 	amount of tax due on the cigarettes. The tax imposed by this section is due and payable by 
222.17 	September 7, 2005, and after that date bears interest at the rate of one percent a month.
222.18 		 Subd. 2.Audit and enforcement. The tax imposed by this section is subject to 
222.19 	the audit, assessment, penalty, and collection provisions applicable to the taxes imposed 
222.20 	under Minnesota Statutes, chapter 297F.  The commissioner may require a distributor to 
222.21 	receive and maintain copies of floor stocks tax returns filed by all persons requesting 
222.22 	a credit for returned cigarettes.
222.23 		 Subd. 3.Deposit of proceeds. The revenue from the tax imposed under this 
222.24 	section shall be deposited by the commissioner in the state treasury and credited to the 
222.25 	general fund.

222.26 	EFFECTIVE DATE. This section is effective August 1, 2005.

222.27 	 Sec. 31. [REPEALER.]
 222.28 	 Minnesota Statutes 2004, section 297E.12, subdivision 10, is repealed effective the 
222.29 	day following final enactment.

222.30 	 ARTICLE 9
222.31 	 ECONOMIC DEVELOPMENT

222.32 	 Section 1. Minnesota Statutes 2004, section 272.02, subdivision 64, is amended to read:
223.1 		 Subd. 64.Job opportunity building zone property.  (a) Improvements to real 
223.2 	property, and personal property, classified under section 273.13, subdivision 24, and 
223.3 	located within a job opportunity building zone, designated under section 469.314, are 
223.4 	exempt from ad valorem taxes levied under chapter 275.
223.5 	 (b) Improvements to real property, and tangible personal property, of an agricultural 
223.6 	production facility located within an agricultural processing facility zone, designated 
223.7 	under section 469.314, is exempt from ad valorem taxes levied under chapter 275.
223.8 	 (c) For property to qualify for exemption under paragraph (a), the occupant must be 
223.9 	a qualified business, as defined in section 469.310.
223.10 	 (d) The exemption applies beginning for the first assessment year after designation 
223.11 	of the job opportunity building zone by the commissioner of employment and economic 
223.12 	development.  The exemption applies to each assessment year that begins during the 
223.13 	duration of the job opportunity building zone and to property .  To be exempt, the property 
223.14 	must be occupied by July 1 of the assessment year by a qualified business that has signed 
223.15 	the business subsidy agreement and relocation agreement, if required, by July 1 of the 
223.16 	assessment year.  This exemption does not apply to:
223.17 	 (1) the levy under section 475.61 or similar levy provisions under any other law to 
223.18 	pay general obligation bonds; or
223.19 	 (2) a levy under section 126C.17, if the levy was approved by the voters before the 
223.20 	designation of the job opportunity building zone.

223.21 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
223.22 	thereafter.

223.23 	 Sec. 2. Minnesota Statutes 2004, section 272.0212, subdivision 1, is amended to read:
223.24 		 Subdivision 1.Exemption.  All qualified property in a zone is exempt to the extent 
223.25 	and for a period up to the duration provided by the zone designation and under sections 
223.26 	469.1731 to 469.1735.

223.27 	EFFECTIVE DATE. This section is effective for development agreements 
223.28 	approved after the day following final enactment and beginning for property taxes payable 
223.29 	in 2006.

223.30 	 Sec. 3. Minnesota Statutes 2004, section 272.0212, subdivision 2, is amended to read:
223.31 		 Subd. 2.Limits on exemption. (a) Property in a zone is not exempt under this 
223.32 	section from the following:
223.33 	 (1) special assessments;
224.1 	 (2) ad valorem property taxes specifically levied for the payment of principal and 
224.2 	interest on debt obligations; and
224.3 	 (3) all taxes levied by a school district, except school referendum levies as defined 
224.4 	in section 126C.17.
224.5 	 (b) The city may limit the property tax exemption to a shorter period than the 
224.6 	duration of the zone or to a percentage of the property taxes payable or both.

224.7 	EFFECTIVE DATE. This section is effective for development agreements 
224.8 	approved after the day following final enactment and beginning for property taxes payable 
224.9 	in 2006.

224.10 	 Sec. 4. Minnesota Statutes 2004, section 289A.56, is amended by adding a subdivision 
224.11 	to read:
224.12 		 Subd. 7.Biotechnology and health sciences industry zone refunds.
 224.13 	Notwithstanding subdivision 3, for refunds payable under section 297A.68, subdivision 
224.14 	38, interest is computed from 90 days after the refund claim is filed with the commissioner.

224.15 	EFFECTIVE DATE. This section is effective for refund claims filed on or after 
224.16 	July 1, 2005.

224.17 	 Sec. 5. Minnesota Statutes 2004, section 297A.68, subdivision 37, is amended to read:
224.18 		 Subd. 37.Job opportunity building zones.  (a) Purchases of tangible personal 
224.19 	property or taxable services by a qualified business, as defined in section 469.310, are 
224.20 	exempt if the property or services are primarily used or consumed in a job opportunity 
224.21 	building zone designated under section 469.314. For purposes of this subdivision, aircraft 
224.22 	that are operated under a Federal Aviation Administration Restricted Airworthiness 
224.23 	Certificate according to Code of Federal Regulations, title 14, part 21, section 21.25(b)(3), 
224.24 	relating to aerial surveying, and that are based, maintained, and dispatched from a 
224.25 	job opportunity building zone, and any aerial camera package, including any camera, 
224.26 	computer, and navigation device contained in the package, that is used in the aircraft, 
224.27 	qualify as primarily used or consumed in a job opportunity building zone if the imagery 
224.28 	acquired from the aerial camera package is returned to the job opportunity building zone 
224.29 	for processing.
224.30 	 (b) Purchase and use of construction materials and supplies for construction of 
224.31 	improvements to real property in a job opportunity building zone are exempt if the 
224.32 	improvements after completion of construction are to be used in the conduct of a qualified 
224.33 	business, as defined in section 469.310.  This exemption applies regardless of whether 
225.1 	the purchases are made by the business or a contractor. The exemption does not apply 
225.2 	unless the business subsidy agreement entered into pursuant to section 469.313 requires 
225.3 	the prevailing wage to be paid on the construction project.
225.4 	 (c) The exemptions under this subdivision apply to a local sales and use tax 
225.5 	regardless of whether the local sales tax is imposed on the sales taxable as defined under 
225.6 	this chapter.
225.7 	 (d) This subdivision applies to sales, if the purchase was made and delivery received 
225.8 	during the duration of the zone.

225.9 	EFFECTIVE DATE. The amendment to paragraph (a) is effective for sales made 
225.10 	after June 30, 2005.

225.11 	 Sec. 6. Minnesota Statutes 2004, section 297A.68, subdivision 38, is amended to read:
225.12 		 Subd. 38.Biotechnology and health sciences industry zone.  (a) Purchases of 
225.13 	tangible personal property or taxable services by a qualified business, as defined in section 
225.14 	469.330, are exempt if the property or services are primarily used or consumed in a 
225.15 	biotechnology and health sciences industry zone designated under section 469.334.
225.16 	 (b) Purchase and use of construction materials and , supplies for , or equipment used 
225.17 	or consumed in the construction of improvements to real property in a biotechnology 
225.18 	and health sciences industry zone are exempt if the improvements after completion of 
225.19 	construction are to be used in the conduct of a qualified business, as defined in section 
225.20 	469.330.  This exemption applies regardless of whether the purchases are made by the 
225.21 	business or a contractor.
225.22 	 (c) The exemptions under this subdivision apply to a local sales and use tax 
225.23 	regardless of whether the local sales tax is imposed on the sales taxable as defined under 
225.24 	this chapter.
225.25 	 (d)(1) The tax on sales of goods or services exempted under this subdivision are 
225.26 	imposed and collected as if the applicable rate under section 297A.62 applied.  Upon 
225.27 	application by the purchaser, on forms prescribed by the commissioner, a refund equal 
225.28 	to the tax paid must be paid to the purchaser.  The application must include sufficient 
225.29 	information to permit the commissioner to verify the sales tax paid and the eligibility of 
225.30 	the claimant to receive the credit.  No more than two applications for refunds may be filed 
225.31 	under this subdivision in a calendar year.  The provisions of section 289A.40 apply to 
225.32 	the refunds payable under this subdivision.
225.33 	 (2) The amount required to make the refunds is annually appropriated to the 
225.34 	commissioner of revenue.
226.1 	 (3) The aggregate amount refunded to a qualified business must not exceed the 
226.2 	amount allocated to the qualified business under section 469.335.
226.3 	 (e) This subdivision applies only to sales made during the duration of the designation 
226.4 	of the zone.

226.5 	EFFECTIVE DATE. This section is effective for sales made after December 31, 
226.6 	2003.

226.7 	 Sec. 7. Minnesota Statutes 2004, section 469.169, is amended by adding a subdivision 
226.8 	to read:
226.9 		 Subd. 17.Additional border city allocations. (a) In addition to tax reductions 
226.10 	authorized in subdivisions 7 to 16, the commissioner shall allocate $750,000 for tax 
226.11 	reductions to border city enterprise zones in cities located on the western border of the 
226.12 	state.  The commissioner shall make allocations to zones in cities on the western border on 
226.13 	a per capita basis. Allocations made under this subdivision may be used for tax reductions 
226.14 	as provided in section 469.171, or for other offsets of taxes imposed on or remitted by 
226.15 	businesses located in the enterprise zone, but only if the municipality determines that the 
226.16 	granting of the tax reduction or offset is necessary in order to retain a business within or 
226.17 	attract a business to the zone.  Any portion of the allocation provided in this paragraph 
226.18 	may alternatively be used for tax reductions under section 469.1732 or 469.1734.
226.19 	 (b) The commissioner shall allocate $750,000 for tax reductions under section 
226.20 	469.1732 or 469.1734 to cities with border city enterprise zones located on the western 
226.21 	border of the state.  The commissioner shall allocate this amount among the cities on a per 
226.22 	capita basis.  Any portion of the allocation provided in this paragraph may alternatively 
226.23 	be used for tax reductions as provided in section 469.171.

226.24 	EFFECTIVE DATE. This section is effective the day following final enactment.

226.25 	 Sec. 8. Minnesota Statutes 2004, section 469.176, subdivision 4l, is amended to read:
226.26 		 Subd. 4l.Prohibited facilities.  (a) No tax increment from any district may be 
226.27 	used for:
226.28 	 (1) a commons area used as a public park; or 
226.29 	 (2) a facility used for social, recreational, or conference purposes; or 
226.30 	 (3) a property that includes a casino or other facility conducting class III gaming as 
226.31 	defined in United States Code, title 25, section 2703, regardless of whether it is conducted 
226.32 	by an Indian tribe or tribal business.
227.1 	 (b) This subdivision does not apply to a privately owned facility for conference 
227.2 	purposes or a parking structure.

227.3 	EFFECTIVE DATE. This section is effective for expenditures of increment made 
227.4 	after June 30, 2005, regardless of when the request for certification of the district was 
227.5 	made.

227.6 	 Sec. 9. Minnesota Statutes 2004, section 469.176, subdivision 7, is amended to read:
227.7 		 Subd. 7.Parcels not includable in districts.  (a) The authority may request 
227.8 	inclusion in a tax increment financing district and the county auditor may certify the 
227.9 	original tax capacity of a parcel or a part of a parcel that qualified under the provisions of 
227.10 	section 273.111 or 273.112 or chapter 473H for taxes payable in any of the five calendar 
227.11 	years before the filing of the request for certification only for:
227.12 	 (1) a district in which 85 percent or more of the planned buildings and facilities 
227.13 	(determined on the basis of square footage) are a qualified manufacturing facility or a 
227.14 	qualified distribution facility or a combination of both; or
227.15 	 (2) a qualified housing district.
227.16 	 (b)(1) A distribution facility means buildings and other improvements to real 
227.17 	property that are used to conduct activities in at least each of the following categories:
227.18 	 (i) to store or warehouse tangible personal property;
227.19 	 (ii) to take orders for shipment, mailing, or delivery;
227.20 	 (iii) to prepare personal property for shipment, mailing, or delivery; and
227.21 	 (iv) to ship, mail, or deliver property.
227.22 	 (2) A manufacturing facility includes space used for manufacturing or producing 
227.23 	tangible personal property, including processing resulting in the change in condition of the 
227.24 	property, and space necessary for and related to the manufacturing activities.
227.25 	 (3) To be a qualified facility, the owner or operator of a manufacturing or distribution 
227.26 	facility must agree to pay and pay 90 percent or more of the employees of the facility at 
227.27 	a rate equal to or greater than 160 percent of the federal minimum wage for individuals 
227.28 	over the age of 20.
227.29 	 (c) The authority may not request inclusion in a tax increment financing district and 
227.30 	the county auditor may not certify the original tax capacity of a parcel or a part of a parcel 
227.31 	that contains or is expected to contain uses, facilities, properties, or businesses containing 
227.32 	class III gaming, as defined in United States Code, title 25, section 2703, regardless of 
227.33 	whether it is conducted by an Indian tribe or tribal business.

228.1 	EFFECTIVE DATE. This section is effective for parcels for which the request for 
228.2 	certification is made after June 30, 2005.

228.3 	 Sec. 10. Minnesota Statutes 2004, section 469.310, subdivision 11, is amended to read:
228.4 		 Subd. 11.Qualified business.  (a) "Qualified business" means A person carrying on 
228.5 	a trade or business at a place of business located within a job opportunity building zone 
228.6 	is a qualified business for the purposes of sections 469.310 to 469.320 according to the 
228.7 	criteria in paragraphs (b) to (f).
228.8 	 (b) A person is a qualified business only on those parcels of land for which the 
228.9 	person has entered into a business subsidy agreement, as required under section 469.313, 
228.10 	with the appropriate local government unit in which the parcels are located.
228.11 	 (c) Prior to execution of the business subsidy agreement, the local government 
228.12 	unit must consider the following factors:
228.13 	 (1) how wages plus benefits compare to 110 percent of the statewide poverty rate 
228.14 	for a family of four;
228.15 	 (2) how wages compare to the regional industry average;
228.16 	 (3) the number of jobs that will be provided relative to overall employment in the 
228.17 	community;
228.18 	 (4) the economic outlook for the industry the business will engage in;
228.19 	 (5) sales that will be generated from outside the state of Minnesota;
228.20 	 (6) how the business will build on existing regional strengths or diversify the 
228.21 	regional economy;
228.22 	 (7) how the business will increase capital investment in the zone; and 
228.23 	 (8) any other criteria the commissioner deems necessary.
228.24 	 (b) (d) A person that relocates a trade or business from outside a job opportunity 
228.25 	building zone into a zone is not a qualified business,unless the business meets all of the 
228.26 	requirements of paragraphs (b) and (c) and:
228.27 	 (1) (i) increases full-time employment in the first full year of operation within the job 
228.28 	opportunity building zone by at least a minimum of five jobs or 20 percent, whichever is 
228.29 	greater,measured relative to the operations that were relocated and maintains the required 
228.30 	level of employment for each year the zone designation applies; or 
228.31 	 (ii) makes a capital investment in the property located within a zone equivalent to 
228.32 	ten percent of the gross revenues of operation that were relocated in the immediately 
228.33 	preceding taxable year;and
228.34 	 (2) enters a binding written agreement with the commissioner that:
228.35 	 (i) pledges the business will meet the requirements of clause (1);
229.1 	 (ii) provides for repayment of all tax benefits enumerated under section 469.315 to 
229.2 	the business under the procedures in section 469.319, if the requirements of clause (1) are 
229.3 	not met for the taxable year or for taxes payable during the year in which the requirements 
229.4 	were not met; and
229.5 	 (iii) contains any other terms the commissioner determines appropriate.
229.6 	 (e) The commissioner may waive the requirements under paragraph (d), clause (1), 
229.7 	if the commissioner determines that the qualified business will substantially achieve 
229.8 	the factors under this subdivision.
229.9 	 (f) A business is not a qualified business if, at its location or locations in the zone, 
229.10 	the business is primarily engaged in making retail sales to purchasers who are physically 
229.11 	present at the business's zone location.
229.12 	 (g) A qualifying business must pay each employee compensation, including benefits 
229.13 	not mandated by law, that on an annualized basis is equal to at least 110 percent of the 
229.14 	federal poverty level for a family of four.

229.15 	EFFECTIVE DATE. This section is effective the day following final enactment 
229.16 	and applies to any business entering a business subsidy agreement for a job opportunity 
229.17 	development zone after that date, except that paragraph (b) is effective retroactively from 
229.18 	June 9, 2003.

229.19 	 Sec. 11. Minnesota Statutes 2004, section 469.310, is amended by adding a subdivision 
229.20 	to read:
229.21 		 Subd. 13.Relocation payroll percentage. "Relocation payroll percentage" is a 
229.22 	fraction, the numerator of which is the zone payroll of the business for the tax year minus 
229.23 	the payroll from the relocated operations in the last full year of operations prior to the 
229.24 	relocation, and the denominator of which is the zone payroll of the business for the tax 
229.25 	year.  The relocation payroll percentage of a business that is not a relocating business 
229.26 	is 100 percent.

229.27 	EFFECTIVE DATE. This section is effective the day following final enactment 
229.28 	but applies only to qualified businesses with business subsidy agreements that are fully 
229.29 	executed after June 30, 2005.

229.30 	 Sec. 12. Minnesota Statutes 2004, section 469.315, is amended to read:
229.31 	 469.315 TAX INCENTIVES AVAILABLE IN ZONES.
230.1 	 Qualified businesses that operate in a job opportunity building zone, individuals who 
230.2 	invest in a qualified business that operates in a job opportunity building zone, and property 
230.3 	located in a job opportunity building zone qualify for:
230.4 	 (1) exemption from individual income taxes as provided under section 469.316;
230.5 	 (2) exemption from corporate franchise taxes as provided under section 469.317;
230.6 	 (3) exemption from the state sales and use tax and any local sales and use taxes on 
230.7 	qualifying purchases as provided in section 297A.68, subdivision 37;
230.8 	 (4) exemption from the state sales tax on motor vehicles and any local sales tax on 
230.9 	motor vehicles as provided under section 297B.03;
230.10 	 (5) exemption from the property tax as provided in section 272.02, subdivision 64;
230.11 	 (6) exemption from the wind energy production tax under section 272.029, 
230.12 	subdivision 7; and
230.13 	 (7) the jobs credit allowed under section 469.318.
230.14 	 The sales tax exemption under section 297A.68, subdivision 37, paragraph (b), is not 
230.15 	"financial assistance" under section 116J.871 or a "business subsidy" under section 
230.16 	116J.993 unless the business subsidy agreement entered into pursuant to section 469.313 
230.17 	requires the payment of the prevailing wage.

230.18 	 EFFECTIVE DATE. This section is effective retroactively from January 1, 2004.

230.19 	 Sec. 13. Minnesota Statutes 2004, section 469.316, is amended to read:
230.20 	 469.316 INDIVIDUAL INCOME TAX EXEMPTION.
230.21 		 Subdivision 1.Application. An individual, estate, or trust operating a trade or 
230.22 	business in a job opportunity building zone, and an individual, estate, or trust making a 
230.23 	qualifying investment in a qualified business operating in a job opportunity building zone 
230.24 	qualifies for the exemptions from taxes imposed under chapter 290, as provided in this 
230.25 	section. The exemptions provided under this section apply only to the extent that the 
230.26 	income otherwise would be taxable under chapter 290.  Subtractions under this section 
230.27 	from federal taxable income, alternative minimum taxable income, or any other base 
230.28 	subject to tax are limited to the amount that otherwise would be included in the tax 
230.29 	base absent the exemption under this section.  This section applies only to taxable years 
230.30 	beginning during the duration of the job opportunity building zone.
230.31 		 Subd. 2.Rents. An individual, estate, or trust is exempt from the taxes imposed 
230.32 	under chapter 290 on net rents derived from real or tangible personal property used 
230.33 	by a qualified business and located in a zone for a taxable year in which the zone was 
230.34 	designated a job opportunity building zone. If tangible personal property was used both 
231.1 	within and outside of the zone by the qualified business, the exemption amount for the 
231.2 	net rental income must be multiplied by a fraction, the numerator of which is the number 
231.3 	of days the property was used in the zone and the denominator of which is the total days 
231.4 	the property is rented by the qualified business.
231.5 		 Subd. 3.Business income. An individual, estate, or trust is exempt from the taxes 
231.6 	imposed under chapter 290 on net income from the operation of a qualified business in a 
231.7 	job opportunity building zone.  If the trade or business is carried on within and without 
231.8 	the zone and the individual is not a resident of Minnesota, or the taxpayer is an estate or 
231.9 	trust, the exemption must be apportioned based on the zone percentage and the relocation 
231.10 	payroll percentage for the taxable year.  If the trade or business is carried on within and 
231.11 	without the zone and the individual is a resident of Minnesota, the exemption must be 
231.12 	apportioned based on the zone percentage and the relocation payroll percentage for the 
231.13 	taxable year, except the ratios under section 469.310, subdivision 7, clause (1), items (i) 
231.14 	and (ii), must use the denominators of the property and payroll factors determined under 
231.15 	section 290.191.  No subtraction is allowed under this section in excess of 20 percent of the 
231.16 	sum of the job opportunity building zone payroll and the adjusted basis of the property at 
231.17 	the time that the property is first used in the job opportunity building zone by the business.
231.18 		 Subd. 4.Capital gains. (a) An individual, estate, or trust is exempt from the taxes 
231.19 	imposed under chapter 290 on:
231.20 	 (1) net gain derived on a sale or exchange of real property located in the zone and 
231.21 	used by a qualified business.  If the property was held by the individual, estate, or trust 
231.22 	during a period when the zone was not designated, the gain must be prorated based on 
231.23 	the percentage of time, measured in calendar days, that the real property was held by the 
231.24 	individual, estate, or trust during the period the zone designation was in effect to the total 
231.25 	period of time the real property was held by the individual;
231.26 	 (2) net gain derived on a sale or exchange of tangible personal property used by a 
231.27 	qualified business in the zone.  If the property was held by the individual, estate, or trust 
231.28 	during a period when the zone was not designated, the gain must be prorated based on 
231.29 	the percentage of time, measured in calendar days, that the property was held by the 
231.30 	individual, estate, or trust during the period the zone designation was in effect to the total 
231.31 	period of time the property was held by the individual.  If the tangible personal property 
231.32 	was used outside of the zone during the period of the zone's designation, the exemption 
231.33 	must be multiplied by a fraction, the numerator of which is the number of days the 
231.34 	property was used in the zone during the time of the designation and the denominator of 
231.35 	which is the total days the property was held during the time of the designation; and
232.1 	 (3) net gain derived on a sale of an ownership interest in a qualified business 
232.2 	operating in the job opportunity building zone, meeting the requirements of paragraph (b).  
232.3 	The exemption on the gain must be multiplied by the zone percentage of the business for 
232.4 	the taxable year prior to the sale.
232.5 	 (b) A qualified business meets the requirements of paragraph (a), clause (3), if 
232.6 	it is a corporation, an S corporation, or a partnership, and for the taxable year its job 
232.7 	opportunity building zone percentage exceeds 25 percent.  For purposes of paragraph 
232.8 	(a), clause (3), the zone percentage must be calculated by modifying the ratios under 
232.9 	section 469.310, subdivision 7, clause (1), items (i) and (ii), to use the denominators of 
232.10 	the property and payroll factors determined under section 290.191.  Upon the request of 
232.11 	an individual, estate, or trust holding an ownership interest in the entity, the entity must 
232.12 	certify to the owner, in writing, the job opportunity building zone percentage needed to 
232.13 	determine the exemption.

232.14 	EFFECTIVE DATE. This section is effective for tax years beginning after 
232.15 	December 31, 2003, except that changes in subdivision 3 relating to the relocation payroll 
232.16 	percentage are effective the day following final enactment and apply only to qualified 
232.17 	businesses with business subsidy agreements that are fully executed after June 30, 2005.

232.18 	 Sec. 14. Minnesota Statutes 2004, section 469.317, is amended to read:
232.19 	 469.317 CORPORATE FRANCHISE TAX EXEMPTION.
232.20 	 (a) A qualified business is exempt from taxation under section 290.02, the alternative 
232.21 	minimum tax under section 290.0921, and the minimum fee under section 290.0922, 
232.22 	on the portion of its income attributable to operations within the zone.  This exemption 
232.23 	is determined as follows:
232.24 	 (1) for purposes of the tax imposed under section 290.02, by multiplying its taxable 
232.25 	net income by its zone percentage and by its relocation payroll percentage and subtracting 
232.26 	the result in determining taxable income;
232.27 	 (2) for purposes of the alternative minimum tax under section 290.0921, by 
232.28 	multiplying its alternative minimum taxable income by its zone percentage and by its 
232.29 	relocation payroll percentage and reducing alternative minimum taxable income by this 
232.30 	amount; and
232.31 	 (3) for purposes of the minimum fee under section 290.0922, by excluding property 
232.32 	and payroll in the zone from the computations of the fee or by exempting the entity under 
232.33 	section 290.0922, subdivision 2, clause (7).
233.1 	 (b) No subtraction is allowed under this section in excess of 20 percent of the sum 
233.2 	of the corporation's job opportunity building zone payroll and the adjusted basis of the 
233.3 	property at the time that the property is first used in the job opportunity building zone 
233.4 	by the corporation.
233.5 	 (c) This section applies only to taxable years beginning during the duration of the 
233.6 	job opportunity building zone.

233.7 	 EFFECTIVE DATE. This section is effective the day following final enactment 
233.8 	but applies only to qualified businesses with business subsidy agreements that are fully 
233.9 	executed after June 30, 2005.

233.10 	 Sec. 15. Minnesota Statutes 2004, section 469.319, subdivision 1, is amended to read:
233.11 		 Subdivision 1.Repayment obligation.  A business must repay the amount of the 
233.12 	total tax reduction listed in section 469.315 and any refund under section 469.318 in 
233.13 	excess of tax liability, received during the two years immediately before it ceased to 
233.14 	operate in the zone, if the business:
233.15 	 (1) received tax reductions authorized by section 469.315; and
233.16 	 (2)(i) did not meet the goals specified in an agreement entered into with the applicant 
233.17 	that states any obligation the qualified business must fulfill in order to be eligible for tax 
233.18 	benefits.  The commissioner of employment and economic development may extend for 
233.19 	up to one year the period for meeting any goals provided in an agreement.  The applicant 
233.20 	may extend the period for meeting other goals by documenting in writing the reason 
233.21 	for the extension and attaching a copy of the document to its next annual report to the 
233.22 	commissioner of employment and economic development; or
233.23 	 (ii) ceased to operate its facility located within the job opportunity building zone or 
233.24 	otherwise ceases to be or is not a qualified business.

233.25 	EFFECTIVE DATE. This section is effective the day following final enactment.

233.26 	 Sec. 16. Minnesota Statutes 2004, section 469.319, is amended by adding a subdivision 
233.27 	to read:
233.28 		 Subd. 6.Reconciliation. Where this section is inconsistent with section 116J.994, 
233.29 	subdivision 3, paragraph (e), or 6, or any other provisions of sections 116J.993 to 
233.30 	116J.995, this section prevails.

233.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

233.32 	 Sec. 17. Minnesota Statutes 2004, section 469.320, subdivision 3, is amended to read:
234.1 		 Subd. 3.Remedies.  If the commissioner determines, based on a report filed 
234.2 	under subdivision 1 or other available information, that a zone or subzone is failing to 
234.3 	meet its performance goals, the commissioner may take any actions the commissioner 
234.4 	determines appropriate, including modification of the boundaries of the zone or a subzone 
234.5 	or termination of the zone or a subzone.  Before taking any action, the commissioner shall 
234.6 	consult with the applicant and the affected local government units, including notifying 
234.7 	them of the proposed actions to be taken. The commissioner shall publish any order 
234.8 	modifying a zone in the State Register and on the Internet.The applicant may appeal the 
234.9 	commissioner's order under the contested case procedures of chapter 14.

234.10 	EFFECTIVE DATE. This section is effective the day following final enactment.

234.11 	 Sec. 18. Minnesota Statutes 2004, section 469.330, subdivision 11, is amended to read:
234.12 		 Subd. 11.Qualified business.  (a) "Qualified business" means a person carrying on 
234.13 	a trade or business at a biotechnology and health sciences industry facility located within a 
234.14 	biotechnology and health sciences industry zone. A person is a qualified business only 
234.15 	on those parcels of land for which it has entered into a business subsidy agreement, as 
234.16 	required under section 469.333, with the appropriate local government unit in which the 
234.17 	parcels are located.
234.18 	 (b) A person that relocates a biotechnology and health sciences industry facility from 
234.19 	outside a biotechnology and health sciences industry zone into a zone is not a qualified 
234.20 	business, unless the business:
234.21 	 (1)(i) increases full-time employment in the first full year of operation within the 
234.22 	biotechnology and health sciences industry zone by at least 20 percent measured relative 
234.23 	to the operations that were relocated and maintains the required level of employment for 
234.24 	each year the zone designation applies; or
234.25 	 (ii) makes a capital investment in the property located within a zone equivalent to 
234.26 	ten percent of the gross revenues of operation that were relocated in the immediately 
234.27 	preceding taxable year; and
234.28 	 (2) enters a binding written agreement with the commissioner that:
234.29 	 (i) pledges the business will meet the requirements of clause (1);
234.30 	 (ii) provides for repayment of all tax benefits enumerated under section 469.336 to 
234.31 	the business under the procedures in section 469.340, if the requirements of clause (1) 
234.32 	are not met; and
234.33 	 (iii) contains any other terms the commissioner determines appropriate.

234.34 	EFFECTIVE DATE. This section is effective retroactively from June 9, 2003.

235.1 	 Sec. 19. Minnesota Statutes 2004, section 469.335, is amended to read:
235.2 	 469.335 APPLICATION FOR TAX BENEFITS.
235.3 	 (a) To claim a tax credit or exemption against a state tax under section 469.336, 
235.4 	clauses (2) through (5), a business must apply to the commissioner for a tax credit 
235.5 	certificate.  As a condition of its application, the business must agree to furnish information 
235.6 	to the commissioner that is sufficient to verify the eligibility for any credits or exemptions 
235.7 	claimed.  The total amount of the state tax credits and exemptions allowed for the 
235.8 	specified period may not exceed the amount of the tax credit certificates provided by the 
235.9 	commissioner to the business.  The commissioner must verify to the commissioner of 
235.10 	revenue the amount of tax exemptions or credits for which each business is eligible.
235.11 	 (b) A tax credit certificate issued under this section may specify the particular tax 
235.12 	exemptions or credits against a state tax that the qualified business is eligible to claim 
235.13 	under section 469.336, clauses (2) through (5), and the amount of each exemption or 
235.14 	credit allowed.
235.15 	 (c) The commissioner may issue $1,000,000 of tax credits or exemptions in fiscal 
235.16 	year 2004.  Any tax credits or exemptions not awarded in fiscal year 2004 may be awarded 
235.17 	in fiscal year 2005. Any tax credits or exemptions not awarded in fiscal year 2004 or 2005 
235.18 	do not cancel and may be awarded in fiscal years 2006 and 2007.
235.19 	 (d) A qualified business must use the tax credits or tax exemptions granted under 
235.20 	this section by the later of the end of the state fiscal year or the taxpayer's tax year in 
235.21 	which the credits or exemptions are granted.

235.22 	 EFFECTIVE DATE. This section is effective the day following final enactment.

235.23 	 Sec. 20. Minnesota Statutes 2004, section 469.337, is amended to read:
235.24 	 469.337 CORPORATE FRANCHISE TAX EXEMPTION.
235.25 	 (a) A qualified business is exempt from taxation under section 290.02, the alternative 
235.26 	minimum tax under section 290.0921, and the minimum fee under section 290.0922, on 
235.27 	the portion of its income attributable to operations of a qualified business within the 
235.28 	biotechnology and health sciences industry zone.  This exemption is determined as follows:
235.29 	 (1) for purposes of the tax imposed under section 290.02, by multiplying its taxable 
235.30 	net income by its zone percentage and subtracting the result in determining taxable income;
235.31 	 (2) for purposes of the alternative minimum tax under section 290.0921, by 
235.32 	multiplying its alternative minimum taxable income by its zone percentage and reducing 
235.33 	alternative minimum taxable income by this amount; and
236.1 	 (3) for purposes of the minimum fee under section 290.0922, by excluding zone 
236.2 	property and payroll in the zone from the computations of the fee. The qualified business 
236.3 	is exempt from the minimum fee if all of its property is located in the zone and all of its 
236.4 	payroll is zone payroll.
236.5 	 (b) No subtraction is allowed under this section in excess of 20 percent of the sum of 
236.6 	the corporation's biotechnology and health sciences industry zone payroll and the adjusted 
236.7 	basis of the property at the time that the property is first used in the biotechnology and 
236.8 	health sciences industry zone by the corporation.
236.9 	 (c) No reduction in tax is allowed in excess of the amount allocated under section 
236.10 	469.335.

236.11 	 EFFECTIVE DATE. This section is effective for tax years beginning after 
236.12 	December 31, 2003.

236.13 	 Sec. 21. Minnesota Statutes 2004, section 469.340, subdivision 1, is amended to read:
236.14 		 Subdivision 1.Repayment obligation.  A business must repay the amount of the tax 
236.15 	reduction listed in section 469.336 and any refunds under sections 469.338 and 469.339
236.16 	in excess of tax liability, received during the two years immediately before it ceased to 
236.17 	operate in the zone, if the business:
236.18 	 (1) received tax reductions authorized by section 469.336; and
236.19 	 (2)(i) did not meet the goals specified in an agreement entered into with the applicant 
236.20 	that states any obligation the qualified business must fulfill in order to be eligible for tax 
236.21 	benefits.  The commissioner of employment and economic development may extend for 
236.22 	up to one year the period for meeting any goals provided in an agreement.  The applicant 
236.23 	may extend the period for meeting other goals by documenting in writing the reason 
236.24 	for the extension and attaching a copy of the document to its next annual report to the 
236.25 	commissioner of employment and economic development; or
236.26 	 (ii) ceased to operate its facility located within the biotechnology and health sciences 
236.27 	industry zone or otherwise ceases to be or is not a qualified business.

236.28 	EFFECTIVE DATE. This section is effective the day following final enactment.

236.29 	 Sec. 22. FERGUS FALLS; ECONOMIC DEVELOPMENT.
 236.30 	 Notwithstanding the time limits in Minnesota Statutes 2004, section 272.02, 
236.31 	subdivision 39, the holding of property by the city of Fergus Falls for later resale for 
236.32 	economic development purposes is considered a public purpose for purposes of Minnesota 
236.33 	Statutes, section 272.02, subdivision 8, for a period not to exceed 15 years.  The other 
237.1 	requirements of Minnesota Statutes, section 272.02, subdivision 39, apply to property 
237.2 	held by the city under this section.

237.3 	 EFFECTIVE DATE. This section is effective the day after approval by the 
237.4 	governing body of the city of Fergus Falls and compliance with Minnesota Statutes, 
237.5 	section 645.021, subdivision 3.

237.6 	 Sec. 23. CITY OF TAYLORS FALLS; BORDER CITY DEVELOPMENT ZONE.
 237.7 		 Subdivision 1.Authorization. The governing body of the city of Taylors Falls may 
237.8 	designate all or any part of the city as a border city development zone.
237.9 		 Subd. 2.Application of general law. (a) Minnesota Statutes, sections 469.1731 to 
237.10 	469.1735, apply to the border city development zones designated under this section.  The 
237.11 	governing body of the city may exercise the powers granted under Minnesota Statutes, 
237.12 	sections 469.1731 to 469.1735, including powers that apply outside of the zones.
237.13 	 (b) The allocation under subdivision 3 for purposes of Minnesota Statutes, section 
237.14 	469.1735, subdivision 2, is appropriated to the commissioner of revenue.
237.15 		 Subd. 3.Allocation of state tax reductions. (a) The cumulative total amount of the 
237.16 	state portion of the tax reductions for all years of the program under Minnesota Statutes, 
237.17 	sections 469.1731 to 469.1735, for the city of Taylors Falls, is limited to $100,000.
237.18 	 (b) This allocation may be used for tax reductions provided in Minnesota Statutes, 
237.19 	section 469.1732 or 469.1734, or for reimbursements under Minnesota Statutes, section 
237.20 	469.1735, subdivision 3, but only if the governing body of the city of Taylors Falls 
237.21 	determines that the tax reduction or offset is necessary to enable a business to expand 
237.22 	within the city or to attract a business to the city.
237.23 	 (c) The commissioner of revenue may waive the limit under this subdivision using 
237.24 	the same rules and standards provided in Minnesota Statutes, section 469.169, subdivision 
237.25 	12, paragraph (b).
237.26 	 [EFFECTIVE DATE; LOCAL APPROVAL.]This section is effective upon 
237.27 	approval by a majority of the voters of the city of Taylors Falls voting on the question at 
237.28 	a general election.

237.29 	 Sec. 24. REVISOR'S INSTRUCTION.
 237.30 	 The revisor shall renumber Minnesota Statutes, section 469.310, subdivision 11, as 
237.31 	section 469.3135, and insert the following definition of "qualified business" in Minnesota 
237.32 	Statutes, section 469.310:  "'Qualified business' means the entity described in section 
237.33 	469.3135." 

238.1 	 Sec. 25. REPEALER.
 238.2 	 Minnesota Statutes 2004, section 272.02, subdivision 65, is repealed effective for 
238.3 	taxes payable in 2006 and thereafter. Minnesota Statutes 2004, section 477A.08, is 
238.4 	repealed effective for aid payable in 2005 and thereafter.

238.5 	 ARTICLE 10
238.6 	 TAX SHELTERS

238.7 	 Section 1. [270.103] EQUITABLE ACTIONS.
238.8 	 (a) The commissioner may bring a civil action to enjoin any person from taking 
238.9 	action or failing to take action that is subject to penalty under section 289A.60, 
238.10 	subdivisions 7, 20, 20a, 26, 27, and 28.
238.11 	 (b) In any action under paragraph (a), the court may enjoin the person from engaging 
238.12 	in the conduct, if the court finds that:
238.13 	 (1) the person has engaged in the specified conduct; and 
238.14 	 (2) injunctive relief is appropriate to prevent recurrence of the conduct.

238.15 	 EFFECTIVE DATE. This section is effective the day following final enactment.

238.16 	 Sec. 2. [289A.121] TAX SHELTERS SPECIAL RULES.
238.17 		 Subdivision 1.Scope. The provisions of this section apply to a tax shelter that:
238.18 	 (1) is organized in this state;
238.19 	 (2) is doing business in this state;
238.20 	 (3) is deriving income from sources in this state; or 
238.21 	 (4) has one or more investors that are Minnesota taxpayers under chapter 290.
238.22 		 Subd. 2.Definitions. (a) For purposes of this section, the definitions under sections 
238.23 	6111 and 6112 of the Internal Revenue Code, including the regulations under those 
238.24 	sections, apply.
238.25 	 (b) The term "tax shelter" includes any reportable transaction under subdivision 5.
238.26 		 Subd. 3.Registration. (a) Any tax shelter organizer required to register a tax 
238.27 	shelter under section 6111 of the Internal Revenue Code must register the shelter with 
238.28 	the commissioner.
238.29 	 (b) A tax shelter organizer subject to this subdivision must send a duplicate of the 
238.30 	federal registration information, along with any other information the commissioner 
238.31 	requires, to the commissioner not later than the day on which interests in that tax shelter 
238.32 	are first offered for sale.
239.1 	 (c) In addition to the requirements under paragraph (b), any listed transactions must 
239.2 	be registered with the commissioner by the latest of:
239.3 	 (1) 60 days after entering into the transaction;
239.4 	 (2) 60 days after the transaction becomes a listed transaction; or 
239.5 	 (3) December 31, 2005.
239.6 		 Subd. 4.Registration number. (a) Any person required to register under section 
239.7 	6111 of the Internal Revenue Code who receives a tax registration number from the 
239.8 	Secretary of the Treasury must, within 30 days after requested by the commissioner, file a 
239.9 	statement of that registration number with the commissioner.
239.10 	 (b) Any person who sells or otherwise transfers an interest in a tax shelter must, in 
239.11 	the same time and manner required under section 6111(b) of the Internal Revenue Code, 
239.12 	furnish to each investor who purchases or otherwise acquires an interest in the tax shelter 
239.13 	the identification number assigned under federal law to the tax shelter.
239.14 	 (c) Any person claiming any deduction, credit, or other tax benefit by reason of a tax 
239.15 	shelter must include on the return of tax on which the deduction, credit, or other benefit is 
239.16 	claimed the identification number assigned under federal law to the tax shelter.
239.17 		 Subd. 5.Reportable transactions. (a) For each taxable year in which a taxpayer 
239.18 	must make a disclosure statement under Code of Federal Regulations, title 26, section 
239.19 	1.6011-4, for a reportable transaction, including a listed transaction, in which the taxpayer 
239.20 	participated in a taxable year for which a return is required under chapter 290, the taxpayer 
239.21 	must file a copy of the disclosure with the commissioner.
239.22 	 (b) Any taxpayer that is a member of a unitary business group that includes any 
239.23 	person that must make a disclosure statement under Code of Federal Regulations, title 26, 
239.24 	section 1.6011-4, must file a disclosure under this subdivision.
239.25 	 (c) Disclosure under this subdivision is required for any transaction entered into after 
239.26 	December 31, 2001, that the Internal Revenue Service determines is a listed transaction 
239.27 	at any time, and must be made in the manner prescribed by the commissioner.  For 
239.28 	transactions in which the taxpayer participated for taxable years ending before December 
239.29 	31, 2005, disclosure must be made by the due date of the first return required under 
239.30 	chapter 290 after the enactment of this section. With respect to transactions in which the 
239.31 	taxpayer participated for taxable years ending on and after December 31, 2005, disclosure 
239.32 	must be made in the time and manner prescribed in the Code of Federal Regulations, title 
239.33 	26, section 1.6011-4(e).
239.34 	 (d) Notwithstanding paragraphs (a) to (c), no disclosure is required for transactions 
239.35 	entered into after December 31, 2001, and before January 1, 2006, (1) if the taxpayer has 
239.36 	filed an amended income tax return which reverses the tax benefits of the potential tax 
240.1 	avoidance transaction, or (2) as a result of a federal audit the Internal Revenue Service 
240.2 	has determined the tax treatment of the transaction and an amended return has been filed 
240.3 	to reflect the federal treatment.
240.4 		 Subd. 6.Abusive shelters; lists of investors. (a) Any person required to maintain a 
240.5 	list under section 6112 of the Internal Revenue Code with respect to a potentially abusive 
240.6 	tax shelter must furnish the list to the commissioner no later than when required under 
240.7 	federal law.  The list required under this subdivision must include the same information 
240.8 	required with respect to a potentially abusive tax shelter under Code of Federal 
240.9 	Regulations, title 26, section 301.6112-1, and any other information the commissioner 
240.10 	requires.
240.11 	 (b) For transactions entered into on or after December 31, 2001, that become listed 
240.12 	transactions at any time, the list must be furnished to the commissioner by the latest of:
240.13 	 (1) 60 days after entering into the transaction;
240.14 	 (2) 60 days after the transaction becomes a listed transaction; or 
240.15 	 (3) December 31, 2005.

240.16 	EFFECTIVE DATE. This section is effective the day following final enactment.

240.17 	 Sec. 3. Minnesota Statutes 2004, section 289A.38, is amended by adding a subdivision 
240.18 	to read:
240.19 		 Subd. 15.Reportable transactions. If a taxpayer fails to include on any return or 
240.20 	statement for any taxable year any information with respect to a reportable transaction, as 
240.21 	required by federal law and under section 289A.121, subdivision 5, the commissioner may 
240.22 	recompute the tax, including a refund, within six years after the return is filed with respect 
240.23 	to the taxable year in which the taxpayer participated in the reportable transaction.  If tax is 
240.24 	assessable solely because of this section, the assessable deficiency is limited to the items 
240.25 	that were not disclosed as required under section 289A.121, subdivision 5.

240.26 	EFFECTIVE DATE. This section is effective the day following final enactment.

240.27 	 Sec. 4. Minnesota Statutes 2004, section 289A.60, subdivision 4, is amended to read:
240.28 		 Subd. 4.Substantial understatement of liability; penalty. (a) The commissioner 
240.29 	of revenue shall impose a penalty for substantial understatement of any tax payable to the 
240.30 	commissioner, except a tax imposed under chapter 297A.
240.31 	 (b) There must be added to the tax an amount equal to 20 percent of the amount of any 
240.32 	underpayment attributable to the understatement.  There is a substantial understatement of 
240.33 	tax for the period if the amount of the understatement for the period exceeds the greater of:
241.1 	 (1) ten percent of the tax required to be shown on the return for the period; or
241.2 	 (2) (a) (i) $10,000 in the case of a mining company or a corporation, other than an 
241.3 	S corporation as defined in section 290.9725, when the tax is imposed by chapter 290 
241.4 	or section 298.01 or 298.015, or
241.5 	 (b) (ii) $5,000 in the case of any other taxpayer, and in the case of a mining company 
241.6 	or a corporation any tax not imposed by chapter 290 or section 298.01 or 298.015.
241.7 	 (c) For a corporation, other than an S corporation, that has been contacted by the 
241.8 	commissioner regarding the use of a potentially abusive tax shelter, as defined under 
241.9 	section 289A.121, there is also a substantial understatement of tax for any taxable year if 
241.10 	the amount of the understatement for the taxable year exceeds the lesser of:
241.11 	 (1) ten percent of the tax required to be shown on the return for the taxable year 
241.12 	(or, if greater, $2,500); or 
241.13 	 (2) $5,000,000.
241.14 	 (d) The term "understatement" means the excess of the amount of the tax required to 
241.15 	be shown on the return for the period, over the amount of the tax imposed that is shown 
241.16 	on the return.  The amount of the understatement shall be reduced by that part of the 
241.17 	understatement that is attributable to the tax treatment of any item by the taxpayer if 
241.18 	there is or was substantial authority for the treatment, or any item with respect to which 
241.19 	the relevant facts affecting the item's tax treatment are adequately disclosed in the return 
241.20 	or in a statement attached to the return.  The special rules in cases involving tax shelters 
241.21 	provided in section 6662(d)(2)(C) of the Internal Revenue Code shall apply and shall 
241.22 	apply to a tax shelter the principal purpose of which is the avoidance or evasion of state 
241.23 	taxes.  The commissioner may abate all or any part of the addition to the tax provided 
241.24 	by this section on a showing by the taxpayer that there was reasonable cause for the 
241.25 	understatement, or part of it, and that the taxpayer acted in good faith.  The additional tax 
241.26 	and penalty shall bear interest at the rate specified in section 270.75 from the time the tax 
241.27 	should have been paid until paid.
241.28 	 (e) For taxpayers that have been contacted by the commissioner regarding the use of 
241.29 	a potentially abusive tax shelter within the meaning of section 298A.121, the amount of 
241.30 	the understatement is reduced by that part of the understatement that is attributable to the 
241.31 	tax treatment of any item by the taxpayer if the taxpayer had reasonable belief that the 
241.32 	tax treatment was more likely than not the proper treatment or if any item with respect to 
241.33 	which the relevant facts affecting the item's tax treatment are adequately disclosed in the 
241.34 	return or in a statement attached to the return.

241.35 	EFFECTIVE DATE. This section is effective for taxpayers contacted by the 
241.36 	commissioner after the day following final enactment.

242.1 	 Sec. 5. Minnesota Statutes 2004, section 289A.60, subdivision 7, is amended to read:
242.2 		 Subd. 7.Penalty for frivolous return. (a) If a taxpayer files what purports to 
242.3 	be a tax return or a claim for refund but which does not contain information on which 
242.4 	the substantial correctness of the purported return or claim for refund may be judged or 
242.5 	contains information that on its face shows that the purported return or claim for refund is 
242.6 	substantially incorrect and the conduct is due to a position that is frivolous or a desire that 
242.7 	appears on the purported return or claim for refund to delay or impede the administration 
242.8 	of Minnesota tax laws, then the individual shall pay a penalty of the greater of $1,000 or 
242.9 	25 percent of the amount of tax required to be shown on the return.  In a proceeding 
242.10 	involving the issue of whether or not a person is liable for this penalty, the burden of proof 
242.11 	is on the commissioner.
242.12 	 (b) If the taxpayer has been contacted by the commissioner of revenue regarding 
242.13 	the use of a potentially abusive tax shelter within the meaning of section 289A.121, the 
242.14 	penalty under this subdivision is the greater of $5,000 or 25 percent of the amount of tax 
242.15 	required to be shown on the return.

242.16 	EFFECTIVE DATE. This section is effective for returns or claims filed after the 
242.17 	day following final enactment.

242.18 	 Sec. 6. Minnesota Statutes 2004, section 289A.60, subdivision 20, is amended to read:
242.19 		 Subd. 20.Penalty for promoting abusive tax shelters.  Any person who:
242.20 	 (1)(i) organizes or assists in the organization of a partnership or other entity, an 
242.21 	investment plan or arrangement, or any other plan or arrangement, or (ii) participates in 
242.22 	the sale of any interest in an entity or plan or arrangement referred to in clause (i); and
242.23 	 (2) makes or furnishes in connection with the organization or sale a statement 
242.24 	with respect to the allowability of a deduction or credit, the excludability of income, 
242.25 	or the securing of any other tax benefit by reason of holding an interest in the entity or 
242.26 	participating in the plan or arrangement that the person knows or has reason to know 
242.27 	is false or fraudulent concerning any material matter, shall pay a penalty equal to the 
242.28 	greater of $1,000 or 20 50 percent of the gross income derived or to be derived by the 
242.29 	person from the activity.
242.30 	 The penalty imposed by this subdivision is in addition to any other penalty provided 
242.31 	by this section.  The penalty must be collected in the same manner as any delinquent 
242.32 	income tax.  In a proceeding involving the issue of whether or not any person is liable for 
242.33 	this penalty, the burden of proof is upon the commissioner.

243.1 	EFFECTIVE DATE. This section is effective for transactions entered into after the 
243.2 	day following final enactment.

243.3 	 Sec. 7. Minnesota Statutes 2004, section 289A.60, is amended by adding a subdivision 
243.4 	to read:
243.5 		 Subd. 20a.Aiding and abetting understating of tax liability. (a) A penalty in the 
243.6 	amount under paragraph (b) for each document is imposed on each person who:
243.7 	 (1) aids or assists in, procures, or advises with respect to, the preparation or 
243.8 	presentation of any portion of a return, affidavit, claim, or other document;
243.9 	 (2) knows or has reason to believe that the portion of a return, affidavit, claim, or 
243.10 	other document will be used in connection with any material matter arising under the 
243.11 	Minnesota individual income or corporate franchise tax; and 
243.12 	 (3) knows that the portion, if so used, would result in an understatement of the 
243.13 	liability for tax of another person.
243.14 	 (b)(1) Except as provided in clause (2), the amount of the penalty imposed by this 
243.15 	subdivision is $1,000.
243.16 	 (2) If the return, affidavit, claim, or other document relates to the tax liability of a 
243.17 	corporation, the amount of the penalty imposed by paragraph (a) is $10,000.
243.18 	 (3) If any person is subject to a penalty under paragraph (a) for any document 
243.19 	relating to any taxpayer for any taxable period or taxable event, the person is not subject 
243.20 	to a penalty under paragraph (a) for any other document relating to the taxpayer for the 
243.21 	taxable period or event.
243.22 	 (c) For purposes of this subdivision, "procures" includes (i) ordering or otherwise 
243.23 	causing any other person to do an act, and (ii) knowing of, and not attempting to prevent, 
243.24 	participation by any other person in an act.
243.25 	 (d) The penalty under this subdivision applies whether or not the understatement 
243.26 	is with the knowledge or consent of the persons authorized or required to present the 
243.27 	return, affidavit, claim, or other document.
243.28 	 (e) For purposes of paragraph (a), clause (1), a person furnishing typing, reproducing, 
243.29 	or other mechanical assistance with respect to a document is not treated as having aided or 
243.30 	assisted in the preparation of the document by reason of the assistance.
243.31 	 (f)(1) Except as provided by clause (2), the penalty imposed by this section is in 
243.32 	addition to any other penalty provided by law.
243.33 	 (2) No penalty applies under subdivision 20 to any person for any document for 
243.34 	which a penalty is assessed on the person under this subdivision.

244.1 	EFFECTIVE DATE. This section is effective for documents prepared after the 
244.2 	day following final enactment.

244.3 	 Sec. 8. Minnesota Statutes 2004, section 289A.60, is amended by adding a subdivision 
244.4 	to read:
244.5 		 Subd. 26.Tax shelter penalties; registration and listing. (a) For purposes of 
244.6 	this subdivision, "material advisor" has the meaning given it under Code of Federal 
244.7 	Regulations, title 26, section 301.6112-1(c)(2).
244.8 	 (b) The penalties in this subdivision apply in connection with the use of tax shelters, 
244.9 	as defined under section 289A.121.
244.10 	 (c) A person who fails to register a tax shelter, including providing all of the required 
244.11 	information under section 289A.121, subdivision 3, is subject to a penalty of $15,000. 
244.12 	If the tax shelter is a listed shelter and disclosure is not made as required by section 
244.13 	289A.121, subdivision 5, a penalty applies equal to the greater of:
244.14 	 (1) $100,000;
244.15 	 (2) 50 percent of the gross income that the organizer or material advisor derived 
244.16 	from that activity; or 
244.17 	 (3) 75 percent of the gross income that the organizer or material advisor derived 
244.18 	from that activity if the organizer or material advisor intentionally failed to act.
244.19 	 (d) Any person who fails to supply a tax shelter registration number required under 
244.20 	section 289A.121, subdivision 4, paragraph (b), is subject to a penalty of $100 for each 
244.21 	failure.  Any person who fails to include a tax shelter registration number on a return as 
244.22 	required under section 289A.121, subdivision 4, paragraph (c), is subject to a penalty of 
244.23 	$250 for each failure, unless the failure was due to reasonable cause.  The penalties under 
244.24 	this paragraph are in addition to any penalties under paragraph (c).
244.25 	 (e) The person required to maintain or provide a list under section 289A.121, 
244.26 	subdivision 6, is subject to a penalty equal to:
244.27 	 (1) for reportable transactions, $10,000 for each day after the 20th day that the 
244.28 	organizer or material advisor failed to make the list available to the commissioner after 
244.29 	written request for that list was made; and 
244.30 	 (2) for listed transactions, the greater of:
244.31 	 (i) $100,000; or 
244.32 	 (ii) 50 percent of the gross income that the organizer or material advisor derived 
244.33 	from that activity.
244.34 	 (f) The penalty imposed by this subdivision is in addition to any penalty imposed 
244.35 	under this section.

245.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
245.2 	December 31, 2000.

245.3 	 Sec. 9. Minnesota Statutes 2004, section 289A.60, is amended by adding a subdivision 
245.4 	to read:
245.5 		 Subd. 27.Failure to report; reportable transaction. (a) Any large entity or high 
245.6 	net worth individual who fails to include on any return or statement any information with 
245.7 	respect to a reportable transaction that is required under section 6011 of the Internal 
245.8 	Revenue Code and under section 289A.121, to be included with that return or statement 
245.9 	must pay a penalty for each omission in the amount determined under paragraph (b).
245.10 	 (b) The penalty is $15,000, except for a listed transaction the penalty is $30,000.
245.11 	 (c) For purposes of this subdivision:
245.12 	 (1) "High net worth individual" means, for a transaction, an individual whose net 
245.13 	worth exceeds $2,000,000 immediately before the transaction.
245.14 	 (2) "Large entity" means, for any taxable year, a person, other than an individual, 
245.15 	with gross receipts in excess of $10,000,000 for either the taxable year in which the 
245.16 	reportable transaction occurs or in the preceding taxable year.  Rules similar to the rules 
245.17 	of section 448(c)(2) and 448(c)(3) of the Internal Revenue Code, other than section 
245.18 	448(c)(3)(A) of the Internal Revenue Code, apply.
245.19 	 (3) "Reportable transaction" means a reportable transaction under section 289A.121, 
245.20 	subdivision 5.
245.21 	 (4) Except as provided in regulations prescribed by the Secretary of the Treasury, the 
245.22 	term "listed transaction" means a reportable transaction, as defined in clause (3), that is the 
245.23 	same as, or substantially similar to, a transaction specifically identified by the Secretary of 
245.24 	the Treasury for purposes of section 6011 of the Internal Revenue Code for federal income 
245.25 	tax purposes as a tax avoidance transaction.
245.26 	 (d) The penalty imposed by this subdivision is in addition to any penalty imposed 
245.27 	under this section.

245.28 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
245.29 	December 31, 2000.

245.30 	 Sec. 10. Minnesota Statutes 2004, section 289A.60, is amended by adding a 
245.31 	subdivision to read:
245.32 		 Subd. 28.Reportable transaction understatement. (a) If a taxpayer has a 
245.33 	reportable transaction understatement for any taxable year, an amount equal to 20 percent 
245.34 	of the amount of the understatement must be added to the tax.
246.1 	 (b)(1) For purposes of this subdivision, "reportable transaction understatement" 
246.2 	means the product of:
246.3 	 (i) the amount of the increase, if any, in taxable income that results from a difference 
246.4 	between the proper tax treatment of an item to which this section applies and the 
246.5 	taxpayer's treatment of that item as shown on the taxpayer's tax return; and 
246.6 	 (ii) the highest rate of tax imposed on the taxpayer under section 290.06.
246.7 	 (2) For purposes of clause (1)(i), any reduction of the excess of deductions allowed 
246.8 	for the taxable year over gross income for that year, and any reduction in the amount of 
246.9 	capital losses which would, without regard to section 1211 of the Internal Revenue Code, 
246.10 	be allowed for that year, must be treated as an increase in taxable income.
246.11 	 (c) This subdivision applies to any item that is attributable to:
246.12 	 (1) any listed transaction under section 289A.121; and 
246.13 	 (2) any reportable transaction, other than a listed transaction, if a significant purpose 
246.14 	of that transaction is the avoidance or evasion of federal income tax liability.
246.15 	 (d) The penalty imposed by this subdivision is in addition to any penalty imposed 
246.16 	under this section.

246.17 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
246.18 	December 31, 2000.

246.19 	 Sec. 11. Minnesota Statutes 2004, section 289A.60, is amended by adding a 
246.20 	subdivision to read:
246.21 		 Subd. 29.Addition to tax. (a) If a taxpayer has been contacted by the commissioner 
246.22 	regarding the use of a potentially abusive tax shelter and has a deficiency, there must be 
246.23 	added to the tax an amount equal to 100 percent of the interest payable under section 
246.24 	270.75 for the period beginning on the last date prescribed by law for the payment of 
246.25 	that tax, determined without regard to extensions, and ending on the date the notice of 
246.26 	proposed assessment is mailed.
246.27 	 (b) "Potentially abusive tax shelter" means:
246.28 	 (1) any tax shelter, as defined in section 6111 of the Internal Revenue Code, for 
246.29 	which registration is required under section 289A.121; or 
246.30 	 (2) any entity, investment plan or arrangement, or other plan or arrangement which 
246.31 	is of a type that the Secretary of the Treasury determines by regulations as having a 
246.32 	potential for tax avoidance or evasion.
246.33 	 (c) The penalty imposed by this subdivision is in addition to any other penalty 
246.34 	imposed under this section and to the interest computation for purposes of section 270.75.

247.1 	EFFECTIVE DATE. This section is effective for notices of proposed assessments 
247.2 	mailed after the day following final enactment.

247.3 	 Sec. 12. Minnesota Statutes 2004, section 289A.60, is amended by adding a 
247.4 	subdivision to read:
247.5 		 Subd. 30.Authority to abate tax shelter penalties. (a) Notwithstanding section 
247.6 	270.07, the commissioner may abate all or any portion of any penalty imposed by 
247.7 	subdivisions 20, 20a, and 26 to 29 for any violation, only if all of the following apply:
247.8 	 (1) the violation is for a reportable transaction, other than a listed transaction, as 
247.9 	defined under Code of Federal Regulations, title 26, section 6011-4;
247.10 	 (2) the person on whom the penalty is imposed has a history of complying with the 
247.11 	requirements of this chapter and chapter 290;
247.12 	 (3) the violation is due to an unintentional mistake of fact;
247.13 	 (4) imposing the penalty would be against equity and good conscience; and 
247.14 	 (5) abating the penalty would promote compliance with the requirements of chapter 
247.15 	290.
247.16 	 (b) The exercise of authority under paragraph (a) is at the sole discretion of 
247.17 	the commissioner and may not be delegated. Notwithstanding any other law or rule, 
247.18 	a determination under this subdivision may not be reviewed in any administrative or 
247.19 	judicial proceeding.

247.20 	 Sec. 13. Minnesota Statutes 2004, section 289A.60, is amended by adding a 
247.21 	subdivision to read:
247.22 		 Subd. 31.Interest computation. For an amended return filed after December 
247.23 	31, 2005, and before the taxpayer is contacted by the Internal Revenue Service or the 
247.24 	commissioner regarding a potentially abusive tax shelter, then, for taxable years beginning 
247.25 	after December 31, 2001, with respect to any understatement of tax related to using 
247.26 	reportable transactions as defined in section 289A.121, the taxpayer is subject to interest at 
247.27 	a rate of 150 percent of the applicable rate under section 270.75.

247.28 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
247.29 	December 31, 2005.

247.30 	 Sec. 14. VOLUNTARY COMPLIANCE INITIATIVE.
 247.31 		 Subdivision 1.Establishment. The commissioner of revenue shall establish and 
247.32 	administer a voluntary compliance initiative for taxpayers subject to Minnesota Statutes, 
247.33 	section 289A.60, subdivision 26, 27, or 28.
248.1 		 Subd. 2.Time period; scope. (a) The commissioner shall conduct the voluntary 
248.2 	compliance initiative from July 1, 2005, to December 31, 2005, under Minnesota Statutes, 
248.3 	section 270.07.
248.4 	 (b) The voluntary compliance initiative applies to tax liabilities and penalties 
248.5 	attributable to an abusive tax avoidance transaction for taxable years beginning before 
248.6 	January 1, 2005.  An abusive tax avoidance transaction means a listed transaction, a 
248.7 	potentially abusive tax shelter, or a reportable transaction as those terms are used in 
248.8 	Minnesota Statutes, section 289A.121.
248.9 		 Subd. 3.Eligibility. (a) No person may participate in the voluntary compliance 
248.10 	initiative, if:
248.11 	 (1) the taxpayer was convicted of a crime in connection with an abusive tax 
248.12 	avoidance transaction or transactions;
248.13 	 (2) a criminal complaint was filed against the taxpayer in connection with an abusive 
248.14 	tax avoidance transaction or transactions;
248.15 	 (3) the taxpayer is the subject of a criminal investigation in connection with an 
248.16 	abusive tax avoidance transaction or transactions; or 
248.17 	 (4) the taxpayer was eligible to participate in the Internal Revenue Service's 
248.18 	Offshore Voluntary Compliance Initiative, as set forth in Revenue Procedure 2003-11.
248.19 	 (b) A person not disqualified under paragraph (a) may participate in the voluntary 
248.20 	compliance initiative.
248.21 		 Subd. 4.Election; commissioner authority. (a) An eligible taxpayer that meets the 
248.22 	requirements of subdivision 3 with respect to any taxable year may elect to participate 
248.23 	in the voluntary compliance program under either subdivision 5 or 6 for a particular tax 
248.24 	avoidance period.  The election must be made separately for each taxable year and in the 
248.25 	form and manner prescribed by the commissioner, and once made is irrevocable.
248.26 	 (b) The commissioner of revenue may issue forms and instructions and take other 
248.27 	actions necessary, including the use of agreements under Minnesota Statutes, section 
248.28 	270.67, to implement the voluntary compliance initiative.
248.29 		 Subd. 5.Participation without right of appeal. (a) A person participating in the 
248.30 	voluntary compliance initiative under this subdivision waives the right to an administrative 
248.31 	appeal, to a claim for refund, or to file an action in district court or tax court.  The person 
248.32 	participating must:
248.33 	 (1) file an amended return for each taxable year for which the taxpayer has filed a 
248.34 	tax return using an abusive tax avoidance transaction to underreport the taxpayer's tax 
248.35 	liability for the taxable year.  Each amended return must report all income from all sources, 
248.36 	without regard to the abusive tax avoidance transactions; and 
249.1 	 (2) pay taxes and interest due in full, except that the commissioner of revenue may 
249.2 	enter into an installment payment agreement under Minnesota Statutes, section 270.67, 
249.3 	before the taxpayer files an amended return.
249.4 	 (b) The commissioner of revenue shall abate all penalties imposed under Minnesota 
249.5 	Statutes, chapter 289A, which could have been assessed in connection with the use of an 
249.6 	abusive tax avoidance transaction, for each taxable year for which the taxpayer elects to 
249.7 	participate in the voluntary compliance initiative under this subdivision, to the extent 
249.8 	those penalties are a result of underreporting of tax liabilities attributable to the use of 
249.9 	abusive tax avoidance transactions, for which a participating person files an amended 
249.10 	return in compliance with paragraph (a).
249.11 	 (c) No criminal action must be brought against a taxpayer for the taxable years 
249.12 	reported under the voluntary compliance initiative with respect to the issues for which a 
249.13 	taxpayer voluntarily complies under this chapter.
249.14 	 (d) A person filing an amended return under this subdivision of the voluntary 
249.15 	compliance initiative may not file a claim for refund, an administrative appeal, or an action 
249.16 	in district court with regard to the amount of taxes or interest paid with the amended 
249.17 	return.  Nothing in this subdivision precludes a taxpayer from filing a claim for credit or 
249.18 	refund for the same taxable year in which a tax avoidance transaction was reported if the 
249.19 	credit or refund is not attributable to the tax avoidance transaction.
249.20 		 Subd. 6.Participation with right of appeal. (a) A person participating in the 
249.21 	voluntary compliance initiative who does not waive the right to an administrative appeal, 
249.22 	a claim for refund, or an action in district court must:
249.23 	 (1) file an amended return for each taxable year for which the taxpayer has filed 
249.24 	a tax return using an abusive tax avoidance transaction to underreport the taxpayer's 
249.25 	tax liability for that taxable year.  Each amended return must report all income from all 
249.26 	sources, without regard to the abusive tax avoidance transactions; and 
249.27 	 (2) pay taxes and interest due in full, except that the commissioner of revenue may 
249.28 	enter into an installment payment agreement pursuant to Minnesota Statutes, section 
249.29 	270.67, prior to the taxpayer filing an amended return.
249.30 	 (b) The commissioner of revenue shall abate all penalties imposed under Minnesota 
249.31 	Statutes, chapter 289A, except for the penalty for substantial understatement of tax 
249.32 	liability under Minnesota Statutes, section 289A.60, subdivision 4, determined without 
249.33 	regard to paragraph (e) of that section, which could have been assessed in connection 
249.34 	with the use of an abusive tax avoidance transaction, for each taxable year for which the 
249.35 	taxpayer elects to participate in the voluntary compliance initiative under this subdivision, 
249.36 	to the extent those penalties apply to underreporting of tax liabilities attributable to the use 
250.1 	of abusive tax avoidance transactions for which a participating person files an amended 
250.2 	return in compliance with paragraph (a).
250.3 	 (c) No criminal action must be brought against a taxpayer for the taxable years 
250.4 	reported under the voluntary compliance initiative with respect to the issues for which a 
250.5 	taxpayer voluntarily complies under this chapter.
250.6 	 (d) The taxpayer may file a claim for refund, an administrative appeal, or an action 
250.7 	in district court only after the earlier of the following occurs:
250.8 	 (1) the date the commissioner of revenue takes action on the claim for refund for 
250.9 	the taxable year;
250.10 	 (2) the later of:
250.11 	 (i) 180 days after the date of a final determination by the Internal Revenue Service 
250.12 	with respect to the transaction or transactions to which Minnesota Statutes, chapter 290, 
250.13 	applies; or 
250.14 	 (ii) four years after the date the claim for refund was filed, or one year after full 
250.15 	payment of all tax was made, including penalty and interest, whichever is later.
250.16 	 (e)(1) The taxpayer is subject to the substantial understatement penalty under 
250.17 	Minnesota Statutes, section 289A.60, subdivision 4.  The penalty may be assessed:
250.18 	 (i) when the commissioner of revenue takes action on the claim for refund; or 
250.19 	 (ii) when a federal determination becomes final for the same issue, in which case 
250.20 	the penalty must be assessed, and may not be abated, if the penalty was assessed at the 
250.21 	federal level.
250.22 	 (2) In determining the amount of the underpayment of tax, Code of Federal 
250.23 	Regulations, title 26, section 1.6664-2(c)(2), relating to qualified amended returns, applies. 
250.24 	The underpayment is the difference between the amount of tax on the original return and 
250.25 	the correct amount of tax for the taxable year.  The underpayment must not be less than the 
250.26 	amount of the claim for refund filed by the taxpayer under paragraph (d) that was denied.
250.27 	 (3) The penalty is due and payable upon notice and demand by the commissioner 
250.28 	of revenue.  Only after the taxpayer has paid all amounts due, including the penalty, and 
250.29 	the claim is denied in whole or in part, may the taxpayer file an appeal under Minnesota 
250.30 	Statutes, section 270.07, in conjunction with the appeal filed under paragraph (d).
250.31 		 Subd. 7.Commissioner orders and penalties. After December 31, 2005, the 
250.32 	commissioner of revenue may issue an order of assessment within the time period 
250.33 	permitted under Minnesota Statutes, section 289A.38, upon an amended return filed under 
250.34 	this section for an underreported amount of tax, may impose penalties on an underreported 
250.35 	amount of tax on an amended return filed under this chapter, or seek initiation of a criminal 
251.1 	action against any person based on any underreported amount of tax on an amended return 
251.2 	filed under this chapter.
251.3 		 Subd. 8.Penalty relief; exception. For purposes of this section, if the commissioner 
251.4 	subsequently determines that the correct amount of Minnesota income tax was not paid for 
251.5 	the taxable year for a participant in the voluntary compliance initiative, then the penalty 
251.6 	relief under this section does not apply to any portion of the underpayment attributable to 
251.7 	a tax avoidance transaction not paid to the state.

251.8 	EFFECTIVE DATE. This section is effective the day following final enactment.

251.9 	 Sec. 15. APPROPRIATION.
 251.10 	 For purposes of administering the voluntary compliance initiative and the tax shelter 
251.11 	registration and compliance provisions of this act, $....... is appropriated from the general 
251.12 	fund for fiscal year 2006 and $....... for fiscal year 2007 to the commissioner of revenue. 
251.13 	$....... is added to the base budget.

251.14 	 ARTICLE 11
251.15 	 MISCELLANEOUS

251.16 	 Section 1. [15.60] PUBLIC SAFETY OFFICERS; AMERICAN FLAG.
251.17 	 (a) A public employer may not forbid a peace officer or firefighter from wearing a 
251.18 	patch or pin depicting the flag of the United States of America on the employee's uniform, 
251.19 	according to customary and standard flag etiquette.  However, a public employer may limit 
251.20 	the size of a flag patch worn on a uniform to no more than three inches by five inches.
251.21 	 (b) For purposes of this section:
251.22 	 (1) "peace officer" has the meaning given in section 626.84, subdivision 1, paragraph 
251.23 	(c) or (f);
251.24 	 (2) "firefighter" means a person as defined in section 299A.41, subdivision 4, clause 
251.25 	(3) or (4); and 
251.26 	 (3) "public employer" has the meaning given in section 179A.03, subdivision 15, 
251.27 	and also includes a municipal fire department and an independent nonprofit firefighting 
251.28 	corporation.
251.29 	 (c) The commissioner of finance or the commissioner of revenue must suspend 
251.30 	disbursement, not to exceed $10,000, of any state appropriation or aid to any public 
251.31 	employer whom the commissioner determines is not complying with paragraph (a) until 
251.32 	the commissioner determines that the employer is in compliance.

252.1 	 Sec. 2. Minnesota Statutes 2004, section 16D.10, is amended to read:
252.2 	 16D.10 CASE REVIEWER.
252.3 		 Subdivision 1.Duties. The commissioner shall make a case reviewer available to 
252.4 	debtors.  The reviewer must be available to answer a debtor's questions concerning the 
252.5 	collection process and to review the collection activity taken. If the reviewer reasonably 
252.6 	believes that the particular action being taken is unreasonable or unfair, the reviewer may 
252.7 	make recommendations to the commissioner in regard to the collection action.
252.8 		 Subd. 2.Authority to issue debtor assistance order. On application filed by a 
252.9 	debtor with the case reviewer, in the form, manner, and in the time prescribed by the 
252.10 	commissioner, and after thorough investigation, the case reviewer may issue a debtor 
252.11 	assistance order if, in the determination of the case reviewer, the manner in which the 
252.12 	state debt collection laws are being administered is creating or will create an unjust and 
252.13 	inequitable result for the debtor.  Debtor assistance orders are governed by the provisions 
252.14 	relating to taxpayer assistance orders under section 270.273.
252.15 		 Subd. 3.Transfer of duties to taxpayer rights advocate.  All duties and authority 
252.16 	of the case reviewer under subdivisions 1 and 2 are transferred to the taxpayer rights 
252.17 	advocate.

252.18 	EFFECTIVE DATE. This section is effective the day following final enactment.

252.19 	 Sec. 3. Minnesota Statutes 2004, section 270.02, subdivision 3, is amended to read:
252.20 		 Subd. 3.Powers, organization, assistants.  Subject to the provisions of this chapter 
252.21 	and other applicable laws the commissioner shall have power to organize the department 
252.22 	with such divisions and other agencies as the commissioner deems necessary and to 
252.23 	appoint one deputy commissioner, a department secretary, directors of divisions, and 
252.24 	such other officers, employees, and agents as the commissioner may deem necessary to 
252.25 	discharge the functions of the department, define the duties of such officers, employees, 
252.26 	and agents, and delegate to them any of the commissioner's powers or duties, subject to 
252.27 	the commissioner's control and under such conditions as the commissioner may prescribe.  
252.28 	Appointments to exercise delegated power to sign documents which require the signature 
252.29 	of the commissioner or a delegate by law shall be by written order filed with the secretary 
252.30 	of state. The delegations of authority granted by the commissioner remain in effect until 
252.31 	revoked by the commissioner or a successor commissioner.

252.32 	EFFECTIVE DATE. This section is effective the day following final enactment.

252.33 	 Sec. 4. Minnesota Statutes 2004, section 270.30, subdivision 1, is amended to read:
253.1 		 Subdivision 1.Scope. (a) This section applies to a person who offers,provides, or 
253.2 	facilitates the provision of refund anticipation loans, as part of or in connection with 
253.3 	the provision of tax preparation services.
253.4 	 (b) This section does not apply to:
253.5 	 (1) a tax preparer who provides tax preparation services for fewer than six clients 
253.6 	in a calendar year;
253.7 	 (2) the provision by a person of tax preparation services to a spouse, parent, 
253.8 	grandparent, child, or sibling; and 
253.9 	 (3) the provision of services by an employee for an employer.

253.10 	 Sec. 5. Minnesota Statutes 2004, section 270.30, subdivision 5, is amended to read:
253.11 		 Subd. 5.Itemized bill required.  A tax preparer must provide an itemized statement 
253.12 	of the charges for services, at least separately stating the charges for:
253.13 	 (1) return preparation; and 
253.14 	 (2) electronic filing; and 
253.15 	 (3) providing or facilitating a refund anticipation loan.

253.16 	 Sec. 6. Minnesota Statutes 2004, section 270.30, is amended by adding a subdivision 
253.17 	to read:
253.18 		 Subd. 5a.Nongame wildlife checkoff. A tax preparer must give written notice of 
253.19 	the option to contribute to the nongame wildlife management account in section 290.431
253.20 	to corporate clients that file an income tax return and to individual clients who file an 
253.21 	income tax return or property tax refund claim form.  This notification must:
253.22 	 (1) state substantially the following:  "You can help preserve Minnesota's nongame 
253.23 	wildlife, such as bald eagles and loons, by donating to the nongame wildlife fund.  If you 
253.24 	wish to donate, enter the amount on the appropriate line provided by your tax preparer 
253.25 	or otherwise notify your tax preparer.  This amount will decrease your refund or increase 
253.26 	the amount you owe"; and 
253.27 	 (2) be included with information sent to the client at the same time as the preliminary 
253.28 	worksheets or other documents used in preparing the client's return and must include a 
253.29 	line for displaying contributions.

253.30 	EFFECTIVE DATE. This section is effective for returns prepared for taxable 
253.31 	years beginning after December 31, 2004.

253.32 	 Sec. 7. Minnesota Statutes 2004, section 270.30, subdivision 6, is amended to read:
254.1 		 Subd. 6.Enforcement; penalties.  The commissioner may impose an administrative 
254.2 	penalty of not more than $1,000 per violation of subdivision 3, 4, or 5.  The commissioner 
254.3 	may terminate a tax preparer's authority to transmit returns electronically to the state, if the 
254.4 	commissioner determines the tax preparer engaged in a pattern and practice of violating 
254.5 	this section.  Imposition of a penalty under this subdivision is subject to the contested case 
254.6 	procedure under chapter 14.  The commissioner shall collect the penalty in the same 
254.7 	manner as the income tax. Penalties imposed under this subdivision are public data.

254.8 	 Sec. 8. Minnesota Statutes 2004, section 270.30, is amended by adding a subdivision 
254.9 	to read:
254.10 		 Subd. 6a.Exchange of data; state board of accountancy. The State Board of 
254.11 	Accountancy shall refer to the commissioner complaints it receives about tax preparers 
254.12 	who are not subject to the jurisdiction of the State Board of Accountancy and who are 
254.13 	alleged to have violated the provisions of subdivisions 3 to 5.

254.14 	 Sec. 9. Minnesota Statutes 2004, section 270.30, is amended by adding a subdivision 
254.15 	to read:
254.16 		 Subd. 6b.Exchange of data; lawyers board of professional responsibility. The 
254.17 	Lawyers Board of Professional Responsibility may refer to the commissioner complaints 
254.18 	it receives about tax preparers who are not subject to its jurisdiction and who are alleged 
254.19 	to have violated the provisions of subdivisions 3 to 5.

254.20 	 Sec. 10. Minnesota Statutes 2004, section 270.30, is amended by adding a subdivision 
254.21 	to read:
254.22 		 Subd. 6c.Exchange of data; commissioner. The commissioner shall refer 
254.23 	complaints about tax preparers who are alleged to have violated the provisions of 
254.24 	subdivisions 3 to 5 to:
254.25 	 (1) the State Board of Accountancy, if the tax preparer is under its jurisdiction; and 
254.26 	 (2) the Lawyers Board of Professional Responsibility, if the tax preparer is under 
254.27 	its jurisdiction.

254.28 	 Sec. 11. Minnesota Statutes 2004, section 270.30, is amended by adding a subdivision 
254.29 	to read:
254.30 		 Subd. 6d.Data private. Information exchanged on individuals under subdivisions 
254.31 	6a to 6c are private data under section 13.02, subdivision 12, until such time as a penalty 
255.1 	is imposed as provided in section 326A.08 or by the Lawyers Board of Professional 
255.2 	Responsibility.

255.3 	 Sec. 12. Minnesota Statutes 2004, section 270.30, subdivision 8, is amended to read:
255.4 		 Subd. 8.Exemptions; enforcement provisions. (a) The provisions of subdivisions 
255.5 	6 and 7 this section, except for subdivision 4,do not apply to:
255.6 	 (1) an attorney admitted to practice under section 481.01;
255.7 	 (2) a certified public accountant holding a certificate under section 326A.04 or a 
255.8 	person issued a permit to practice under section 326A.05or other person who is subject to 
255.9 	the jurisdiction of the State Board of Accountancy;
255.10 	 (3) a person designated as a registered accounting practitioner under Minnesota 
255.11 	Rules, part 1105.6600, or a registered accounting practitioner firm issued a permit under 
255.12 	Minnesota Rules, part 1105.7100;
255.13 	 (4) an enrolled agent who has passed the special enrollment examination 
255.14 	administered by the Internal Revenue Service; and 
255.15 	 (5) (4) any fiduciary, or the regular employees of a fiduciary, while acting on behalf 
255.16 	of the fiduciary estate, the testator, trustor, grantor, or beneficiaries of them;
255.17 	 (5) a tax preparer who provides tax preparation services for fewer than six clients 
255.18 	in a calendar year;
255.19 	 (6) tax preparation services to a spouse, parent, grandparent, child, or sibling of 
255.20 	the tax preparer; and 
255.21 	 (7) the preparation by an employee of the tax return of the employee's employer.

255.22 	 Sec. 13. [270.301] PUBLICATION OF NAMES OF TAX PREPARERS SUBJECT 
255.23 	TO PENALTIES.
255.24 		 Subdivision 1.Publication of list. Notwithstanding any other law, the commissioner 
255.25 	must publish as provided in this section a list or lists of tax preparers subject to penalties.
255.26 		 Subd. 2.Required and excluded tax preparers. (a) Subject to the limitations 
255.27 	of paragraph (b), the commissioner must publish lists of tax preparers who have been 
255.28 	convicted under section 289A.63.
255.29 	 (b) For the purposes of this section, tax preparers are not subject to publication if:
255.30 	 (1) an administrative or court action contesting the penalty has been filed or served 
255.31 	and is unresolved at the time when notice would be given under subdivision 3;
255.32 	 (2) an appeal period to contest the penalty has not expired; or 
255.33 	 (3) the commissioner has been notified that the tax preparer is deceased.
256.1 		 Subd. 3.Notice to tax preparer. (a) At least 30 days before publishing the name of 
256.2 	a tax preparer subject to penalty, the commissioner shall mail a written notice to the tax 
256.3 	preparer, detailing the amount and nature of each penalty and the intended publication of 
256.4 	the information listed in subdivision 4 related to the penalty.  The notice must be mailed 
256.5 	by first class and certified mail addressed to the last known address of the tax preparer. 
256.6 	The notice must include information regarding the exceptions listed in subdivision 2, 
256.7 	paragraph (b), and must state that the tax preparer's information will not be published 
256.8 	if the tax preparer provides information establishing that subdivision 2, paragraph (b), 
256.9 	prohibits publication of the tax preparer's name.
256.10 	 (b) Thirty days after the notice is mailed and if the tax preparer has not proved to the 
256.11 	commissioner that subdivision 2, paragraph (b), prohibits publication, the commissioner 
256.12 	may publish in a list of tax preparers subject to penalty the information about the tax 
256.13 	preparer that is listed in subdivision 4.
256.14 		 Subd. 4.Form of list. The list may be published by any medium or method.  The 
256.15 	list must contain the name, associated business name or names, address or addresses, and 
256.16 	violation or violations for which a penalty was imposed of each tax preparer subject 
256.17 	to penalty.
256.18 		 Subd. 5.Removal from list. The commissioner shall remove the name of a tax 
256.19 	preparer from the list of tax preparers published under this section:
256.20 	 (1) when the commissioner determines that the name was included on the list in error;
256.21 	 (2) within 90 days after the preparer has fully paid all fines imposed, served any 
256.22 	suspension, and demonstrated to the satisfaction of the commissioner that the preparer 
256.23 	has successfully completed any remedial actions required by the commissioner, the State 
256.24 	Board of Accountancy, or the Lawyers Board of Professional Responsibility; or 
256.25 	 (3) when the commissioner has been notified that the tax preparer is deceased.
256.26 		 Subd. 6.Names published in error. If the commissioner publishes a name under 
256.27 	subdivision 1 in error, the tax preparer whose name was erroneously published has a right 
256.28 	to request a retraction and apology.  If the tax preparer so requests, the commissioner 
256.29 	shall publish a retraction and apology acknowledging that the tax preparer's name was 
256.30 	published in error.  The retraction and apology must appear in the same medium and the 
256.31 	same format as the original list that contained the name listed in error.
256.32 		 Subd. 7.Payment of damages. Actions against the commissioner of revenue or 
256.33 	the state of Minnesota arising out of the implementation of this program must be brought 
256.34 	under section 270.276.

257.1 	EFFECTIVE DATE. The provision of this section requiring the commissioner to 
257.2 	publish the names of tax preparers applies only to publishing the names of those tax 
257.3 	preparers who commit a crime under section 289A.63 on or after August 1, 2005.

257.4 	 Sec. 14. Minnesota Statutes 2004, section 270.65, is amended to read:
257.5 	 270.65 DATE OF ASSESSMENT; DEFINITION.
257.6 	 For purposes of taxes administered by the commissioner, the term "date of 
257.7 	assessment" means the date a liability reported on a return was entered into the records of 
257.8 	the commissioner or the date a return should have been filed, whichever is later; or, in the 
257.9 	case of taxes determined by the commissioner, "date of assessment" means the date of the 
257.10 	order assessing taxes or date of the return made by the commissioner; or, in the case of an 
257.11 	amended return filed by the taxpayer, the assessment date is the date additional liability 
257.12 	reported on the return, if any, was entered into the records of the commissioner; or, in the 
257.13 	case of a consent agreement signed by the taxpayer under section 270.67, subdivision 3, 
257.14 	the assessment date is the notice date shown on the agreement;or, in the case of a check 
257.15 	from a taxpayer that is dishonored and results in an erroneous refund being given to 
257.16 	the taxpayer, remittance of the check is deemed to be an assessment and the "date of 
257.17 	assessment" is the date the check was received by the commissioner.

257.18 	 EFFECTIVE DATE. This section is effective the day following final enactment.

257.19 	 Sec. 15. Minnesota Statutes 2004, section 270.67, subdivision 4, is amended to read:
257.20 		 Subd. 4.Offer-in-compromise and installment payment program.  (a) In 
257.21 	implementing the authority provided in subdivision 2 or in sections 8.30 and 16D.15
257.22 	to accept offers of installment payments or offers-in-compromise of tax liabilities, the 
257.23 	commissioner of revenue shall prescribe guidelines for employees of the Department of 
257.24 	Revenue to determine whether an offer-in-compromise or an offer to make installment 
257.25 	payments is adequate and should be accepted to resolve a dispute.  In prescribing the 
257.26 	guidelines, the commissioner shall develop and publish schedules of national and local 
257.27 	allowances designed to provide that taxpayers entering into a compromise or payment 
257.28 	agreement have an adequate means to provide for basic living expenses.  The guidelines 
257.29 	must provide that the taxpayer's ownership interest in a motor vehicle, to the extent of 
257.30 	the value allowed in section 550.37, will not be considered as an asset; in the case of an 
257.31 	offer related to a joint tax liability of spouses, that value of two motor vehicles must be 
257.32 	excluded. The guidelines must provide that employees of the department shall determine, 
257.33 	on the basis of the facts and circumstances of each taxpayer, whether the use of the 
258.1 	schedules is appropriate and that employees must not use the schedules to the extent the 
258.2 	use would result in the taxpayer not having adequate means to provide for basic living 
258.3 	expenses.  The guidelines must provide that:
258.4 	 (1) an employee of the department shall not reject an offer-in-compromise or an 
258.5 	offer to make installment payments from a low-income taxpayer solely on the basis of the 
258.6 	amount of the offer; and
258.7 	 (2) in the case of an offer-in-compromise which relates only to issues of liability of 
258.8 	the taxpayer:
258.9 	 (i) the offer must not be rejected solely because the commissioner is unable to locate 
258.10 	the taxpayer's return or return information for verification of the liability; and
258.11 	 (ii) the taxpayer shall not be required to provide an audited, reviewed, or compiled 
258.12 	financial statement.
258.13 	 (b) The commissioner shall establish procedures:
258.14 	 (1) that require presentation of a counteroffer or a written rejection of the offer by 
258.15 	the commissioner if the amount offered by the taxpayer in an offer-in-compromise or an 
258.16 	offer to make installment payments is not accepted by the commissioner;
258.17 	 (2) for an administrative review of any written rejection of a proposed 
258.18 	offer-in-compromise or installment agreement made by a taxpayer under this section 
258.19 	before the rejection is communicated to the taxpayer;
258.20 	 (3) that allow a taxpayer to request reconsideration of any written rejection of the 
258.21 	offer or agreement to the commissioner of revenue to determine whether the rejection is 
258.22 	reasonable and appropriate under the circumstances; and
258.23 	 (4) that provide for notification to the taxpayer when an offer-in-compromise has 
258.24 	been accepted, and issuance of certificates of release of any liens imposed under section 
258.25 	270.69 related to the liability which is the subject of the compromise.
258.26 	 (c) Each compromise proposal must be accompanied by a nonrefundable payment 
258.27 	of $250.  If the compromise proposal is accepted, the payment must be applied to the 
258.28 	accepted compromise amount.  If the compromise is rejected, the payment must be applied 
258.29 	to the outstanding tax debts of the taxpayer pursuant to section 270.652.  In cases of 
258.30 	financial hardship, upon presentation of information establishing an inability to make the 
258.31 	$250 payment, the commissioner may waive this requirement.

258.32 	EFFECTIVE DATE. This section is effective for offers in compromise submitted 
258.33 	after August 31, 2005.

258.34 	 Sec. 16. Minnesota Statutes 2004, section 270.69, subdivision 4, is amended to read:
259.1 		 Subd. 4.Period of limitations.  The lien imposed by this section shall, 
259.2 	notwithstanding any other provision of law to the contrary, be enforceable from the time 
259.3 	the lien arises and for ten years from the date of filing the notice of lien, which must be 
259.4 	filed by the commissioner within five years after the date of assessment of the tax or final 
259.5 	administrative or judicial determination of the assessment.  A notice of lien filed in one 
259.6 	county may be transcribed to the secretary of state or to any other county within ten years 
259.7 	after the date of its filing, but the transcription shall not extend the period during which 
259.8 	the lien is enforceable.  A notice of lien may be renewed by the commissioner before the 
259.9 	expiration of the ten-year period for an additional ten years.  The taxpayer must receive 
259.10 	written notice of the renewal.

259.11 	EFFECTIVE DATE. This section is effective the day following final enactment.

259.12 	 Sec. 17. Minnesota Statutes 2004, section 270A.03, subdivision 5, is amended to read:
259.13 		 Subd. 5.Debt.  "Debt" means a legal obligation of a natural person to pay a fixed 
259.14 	and certain amount of money, which equals or exceeds $25 and which is due and payable 
259.15 	to a claimant agency.  The term includes criminal fines imposed under section 609.10 or 
259.16 	609.125, fines imposed for petty misdemeanors as defined in section 609.02, subdivision 
259.17 	4a,and restitution.  The term also includes the co-payment for the appointment of a district 
259.18 	public defender imposed under section 611.17, paragraph (c).  A debt may arise under a 
259.19 	contractual or statutory obligation, a court order, or other legal obligation, but need not 
259.20 	have been reduced to judgment.
259.21 	 A debt includes any legal obligation of a current recipient of assistance which is 
259.22 	based on overpayment of an assistance grant where that payment is based on a client 
259.23 	waiver or an administrative or judicial finding of an intentional program violation; 
259.24 	or where the debt is owed to a program wherein the debtor is not a client at the time 
259.25 	notification is provided to initiate recovery under this chapter and the debtor is not a 
259.26 	current recipient of food support, transitional child care, or transitional medical assistance.
259.27 	 A debt does not include any legal obligation to pay a claimant agency for medical 
259.28 	care, including hospitalization if the income of the debtor at the time when the medical 
259.29 	care was rendered does not exceed the following amount:
259.30 	 (1) for an unmarried debtor, an income of $8,800 or less;
259.31 	 (2) for a debtor with one dependent, an income of $11,270 or less;
259.32 	 (3) for a debtor with two dependents, an income of $13,330 or less;
259.33 	 (4) for a debtor with three dependents, an income of $15,120 or less;
259.34 	 (5) for a debtor with four dependents, an income of $15,950 or less; and
259.35 	 (6) for a debtor with five or more dependents, an income of $16,630 or less.
260.1 	 The income amounts in this subdivision shall be adjusted for inflation for debts 
260.2 	incurred in calendar years 2001 and thereafter.  The dollar amount of each income level 
260.3 	that applied to debts incurred in the prior year shall be increased in the same manner 
260.4 	as provided in section 1(f) of the Internal Revenue Code of 1986, as amended through 
260.5 	December 31, 2000, except that for the purposes of this subdivision the percentage increase 
260.6 	shall be determined from the year starting September 1, 1999, and ending August 31, 2000, 
260.7 	as the base year for adjusting for inflation for debts incurred after December 31, 2000.
260.8 	 Debt also includes an agreement to pay a MinnesotaCare premium, regardless of the 
260.9 	dollar amount of the premium authorized under section 256L.15, subdivision 1a.

260.10 	 Sec. 18. Minnesota Statutes 2004, section 270A.03, subdivision 7, is amended to read:
260.11 		 Subd. 7.Refund.  "Refund" means an individual income tax refund or political 
260.12 	contribution refund, pursuant to chapter 290, or a property tax credit or refund, pursuant to 
260.13 	chapter 290A, or a sustainable forest tax payment to a claimant under chapter 290C.
260.14 	 For purposes of this chapter, lottery prizes, as set forth in section 349A.08, 
260.15 	subdivision 8, and amounts granted to persons by the legislature on the recommendation 
260.16 	of the joint senate-house of representatives Subcommittee on Claims shall be treated 
260.17 	as refunds.
260.18 	 In the case of a joint property tax refund payable to spouses under chapter 290A, 
260.19 	the refund shall be considered as belonging to each spouse in the proportion of the total 
260.20 	refund that equals each spouse's proportion of the total income determined under section 
260.21 	290A.03, subdivision 3.  In the case of a joint income tax refund under chapter 289A, the 
260.22 	refund shall be considered as belonging to each spouse in the proportion of the total 
260.23 	refund that equals each spouse's proportion of the total taxable income determined under 
260.24 	section 290.01, subdivision 29.  The commissioner shall remit the entire refund to the 
260.25 	claimant agency, which shall, upon the request of the spouse who does not owe the debt, 
260.26 	determine the amount of the refund belonging to that spouse and refund the amount to 
260.27 	that spouse.  For court fines, fees, and surcharges and court-ordered restitution under 
260.28 	section 611A.04, subdivision 2, the notice provided by the commissioner of revenue under 
260.29 	section 270A.07, subdivision 2, paragraph (b), serves as the appropriate legal notice 
260.30 	to the spouse who does not owe the debt.

260.31 	EFFECTIVE DATE. This section is effective for political contribution refund 
260.32 	claims based on contributions made on or after July 1, 2005.

260.33 	 Sec. 19. Minnesota Statutes 2004, section 289A.08, subdivision 16, is amended to read:
261.1 		 Subd. 16.Tax refund or return preparers; electronic filing; paper filing fee 
261.2 	imposed.  (a) A "tax refund or return preparer," as defined in section 289A.60, subdivision 
261.3 	13, paragraph (g) (h), who prepared more than 500 100 Minnesota individual income tax 
261.4 	returns for the prior calendar year must file all Minnesota individual income tax returns 
261.5 	prepared for the current calendar year by electronic means.
261.6 	 (b) For tax returns prepared for the tax year beginning in 2001, the "500" in 
261.7 	paragraph (a) is reduced to 250.
261.8 	 (c) For tax returns prepared for tax years beginning after December 31, 2001, the 
261.9 	"500" in paragraph (a) is reduced to 100.
261.10 	 (d) Paragraph (a) does not apply to a return if the taxpayer has indicated on the return 
261.11 	that the taxpayer did not want the return filed by electronic means.
261.12 	 (e) (c) For each return that is not filed electronically by a tax refund or return 
261.13 	preparer under this subdivision, including returns filed under paragraph (d) (b), a paper 
261.14 	filing fee of $5 is imposed upon the preparer.  The fee is collected from the preparer in 
261.15 	the same manner as income tax.  The fee does not apply to returns that the commissioner 
261.16 	requires to be filed in paper form.

261.17 	 Sec. 20. Minnesota Statutes 2004, section 289A.37, subdivision 5, is amended to read:
261.18 		 Subd. 5.Sufficiency of notice.  An order of assessment, sent postage prepaid 
261.19 	by United States mail to the taxpayer at the taxpayer's last known address, or sent by 
261.20 	electronic mail to the taxpayer's last known electronic mailing address as provided for in 
261.21 	section 325L.08,is sufficient even if the taxpayer is deceased or is under a legal disability, 
261.22 	or, in the case of a corporation, has terminated its existence, unless the department has 
261.23 	been provided with a new address by a party authorized to receive notices of assessment.

261.24 	EFFECTIVE DATE. This section is effective the day following final enactment.

261.25 	 Sec. 21. Minnesota Statutes 2004, section 289A.50, subdivision 1, is amended to read:
261.26 		 Subdivision 1.General right to refund.  (a) Subject to the requirements of this 
261.27 	section and section 289A.40, a taxpayer who has paid a tax in excess of the taxes lawfully 
261.28 	due and who files a written claim for refund will be refunded or credited the overpayment 
261.29 	of the tax determined by the commissioner to be erroneously paid.
261.30 	 (b) The claim must specify the name of the taxpayer, the date when and the period 
261.31 	for which the tax was paid, the kind of tax paid, the amount of the tax that the taxpayer 
261.32 	claims was erroneously paid, the grounds on which a refund is claimed, and other 
261.33 	information relative to the payment and in the form required by the commissioner.  An 
262.1 	income tax, estate tax, or corporate franchise tax return, or amended return claiming an 
262.2 	overpayment constitutes a claim for refund.
262.3 	 (c) When, in the course of an examination, and within the time for requesting a 
262.4 	refund, the commissioner determines that there has been an overpayment of tax, the 
262.5 	commissioner shall refund or credit the overpayment to the taxpayer and no demand 
262.6 	is necessary.  If the overpayment exceeds $1, the amount of the overpayment must 
262.7 	be refunded to the taxpayer.  If the amount of the overpayment is less than $1, the 
262.8 	commissioner is not required to refund.  In these situations, the commissioner does not 
262.9 	have to make written findings or serve notice by mail to the taxpayer.
262.10 	 (d) If the amount allowable as a credit for withholding, estimated taxes, or dependent 
262.11 	care exceeds the tax against which the credit is allowable, the amount of the excess is 
262.12 	considered an overpayment. The refund allowed by section 290.06, subdivision 23, is 
262.13 	also considered an overpayment.The requirements of section 270.10, subdivision 1, do 
262.14 	not apply to the refunding of such an overpayment shown on the original return filed 
262.15 	by a taxpayer.
262.16 	 (e) If the entertainment tax withheld at the source exceeds by $1 or more the taxes, 
262.17 	penalties, and interest reported in the return of the entertainment entity or imposed by 
262.18 	section 290.9201, the excess must be refunded to the entertainment entity.  If the excess is 
262.19 	less than $1, the commissioner need not refund that amount.
262.20 	 (f) If the surety deposit required for a construction contract exceeds the liability of 
262.21 	the out-of-state contractor, the commissioner shall refund the difference to the contractor.
262.22 	 (g) An action of the commissioner in refunding the amount of the overpayment does 
262.23 	not constitute a determination of the correctness of the return of the taxpayer.
262.24 	 (h) There is appropriated from the general fund to the commissioner of revenue the 
262.25 	amount necessary to pay refunds allowed under this section.

262.26 	EFFECTIVE DATE. This section is effective for political contribution refund 
262.27 	claims based on contributions made on or after July 1, 2005.

262.28 	 Sec. 22. Minnesota Statutes 2004, section 289A.60, subdivision 2a, is amended to read:
262.29 		 Subd. 2a.Penalties for extended delinquency.  (a) If an individual income tax is 
262.30 	not paid within 180 days after the date of filing of a return or, in the case of taxes assessed 
262.31 	by the commissioner, within 180 days after the assessment date or, if appealed, within 180 
262.32 	days after final resolution of the appeal, an extended delinquency penalty of five percent 
262.33 	of the tax remaining unpaid is added to the amount due.
262.34 	 (b) If a corporate franchise, fiduciary income, mining company, estate, partnership, S 
262.35 	corporation, or nonresident entertainer tax return is not filed within 30 days after written 
263.1 	demand for the filing of a delinquent return, an extended delinquency penalty of five 
263.2 	percent of the tax not paid prior to the demand is added to the tax,or in the case of an 
263.3 	individual income tax return, a minimum penalty of $100 or the five percent penalty 
263.4 	is imposed, whichever amount is greater.

263.5 	EFFECTIVE DATE. This section is effective for returns originally due on or 
263.6 	after August 1, 2005.

263.7 	 Sec. 23. Minnesota Statutes 2004, section 289A.60, subdivision 6, is amended to read:
263.8 		 Subd. 6.Penalty for failure to file,false or fraudulent return, evasion.  If a 
263.9 	person, with intent to evade or defeat a tax or payment of tax, fails to file a return,files 
263.10 	a false or fraudulent return, or attempts in any other manner to evade or defeat a tax or 
263.11 	payment of tax, there is imposed on the person a penalty equal to 50 percent of the tax, 
263.12 	less amounts paid by the person on the basis of the false or fraudulent return, if any, due 
263.13 	for the period to which the return related.

263.14 	EFFECTIVE DATE. This section is effective the day following final enactment.

263.15 	 Sec. 24. Minnesota Statutes 2004, section 289A.60, subdivision 11, is amended to read:
263.16 		 Subd. 11.Penalties relating to information reports, withholding.  (a) When a 
263.17 	person required under section 289A.09, subdivision 2, to give a statement to an employee 
263.18 	or payee and a duplicate statement to the commissioner, or to give a reconciliation of the 
263.19 	statements and quarterly returns to the commissioner, gives a false or fraudulent statement 
263.20 	to an employee or payee or a false or fraudulent duplicate statement or reconciliation of 
263.21 	statements and quarterly returns to the commissioner, or fails to give a statement or the 
263.22 	reconciliation in the manner, when due, and showing the information required by section 
263.23 	289A.09, subdivision 2, or rules prescribed by the commissioner under that section, that 
263.24 	person is liable for a penalty of $50 for an act or failure to act.  The total amount imposed 
263.25 	on the delinquent person for failures during a calendar year must not exceed $25,000.
263.26 	 (b) In addition to any other penalty provided by law, an employee who gives 
263.27 	a withholding exemption certificate or a residency affidavit to an employer that the 
263.28 	employee has reason to know contains a materially incorrect statement decreases the 
263.29 	amount withheld under section 290.92 and as of the time the certificate or affidavit was 
263.30 	given to the employer there was no reasonable basis for the statements in the certificate or 
263.31 	affidavit is liable to the commissioner of revenue for a penalty of $500 for each instance.
263.32 	 (c) In addition to any other penalty provided by law, an employer who fails to 
263.33 	submit a copy of a withholding exemption certificate or a residency affidavit required by 
264.1 	section 290.92, subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the commissioner of 
264.2 	revenue for a penalty of $50 for each instance.
264.3 	 (d) An employer or payor who fails to file an application for a withholding account 
264.4 	number, as required by section 290.92, subdivision 24, is liable to the commissioner for 
264.5 	a penalty of $100.

264.6 	EFFECTIVE DATE. This section is effective for certificates and affidavits given to 
264.7 	employers after December 31, 2005.

264.8 	 Sec. 25. Minnesota Statutes 2004, section 289A.60, subdivision 13, is amended to read:
264.9 		 Subd. 13.Penalties for tax return preparers.  (a) If an understatement of liability 
264.10 	with respect to a return or claim for refund is due to a willful attempt in any manner to 
264.11 	understate the liability for a tax by a person who is a tax return preparer with respect to the 
264.12 	return or claim, the person shall pay to the commissioner a penalty of $500.  If a part of a 
264.13 	property tax refund claim is excessive due to a willful attempt in any manner to overstate 
264.14 	the claim for relief allowed under chapter 290A by a person who is a tax refund or return 
264.15 	preparer, the person shall pay to the commissioner a penalty of $500 with respect to the 
264.16 	claim.  These penalties may not be assessed against the employer of a tax return preparer 
264.17 	unless the employer was actively involved in the willful attempt to understate the liability 
264.18 	for a tax or to overstate the claim for refund.  These penalties are income tax liabilities and 
264.19 	may be assessed at any time as provided in section 289A.38, subdivision 5.
264.20 	 (b) A civil action in the name of the state of Minnesota may be commenced to 
264.21 	enjoin any person who is a tax return preparer doing business in this state from further 
264.22 	engaging in any conduct described in paragraph (c).  An action under this paragraph 
264.23 	must be brought by the attorney general in the district court for the judicial district of the 
264.24 	tax return preparer's residence or principal place of business, or in which the taxpayer 
264.25 	with respect to whose tax return the action is brought resides.  The court may exercise its 
264.26 	jurisdiction over the action separate and apart from any other action brought by the state 
264.27 	of Minnesota against the tax return preparer or any taxpayer.
264.28 	 (c) In an action under paragraph (b), if the court finds that a tax return preparer has:
264.29 	 (1) engaged in any conduct subject to a civil penalty under section 289A.60 or a 
264.30 	criminal penalty under section 289A.63;
264.31 	 (2) misrepresented the preparer's eligibility to practice before the Department of 
264.32 	Revenue, or otherwise misrepresented the preparer's experience or education as a tax 
264.33 	return preparer;
264.34 	 (3) guaranteed the payment of any tax refund or the allowance of any tax credit; or
265.1 	 (4) engaged in any other fraudulent or deceptive conduct that substantially interferes 
265.2 	with the proper administration of state tax law, and injunctive relief is appropriate to 
265.3 	prevent the recurrence of that conduct,
265.4 	 the court may enjoin the person from further engaging in that conduct.
265.5 	 (d) If the court finds that a tax return preparer has continually or repeatedly engaged 
265.6 	in conduct described in paragraph (c), and that an injunction prohibiting that conduct 
265.7 	would not be sufficient to prevent the person's interference with the proper administration 
265.8 	of state tax laws, the court may enjoin the person from acting as a tax return preparer.  
265.9 	The court may not enjoin the employer of a tax return preparer for conduct described in 
265.10 	paragraph (c) engaged in by one or more of the employer's employees unless the employer 
265.11 	was also actively involved in that conduct.
265.12 	 (e) The commissioner may terminate or suspend a tax preparer's authority to 
265.13 	transmit returns electronically to the state, if the commissioner determines that the tax 
265.14 	preparer has engaged in a pattern and practice of conduct in violation of paragraph (a) of 
265.15 	this subdivision or has been convicted under section 289A.63.
265.16 	 (f) For purposes of this subdivision, the term "understatement of liability" means 
265.17 	an understatement of the net amount payable with respect to a tax imposed by state tax 
265.18 	law, or an overstatement of the net amount creditable or refundable with respect to a 
265.19 	tax.  The determination of whether or not there is an understatement of liability must be 
265.20 	made without regard to any administrative or judicial action involving the taxpayer.  For 
265.21 	purposes of this subdivision, the amount determined for underpayment of estimated tax 
265.22 	under either section 289A.25 or 289A.26 is not considered an understatement of liability.
265.23 	 (f) (g) For purposes of this subdivision, the term "overstatement of claim" means an 
265.24 	overstatement of the net amount refundable with respect to a claim for property tax relief 
265.25 	provided by chapter 290A.  The determination of whether or not there is an overstatement 
265.26 	of a claim must be made without regard to administrative or judicial action involving 
265.27 	the claimant.
265.28 	 (g) (h) For purposes of this section, the term "tax refund or return preparer" means 
265.29 	an individual who prepares for compensation, or who employs one or more individuals to 
265.30 	prepare for compensation, a return of tax, or a claim for refund of tax.  The preparation of 
265.31 	a substantial part of a return or claim for refund is treated as if it were the preparation of 
265.32 	the entire return or claim for refund.  An individual is not considered a tax return preparer 
265.33 	merely because the individual:
265.34 	 (1) gives typing, reproducing, or other mechanical assistance;
265.35 	 (2) prepares a return or claim for refund of the employer, or an officer or employee 
265.36 	of the employer, by whom the individual is regularly and continuously employed;
266.1 	 (3) prepares a return or claim for refund of any person as a fiduciary for that person; 
266.2 	or
266.3 	 (4) prepares a claim for refund for a taxpayer in response to a tax order issued 
266.4 	to the taxpayer.

266.5 	 Sec. 26. Minnesota Statutes 2004, section 290.01, subdivision 6, is amended to read:
266.6 		 Subd. 6.Taxpayer.  The term "taxpayer" means any person or corporation subject to 
266.7 	a tax imposed by this chapter. For purposes of section 290.06, subdivision 23, the term 
266.8 	"taxpayer" means an individual eligible to vote in Minnesota under section 201.014.

266.9 	EFFECTIVE DATE. This section is effective for political contribution refund 
266.10 	claims based on contributions that are made on or after July 1, 2005.

266.11 	 Sec. 27. Minnesota Statutes 2004, section 290.92, subdivision 1, is amended to read:
266.12 		 Subdivision 1.Definitions.  (1)  [WAGES.] For purposes of this section, the term 
266.13 	"wages" means the same as that term is defined in section 3401(a) and (f) of the Internal 
266.14 	Revenue Code.
266.15 	 (2)  [PAYROLL PERIOD.] For purposes of this section the term "payroll period" 
266.16 	means a period for which a payment of wages is ordinarily made to the employee by 
266.17 	the employee's employer, and the term "miscellaneous payroll period" means a payroll 
266.18 	period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, 
266.19 	or annual payroll period.
266.20 	 (3)  [EMPLOYEE.] For purposes of this section the term "employee" means any 
266.21 	resident individual performing services for an employer, either within or without, or both 
266.22 	within and without the state of Minnesota, and every nonresident individual performing 
266.23 	services within the state of Minnesota, the performance of which services constitute, 
266.24 	establish, and determine the relationship between the parties as that of employer and 
266.25 	employee.  As used in the preceding sentence, the term "employee" includes an officer 
266.26 	of a corporation, and an officer, employee, or elected official of the United States, a 
266.27 	state, or any political subdivision thereof, or the District of Columbia, or any agency or 
266.28 	instrumentality of any one or more of the foregoing.
266.29 	 (4)  [EMPLOYER.] For purposes of this section the term "employer" means any 
266.30 	person, including individuals, fiduciaries, estates, trusts, partnerships, limited liability 
266.31 	companies, and corporations transacting business in or deriving any income from sources 
266.32 	within the state of Minnesota for whom an individual performs or performed any service, 
266.33 	of whatever nature, as the employee of such person, except that if the person for whom the 
266.34 	individual performs or performed the services does not have legal control of the payment 
267.1 	of the wages for such services, the term "employer," except for purposes of paragraph (1), 
267.2 	means the person having legal control of the payment of such wages.  As used in the 
267.3 	preceding sentence, the term "employer" includes any corporation, individual, estate, trust, 
267.4 	or organization which is exempt from taxation under section 290.05 and further includes, 
267.5 	but is not limited to, officers of corporations who have legal  control, either individually or 
267.6 	jointly with another or others, of the payment of the wages.
267.7 	 (5)  [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For purposes of 
267.8 	this section, the term "number of withholding exemptions claimed" means the number of 
267.9 	withholding exemptions claimed in a withholding exemption certificate in effect under 
267.10 	subdivision 5, except that if no such certificate is in effect, the number of withholding 
267.11 	exemptions claimed shall be considered to be zero.

267.12 	EFFECTIVE DATE. This section is effective the day following final enactment.

267.13 	 Sec. 28. Minnesota Statutes 2004, section 325D.33, subdivision 6, is amended to read:
267.14 		 Subd. 6.Violations.  If the commissioner determines that a distributor is violating 
267.15 	any provision of this chapter, the commissioner must give the distributor a written 
267.16 	warning explaining the violation and an explanation of what must be done to comply with 
267.17 	this chapter.  Within ten days of issuance of the warning, the distributor must notify the 
267.18 	commissioner that the distributor has complied with the commissioner's recommendation 
267.19 	or request that the commissioner set the issue for a hearing pursuant to chapter 14.  If a 
267.20 	hearing is requested, the hearing shall be scheduled within 20 days of the request and the 
267.21 	recommendation of the administrative law judge shall be issued within five working days 
267.22 	of the close of the hearing.  The commissioner's final determination shall be issued within 
267.23 	five working days of the receipt of the administrative law judge's recommendation.  If the 
267.24 	commissioner's final determination is adverse to the distributor and the distributor does 
267.25 	not comply within ten days of receipt of the commissioner's final determination, the 
267.26 	commissioner may order the distributor to immediately cease the stamping of cigarettes.  
267.27 	As soon as practicable after the order, the commissioner must remove the meter and any 
267.28 	unapplied cigarette stamps from the premises of the distributor.
267.29 	 If within ten days of issuance of the written warning the distributor has not complied 
267.30 	with the commissioner's recommendation or requested a hearing, the commissioner may 
267.31 	order the distributor to immediately cease the stamping of cigarettes and remove the meter 
267.32 	and unapplied stamps from the distributor's premises.
267.33 	 If, within any 12-month period, the commissioner has issued three written warnings 
267.34 	to any distributor, even if the distributor has complied within ten days, the commissioner 
267.35 	shall notify the distributor of the commissioner's intent to revoke the distributor's 
268.1 	license for a continuing course of conduct contrary to this chapter.  For purposes of this 
268.2 	paragraph, a written warning that was ultimately resolved by removal of the warning by 
268.3 	the commissioner is not deemed to be a warning.  The commissioner must notify the 
268.4 	distributor of the date and time of a hearing pursuant to chapter 14 at least 20 days before 
268.5 	the hearing is held.  The hearing must provide an opportunity for the distributor to show 
268.6 	cause why the license should not be revoked.  If the commissioner revokes a distributor's 
268.7 	license, the commissioner shall not issue a new license to that distributor for 180 days.

268.8 	EFFECTIVE DATE. This section is effective the day following final enactment.

268.9 	 Sec. 29. [459.21] GAMBLING SUBSIDIES; REFERENDUM APPROVAL.
268.10 	 No city or county may provide an exemption from a tax or fee, an abatement of a 
268.11 	tax, or fee or any other type of public subsidy to an enterprise engaged in gambling, 
268.12 	unless the question of whether to provide the exemption, abatement, or subsidy has been 
268.13 	submitted to the voters at a special or general election and a majority of the votes cast on 
268.14 	the question are in the affirmative.
268.15 	 For purposes of this section, the following terms have the meanings given:
268.16 	 (1) "Gambling" means conducting class III gaming as defined in United States 
268.17 	Code, title 25, section 2703.
268.18 	 (2) "Public subsidy" does not include (i) construction of public infrastructure unless 
268.19 	the predominant use of the infrastructure is to serve an enterprise engaged in gambling 
268.20 	or (ii) the use, maintenance, or reconstruction (without expansion) of preexisting 
268.21 	infrastructure.

268.22 	 EFFECTIVE DATE. This section is effective the day following enactment.

268.23 	 Sec. 30. Minnesota Statutes 2004, section 645.44, is amended by adding a subdivision 
268.24 	to read:
268.25 		 Subd. 19.Fee and tax. (a) "Tax" means any fee, charge, exaction, or assessment 
268.26 	imposed by a governmental entity on an individual, person, entity, transaction, good, 
268.27 	service, or other thing.  It excludes a price that an individual or entity chooses voluntarily 
268.28 	to pay in return for receipt of goods or services provided by the governmental entity. 
268.29 	A government good or service does not include access to or the authority to engage in 
268.30 	private market transactions with a nongovernmental party, such as licenses to engage in a 
268.31 	trade, profession, or business or to improve private property.
268.32 	 (b) For purposes of applying the laws of this state, a "fee," "charge," or other similar 
268.33 	term that satisfies the functional requirements of paragraph (a) must be treated as a tax for 
269.1 	all purposes, regardless of whether the statute or law names or describes it as a tax.  The 
269.2 	provisions of this subdivision do not preempt or supersede limitations under statute or law 
269.3 	that apply to fees, charges, or assessments.

269.4 	EFFECTIVE DATE. This section is effective the day following final enactment.

269.5 	 Sec. 31. TAX REFORM COMMISSION.
 269.6 		 Subdivision 1.Commission established. A tax reform action commission is 
269.7 	established in the legislative branch to study the Minnesota tax and revenue system and to 
269.8 	make recommendations to the legislature.
269.9 		 Subd. 2.Membership. (a) The commission consists of 15 members, appointed 
269.10 	as follows:
269.11 	 (1) three members appointed by the governor, two from the executive branch and 
269.12 	one from private life;
269.13 	 (2) four members appointed by the majority leader of the senate, two members of the 
269.14 	senate and two from private life;
269.15 	 (3) two members appointed by the minority leader of the senate, one member of the 
269.16 	senate and one from private life;
269.17 	 (4) four members appointed by the speaker of the house of representatives, two 
269.18 	members of the house of representatives and two from private life; and 
269.19 	 (5) two members appointed by the minority leader of the house of representatives, 
269.20 	one member of the house of representatives and one from private life.
269.21 	 (b) The appointing authority shall select members who are of recognized standing 
269.22 	and distinction and who possess demonstrated capacity to discharge the duties of the 
269.23 	commission.  In making appointments, the appointing authorities shall attempt to appoint 
269.24 	some individuals to the commission who have special experience or knowledge in 
269.25 	taxation, economics, and accounting.
269.26 	 (c) The governor shall designate a member of the commission as its chair who shall 
269.27 	determine its duties and supervise its staff.
269.28 	 (d) The appointing authorities shall appoint members of the commission not more 
269.29 	than 30 days after enactment of this section.  Members serve for the life of the commission. 
269.30 	A vacancy in the commission membership does not affect the power of the remaining 
269.31 	members to execute the duties of the commission.  A vacancy in commission membership 
269.32 	is filled in the same manner in which the original appointment was made.
269.33 		 Subd. 3.Duties; report. (a) The commission shall study and evaluate the Minnesota 
269.34 	state and local tax and revenue system with a goal of making long-term improvements in 
269.35 	the system for the citizens of the state, given standard principles of good tax policy and 
270.1 	the background of expected demographic and economic changes in the state, nation, and 
270.2 	world.  The commission's recommendations must be done on a revenue neutral basis.  In 
270.3 	particular, the commission shall examine:
270.4 	 (1) the mix of state revenues between tax revenues and fees and charges for services 
270.5 	used or benefits received;
270.6 	 (2) the implications of likely demographic and economic changes, affecting both (i) 
270.7 	the demands for state and local government services and (ii) taxes and other revenues; and 
270.8 	 (3) the extent to which the existing tax system and the commission's proposal satisfy 
270.9 	the following basic tax policy principles:
270.10 	 (i) equity or fairness, including measures based on ability to pay, equal treatment of 
270.11 	equals, and payment for benefits received;
270.12 	 (ii) neutrality or efficiency, the extent to which the effects on private market 
270.13 	decisions are minimized;
270.14 	 (iii) revenue adequacy, the extent to which the revenues are stable and predictable 
270.15 	and grow with increases in income or economic activity;
270.16 	 (iv) competitiveness, the extent to which negative effects on the state's attractiveness 
270.17 	as a location for investment, working, and living are minimized;
270.18 	 (v) simplicity, the extent to which it is easy to understand;
270.19 	 (vi) ease of compliance and administration, the extent to which taxpayers can easily 
270.20 	comply and the government can easily administer it; and 
270.21 	 (vii) visibility or accountability, the extent to which the taxes or other charges are 
270.22 	clear and apparent to their payers as a cost of government and that the government 
270.23 	officials imposing the tax are accountable, through election or otherwise, to the principal 
270.24 	payers of the tax.
270.25 	 (b) The commission shall report to the legislature as provided in this paragraph.  Each 
270.26 	report must include the commission's evaluation of the tax or taxes, its recommendations 
270.27 	for reform and improvement of the tax or taxes on a revenue neutral basis, its rationale for 
270.28 	the proposed changes, and a draft bill implementing the commission's recommendation 
270.29 	for introduction in the legislature.  The reports must be submitted by the following dates:
270.30 	 (1) corporate and other business taxation, including the credit for increasing research 
270.31 	activities, by July 1, 2007;
270.32 	 (2) general sales and motor vehicle sales and special excise taxes by July 1, 2008;
270.33 	 (3) individual income taxation by July 1, 2009; and 
270.34 	 (4) estate, insurance premium, MinnesotaCare, and all other taxes not covered by 
270.35 	clauses (1) to (3) by July 1, 2010.
271.1 		 Subd. 4.Per diem and expenses. Members of the commission may be compensated 
271.2 	and receive reimbursement for expenses, as provided for members of advisory councils 
271.3 	under Minnesota Statutes, section 15.059, subdivision 3.  This subdivision does not apply 
271.4 	to members of the legislature or state employees.
271.5 	 Subd 5.[STAFF.] The commission may employ staff as it deems appropriate to 
271.6 	carry out its duties or use existing legislative and executive branch staff.  All staff are in 
271.7 	the unclassified state service.  Legislative staff and the Department of Revenue staff must 
271.8 	provide research, bill drafting, and other services to the commission upon its request.  The 
271.9 	commission may contract with consultants for research and other services and enter other 
271.10 	contracts, as it deems necessary or appropriate to carry out its duties.  These contracts are 
271.11 	not subject to the requirements of Minnesota Statutes, chapter 16C.
271.12 		 Subd. 6.Expiration. The commission terminates 30 days after transmitting its final 
271.13 	report to the legislature under subdivision 3, paragraph (b).

271.14 	EFFECTIVE DATE. This section is effective the day following final enactment.

271.15 	 Sec. 32. TRANSFER.
 271.16 	 On July 1, 2005, the commissioner of finance shall transfer $3,408,000 and any 
271.17 	additional amount from the tax relief account under Minnesota Statutes, section 16A.1522, 
271.18 	subdivision 4, to the general fund.

271.19 	 Sec. 33. APPROPRIATION.
 271.20 	 (a) $125,000 in fiscal year 2006 and $125,000 in fiscal year 2007 are appropriated 
271.21 	from the general fund to the commissioner of revenue to make grants to one or more 
271.22 	nonprofit organizations, qualifying under section 501(c)(3) of the Internal Revenue Code 
271.23 	of 1986, to coordinate, facilitate, encourage, and aid in the provision of taxpayer assistance 
271.24 	services.  This is a onetime appropriation and is not added to the base.
271.25 	 (b) "Taxpayer assistance services" mean accounting and tax preparation services 
271.26 	provided by volunteers to low-income and disadvantaged Minnesota residents to help 
271.27 	them file federal and state income tax returns and Minnesota property tax refund claims 
271.28 	and to provide personal representation before the Department of Revenue and Internal 
271.29 	Revenue Service.

271.30 	 Sec. 34. REPEALER.
 271.31 	 (a) Minnesota Statutes 2004, section 10A.322, subdivision 4, is repealed effective 
271.32 	July 1, 2005.
272.1 	 (b) Minnesota Statutes 2004, section 16A.1522, subdivision 4, is repealed effective 
272.2 	July 2, 2005.
272.3 	 (c) Minnesota Statutes 2004, section 290.06, subdivision 23, is repealed effective for 
272.4 	contributions made after June 30, 2005.