2E Relating to the financing and operation of state and local government

ARTICLE 1 - INCOME TAX

Extending the time limit for filing and payment of income taxes for and modifying the definition of resident relating to members of the military; disallowing trade or business expense income tax deductions for fines, penalties, damages or expenses paid to governmental units; providing income tax subtractions for certain organ donation expenses and for certain compensation paid to members of the military on active duty; exempting corporations operating personal rapid transit systems, exception; increasing the income tax rate on certain higher income earners; changing the income tax credit for transit passes to a refund; providing income tax credits for carsharing, for investment in certain qualifying regional angel investment network funds and for certain historic structures rehabilitation costs; modifying the education credit; modifying the alternative minimum tax (AMT); providing an income tax checkoff for the payment of bonuses to veterans of the global war on terrorism; exempting publicly traded partnerships from certain income tax withholding requirements for nonresident partners; requiring the Minnesota historical society to annually determine the economic impact to the state of the credit for rehabilitation of certain historic structures and to report to the legislature; requiring the commissioners of finance and revenue to conduct a comprehensive study to identify the reasons for the decline on corporate tax receipts and report to the legislature by a certain date

ARTICLE 2 - FEDERAL UPDATE

Updating certain state income tax and property tax refund provisions to changes in the internal revenue code (IRC) and the definition of internal revenue code under tax administration and compliance provisions; preemption provision

ARTICLE 3 - SALES TAX

Modifying certain filing requirements for use tax returns for individuals; exempting certain geothermal equipment and stoves designed to burn agricultural products or other biomass fuels from the sales tax; excluding certain telecommunications equipment from the capital equipment exemption; exempting from the sales tax products purchased for use as (diesel) fuel for commuter rail systems, requiring payment and later refund; exempting inputs to the production of movies and television shows and personal rapid transit systems from the sales tax; expanding the exemption for regionwide public safety radio communication system products and services; exempting from the sales tax certain meals donated to nonprofit groups, materials, supplies and equipment used in the construction, equipment or improvement of commuter rail transportation systems, in the construction, improvement or expansion of certain waste to energy resource recovery facilities and certain joint purchase agreement municipal electric utilities, in the construction of the St. Mary's Duluth clinic health system and in the construction, improvement or expansion of the Chatfield wastewater treatment facility, requiring payment and later refund of certain taxes; expanding the sales tax permit exemption for occasional flea market sales; temporarily exempting certain fuel efficient motor vehicles purchased by state agencies or local government units from the motor vehicle sales tax; authorizing the city of Mankato to extend the local sales tax by resolution, providing for a reverse referendum; expanding the authority of the city of Hermantown to impose a local sales tax to a local use tax and specifying certain additional required uses of the proceeds, requiring the city to conduct a referendum on a tax rate increase and granting the city certain bonding authority; expanding a certain required use of revenues from the local sales and use tax imposed by the city of Rochester relating to the construction of a regional recreation and sports center and associated facilities, requiring use for other higher education facilities and eliminating the requirement for the facilities to be located at or adjacent to the center, increasing the bonding authority of the city and permitting the city to enter into an agreement with Olmsted county to jointly undertake and finance certain roadway infrastructure improvements;
authorizing the city of Proctor to impose by ordinance an additional sales and use tax to be used for construction of and improvements to city streets, public utilities, sidewalks, bikeways and trails and increasing the bonding authority of the city for the projects; extending the duration of the sales tax exemption for materials, supplies and equipment used in constructing poultry litter biomass generation facilities; delaying the requirement for the commissioner of revenue to administer local sales taxes for the city of Duluth; eliminating the expiration date on the exclusion of certain ready to eat meat and seafood from the definition of prepared food for sales tax imposition purposes; exempting the nonprofit corporation in the city of Thief River Falls operating the community or regional center from payment of the sales tax on materials, equipment and supplies used in the construction of the center; authorizing the cities of Albert Lea, Baxter, Beaver Bay, Bemidji, Cloquet, Clearwater, Medford, Park Rapids, St. Cloud, St. Joseph, Waite Park, Sartell, Sauk Rapids, St. Augusta, Waseca, Willmar and Winona to impose local sales and use taxes to finance certain projects, authorizing the issuance of bonds for certain projects; authorizing the city of Proctor to use a certain percentage of revenues from the lodging tax for preservation of a certain caboose, locomotive and aircraft donated to the city and authorizing and providing for Hubbard county to impose a lodging tax; requiring the commissioner of revenue to reduce the sales and use tax compliance gap and to establish a use tax enforcement unit within the department of revenue to conduct direct compliance activities

ARTICLE 4 - PROPERTY TAXES

Expanding the definition of special taxing districts to soil and water
conservation districts for property tax purposes and providing for district
funds, budgets and levies; authorizing school boards to elect by resolution to levy debt service against the alternative referendum market value in lieu of net tax capacity under the debt service equalization program, providing for apportionment of aid between the net tax capacity and alternative referendum market value debt service levies and for determination of the levies; modifying certain school district referendum revenue and equalization aid provisions, providing for local effort level and revenue and clarifying and simplifying certain ballot questions; prohibiting the commissioner of public safety from requiring manufactured home park owners to satisfy delinquent or current year personal property taxes owed as a condition of title transfer; requiring the commissioner of transportation (DOT) to notify the county auditor of the acquisition of taxable property; providing for the valuation of land improved with wind energy conversion systems; extending the deadline for the commencement of construction of poultry litter biomass generation facilities for personal property tax exemption purposes and exempting personal property of certain other electric generation facilities from the tax; exempting from the property tax property used in the operation of personal rapid transit systems and of qualified elderly living facilities; accelerating the annual deadline for wind energy conversion system owners to file production reports with the commissioner of revenue and modifying the distribution of revenues from the wind energy production tax; extending limited market value to certain resort property, limiting the valuation increase for assessment year 2005; providing a valuation exclusion for sewage treatment system improvements and for lead hazard reduction; reducing the market value of certain energy efficient commercial properties; establishing an aggregate resource preservation property tax program; entitling certain homestead resorts to valuation and deferment; expanding the Minnesota open space property tax law to property actively and exclusively devoted to polo; providing a property tax reduction for certain homestead property contaminated by mold; extending homestead property tax treatment to property used for licensed child care and agricultural homestead treatment to property actively farmed by the grandson or granddaughter of the owner or of the
spouse of the owner; reducing the property tax classification rate for certain smaller resorts; expanding the property tax classification for certain property used for growing trees to certain land with unmined commercial aggregate deposits and the definition of agricultural products for property tax classification purposes to short rotation woody crops cultivated using agricultural practices to produce timber or forest products; clarifying the property tax classification of certain noncommercial aircraft storage hangars abutting public airports; providing for the valuation of certain low income rental property; authorizing and providing for cities to encourage redevelopment and better use of vacant commercial industrial properties; providing for the determination of credit reimbursements (tax reductions) for certain homestead property; prohibiting rules adopted by the commissioner prescribing the method of valuing electric and transmission pipeline utility property from taking effect before the end of the legislative session following adoption of the rules; requiring separate statement of library levies on Ramsey county proposed property tax notices and property tax statements; authorizing Aitkin county, the city of Aitkin and independent school district #1, Aitkin and Nobles county, the city of Worthington and independent school district #518, Worthington to hold joint initial truth in taxation hearings; increasing the limit on annual appropriations by counties or cities for maintenance and support of societies for the prevention of cruelty to animals (humane societies), requiring deduction from the levy limit base under certain conditions for levy limit determination purposes; regulating the content of petitions objecting to property taxes on certain low income rental housing property; delaying the penalty accrual dates for payment of property taxes on certain resort property; imposing a school referendum tax on individuals approving income tax increases at certain future referenda; authorizing the housing finance agency (HFA) to certify certain rural housing service units as section 8 housing for property tax valuation purposes; entitling counties with certain qualifying hospitals to reimbursement for certain uncompensated care costs under the metropolitan revenue distribution (fiscal disparities) law; providing for reimbursement to Hennepin county for certain pubic defender costs; increasing the city aid base for certain cities for temporary local government aid (LGA) increase purposes; separately defining federal land utilization project land for counties payments in lieu of taxes on natural resources land purposes and providing for payments to counties by the commissioner of natural resources (DNR) on the project lands; requiring and providing for payment of deferred special assessments on property in the city of Eagan used for the Caponi art park upon transfer of ownership of the property; extending the expiration date of emergency medical services (EMS) special taxing districts; designating the lakes area economic development authority a special taxing district and authorizing the authority to levy a property tax; clarifying the effective date for the local law establishing the southern St. Louis county special taxing district for purposes of the Chris Jensen nursing home; temporarily exempting certain property in certain larger cities owned and operated by certain nonprofit corporations and used for educational instruction for grades 7 through 10 from the property tax; creating and appropriating money
to the education reserve account; requiring the commissioner to study the application of the property tax exemption for pollution control equipment to personal property used for pollution control as part of an electric generation system and report recommendations to the legislature by a certain date; authorizing the Sauk River watershed district to annually levy for the administrative fund; authorizing certain larger cities or cities located in the taconite relief area to adopt a system of valuing commercial industrial property based on the value of land excluding improvements under certain conditions; requiring legislative fiscal staff to conduct a study of the metropolitan revenue distribution (fiscal disparities) program and report to the legislature by a certain date; requiring certain state agency, department of education and city fee imposition or increase reports to the commissioner or the legislature

ARTICLE 5 - LOCAL DEVELOPMENT

Modifying certain business subsidy regulation provisions, providing for equitable relief for violation of the requirements; requiring the commissioner of transportation (DOT) to transfer ownership of I-394 parking facilities to the city of Minneapolis; authorizing cities to limit the property tax exemption for border development zone property; modifying the definition of qualified housing development project for housing redevelopment authorities bond issuance purposes; providing for additional border city enterprise zone allocations by the commissioner of employment and economic development (DEED); modifying certain provisions relating to tax increment financing; providing for the use of increments for job training; expanding the authority of certain larger cities to expend increments; authorizing development authorities to designate urban renewal areas within certain TIF districts, defining urban renewal area and specifying certain requirements and restrictions; authorizing the creation of housing districts for developments containing both owner occupied and residential rental units for mixed income occupancy; authorizing the use of increments from TIF districts created within biotechnology and health sciences industry zones outside the district for construction of public infrastructure; authorizing special deficit authorities to establish affordable housing or hazardous substance, pollutant or contaminant remediation accounts and regulating expenditures from the accounts; excluding retail businesses from the definition of qualified business under the job opportunity building zones program; extending the duration of certain TIF districts in the cities of Brooklyn Park and Brooklyn Center; removing a certain duration limit on the Minneapolis Lake street project redevelopment TIF district; authorizing the Anoka county regional railroad authority to exercise the powers and duties of an economic development authority; authorizing the city of Bemidji to extend the duration of the certain tax abatement to support development within the fairgrounds district; authorizing and providing for the city of Detroit Lakes to create a redevelopment TIF district subject to certain special rules, sunset provision; authorizing the cities of Elgin, Eyota, Byron and Oronoco to act as small cities for TIF district revenues use purposes, prohibiting exceeding of the population limit; authorizing the city of Fairmont to reduce the original tax capacity of a previously tax exempt parcel formerly owned by the federal post office; applying a certain provision providing a property tax exemption for property held for later resale for economic development purposes to the city of Fergus Falls; authorizing the city of Ramsey to create a housing TIF district and the cities of Richfield and St. Michael to create redevelopment TIF districts subject to certain special rules; authorizing and providing for the St. Paul HRA to establish TIF subdistricts; authorizing the city of Wabasha to extend the duration of a certain redevelopment TIF district and to use the proceeds of tax increment bonds issued before a certain date to pay the costs of acquiring and constructing a national eagle center; extending the duration of a certain TIF district in the city of Winona; requiring the commissioner of revenue with the assistance of the commissioner of employment and economic development to estimate the total amount of tax expenditures projected to have been obligated for all JOBZ projects approved before a certain date and report certain excess amounts to the legislature

ARTICLE 6 - PUBLIC FINANCE

Authorizing local government guaranteed investment contracts with domestic affiliates of certain banks or insurance companies; authorizing local government unit special property tax levies storm sewer improvement districts; expanding the authority of counties and cities to issue capital notes for computer hardware and software and extending the term of the notes; expanding the definition of capital improvement for county bond issuance authority purposes to the acquisition of development rights in the form of conservation easements; authorizing counties to waive the requirement for performance bonds or accept another form of financial guarantee for solid waste management projects under certain conditions; extending the deadline for city establishment by cities of special service and housing improvement districts without enactment of a special law; authorizing city improvements in areas subject to orderly annexation agreements, authorizing self reimbursement; extending the terms of certain general obligation revenue bonds; authorizing the metropolitan council to issue certificates of indebtedness, bonds or other obligations for metropolitan area transit and paratransit capital expenditures under the regional transit master plan and transit capital improvement program, limit; increasing the reserve for bonding authority from the public facilities pool for projects financed by the western Lake Superior sanitary district; modifying the deadline notice of bond issuance; expanding the definition of net debt of counties, cities, towns and school districts to obligations to pay judgments; expanding the definition of capital improvement for bonds issuance purposes to town halls and libraries and modifying certain limits; expanding the definition of street reconstruction for bond issuance purposes to certain safety improvements; authorizing and providing for the city of St. Paul to participate in the creation of and contract with a nonprofit organization for the management and operation of the RiverCentre complex; authorizing the housing finance agency (HFA) to enter into an agreement with the higher education services office (HESO) to issue qualified student loan bonds; repealing the prohibition on metropolitan council issuance of general obligation bonds for the Hiawatha light rail transit (LRT) line

ARTICLE 7 - MINERALS; AGGREGATE

Exempting from the property tax certain property used in the business of mining subject to the net proceeds tax; clarifying the exemption of the business of mining from the income tax and excluding apportionment factors associated with tax exempt activities from the formula for apportionment of net income; expanding the sales tax exemption for taconite production materials to materials used in the production of other ores, metals or minerals; imposing the occupation tax on the refining of ores, metals or minerals and on hydrometallurgical processes, defining refining and precious minerals tax relief area and expanding the definition of mining to hydrometallurgical processes for occupation tax purposes and clarifying exemptions from the tax and the application of the tax to transfers of ores, metals or minerals; increasing the net proceeds tax rate and modifying the definition of net proceeds; modifying the distribution of proceeds and changing the taconite assistance area to the precious minerals assistance area; imposing a royalty tax on ore, exceptions; requiring iron range resources and rehabilitation board approval of local economic development projects funded through the taconite environmental protection fund; modifying the increase in the taconite tax and defining commercial production for clarification purposes, prohibiting imposition of the tax on direct reduced ore during noncommercial production; providing for the distribution of proceeds in 2005; establishing a grant and loan fund to fund certain projects approved by the IRRRB; clarifying the definition of operator for aggregate material removal tax imposition purposes; authorizing counties or towns to exempt certain operators from the tax under certain conditions; authorizing the commissioner of iron range resources and rehabilitation to issue bonds for grants to school districts located in the taconite tax relief or assistance areas for health, safety and maintenance improvements under certain conditions, limit, credit enhancement provision; authorizing persons with alterative minimum tax (AMT) credits to take the credits against the occupation tax; repealing the alternative minimum income tax on mining and the deductions from the net proceeds tax

ARTICLE 8 - MISCELLANEOUS

Modifying certain provisions regulating tax preparation services, providing for the handling of complaints, classifying certain data and strengthening enforcement; expanding the definition of debt under the revenue recapture act to fines imposed for petty misdemeanors for collection purposes; authorizing commissioner of revenue earlier payment of property tax refunds claims filed electronically; providing for the collection of sales taxes on motor vehicle leases; modifying the bad debt refund for tobacco taxes paid; imposing sales taxes on wholesales and floor stocks of cigarettes; reducing the gross premium tax rate on life insurance premiums; prohibiting employers from misrepresenting the nature of the employment relationship with employees; regulating delivery sales of tobacco products, defining out of state retailer and specifying certain registration and reporting requirements; expanding the authority of towns to collect unpaid service charges, requiring county auditors to remit to the towns all service charges collected; authorizing the commissioner to enter into compact agreements with other states to eliminate retaliatory insurance premiums tax provisions between states

ARTICLE 9 - DEPARTMENT OF REVENUE; INCOME, CORPORATE FRANCHISE AND ESTATE TAXES

Providing for corporate payment of taxes in excess of the amount lawfully due by electronic means; expanding eligibility to file composite income tax returns to certain trusts or estates and defining income for composite return purposes; modifying the filing date for corporations filing returns for a fractional part of a year; authorizing the filing of amended corporate franchise tax returns reflecting federal tax changes; expanding the civil penalty for understatement of tax liability to the filing of refund claims; creating an exception to additions to federal taxable income of the amount of expense, interest or taxes disallowed as nondeductible items; clarifying the depreciation deduction for shareholders of S corporations; eliminating the income tax subtraction for youth community service postservice benefits and the addition to corporate federal taxable income for environmental taxes paid; clarifying certain provisions under the education income tax credit; requiring calculation of the estate tax amount using Minnesota adjusted taxable estate in lieu of federal adjusted taxable estate, defining Minnesota adjusted taxable estate; repealing certain rules relating to the filing of declarations of estimated tax by corporations

ARTICLE 10 - DEPARTMENT OF REVENUE; PROPERTY TAXES

Expanding the population estimate requirements of the state demographer and delaying the annual date for conveying population estimates to local government units, requiring annual certification of estimates to the commissioner of revenue; clarifying the treatment of manufactured home personal property taxes for payment statement purposes; expanding final abstract of assessments content requirements to areawide net tax capacity contribution values for taconite tax relief and metropolitan revenue distribution areas; modifying the requirement for the commissioner to appoint special and deputy assessors for reappraisal of certain property; exempting property leased, loaned or otherwise made available to private individuals, corporations or associations under cooperative farming agreements or temporarily under housing and redevelopment authority redevelopment projects from the property tax; subjecting certain exempt property to certain additional limits; clarifying the exemption for rental housing property of institutions of public charity; exempting from the tax certain property subject to the taconite production or net proceeds tax and certain property of religious corporations, children's homes, HRAs, regional rail authorities and the spirit mountain recreation area authority and defining installed capacity for tax exemption purposes; accelerating the annual deadline for wind energy conversion system owners to file production reports with the commissioner and modifying the distribution of revenues from the wind energy production tax; modifying certain penalties for improper receipt of homestead benefits and requiring counties to file certain homestead property information with the commissioner by electronic means; modifying the eligibility of certain family farm trust property for homestead classification; clarifying the requirement for the inclusion of certain information necessary for the certification of certain property as homestead property; excluding certain leases from the definition of lease for property tax exemption purposes; defining the scope and clarifying the applicability of proceedings and appeals of utility or railroad valuations; modifying and clarifying certain provisions relating to local boards of appeal and equalization; delaying the annual deadline for county auditor certification of proposed levies and tax rates in overlapping jurisdictions; modifying certain certification and reporting requirements for city, town, county and school district taxes; changing a certain county treasurer full settlement deadline; modifying the definition of population for taconite tax relief area revenue distribution purposes; modifying certain tax-forfeited land provisions; expanding the prohibition on the purchase of tax-forfeited lands to county attorneys; modifying the apportionment of proceeds of tax-forfeited land sales to taxing districts and the requirement to restore to the tax rolls forfeited agricultural lands and clarifying certain conveyance form and payment receipt requirements; providing for electronic filing of copies of certificates of rent paid by rental property owners or managers; including special assessments in the calculation of deferred property tax amounts for senior citizens; modifying city property tax transfer authority for border city development zones; expanding certain population estimate requirements of the metropolitan council, authorizing challenges; clarifying the definitions of population and household size for local government aid (LGA) purposes; modifying the definition of population over age 65 for county program aid purposes and the effective dates of certain prior property tax distribution modifications; modifying a certain 2004 city aid reduction requirement; excluding attached machinery aid from county program aid under a certain prior aid reduction requirement; authorizing towns in Lincoln and Pipestone counties to adjust the payable 2004 levy for estimated wind energy production tax amounts; repealing certain provisions relating to property used for the production of hydropower, voter approved levies and taxes paid by mistake on railroad lands and a certain Alexandria sanitary sewer district joint powers agreement

ARTICLE 11 - DEPARTMENT OF REVENUE; SALES AND USE TAXES

Clarifying the inclusion of the use tax in a certain provision limiting the time
for assessment of certain omitted taxes and the limit on sales and use tax
refund claims for bad debt loss; imposing certain time limits on purchaser filed refund claims; expanding the definition of sale or purchase for general sales tax purposes to dietary supplements; clarifying the sales tax on lodging and related services, the definition of retail sale relating to the normal course of business and certain exemptions from the motor vehicle rental tax; modifying the application of the sourcing rule to watercraft, aircraft and modular, manufactured or mobile homes; excluding certain services from the definition of industrial production for exemption clarification purposes; clarifying the exemptions for certain electronic and ready mixed concrete equipment from the sales tax and excluding certain additional machinery and equipment from the
definition of capital equipment; expanding the definition of telecommunications services; clarifying the exemption for tangible personal property or services under preexisting bids or contracts; modifying the local sales tax base and clarifying the exemption of tangible personal property from local taxes; repealing certain obsolete sales tax rules

ARTICLE 12 - DEPARTMENT OF REVENUE; SPECIAL TAXES

Exempting mortgages on armory buildings from the mortgage registry tax; defining blood components and excluding blood and blood components from the definition of legend drugs for hospital and health care provider gross earning tax determination purposes and subjecting enrollee deductibles, coinsurance and copayments to the tax; modifying the determination of underpayments of estimated taxes for fur clothing tax purposes; exempting aviation gasoline and jet fuel purchased by ambulance services from gasoline and special fuels taxes; granting
the commissioner of revenue certain petroleum tax abatement authority; applying certain gambling tax provisions to linked bingo and expanding certain gambling organization recordkeeping requirements to copies of substitute checks; clarifying the application of the cigarette transport report requirement for tobacco tax purposes and authorizing the commissioner to require the furnishing of a corporate surety bond or certified check to guarantee payment of tax stamps purchased by distributors; clarifying the payment dates for cigarette and tobacco products distributors subject to accelerated May or June tax payment
liability; providing for quarterly or annual tax payments by certain liquor
manufacturers, wholesalers, brewers and importers; defining reinsurance for insurance gross premium tax purposes and clarifying the imposition of the tax on health maintenance organizations (HMO), nonprofit health service plan corporations and community integrated service networks (CISN); repealing a certain provision providing for the crediting of civil penalty payments for gambling tax violations

ARTICLE 13 - DEPARTMENT OF REVENUE; ELECTRONIC PAYMENTS

Specifying certain minimum dollar requirements for electronic payment of taxes and fees; repealing the civil penalty for failure to make payments
electronically

ARTICLE 14 - DEPARTMENT OF REVENUE; MISCELLANEOUS

Authorizing state agency commissioners delegating identical powers or duties to subordinate employees to combine the delegations in one written order and providing for continuation of the delegations by successor commissioners; authorizing case reviewers under the state debt collection procedure to issue debtor assistance orders under certain unjust or inequitable results determination conditions and transferring duties and authority of case reviewers to the taxpayer rights advocate; specifying the assessment date in consent agreement cases; requiring compromise proposals relating to tax liability to be accompanied by a nonrefundable payment and providing for application of the payment; authorizing the transcription of lien notices to the secretary of state; clarifying the authority of the commissioner to extend the time limit for filing estate tax returns; imposing a time limit on requests for calculation of separate liability for taxes reported on joint income tax returns; authorizing the sending of assessment orders by electronic mail (e-mail); modifying and clarifying certain civil penalty provisions; clarifying the definition of employer for income tax withholding purposes; clarifying certain annual certification requirements under the sustainable forest resource management incentive program, providing for the length of covenants and clarifying the early withdrawal procedure in the case of eminent domain; eliminating the license revocation penalty for distributor sales below cost; clarifying the application of certain penalties relating to the metropolitan solid waste landfill fee
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