1.1 	 A bill for an act
1.2 	 relating to financing and operation of government in this state; providing for 
1.3 	allocation of additional general fund revenues; modifying income tax rates 
1.4 	and providing an income tax credit; modifying taxation of certain trusts; 
1.5 	modifying taxation of certain compensation paid to nonresidents; providing 
1.6 	for taxation of foreign operating corporations; changing and providing certain 
1.7 	sales and use tax exemptions; modifying and authorizing certain local sales 
1.8 	taxes; modifying certain levies; changing and providing property tax exemptions 
1.9 	and value exclusions; modifying the state general levy and providing for 
1.10 	deposit of revenues; providing for aids to local governments; providing for 
1.11 	an international economic development zone; conveying certain powers and 
1.12 	providing tax incentives in the zone; clarifying the effect of certain statements 
1.13 	of taxpayer rights by commissioner of revenue; limiting agricultural processing 
1.14 	zone property tax exemption in certain circumstances; defining term "tax"; 
1.15 	extending a petrofund fee exemption; extending fiscal disparity computation 
1.16 	for city of Bloomington; conveying powers and authority to and imposing 
1.17 	duties and requirements on certain local governments and authorities for certain 
1.18 	purposes; providing tax shelter and compliance initiatives; providing for a 
1.19 	property tax freeze; providing for certain payments to certain cities and counties; 
1.20 	requiring studies; reducing appropriations; appropriating money; amending 
1.21 	Minnesota Statutes 2004, sections 16A.152, subdivision 2; 123B.53, subdivision 
1.22 	5; 126C.01, by adding a subdivision; 127A.48, by adding a subdivision; 
1.23 	254B.02, subdivision 3; 270.0603, subdivision 3; 270.0682, subdivision 1; 
1.24 	272.02, subdivisions 53, 64, by adding subdivisions; 272.0211, subdivisions 
1.25 	1, 2; 273.11, subdivision 1a; 275.025, subdivision 1; 275.065, subdivision 3; 
1.26 	289A.38, by adding a subdivision; 289A.60, by adding a subdivision; 290.01, 
1.27 	subdivisions 6b, 7b, 19a, as amended, if enacted, 19d; 290.06, subdivisions 
1.28 	2c, 2d, by adding subdivisions; 290.17, subdivisions 2, 4; 297A.61, by adding 
1.29 	a subdivision; 297A.67, subdivisions 6, 7, 8, 29; 297A.68, subdivision 28, 
1.30 	by adding a subdivision; 297A.71, subdivision 12, by adding a subdivision; 
1.31 	429.021, subdivision 1; 469.015, subdivision 4; 469.033, subdivision 6; 469.175, 
1.32 	subdivision 2; 473F.08, subdivision 3a; 477A.011, subdivisions 34, 36, as 
1.33 	amended; 477A.0124, subdivision 4; 477A.013, subdivisions 8, 9; 477A.03, 
1.34 	subdivisions 2a, 2b; 645.44, by adding a subdivision; Laws 1993, chapter 375, 
1.35 	article 9, section 46, subdivision 2, as amended; Laws 1994, chapter 587, article 
1.36 	9, section 8, subdivision 1; Laws 2001, First Special Session chapter 5, article 
1.37 	12, section 44, the effective date; Laws 2003, chapter 128, article 1, section 
2.1 	172; 2005 S.F. No. 467, section 1, if enacted; proposing coding for new law in 
2.2 	Minnesota Statutes, chapters 289A; 469; 477A.
2.3 	 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

2.4 	 ARTICLE 1
2.5 	 INDIVIDUAL INCOME TAX

2.6 	 Section 1. Minnesota Statutes 2004, section 16A.152, subdivision 2, is amended to 
2.7 	read:
2.8 		 Subd. 2.Additional revenues; priority.  (a) If on the basis of a forecast of general 
2.9 	fund revenues and expenditures, the commissioner of finance determines that there will be 
2.10 	a positive unrestricted budgetary general fund balance at the close of the biennium, the 
2.11 	commissioner of finance must allocate money to the following accounts and purposes in 
2.12 	priority order:
2.13 	 (1) the cash flow account established in subdivision 1 until that account reaches 
2.14 	$350,000,000;
2.15 	 (2) the budget reserve account established in subdivision 1a until that account 
2.16 	reaches $653,000,000;
2.17 	 (3) the amount necessary to increase the aid payment schedule for school district 
2.18 	aids and credits payments in section 127A.45 to not more than 90 percent; and 
2.19 	 (4) the amount necessary to restore all or a portion of the net aid reductions under 
2.20 	section 127A.441 and to reduce the property tax revenue recognition shift under section 
2.21 	123B.75, subdivision 5, paragraph (c), and Laws 2003, First Special Session chapter 9, 
2.22 	article 5, section 34, as amended by Laws 2003, First Special Session chapter 23, section 
2.23 	20, by the same amount;
2.24 	 (5) the amount necessary to eliminate requirements for accelerated payments of June 
2.25 	tax liabilities under sections 287.12; 287.29; 289A.20, subdivision 4; 297F.09, subdivision 
2.26 	10, and 297G.09, subdivision 9;
2.27 	 (6) the amount necessary to provide that interest is payable on claims for refunds 
2.28 	of the sales tax paid on exempt capital equipment from the date the claim is filed with 
2.29 	the commissioner and on other exempt items as provided in Minnesota Statutes 2002, 
2.30 	section 297A.75, subdivision 4; and 
2.31 	 (7) the amount necessary to make payments of local government aids and taconite 
2.32 	aid reimbursements in four installments in each of the months of March, July, September, 
2.33 	and November as provided in Minnesota Statutes 1980, section 477A.01.
2.34 	 (b) The amounts necessary to meet the requirements of this section are appropriated 
2.35 	from the general fund within two weeks after the forecast is released or, in the case of 
3.1 	transfers under paragraph (a), clauses (3) and (4), as necessary to meet the appropriations 
3.2 	schedules otherwise established in statute.
3.3 	 (c) To the extent that a positive unrestricted budgetary general fund balance is 
3.4 	projected, appropriations under this section must be made before any transfer is made 
3.5 	under section 16A.1522.
3.6 	 (d) The commissioner of finance shall certify the total dollar amount of the 
3.7 	reductions under paragraph (a), clauses (3) and (4), to the commissioner of education.  The 
3.8 	commissioner of education shall increase the aid payment percentage and reduce the 
3.9 	property tax shift percentage by these amounts and apply those reductions to the current 
3.10 	fiscal year and thereafter.

3.11 	 Sec. 2. Minnesota Statutes 2004, section 290.01, subdivision 7b, is amended to read:
3.12 		 Subd. 7b.Resident trust. (a) Resident trust means a trust, except a grantor type 
3.13 	trust, which either (1) was created by a will of a decedent who at death was domiciled in 
3.14 	this state or (2) is an irrevocable trust, the grantor of which was domiciled in this state 
3.15 	at the time the trust became irrevocable.  For the purpose of this subdivision, a trust is 
3.16 	considered irrevocable to the extent the grantor is not treated as the owner thereof under 
3.17 	sections 671 to 678 of the Internal Revenue Code.  The term "grantor type trust" means a 
3.18 	trust where the income or gains of the trust are taxable to the grantor or others treated as 
3.19 	substantial owners under sections 671 to 678 of the Internal Revenue Code.
3.20 	 (b)(1) A trust, other than a grantor type trust, that became irrevocable before January 
3.21 	1, 1996, or that was administered in Minnesota before January 1, 1996, is a resident trust 
3.22 	only if two or more of the following conditions are satisfied:
3.23 	 (i) a majority of the discretionary decisions of the trustees relative to the investment 
3.24 	of trust assets are made in Minnesota;
3.25 	 (ii) a majority of the discretionary decisions of the trustees relative to the 
3.26 	distributions of trust income and principal are made in Minnesota;
3.27 	 (iii) the official books and records of the trust, consisting of the original minutes of 
3.28 	trustee meetings and the original trust instruments, are located in Minnesota.
3.29 	 (2) For purposes of this paragraph, if the trustees delegate decisions and actions to an 
3.30 	agent or custodian, the actions and decisions of the agent or custodian must not be taken 
3.31 	into account in determining whether the trust is administered in Minnesota, if:
3.32 	 (i) the delegation was permitted under the trust agreement;
3.33 	 (ii) the trustees retain the power to revoke the delegation on reasonable notice; and 
3.34 	 (iii) the trustees monitor and evaluate the performance of the agent or custodian on a 
3.35 	regular basis as is reasonably determined by the trustees.

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

4.2 	 Sec. 3. Minnesota Statutes 2004, section 290.01, subdivision 19a, as amended by 2005 
4.3 	S.F. No. 1683, article 2, section 3, if enacted, is amended to read:
4.4 		 Subd. 19a.Additions to federal taxable income.  For individuals, estates, and 
4.5 	trusts, there shall be added to federal taxable income:
4.6 	 (1)(i) interest income on obligations of any state other than Minnesota or a political 
4.7 	or governmental subdivision, municipality, or governmental agency or instrumentality 
4.8 	of any state other than Minnesota exempt from federal income taxes under the Internal 
4.9 	Revenue Code or any other federal statute; and
4.10 	 (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue 
4.11 	Code, except the portion of the exempt-interest dividends derived from interest income 
4.12 	on obligations of the state of Minnesota or its political or governmental subdivisions, 
4.13 	municipalities, governmental agencies or instrumentalities, but only if the portion of the 
4.14 	exempt-interest dividends from such Minnesota sources paid to all shareholders represents 
4.15 	95 percent or more of the exempt-interest dividends that are paid by the regulated 
4.16 	investment company as defined in section 851(a) of the Internal Revenue Code, or the 
4.17 	fund of the regulated investment company as defined in section 851(g) of the Internal 
4.18 	Revenue Code, making the payment; and
4.19 	 (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal 
4.20 	government described in section 7871(c) of the Internal Revenue Code shall be treated as 
4.21 	interest income on obligations of the state in which the tribe is located;
4.22 	 (2) the amount of income or sales and use taxes paid or accrued within the taxable 
4.23 	year under this chapter and income or sales and use taxes paid to any other state or to any 
4.24 	province or territory of Canada, to the extent allowed as a deduction under section 63(d) of 
4.25 	the Internal Revenue Code, but the addition may not be more than the amount by which the 
4.26 	itemized deductions as allowed under section 63(d) of the Internal Revenue Code exceeds 
4.27 	the amount of the standard deduction as defined in section 63(c) of the Internal Revenue 
4.28 	Code of 1986, as amended through June 15, 2003.  For the purpose of this paragraph, the 
4.29 	disallowance of itemized deductions under section 68 of the Internal Revenue Code of 
4.30 	1986, income or sales and use tax is the last itemized deduction disallowed;
4.31 	 (3) the capital gain amount of a lump sum distribution to which the special tax under 
4.32 	section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
4.33 	 (4) the amount of income taxes paid or accrued within the taxable year under this 
4.34 	chapter and income taxes paid to any other state or any province or territory of Canada, 
4.35 	to the extent allowed as a deduction in determining federal adjusted gross income.  For 
5.1 	the purpose of this paragraph, income taxes do not include the taxes imposed by sections 
5.2 	290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
5.3 	 (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10;
5.4 	 (6) the amount of a partner's pro rata share of net income which does not flow 
5.5 	through to the partner because the partnership elected to pay the tax on the income under 
5.6 	section 6242(a)(2) of the Internal Revenue Code; and
5.7 	 (7) 80 percent of the depreciation deduction allowed under section 168(k) of the 
5.8 	Internal Revenue Code.  For purposes of this clause, if the taxpayer has an activity that 
5.9 	in the taxable year generates a deduction for depreciation under section 168(k) and the 
5.10 	activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 
5.11 	the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 
5.12 	limited to excess of the depreciation claimed by the activity under section 168(k) over the 
5.13 	amount of the loss from the activity that is not allowed in the taxable year.  In succeeding 
5.14 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
5.15 	under section 168(k) is allowed;
5.16 	 (8) 80 percent of the amount by which the deduction allowed by section 179 of the 
5.17 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
5.18 	Revenue Code of 1986, as amended through December 31, 2003;
5.19 	 (9) to the extent deducted in computing federal taxable income, the amount of the 
5.20 	deduction allowable under section 199 of the Internal Revenue Code;
5.21 	 (10) to the extent deducted in computing federal taxable income, the amount by 
5.22 	which the standard deduction allowed under section 63(c) of the Internal Revenue Code 
5.23 	exceeds the standard deduction allowable under section 63(c) of the Internal Revenue 
5.24 	Code of 1986, as amended through December 31, 2003;
5.25 	 (11) the exclusion allowed under section 139A of the Internal Revenue Code for 
5.26 	federal subsidies for prescription drug plans; and
5.27 	 (12) (11) the deduction or exclusion allowed under section 223 of the Internal 
5.28 	Revenue Code for contributions to health savings accounts.

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

5.31 	 Sec. 4. Minnesota Statutes 2004, section 290.06, subdivision 2c, is amended to read:
5.32 		 Subd. 2c.Schedules of rates for individuals, estates, and trusts.  (a) The income 
5.33 	taxes imposed by this chapter upon married individuals filing joint returns and surviving 
5.34 	spouses as defined in section 2(a) of the Internal Revenue Code must be computed by 
5.35 	applying to their taxable net income the following schedule of rates:
6.1 	 (1) On the first $25,680 $29,070, 5.35 percent;
6.2 	 (2) On all over $25,680 $29,070, but not over $102,030 $115,510, 7.05 percent;
6.3 	 (3) On all over $102,030 $115,510, but not over $250,000, 7.85 percent; and 
6.4 	 (4) On all over $250,000, 10.65 percent for taxable years beginning after December 
6.5 	31, 2004, and before the fourth bracket termination year as defined in paragraph (f).  For 
6.6 	the fourth bracket termination year and subsequent taxable years, the income included in 
6.7 	this clause will be subject to the rate in clause (3).
6.8 	 Married individuals filing separate returns, estates, and trusts must compute their 
6.9 	income tax by applying the above rates to their taxable income, except that the income 
6.10 	brackets will be one-half of the above amounts.
6.11 	 (b) The income taxes imposed by this chapter upon unmarried individuals must be 
6.12 	computed by applying to taxable net income the following schedule of rates:
6.13 	 (1) On the first $17,570 $19,890, 5.35 percent;
6.14 	 (2) On all over $17,570 $19,890, but not over $57,710 $65,330, 7.05 percent;
6.15 	 (3) On all over $57,710 $65,330, but not over $166,665, 7.85 percent; and 
6.16 	 (4) On all over $166,665, 10.65 percent for taxable years beginning after December 
6.17 	31, 2004, and before the fourth bracket termination year as defined in paragraph (f).  For 
6.18 	the fourth bracket termination year and subsequent taxable years, the income included in 
6.19 	this clause will be subject to the rate in clause (3).
6.20 	 (c) The income taxes imposed by this chapter upon unmarried individuals qualifying 
6.21 	as a head of household as defined in section 2(b) of the Internal Revenue Code must be 
6.22 	computed by applying to taxable net income the following schedule of rates:
6.23 	 (1) On the first $21,630 $24,490, 5.35 percent;
6.24 	 (2) On all over $21,630 $24,490, but not over $86,910 $98,390, 7.05 percent;
6.25 	 (3) On all over $86,910 $98,390, but not over $208,330, 7.85 percent; and 
6.26 	 (4) On all over $208,330, 10.65 percent for taxable years beginning after December 
6.27 	31, 2004, and before the fourth bracket termination year as defined in paragraph (f).  For 
6.28 	the fourth bracket termination year and subsequent taxable years, the income included in 
6.29 	this clause will be subject to the rate in clause (3).
6.30 	 (d) In lieu of a tax computed according to the rates set forth in this subdivision, the 
6.31 	tax of any individual taxpayer whose taxable net income for the taxable year is less than 
6.32 	an amount determined by the commissioner must be computed in accordance with tables 
6.33 	prepared and issued by the commissioner of revenue based on income brackets of not 
6.34 	more than $100.  The amount of tax for each bracket shall be computed at the rates set 
6.35 	forth in this subdivision, provided that the commissioner may disregard a fractional part of 
6.36 	a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
7.1 	 (e) An individual who is not a Minnesota resident for the entire year must compute 
7.2 	the individual's Minnesota income tax as provided in this subdivision.  After the 
7.3 	application of the nonrefundable credits provided in this chapter, the tax liability must 
7.4 	then be multiplied by a fraction in which:
7.5 	 (1) the numerator is the individual's Minnesota source federal adjusted gross income 
7.6 	as defined in section 62 of the Internal Revenue Code and increased by the additions 
7.7 	required under section 290.01, subdivision 19a, clauses (1), (5), and (6), and reduced by 
7.8 	the subtraction under section 290.01, subdivision 19b, clause (11), and the Minnesota 
7.9 	assignable portion of the subtraction for United States government interest under section 
7.10 	290.01, subdivision 19b, clause (1), after applying the allocation and assignability 
7.11 	provisions of section 290.081, clause (a), or 290.17; and
7.12 	 (2) the denominator is the individual's federal adjusted gross income as defined in 
7.13 	section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in 
7.14 	section 290.01, subdivision 19a, clauses (1), (5), and (6), and reduced by the amounts 
7.15 	specified in section 290.01, subdivision 19b, clauses (1) and (11).
7.16 	 (f) In this subdivision, the fourth bracket termination year is the first taxable year 
7.17 	beginning after the commissioner of finance has determined that there will be a positive 
7.18 	unrestricted budgeting general fund balance at the close of the biennium that is sufficient 
7.19 	to complete the allocations required under section 16A.152, subdivision 2.

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

7.22 	 Sec. 5. Minnesota Statutes 2004, section 290.06, subdivision 2d, is amended to read:
7.23 		 Subd. 2d.Inflation adjustment of brackets.  (a) For taxable years beginning after 
7.24 	December 31, 2000 2005, the minimum and maximum dollar amounts for each rate 
7.25 	bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the 
7.26 	percentage determined under paragraph (b).  For the purpose of making the adjustment as 
7.27 	provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the 
7.28 	rate brackets as they existed for taxable years beginning after December 31, 1999 2004, 
7.29 	and before January 1, 2001 2006.  The rate applicable to any rate bracket must not be 
7.30 	changed.  The dollar amounts setting forth the tax shall be adjusted to reflect the changes 
7.31 	in the rate brackets.  The rate brackets as adjusted must be rounded to the nearest $10 
7.32 	amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.
7.33 	 (b) The commissioner shall adjust the rate brackets and by the percentage determined 
7.34 	pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in 
7.35 	section 1(f)(3)(B) the word " 1999 2004 " shall be substituted for the word "1992."  For 
8.1 	2001 2006, the commissioner shall then determine the percent change from the 12 months 
8.2 	ending on August 31, 1999 2004, to the 12 months ending on August 31, 2000 2005, and 
8.3 	in each subsequent year, from the 12 months ending on August 31, 1999 2004, to the 12 
8.4 	months ending on August 31 of the year preceding the taxable year.  The determination of 
8.5 	the commissioner pursuant to this subdivision shall not be considered a "rule" and shall 
8.6 	not be subject to the Administrative Procedure Act contained in chapter 14.
8.7 	 No later than December 15 of each year, the commissioner shall announce the 
8.8 	specific percentage that will be used to adjust the tax rate brackets.

8.9 	 Sec. 6. Minnesota Statutes 2004, section 290.06, is amended by adding a subdivision 
8.10 	to read:
8.11 		 Subd. 32.Dairy investment credit. (a) A dairy investment credit is allowed against 
8.12 	the tax computed under this chapter equal to the credit amount in the table, based on the 
8.13 	amount paid or incurred by the taxpayer in the tax year and certified by the commissioner 
8.14 	of agriculture under paragraph (f), for qualifying expenditures:
8.15 	 Amount of   qualifying expenditures Credit amount 
8.16 	 up to $500,000 ten percent of                                    qualifying expenditures 
8.17 	 over $500,000, but not $50,000, plus nine percent    more than $600,000 of the amount 
8.18 	of qualified                                    expenditures in excess of                                    $500,000 
8.19 	 over $600,000, but not $59,000, plus seven percent    more than $700,000 of the 
8.20 	amount of qualified                                    expenditures in excess of                                    $600,000 
8.21 	 over $700,000, but not $66,000, plus five percent    more than $800,000 of the amount 
8.22 	of qualified                                    expenditures in excess of                                    $700,000 
8.23 	 over $800,000, but not $71,000, plus three percent    more than $900,000 of the 
8.24 	amount of qualified                                    expenditures in excess of                                    $800,000 
8.25 	 over $900,000, but not $74,000, plus one percent    more than $1,000,000 of the 
8.26 	amount of qualified                                    expenditures in excess of                                    $900,000 
8.27 	 $1,000,000 or more $75,000 
8.28 	 (b) "Qualifying expenditures," for purposes of this subdivision, means the expenses 
8.29 	incurred for dairy animals for the construction or improvement of buildings or facilities, 
8.30 	or the acquisition of equipment, for dairy animal housing, confinement, animal feeding, 
8.31 	milk production, and waste management, including, but not limited to, the following:
8.32 	 (1) freestall barns;
8.33 	 (2) fences;
8.34 	 (3) watering facilities;
8.35 	 (4) feed storage and handling equipment;
9.1 	 (5) milking parlors;
9.2 	 (6) robotic equipment;
9.3 	 (7) scales;
9.4 	 (8) milk storage and cooling facilities;
9.5 	 (9) bulk tanks;
9.6 	 (10) manure handling equipment and storage facilities;
9.7 	 (11) digesters;
9.8 	 (12) equipment used to produce energy; and 
9.9 	 (13) on-farm processing.
9.10 	 Qualifying expenditures only include amounts that are capitalized and deducted under 
9.11 	either section 167 or 179 of the Internal Revenue Code in computing federal taxable 
9.12 	income.
9.13 	 (c) The credit is limited to the liability for tax, as computed under this section for 
9.14 	the taxable year for which the credit certificate is issued.  If the amount of the credit 
9.15 	determined under this section for any taxable year exceeds this limitation, the excess is a 
9.16 	dairy investment credit carryover to each of the 15 succeeding taxable years.  The entire 
9.17 	amount of the excess unused credit for the taxable year is carried first to the earliest of the 
9.18 	taxable years to which the credit may be carried and then to each successive year to which 
9.19 	the credit may be carried.  The amount of the unused credit which may be added under 
9.20 	this paragraph shall not exceed the taxpayer's liability for tax less the dairy investment 
9.21 	credit for the taxable year.
9.22 	 (d) For a partnership or S corporation, the maximum amount of the credit applies to 
9.23 	the entity, not the individual partner or shareholder.
9.24 	 (e) To be eligible for the dairy investment credit in this subdivision, a taxpayer must 
9.25 	apply to the commissioner of agriculture for a tax credit certificate.  The application must 
9.26 	be made on forms prescribed by the commissioner of agriculture and must include a 
9.27 	statement of the qualifying expenditures by the taxpayer.
9.28 	 (f) The commissioner of agriculture shall certify credits in the order the forms 
9.29 	required under paragraph (e) are received and approved by the commissioner of 
9.30 	agriculture, until the maximum credit amount for the taxable year has been reached. 
9.31 	The maximum credit amount is $900,000 for tax years beginning after December 31, 
9.32 	2004, and before January 1, 2006; $2,000,000 for tax years beginning after December 31, 
9.33 	2005, and before January 1, 2007; $3,500,000 for tax years beginning after December 
9.34 	31, 2006, and before January 1, 2008; and $4,000,000 per year for tax years beginning 
9.35 	after December 31, 2007.
10.1 	 Any eligible applications for which certificates are not issued in a tax year because 
10.2 	the commissioner of agriculture has issued certificates totaling the maximum credit 
10.3 	amount for that tax year remain eligible for a credit certificate in subsequent tax years, in 
10.4 	the order in which the forms were received by the commissioner of agriculture.

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

10.7 	 Sec. 7. Minnesota Statutes 2004, section 290.17, subdivision 2, is amended to read:
10.8 		 Subd. 2.Income not derived from conduct of a trade or business.  The income of 
10.9 	a taxpayer subject to the allocation rules that is not derived from the conduct of a trade or 
10.10 	business must be assigned in accordance with paragraphs (a) to (f):
10.11 	 (a)(1) Subject to paragraphs (a)(2),and (a)(3), and (a)(4),income from wages as 
10.12 	defined in section 3401(a) and (f) of the Internal Revenue Code is assigned to this state if, 
10.13 	and to the extent that, the work of the employee is performed within it; all other income 
10.14 	from such sources is treated as income from sources without this state.
10.15 	 Severance pay shall be considered income from labor or personal or professional 
10.16 	services.
10.17 	 (2) In the case of an individual who is a nonresident of Minnesota and who is an 
10.18 	athlete or entertainer, income from compensation for labor or personal services performed 
10.19 	within this state shall be determined in the following manner:
10.20 	 (i) The amount of income to be assigned to Minnesota for an individual who is a 
10.21 	nonresident salaried athletic team employee shall be determined by using a fraction in 
10.22 	which the denominator contains the total number of days in which the individual is under 
10.23 	a duty to perform for the employer, and the numerator is the total number of those days 
10.24 	spent in Minnesota.  For purposes of this paragraph, off-season training activities, unless 
10.25 	conducted at the team's facilities as part of a team imposed program, are not included in 
10.26 	the total number of duty days. Bonuses earned as a result of play during the regular season 
10.27 	or for participation in championship, play-off, or all-star games must be allocated under 
10.28 	the formula.  Signing bonuses are not subject to allocation under the formula if they are 
10.29 	not conditional on playing any games for the team, are payable separately from any other 
10.30 	compensation, and are nonrefundable; and
10.31 	 (ii) The amount of income to be assigned to Minnesota for an individual who is a 
10.32 	nonresident, and who is an athlete or entertainer not listed in clause (i), for that person's 
10.33 	athletic or entertainment performance in Minnesota shall be determined by assigning to 
10.34 	this state all income from performances or athletic contests in this state.
11.1 	 (3) For purposes of this section, amounts received by a nonresident as "retirement 
11.2 	income" as defined in section (b)(1) of the State Income Taxation of Pension Income 
11.3 	Act, Public Law 104-95, are not considered income derived from carrying on a trade 
11.4 	or business or from wages or other compensation for work an employee performed in 
11.5 	Minnesota, and are not taxable under this chapter.
11.6 	 (4) Wages, otherwise assigned to this state under clause (1) and not qualifying under 
11.7 	clause (3), are not taxable under this chapter if the following conditions are met:
11.8 	 (i) the recipient was not a resident of this state for any part of the taxable year in 
11.9 	which the wages were received; and 
11.10 	 (ii) the wages are for work performed while the recipient was a resident of this state.
11.11 	 (b) Income or gains from tangible property located in this state that is not employed 
11.12 	in the business of the recipient of the income or gains must be assigned to this state.
11.13 	 (c) Income or gains from intangible personal property not employed in the business 
11.14 	of the recipient of the income or gains must be assigned to this state if the recipient of the 
11.15 	income or gains is a resident of this state or is a resident trust or estate.
11.16 	 Gain on the sale of a partnership interest is allocable to this state in the ratio of the 
11.17 	original cost of partnership tangible property in this state to the original cost of partnership 
11.18 	tangible property everywhere, determined at the time of the sale.  If more than 50 percent 
11.19 	of the value of the partnership's assets consists of intangibles, gain or loss from the sale 
11.20 	of the partnership interest is allocated to this state in accordance with the sales factor of 
11.21 	the partnership for its first full tax period immediately preceding the tax period of the 
11.22 	partnership during which the partnership interest was sold.
11.23 	 Gain on the sale of goodwill or income from a covenant not to compete that is 
11.24 	connected with a business operating all or partially in Minnesota is allocated to this state 
11.25 	to the extent that the income from the business in the year preceding the year of sale was 
11.26 	assignable to Minnesota under subdivision 3.
11.27 	 When an employer pays an employee for a covenant not to compete, the income 
11.28 	allocated to this state is in the ratio of the employee's service in Minnesota in the calendar 
11.29 	year preceding leaving the employment of the employer over the total services performed 
11.30 	by the employee for the employer in that year.
11.31 	 (d) Income from winnings on a bet made by an individual while in Minnesota is 
11.32 	assigned to this state.  In this paragraph, "bet" has the meaning given in section 609.75, 
11.33 	subdivision 2, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).
11.34 	 (e) All items of gross income not covered in paragraphs (a) to (d) and not part of the 
11.35 	taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.
12.1 	 (f) For the purposes of this section, working as an employee shall not be considered 
12.2 	to be conducting a trade or business.

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

12.5 	 ARTICLE 2
12.6 	 CORPORATE FRANCHISE TAX

12.7 	 Section 1. Minnesota Statutes 2004, section 290.01, subdivision 6b, is amended to read:
12.8 		 Subd. 6b.Foreign operating corporation.  The term "foreign operating 
12.9 	corporation," when applied to a corporation, means a domestic corporation with the 
12.10 	following characteristics:
12.11 	 (1) it is part of a unitary business at least one member of which is taxable in this state;
12.12 	 (2) it is not a foreign sales corporation under section 922 of the Internal Revenue 
12.13 	Code, as amended through December 31, 1999, for the taxable year; and
12.14 	 (3) either (i) the average of the percentages of its property and payrolls assigned 
12.15 	to locations inside outside the United States and the District of Columbia, excluding the 
12.16 	commonwealth of Puerto Rico and possessions of the United States,as determined under 
12.17 	section 290.191 or 290.20, is 20 80  percent or less greater and it has at least $2,000,000 of 
12.18 	property and $1,000,000 of payroll as determined under section 290.191 or 290.20; or (ii) 
12.19 	it has in effect a valid election under section 936 of the Internal Revenue Code.

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

12.22 	 Sec. 2. Minnesota Statutes 2004, section 290.01, subdivision 19d, is amended to read:
12.23 		 Subd. 19d.Corporations; modifications decreasing federal taxable income.  For 
12.24 	corporations, there shall be subtracted from federal taxable income after the increases 
12.25 	provided in subdivision 19c:
12.26 	 (1) the amount of foreign dividend gross-up added to gross income for federal 
12.27 	income tax purposes under section 78 of the Internal Revenue Code;
12.28 	 (2) the amount of salary expense not allowed for federal income tax purposes due to 
12.29 	claiming the federal jobs credit under section 51 of the Internal Revenue Code;
12.30 	 (3) any dividend (not including any distribution in liquidation) paid within the 
12.31 	taxable year by a national or state bank to the United States, or to any instrumentality of 
12.32 	the United States exempt from federal income taxes, on the preferred stock of the bank 
12.33 	owned by the United States or the instrumentality;
13.1 	 (4) amounts disallowed for intangible drilling costs due to differences between 
13.2 	this chapter and the Internal Revenue Code in taxable years beginning before January 
13.3 	1, 1987, as follows:
13.4 	 (i) to the extent the disallowed costs are represented by physical property, an amount 
13.5 	equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09, 
13.6 	subdivision 7, subject to the modifications contained in subdivision 19e; and
13.7 	 (ii) to the extent the disallowed costs are not represented by physical property, an 
13.8 	amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section 
13.9 	290.09, subdivision 8;
13.10 	 (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the 
13.11 	Internal Revenue Code, except that:
13.12 	 (i) for capital losses incurred in taxable years beginning after December 31, 1986, 
13.13 	capital loss carrybacks shall not be allowed;
13.14 	 (ii) for capital losses incurred in taxable years beginning after December 31, 1986, 
13.15 	a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be 
13.16 	allowed;
13.17 	 (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a 
13.18 	capital loss carryback to each of the three taxable years preceding the loss year, subject to 
13.19 	the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
13.20 	 (iv) for capital losses incurred in taxable years beginning before January 1, 1987, 
13.21 	a capital loss carryover to each of the five taxable years succeeding the loss year to the 
13.22 	extent such loss was not used in a prior taxable year and subject to the provisions of 
13.23 	Minnesota Statutes 1986, section 290.16, shall be allowed;
13.24 	 (6) an amount for interest and expenses relating to income not taxable for federal 
13.25 	income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and 
13.26 	expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or 
13.27 	291 of the Internal Revenue Code in computing federal taxable income;
13.28 	 (7) in the case of mines, oil and gas wells, other natural deposits, and timber for 
13.29 	which percentage depletion was disallowed pursuant to subdivision 19c, clause (11), a 
13.30 	reasonable allowance for depletion based on actual cost.  In the case of leases the deduction 
13.31 	must be apportioned between the lessor and lessee in accordance with rules prescribed 
13.32 	by the commissioner.  In the case of property held in trust, the allowable deduction must 
13.33 	be apportioned between the income beneficiaries and the trustee in accordance with the 
13.34 	pertinent provisions of the trust, or if there is no provision in the instrument, on the basis 
13.35 	of the trust's income allocable to each;
14.1 	 (8) for certified pollution control facilities placed in service in a taxable year 
14.2 	beginning before December 31, 1986, and for which amortization deductions were elected 
14.3 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
14.4 	31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes 
14.5 	1986, section 290.09, subdivision 7;
14.6 	 (9) amounts included in federal taxable income that are due to refunds of income, 
14.7 	excise, or franchise taxes based on net income or related minimum taxes paid by the 
14.8 	corporation to Minnesota, another state, a political subdivision of another state, the 
14.9 	District of Columbia, or a foreign country or possession of the United States to the extent 
14.10 	that the taxes were added to federal taxable income under section 290.01, subdivision 19c, 
14.11 	clause (1), in a prior taxable year;
14.12 	 (10) 80 percent of royalties, fees, or other like income accrued or received from a 
14.13 	foreign operating corporation or a foreign corporation which is part of the same unitary 
14.14 	business as the receiving corporation;
14.15 	 (11) income or gains from the business of mining as defined in section 290.05, 
14.16 	subdivision 1, clause (a), that are not subject to Minnesota franchise tax;
14.17 	 (12) (11) the amount of handicap access expenditures in the taxable year which are 
14.18 	not allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue 
14.19 	Code;
14.20 	 (13) (12) the amount of qualified research expenses not allowed for federal income 
14.21 	tax purposes under section 280C(c) of the Internal Revenue Code, but only to the extent 
14.22 	that the amount exceeds the amount of the credit allowed under section 290.068;
14.23 	 (14) (13) the amount of salary expenses not allowed for federal income tax purposes 
14.24 	due to claiming the Indian employment credit under section 45A(a) of the Internal 
14.25 	Revenue Code;
14.26 	 (15) (14) the amount of any refund of environmental taxes paid under section 59A of 
14.27 	the Internal Revenue Code;
14.28 	 (16) (15) for taxable years beginning before January 1, 2008, the amount of the 
14.29 	federal small ethanol producer credit allowed under section 40(a)(3) of the Internal 
14.30 	Revenue Code which is included in gross income under section 87 of the Internal Revenue 
14.31 	Code;
14.32 	 (17) (16) for a corporation whose foreign sales corporation, as defined in section 
14.33 	922 of the Internal Revenue Code, constituted a foreign operating corporation during any 
14.34 	taxable year ending before January 1, 1995, and a return was filed by August 15, 1996, 
14.35 	claiming the deduction under section 290.21, subdivision 4, for income received from 
14.36 	the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of 
15.1 	income excluded under section 114 of the Internal Revenue Code, provided the income is 
15.2 	not income of a foreign operating company;
15.3 	 (18) (17) any decrease in subpart F income, as defined in section 952(a) of the 
15.4 	Internal Revenue Code, for the taxable year when subpart F income is calculated without 
15.5 	regard to the provisions of section 614 of Public Law 107-147; and
15.6 	 (19) (18) in each of the five tax years immediately following the tax year in which 
15.7 	an addition is required under subdivision 19c, clause (16), an amount equal to one-fifth 
15.8 	of the delayed depreciation.  For purposes of this clause, "delayed depreciation" means 
15.9 	the amount of the addition made by the taxpayer under subdivision 19c, clause (16).  The 
15.10 	resulting delayed depreciation cannot be less than zero.

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

15.13 	 Sec. 3. Minnesota Statutes 2004, section 290.17, subdivision 4, is amended to read:
15.14 		 Subd. 4.Unitary business principle.  (a) If a trade or business conducted wholly 
15.15 	within this state or partly within and partly without this state is part of a unitary business, 
15.16 	the entire income of the unitary business is subject to apportionment pursuant to section 
15.17 	290.191.  Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary 
15.18 	business is considered to be derived from any particular source and none may be allocated 
15.19 	to a particular place except as provided by the applicable apportionment formula.  The 
15.20 	provisions of this subdivision do not apply to business income subject to subdivision 5, 
15.21 	income of an insurance company, or income of an investment company determined under 
15.22 	section 290.36.
15.23 	 (b) The term "unitary business" means business activities or operations which 
15.24 	result in a flow of value between them.  The term may be applied within a single legal 
15.25 	entity or between multiple entities and without regard to whether each entity is a sole 
15.26 	proprietorship, a corporation, a partnership or a trust.
15.27 	 (c) Unity is presumed whenever there is unity of ownership, operation, and use, 
15.28 	evidenced by centralized management or executive force, centralized purchasing, 
15.29 	advertising, accounting, or other controlled interaction, but the absence of these 
15.30 	centralized activities will not necessarily evidence a nonunitary business.  Unity is also 
15.31 	presumed when business activities or operations are of mutual benefit, dependent upon or 
15.32 	contributory to one another, either individually or as a group.
15.33 	 (d) Where a business operation conducted in Minnesota is owned by a business 
15.34 	entity that carries on business activity outside the state different in kind from that 
15.35 	conducted within this state, and the other business is conducted entirely outside the state, it 
16.1 	is presumed that the two business operations are unitary in nature, interrelated, connected, 
16.2 	and interdependent unless it can be shown to the contrary.
16.3 	 (e) Unity of ownership is not deemed to exist when a corporation is involved unless 
16.4 	that corporation is a member of a group of two or more business entities and more than 50 
16.5 	percent of the voting stock of each member of the group is directly or indirectly owned 
16.6 	by a common owner or by common owners, either corporate or noncorporate, or by one 
16.7 	or more of the member corporations of the group.  For this purpose, the term "voting 
16.8 	stock" shall include membership interests of mutual insurance holding companies formed 
16.9 	under section 60A.077.
16.10 	 (f) The net income and apportionment factors under section 290.191 or 290.20 of 
16.11 	foreign corporations and other foreign entities which are part of a unitary business shall 
16.12 	not be included in the net income or the apportionment factors of the unitary business.  
16.13 	A foreign corporation or other foreign entity which is required to file a return under this 
16.14 	chapter shall file on a separate return basis.  The net income and apportionment factors 
16.15 	under section 290.191 or 290.20 of foreign operating corporations shall not be included in 
16.16 	the net income or the apportionment factors of the unitary business except as provided in 
16.17 	paragraph (g).
16.18 	 (g) The adjusted net income of a foreign operating corporation shall be deemed to 
16.19 	be paid as a dividend on the last day of its taxable year to each shareholder thereof, in 
16.20 	proportion to each shareholder's ownership, with which such corporation is engaged in 
16.21 	a unitary business.  Such deemed dividend shall be treated as a dividend under section 
16.22 	290.21, subdivision 4. The dividends-received deduction must not be allowed on 
16.23 	dividends, interest, royalties, or capital gains received by the foreign operating corporation 
16.24 	included in the deemed dividend.
16.25 	 Dividends actually paid by a foreign operating corporation to a corporate shareholder 
16.26 	which is a member of the same unitary business as the foreign operating corporation shall 
16.27 	be eliminated from the net income of the unitary business in preparing a combined report 
16.28 	for the unitary business.  The adjusted net income of a foreign operating corporation 
16.29 	shall be its net income adjusted as follows:
16.30 	 (1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto 
16.31 	Rico, or a United States possession or political subdivision of any of the foregoing shall 
16.32 	be a deduction; and
16.33 	 (2) the subtraction from federal taxable income for payments received from foreign 
16.34 	corporations or foreign operating corporations under section 290.01, subdivision 19d, 
16.35 	clause (10), shall not be allowed.
17.1 	 If a foreign operating corporation incurs a net loss, neither income nor deduction 
17.2 	from that corporation shall be included in determining the net income of the unitary 
17.3 	business.
17.4 	 (h) For purposes of determining the net income of a unitary business and the factors 
17.5 	to be used in the apportionment of net income pursuant to section 290.191 or 290.20, there 
17.6 	must be included only the income and apportionment factors of domestic corporations or 
17.7 	other domestic entities other than foreign operating corporations that are determined to 
17.8 	be part of the unitary business pursuant to this subdivision, notwithstanding that foreign 
17.9 	corporations or other foreign entities might be included in the unitary business.
17.10 	 (i) Deductions for expenses, interest, or taxes otherwise allowable under this chapter 
17.11 	that are connected with or allocable against dividends, deemed dividends described 
17.12 	in paragraph (g), or royalties, fees, or other like income described in section 290.01, 
17.13 	subdivision 19d, clause (10), shall not be disallowed.
17.14 	 (j) Each corporation or other entity, except a sole proprietorship, that is part of a 
17.15 	unitary business must file combined reports as the commissioner determines.  On the 
17.16 	reports, all intercompany transactions between entities included pursuant to paragraph 
17.17 	(h) must be eliminated and the entire net income of the unitary business determined in 
17.18 	accordance with this subdivision is apportioned among the entities by using each entity's 
17.19 	Minnesota factors for apportionment purposes in the numerators of the apportionment 
17.20 	formula and the total factors for apportionment purposes of all entities included pursuant 
17.21 	to paragraph (h) in the denominators of the apportionment formula.
17.22 	 (k) If a corporation has been divested from a unitary business and is included in a 
17.23 	combined report for a fractional part of the common accounting period of the combined 
17.24 	report:
17.25 	 (1) its income includable in the combined report is its income incurred for that part 
17.26 	of the year determined by proration or separate accounting; and
17.27 	 (2) its sales, property, and payroll included in the apportionment formula must 
17.28 	be prorated or accounted for separately.

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

17.31 	 ARTICLE 3
17.32 	 SALES TAX

17.33 	 Section 1. Minnesota Statutes 2004, section 297A.61, is amended by adding a 
17.34 	subdivision to read:
18.1 		 Subd. 37.Event souvenir clothing. "Event souvenir clothing" is clothing 
18.2 	that is sold at a state-subsidized facility and that bears a name, image, or logo of the 
18.3 	entertainer, athlete, or team that performs at the facility.  As used in this subdivision, a 
18.4 	"state-subsidized facility" means the Metrodome financed under section 473.581, the 
18.5 	basketball arena that receives payments from the Amateur Sports Commission under 
18.6 	section 473.556, subdivision 16, the hockey arena that received a loan of state funds under 
18.7 	Laws 1998, chapter 404, section 23, subdivision 6, and the entertainment and convention 
18.8 	center that received a grant under Laws 1998, chapter 404, section 23, subdivision 9.

18.9 	EFFECTIVE DATE. This section is effective for sales after June 30, 2005.

18.10 	 Sec. 2. Minnesota Statutes 2004, section 297A.67, subdivision 6, is amended to read:
18.11 		 Subd. 6.Other exempt meals. (a) Meals or drinks purchased for and served 
18.12 	exclusively to individuals who are 60 years of age or over and their spouses or to 
18.13 	handicapped persons and their spouses by governmental agencies, nonprofit organizations, 
18.14 	or churches, or pursuant to any program funded in whole or in part through United States 
18.15 	Code, title 42, sections 3001 through 3045, wherever delivered, prepared, or served, 
18.16 	are exempt.
18.17 	 (b) Meals or drinks purchased for and served exclusively to children who are less 
18.18 	than 14 years of age or disabled children who are less than 16 years of age and who are 
18.19 	attending a child care or early childhood education program, are exempt if they are:
18.20 	 (1) purchased by a nonprofit child care facility that is exempt under section 297A.70, 
18.21 	subdivision 4, and that primarily serves families with income of 250 percent or less of 
18.22 	federal poverty guidelines; and 
18.23 	 (2) prepared at the site of the child care facility.

18.24 	EFFECTIVE DATE. This section is effective for sales after December 31, 1997.

18.25 	 Sec. 3. Minnesota Statutes 2004, section 297A.67, subdivision 7, is amended to read:
18.26 		 Subd. 7.medicines drugs; medical devices.  (a) Prescribed Sales of the following 
18.27 	drugs and medical devices are exempt:
18.28 	 (1) drugs and medicine, and insulin, intended for internal or external use, in the 
18.29 	cure, mitigation, treatment, or prevention of illness or disease in human beings are 
18.30 	exempt. "Prescribed drugs and medicine" includes use, including  over-the-counter drugs 
18.31 	or medicine prescribed by a licensed health care professional.
18.32 	 (b) Nonprescription medicines consisting principally (determined by the weight 
18.33 	of all ingredients) of analgesics that are approved by the United States Food and Drug 
19.1 	Administration for internal use by human beings are exempt.  For purposes of this 
19.2 	subdivision, "principally" means greater than 50 percent analgesics by weight.
19.3 	 (c) Prescription glasses, hospital beds, fever thermometers, reusable ;
19.4 	 (2) single-use finger-pricking devices for the extraction of blood, blood glucose 
19.5 	monitoring machines,and other single-use devices and single-use diagnostic agents used 
19.6 	in diagnosing, monitoring, or treating diabetes, and therapeutic and ;
19.7 	 (3) insulin and medical oxygen for human use, regardless of whether prescribed 
19.8 	or sold over the counter;
19.9 	 (4) prosthetic devices are exempt.  "Therapeutic devices" means devices that are 
19.10 	attached or applied to the human body to cure, heal, or alleviate injury, illness, or disease, 
19.11 	either directly or by administering a curative agent.  "Prosthetic devices" means devices 
19.12 	that replace injured, diseased, or missing parts of the human body, either temporarily or 
19.13 	permanently ;
19.14 	 (5) durable medical equipment for home use only;
19.15 	 (6) mobility enhancing equipment; and 
19.16 	 (7) prescription corrective eyeglasses.
19.17 	 (b) For purposes of this subdivision:
19.18 	 (1) "Drug" means a compound, substance, or preparation, and any component of 
19.19 	a compound, substance, or preparation, other than food and food ingredients, dietary 
19.20 	supplements, or alcoholic beverages that is:
19.21 	 (i) recognized in the official United States Pharmacopoeia, official Homeopathic 
19.22 	Pharmacopoeia of the United States, or official National Formulary, and supplement 
19.23 	to any of them;
19.24 	 (ii) intended for use in the diagnosis, cure, mitigation, treatment, or prevention 
19.25 	of disease; or 
19.26 	 (iii) intended to affect the structure or any function of the body.
19.27 	 (2) "Durable medical equipment" means equipment, including repair and 
19.28 	replacement parts, but not including mobility enhancing equipment, that:
19.29 	 (i) can withstand repeated use;
19.30 	 (ii) is primarily and customarily used to serve a medical purpose;
19.31 	 (iii) generally is not useful to a person in the absence of illness or injury; and 
19.32 	 (iv) is not worn in or on the body.
19.33 	 (3) "Mobility enhancing equipment" means equipment, including repair and 
19.34 	replacement parts, but not including durable medical equipment, that:
19.35 	 (i) is primarily and customarily used to provide or increase the ability to move from 
19.36 	one place to another and that is appropriate for use either in a home or a motor vehicle;
20.1 	 (ii) is not generally used by persons with normal mobility; and 
20.2 	 (iii) does not include any motor vehicle or equipment on a motor vehicle normally 
20.3 	provided by a motor vehicle manufacturer.
20.4 	 (4) "Over-the-counter drug" means a drug that contains a label that identifies the 
20.5 	product as a drug as required by Code of Federal Regulations, title 21, section 201.66.  The 
20.6 	label must include a "drug facts" panel or a statement of the active ingredients with a list of 
20.7 	those ingredients contained in the compound, substance, or preparation.  Over-the-counter 
20.8 	drugs do not include grooming and hygiene products, regardless of whether they otherwise 
20.9 	meet the definition.  "Grooming and hygiene products" are soaps, cleaning solutions, 
20.10 	shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and sunscreens.
20.11 	 (5) "Prescribed" and "prescription" means a direction in the form of an order, 
20.12 	formula, or recipe issued in any form of oral, written, electronic, or other means of 
20.13 	transmission by a duly licensed health care professional.
20.14 	 (6) "Prosthetic device" means a replacement, corrective, or supportive device, 
20.15 	including repair and replacement parts, worn on or in the body to:
20.16 	 (i) artificially replace a missing portion of the body;
20.17 	 (ii) prevent or correct physical deformity or malfunction; or 
20.18 	 (iii) support a weak or deformed portion of the body.
20.19 	 Prosthetic device does not include corrective eyeglasses.

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

20.22 	 Sec. 4. Minnesota Statutes 2004, section 297A.67, subdivision 8, is amended to read:
20.23 		 Subd. 8.Clothing.  (a) Clothing is exempt.  For purposes of this subdivision, 
20.24 	"clothing" means all human wearing apparel suitable for general use.
20.25 	 (b) Clothing includes, but is not limited to, aprons, household and shop; athletic 
20.26 	supporters; baby receiving blankets; bathing suits and caps; beach capes and coats; belts 
20.27 	and suspenders; boots; coats and jackets; costumes; children and adult diapers, including 
20.28 	disposable; ear muffs; footlets; formal wear; garters and garter belts; girdles; gloves and 
20.29 	mittens for general use; hats and caps; hosiery; insoles for shoes; lab coats; neckties; 
20.30 	overshoes; pantyhose; rainwear; rubber pants; sandals; scarves; shoes and shoe laces; 
20.31 	slippers; sneakers; socks and stockings; steel-toed boots; underwear; uniforms, athletic 
20.32 	and nonathletic; and wedding apparel.
20.33 	 (c) Clothing does not include the following:
20.34 	 (1) belt buckles sold separately;
21.1 	 (2) costume masks sold separately;
21.2 	 (3) patches and emblems sold separately;
21.3 	 (4) sewing equipment and supplies, including but not limited to, knitting needles, 
21.4 	patterns, pins, scissors, sewing machines, sewing needles, tape measures, and thimbles;
21.5 	 (5) sewing materials that become part of clothing, including but not limited to, 
21.6 	buttons, fabric, lace, thread, yarn, and zippers;
21.7 	 (6) clothing accessories or equipment;
21.8 	 (7) sports or recreational equipment; and 
21.9 	 (8) protective equipment; and 
21.10 	 (9) event souvenir clothing.
21.11 	 Clothing also does not include apparel made from fur if a uniform definition of "apparel 
21.12 	made from fur" is developed by the member states of the Streamlined Sales and Use 
21.13 	Tax Agreement.
21.14 	 For purposes of this subdivision, "clothing accessories or equipment" means 
21.15 	incidental items worn on the person or in conjunction with clothing.  Clothing accessories 
21.16 	and equipment include, but are not limited to, briefcases; cosmetics; hair notions, including 
21.17 	barrettes, hair bows, and hairnets; handbags; handkerchiefs; jewelry; nonprescription 
21.18 	sunglasses; umbrellas; wallets; watches; and wigs and hairpieces.  "Sports or recreational 
21.19 	equipment" means items designed for human use and worn in conjunction with an athletic 
21.20 	or recreational activity that are not suitable for general use.  Sports and recreational 
21.21 	equipment includes, but is not limited to, ballet and tap shoes; cleated or spiked athletic 
21.22 	shoes; gloves, including, but not limited to, baseball, bowling, boxing, hockey, and golf 
21.23 	gloves; goggles; hand and elbow guards; life preservers and vests; mouth guards; roller 
21.24 	and ice skates; shin guards; shoulder pads; ski boots; waders; and wetsuits and fins.  
21.25 	"Protective equipment" means items for human wear and designed as protection of the 
21.26 	wearer against injury or disease or as protection against damage or injury of other persons 
21.27 	or property but not suitable for general use.  Protective equipment includes, but is not 
21.28 	limited to, breathing masks; clean room apparel and equipment; ear and hearing protectors; 
21.29 	face shields; finger guards; hard hats; helmets; paint or dust respirators; protective gloves; 
21.30 	safety glasses and goggles; safety belts; tool belts; and welders gloves and masks.

21.31 	EFFECTIVE DATE. This section is effective for sales after June 30, 2005.

21.32 	 Sec. 5. Minnesota Statutes 2004, section 297A.67, subdivision 29, is amended to read:
21.33 		 Subd. 29.solar energy efficient products. (a) A residential lighting fixture or a 
21.34 	compact fluorescent bulb is exempt if it has an energy star label.
22.1 	 (b) The following products are exempt if they have an energyguide label that 
22.2 	indicates that the product meets or exceeds the standards listed below:
22.3 	 (1) an electric heat pump hot water heater with an energy factor of at least 1.9;
22.4 	 (2) a natural gas water heater with an energy factor of at least 0.62;
22.5 	 (3) a propane gas or fuel oil water heater with an energy factor of at least 0.62;
22.6 	 (4) a natural gas furnace with an annual fuel utilization efficiency greater than 92 
22.7 	percent; and 
22.8 	 (5) a propane gas or fuel oil furnace with an annual fuel utilization efficiency 
22.9 	greater than 92 percent.
22.10 	 (c) A photovoltaic device solar energy system, as defined in section 216C.06, 
22.11 	subdivision 17,is exempt. For purposes of this subdivision, "photovoltaic device" means 
22.12 	a solid-state electrical device, such as a solar module, that converts light directly into 
22.13 	direct current electricity of voltage-current characteristics that are a function of the 
22.14 	characteristics of the light source and the materials in and design of the device. A "solar 
22.15 	module" is a photovoltaic device that produces a specified power output under defined test 
22.16 	conditions, usually composed of groups of solar cells connected in series, in parallel, or 
22.17 	in series-parallel combinations.
22.18 	 (d) For purposes of this subdivision, "energy star label" means the label granted 
22.19 	to certain products that meet United States Environmental Protection Agency and 
22.20 	United States Department of Energy criteria for energy efficiency.  For purposes of this 
22.21 	subdivision, "energyguide label" means the label that the United States Federal Trade 
22.22 	Commissioner requires manufacturers to apply to certain appliances under United States 
22.23 	Code, title 16, part 305.

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

22.26 	 Sec. 6. Minnesota Statutes 2004, section 297A.68, subdivision 28, is amended to read:
22.27 		 Subd. 28.Medical supplies.  Medical supplies purchased by a licensed health care 
22.28 	facility or licensed health care professional to provide medical treatment to residents or 
22.29 	patients are exempt.  The exemption does not apply to durable  medical equipment or 
22.30 	components of durable medical equipment, laboratory supplies, radiological supplies, and 
22.31 	other items used in providing medical services.  For purposes of this subdivision, "medical 
22.32 	supplies" means adhesive and nonadhesive bandages, gauze pads and strips, cotton 
22.33 	applicators, antiseptics, nonprescription drugs,eye solution, and other similar supplies 
22.34 	used directly on the resident or patient in providing medical services.

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

23.3 	 Sec. 7. Minnesota Statutes 2004, section 297A.71, subdivision 12, is amended to read:
23.4 		 Subd. 12.Chair lifts, ramps, elevators. Chair lifts, ramps, and Elevators and 
23.5 	building materials used to install or construct them chair lifts, ramps, and elevators are 
23.6 	exempt, if they are authorized by a physician and installed in or attached to the owner's 
23.7 	homestead.  The tax must be imposed and collected as if the rate under section 297A.62, 
23.8 	subdivision 1, applied and then refunded in the manner provided in section 297A.75.

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

23.11 	 Sec. 8. Minnesota Statutes 2004, section 297A.71, is amended by adding a subdivision 
23.12 	to read:
23.13 		 Subd. 33.Hydroelectric generating facility. Materials and supplies used or 
23.14 	consumed in the construction of a hydroelectric generating facility that meets the 
23.15 	requirements of this subdivision are exempt.  To qualify for the exemption under this 
23.16 	subdivision, a hydroelectric generating facility must:
23.17 	 (1) utilize two turbine generators at a dam site existing on March 31, 1994;
23.18 	 (2) be located on land within 1,500 feet of a 13.8 kilovolt distribution circuit; and 
23.19 	 (3) be eligible to receive a renewable energy production incentive payment under 
23.20 	section 216C.41.

23.21 	EFFECTIVE DATE. This section is effective for sales made after December 31, 
23.22 	2004, and on or before December 31, 2007.

23.23 	 Sec. 9. Laws 1993, chapter 375, article 9, section 46, subdivision 2, as amended by 
23.24 	Laws 1997, chapter 231, article 7, section 40, and Laws 1998, chapter 389, article 8, 
23.25 	section 30, and Laws 2003 First Special Session chapter 21, article 8, section 13, is 
23.26 	amended to read:
23.27 		 Subd. 2.Use of revenues. Revenues received from the tax authorized by 
23.28 	subdivision 1 may only be used by the city to pay the cost of collecting the tax, and to pay 
23.29 	for the following projects or to secure or pay any principal, premium, or interest on bonds 
23.30 	issued in accordance with subdivision 3 for the following projects.
23.31 	 (a) To pay all or a portion of the capital expenses of construction, equipment and 
23.32 	acquisition costs for the expansion and remodeling of the St. Paul Civic Center complex, 
24.1 	including the demolition of the existing arena and the construction and equipping of a 
24.2 	new arena.
24.3 	 (b) The remainder of the funds must be spent for:
24.4 	 (1) capital projects to further residential, cultural, commercial, and economic 
24.5 	development in both downtown St. Paul and St. Paul neighborhoods ; and
24.6 	 (2) capital and operating expenses of cultural organizations in the city, provided 
24.7 	that the amount spent under this clause must equal ten percent of the total amount spent 
24.8 	under this paragraph in any year.
24.9 	 (c) The amount apportioned under paragraph (b) shall be no less than 60 percent 
24.10 	of the revenues derived from the tax each year, except to the extent that a portion of that 
24.11 	amount is required to pay debt service on (1) bonds issued for the purposes of paragraph (a) 
24.12 	prior to March 1, 1998; or (2) bonds issued for the purposes of paragraph (a) after March 1, 
24.13 	1998, but only if the city council determines that 40 percent of the revenues derived from 
24.14 	the tax together with other revenues pledged to the payment of the bonds, including the 
24.15 	proceeds of definitive bonds, is expected to exceed the annual debt service on the bonds.
24.16 	 (d) If in any year more than 40 percent of the revenue derived from the tax authorized 
24.17 	by subdivision 1 is used to pay debt service on the bonds issued for the purposes of 
24.18 	paragraph (a) and to fund a reserve for the bonds, the amount of the debt service payment 
24.19 	that exceeds 40 percent of the revenue must be determined for that year.  In any year when 
24.20 	40 percent of the revenue produced by the sales tax exceeds the amount required to pay 
24.21 	debt service on the bonds and to fund a reserve for the bonds under paragraph (a), the 
24.22 	amount of the excess must be made available for capital projects to further residential, 
24.23 	cultural, commercial, and economic development in the neighborhoods and downtown 
24.24 	until the cumulative amounts determined for all years under the preceding sentence have 
24.25 	been made available under this sentence.  The amount made available as reimbursement in 
24.26 	the preceding sentence is not included in the 60 percent determined under paragraph (c).
24.27 	 (e) No revenues from the tax authorized by subdivision 1 may be used to pay 
24.28 	principal, premium, or interest on any bonds or other obligations except the bonds issued 
24.29 	under subdivision 3.
24.30 	 (e) (f) By January 15 of each odd-numbered year, the mayor and the city council 
24.31 	must report to the legislature on the use of sales tax revenues during the preceding 
24.32 	two-year period.

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

24.34 	 Sec. 10. Laws 2001, First Special Session chapter 5, article 12, section 44, the effective 
24.35 	date, is amended to read:

25.1 	 EFFECTIVE DATE. This section is effective for sales and purchases made after 
25.2 	July 31, 2001, and before August 1, 2005.

25.3 	 Sec. 11. COUNTY OF MOWER; SALES AND USE TAX.
 25.4 		 Subdivision 1.Sales and use tax authorized. Notwithstanding Minnesota Statutes, 
25.5 	section 477A.016, or any other provision of law or ordinance, the county of Mower may, 
25.6 	by resolution, impose a sales and use tax of up to one-half percent for the purposes 
25.7 	specified in subdivision 2. Except as otherwise provided in this section, the provisions of 
25.8 	Minnesota Statutes, section 297A.99, govern the imposition, administration, collection, 
25.9 	and enforcement of the tax authorized under this subdivision.
25.10 		 Subd. 2.Use of revenues. The proceeds of the tax imposed under this section 
25.11 	must be solely used to pay for costs associated with a Criminal Justice Center for Mower 
25.12 	County. Government functions to be located in the facility for which proceeds of the tax 
25.13 	may be used include, but are not limited to, jail, law enforcement, dispatch, courts, court 
25.14 	administration, correctional services, and county attorney.
25.15 	 Authorized expenses include, but are not limited to, site acquisition, infrastructure, 
25.16 	construction, and professional fees related to the project.
25.17 		 Subd. 3.Bonding authority. (a) The county may issue bonds under Minnesota 
25.18 	Statutes, chapter 475, to finance the capital expenditures and improvements authorized by 
25.19 	the referendum under subdivision 4.  An election to approve the bonds under Minnesota 
25.20 	Statutes, section 475.58, is not required.
25.21 	 (b) The bonds are not included in computing any debt limits applicable to the county, 
25.22 	and the levy of taxes under Minnesota Statutes, section 475.61, to pay principal and 
25.23 	interest on the bonds is not subject to levy limits.
25.24 		 Subd. 4.Referendum. If the county of Mower proposes to impose the tax 
25.25 	authorized by this section, the question of imposing the tax must be submitted to the voters 
25.26 	at either a special election held before January 1, 2006, or at the next general election.
25.27 		 Subd. 5.Termination of taxes. The tax imposed under this section expires when 
25.28 	the county board first determines that the amount of revenues raised to pay for the 
25.29 	Criminal Justice Center project under subdivision 2 meet or exceed approved project 
25.30 	costs.  Any funds remaining after completion of the projects may be placed in the general 
25.31 	funds of the county.  The county may rescind the tax imposed under this section at an 
25.32 	earlier time by ordinance.

25.33 	EFFECTIVE DATE. This section is effective the day after compliance by the 
25.34 	governing body of the county of Mower with Minnesota Statutes, section 645.021, 
25.35 	subdivision 3.

26.1 	 Sec. 12. CITY OF WORTHINGTON; TAXES AUTHORIZED.
 26.2 		 Subdivision 1.Sales and use tax. Notwithstanding Minnesota Statutes, section 
26.3 	477A.016, or any other provision of law, ordinance, or city charter, if approved by the 
26.4 	voters pursuant to Minnesota Statutes, section 297A.99, at the next general election, the 
26.5 	city of Worthington may impose by ordinance a sales and use tax of up to one-half of one 
26.6 	percent for the purpose specified in subdivision 3.  Except as otherwise provided in this 
26.7 	section, the provisions of Minnesota Statutes, section 297A.99, govern the imposition, 
26.8 	administration, collection, and enforcement of the tax authorized under this subdivision.
26.9 		 Subd. 2.Excise tax authorized. Notwithstanding Minnesota Statutes, section 
26.10 	477A.016, or any other provision of law, ordinance, or city charter, the city of Worthington 
26.11 	may impose by ordinance, for the purposes specified in subdivision 3, an excise tax of up 
26.12 	to $20 per motor vehicle, as defined by ordinance, purchased or acquired from any person 
26.13 	engaged within the city in the business of selling motor vehicles at retail.
26.14 		 Subd. 3.Use of revenues. Revenues received from taxes authorized by subdivisions 
26.15 	1 and 2 must be used by the city to pay the cost of collecting and administering the 
26.16 	taxes and to pay for the costs of a multipurpose city facility to include meeting rooms, 
26.17 	a swimming pool, and a senior citizen center, and to make renovations to the Memorial 
26.18 	Auditorium.  Authorized expenses include, but are not limited to, acquiring property and 
26.19 	paying construction expenses related to these improvements, and paying debt service 
26.20 	on bonds or other obligations issued to finance acquisition and construction of these 
26.21 	improvements.
26.22 		 Subd. 4.Bonding authority. (a) If the tax authorized under subdivision 1 is 
26.23 	approved by the voters, the city may issue bonds under Minnesota Statutes, chapter 475, 
26.24 	to pay capital and administrative expenses for the improvements described in subdivision 
26.25 	3 in an amount that does not exceed $7,800,000.  An election to approve the bonds under 
26.26 	Minnesota Statutes, section 475.58, is not required.
26.27 	 (b) The debt represented by the bonds is not included in computing any debt 
26.28 	limitation applicable to the city, and any levy of taxes under Minnesota Statutes, section 
26.29 	475.61, to pay principal of and interest on the bonds is not subject to any levy limitation.
26.30 		 Subd. 5.Termination of taxes. The taxes imposed under subdivisions 1 and 2 
26.31 	expire at the earlier of (1) ten years, or (2) when the city council determines that the 
26.32 	amount of revenue received from the taxes to pay for the projects under subdivision 3 
26.33 	equals or exceeds $7,800,000 plus the additional amount needed to pay the costs related 
26.34 	to issuance of bonds under subdivision 4, including interest on the bonds.  Any funds 
26.35 	remaining after completion of the project and retirement or redemption of the bonds shall 
27.1 	be placed in a capital project fund of the city.  The taxes imposed under subdivisions 1 and 
27.2 	2 may expire at an earlier time if the city so determines by ordinance.

27.3 	EFFECTIVE DATE. This section is effective the day after the governing body 
27.4 	of the city of Worthington and its chief clerical officer timely comply with Minnesota 
27.5 	Statutes, section 645.021, subdivisions 2 and 3.

27.6 	 ARTICLE 4
27.7 	 PROPERTY TAX AND AIDS

27.8 	 Section 1. Minnesota Statutes 2004, section 123B.53, subdivision 5, is amended to read:
27.9 		 Subd. 5.Equalized debt service levy.  (a) The equalized debt service levy of a 
27.10 	district equals the sum of the first tier equalized debt service levy and the second tier 
27.11 	equalized debt service levy.
27.12 	 (b) A district's first tier equalized debt service levy equals the district's first tier debt 
27.13 	service equalization revenue times the lesser of one or the ratio of:
27.14 	 (1) the quotient derived by dividing the adjusted debt service net tax capacity of the 
27.15 	district for the year before the year the levy is certified by the adjusted pupil units in the 
27.16 	district for the school year ending in the year prior to the year the levy is certified; to
27.17 	 (2) $3,200.
27.18 	 (c) A district's second tier equalized debt service levy equals the district's second 
27.19 	tier debt service equalization revenue times the lesser of one or the ratio of:
27.20 	 (1) the quotient derived by dividing the adjusted debt service net tax capacity of the 
27.21 	district for the year before the year the levy is certified by the adjusted pupil units in the 
27.22 	district for the school year ending in the year prior to the year the levy is certified; to
27.23 	 (2) $8,000.

27.24 	EFFECTIVE DATE. This section is effective for taxes payable in 2006.

27.25 	 Sec. 2. Minnesota Statutes 2004, section 126C.01, is amended by adding a subdivision 
27.26 	to read:
27.27 		 Subd. 2a.Debt service net tax capacity. A school district's debt service net tax 
27.28 	capacity means the net tax capacity of the taxable property of the district as adjusted by 
27.29 	the commissioner of revenue under section 127A.48, subdivision 17.  The debt service net 
27.30 	tax capacity for any given calendar year must be used to compute the debt service levy 
27.31 	limitations for levies certified in the succeeding calendar year and aid for the school year 
27.32 	beginning in the second succeeding calendar year.

28.1 	EFFECTIVE DATE. This section is effective the day following final enactment for 
28.2 	computing taxes payable in 2006.

28.3 	 Sec. 3. Minnesota Statutes 2004, section 127A.48, is amended by adding a subdivision 
28.4 	to read:
28.5 		 Subd. 17.Debt service net tax capacity. To calculate each district's debt service 
28.6 	net tax capacity, the commissioner of revenue must recompute the amounts in this section 
28.7 	using an alternative sales ratio comparing the sales price to the estimated market value 
28.8 	of the property.

28.9 	EFFECTIVE DATE. This section is effective the day following final enactment for 
28.10 	computing taxes payable in 2006.

28.11 	 Sec. 4. Minnesota Statutes 2004, section 254B.02, subdivision 3, is amended to read:
28.12 		 Subd. 3.Reserve account.  The commissioner shall allocate money from the 
28.13 	reserve account to counties that, during the current fiscal year, have met or exceeded the 
28.14 	base level of expenditures for eligible chemical dependency services from local money.  
28.15 	The commissioner shall establish the base level for fiscal year 1988 as the amount of local 
28.16 	money used for eligible services in calendar year 1986.  In later years, the base level must 
28.17 	be increased in the same proportion as state appropriations to implement Laws 1986, 
28.18 	chapter 394, sections 8 to 20, are increased, except the base level shall not exceed 55 
28.19 	percent of the county allocation provided in subdivision 1 for fiscal year 2006; 50 percent 
28.20 	in fiscal year 2007; 45 percent in fiscal year 2008; and 40 percent in fiscal year 2009. 
28.21 	Thereafter the maximum base level shall decrease by five percent each year until the 
28.22 	maximum county match is 15 percent.  The base level must be decreased if the fund balance 
28.23 	from which allocations are made under section 254B.02, subdivision 1, is decreased in 
28.24 	later years.  The local match rate for the reserve account is the same rate as applied to the 
28.25 	initial allocation. Reserve account payments must not be included when calculating the 
28.26 	county adjustments made according to subdivision 2.  For counties providing medical 
28.27 	assistance or general assistance medical care through managed care plans on January 1, 
28.28 	1996, the base year is fiscal year 1995.  For counties beginning provision of managed 
28.29 	care after January 1, 1996, the base year is the most recent fiscal year before enrollment 
28.30 	in managed care begins. For counties providing managed care, the base level will be 
28.31 	increased or decreased in proportion to changes in the fund balance from which allocations 
28.32 	are made under subdivision 2, but will be additionally increased or decreased in proportion 
28.33 	to the change in county adjusted population made in subdivision 1, paragraphs (b) and (c).  
28.34 	Effective July 1, 2001, at the end of each biennium, any funds deposited in the reserve 
29.1 	account funds in excess of those needed to meet obligations incurred under this section 
29.2 	and sections 254B.06 and 254B.09 shall cancel to the general fund.

29.3 	 Sec. 5. Minnesota Statutes 2004, section 272.02, subdivision 53, is amended to read:
29.4 		 Subd. 53.Electric generation facility; personal property.  Notwithstanding 
29.5 	subdivision 9, clause (a), attached machinery and other personal property which is part 
29.6 	of a 3.2 megawatt run-of-the-river hydroelectric generation facility and that meets the 
29.7 	requirements of this subdivision is exempt.  At the time of construction, the facility must:
29.8 	 (1) utilize two turbine generators at a dam site existing on March 31, 1994;
29.9 	 (2) be located on publicly owned land and within 1,500 feet of a 13.8 kilovolt 
29.10 	distribution substation; and
29.11 	 (3) be eligible to receive a renewable energy production incentive payment under 
29.12 	section 216C.41.
29.13 	 Construction of the facility must be commenced after January 1, 2002 December 
29.14 	31, 2004, and before January 1, 2005  2007.  Property eligible for this exemption 
29.15 	does not include electric transmission lines and interconnections or gas pipelines and 
29.16 	interconnections appurtenant to the property or the facility.

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

29.19 	 Sec. 6. Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision 
29.20 	to read:
29.21 		 Subd. 68.Electric generation facility personal property. (a) Notwithstanding 
29.22 	subdivision 9, clause (a), attached machinery and other personal property which is part of 
29.23 	either a simple-cycle, combustion-turbine electric generation facility, or a combined-cycle, 
29.24 	combustion-turbine electric generation facility that does not exceed 325 megawatts of 
29.25 	installed capacity and that meets the requirements of this subdivision is exempt.  At the 
29.26 	time of construction, the facility must:
29.27 	 (1) utilize either a simple-cycle or a combined-cycle combustion-turbine generator 
29.28 	fueled by natural gas;
29.29 	 (2) be connected to an existing 115-kilovolt high-voltage electric transmission line 
29.30 	that is within two miles of the facility;
29.31 	 (3) be located on an underground natural gas storage aquifer;
29.32 	 (4) be designed as either a peaking or intermediate load facility; and 
29.33 	 (5) have received, by resolution, the approval from the governing body of the county 
29.34 	for the exemption of personal property under this subdivision.
30.1 	 (b) Construction of the facility must be commenced after January 1, 2006, and 
30.2 	before January 1, 2008.  Property eligible for this exemption does not include electric 
30.3 	transmission lines and interconnections or gas pipelines and interconnections appurtenant 
30.4 	to the property or the facility.

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

30.7 	 Sec. 7. Minnesota Statutes 2004, section 272.0211, subdivision 1, is amended to read:
30.8 		 Subdivision 1.Efficiency determination and certification.  An owner or operator 
30.9 	of a new or existing electric power generation facility, excluding wind energy conversion 
30.10 	systems, may apply to the commissioner of revenue for a market value exclusion on the 
30.11 	property as provided for in this section.  This exclusion shall apply only to the market 
30.12 	value of the equipment of the facility, and shall not apply to the structures and the land 
30.13 	upon which the facility is located.  The commissioner of revenue shall prescribe the forms 
30.14 	and procedures for this application.  Upon receiving the application, the commissioner 
30.15 	of revenue shall request the commissioner of commerce to make a determination of the 
30.16 	efficiency of the applicant's electric power generation facility. In calculating the efficiency 
30.17 	of a facility,The commissioner of commerce shall use a definition of calculate efficiency 
30.18 	which calculates efficiency as the sum of:
30.19 	 (1) the useful electrical power output; plus 
30.20 	 (2) the useful thermal energy output; plus 
30.21 	 (3) the fuel energy of the useful chemical products,
30.22 	 all divided by the total energy input to the facility, expressed as a percentage as the 
30.23 	ratio of useful energy outputs to energy inputs, expressed as a percentage, based on 
30.24 	the performance of the facility's equipment during normal full load operation.  The 
30.25 	commissioner must include in this formula the energy used in any on-site preparation of 
30.26 	materials necessary to convert the materials into the fuel used to generate electricity, 
30.27 	such as a process to gasify petroleum coke.  The commissioner shall use the high heating 
30.28 	value Higher Heating Value (HHV) for all substances in the commissioner's efficiency 
30.29 	calculations, except for wood for fuel in a biomass-eligible project under section 
30.30 	216B.2424; for these instances, the commissioner shall adjust the heating value to allow 
30.31 	for energy consumed for evaporation of the moisture in the wood.  The applicant shall 
30.32 	provide the commissioner of commerce with whatever information the commissioner 
30.33 	deems necessary to make the determination.  Within 30 days of the receipt of the necessary 
30.34 	information, the commissioner of commerce shall certify the findings of the efficiency 
31.1 	determination to the commissioner of revenue and to the applicant. The commissioner 
31.2 	of commerce shall determine the efficiency of the facility and certify the findings of 
31.3 	that determination to the commissioner of revenue every two years thereafter from the 
31.4 	date of the original certification.

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

31.7 	 Sec. 8. Minnesota Statutes 2004, section 272.0211, subdivision 2, is amended to read:
31.8 		 Subd. 2.Sliding scale exclusion.  Based upon the efficiency determination provided 
31.9 	by the commissioner of commerce as described in subdivision 1, the commissioner of 
31.10 	revenue shall subtract five eight percent of the taxable market value of the qualifying 
31.11 	property for each percentage point that the efficiency of the specific facility, as determined 
31.12 	by the commissioner of commerce, is above 35 40 percent.  The reduction in taxable 
31.13 	market value shall be reflected in the taxable market value of the facility beginning 
31.14 	with the assessment year immediately following the determination.  For a facility that is 
31.15 	assessed by the county in which the facility is located, the commissioner of revenue 
31.16 	shall certify to the assessor of that county the percentage of the taxable market value of 
31.17 	the facility to be excluded.

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

31.20 	 Sec. 9. Minnesota Statutes 2004, section 273.11, subdivision 1a, is amended to read:
31.21 		 Subd. 1a.Limited market value.  In the case of all property classified as 
31.22 	agricultural homestead or nonhomestead, residential homestead or nonhomestead, timber, 
31.23 	or noncommercial seasonal residential recreational, the assessor shall compare the value 
31.24 	with the taxable portion of the value determined in the preceding assessment.
31.25 	 For assessment year 2002, the amount of the increase shall not exceed the greater of 
31.26 	(1) ten percent of the value in the preceding assessment, or (2) 15 percent of the difference 
31.27 	between the current assessment and the preceding assessment.
31.28 	 For assessment year 2003, the amount of the increase shall not exceed the greater of 
31.29 	(1) 12 percent of the value in the preceding assessment, or (2) 20 percent of the difference 
31.30 	between the current assessment and the preceding assessment.
31.31 	 For assessment year 2004, the amount of the increase shall not exceed the greater of 
31.32 	(1) 15 percent of the value in the preceding assessment, or (2) 25 percent of the difference 
31.33 	between the current assessment and the preceding assessment.
32.1 	 For assessment year 2005, the amount of the increase shall not exceed the greater of 
32.2 	(1) 15 percent of the value in the preceding assessment, or (2) 33 percent of the difference 
32.3 	between the current assessment and the preceding assessment.
32.4 	 For assessment year 2006, the amount of the increase shall not exceed the greater of 
32.5 	(1) 15 percent of the value in the preceding assessment, or (2) 50 percent of the difference 
32.6 	between the current assessment and the preceding assessment.
32.7 	 This limitation shall not apply to increases in value due to improvements.  For 
32.8 	purposes of this subdivision, the term "assessment" means the value prior to any exclusion 
32.9 	under subdivision 16.
32.10 	 The provisions of this subdivision shall be in effect through assessment year 2006 
32.11 	as provided in this subdivision.
32.12 	 For purposes of the assessment/sales ratio study conducted under section 127A.48, 
32.13 	and the computation of state aids paid under chapters 122A, 123A, 123B, excluding 
32.14 	section 123B.53, 124D, 125A, 126C, 127A, and 477A, market values and net tax 
32.15 	capacities determined under this subdivision and subdivision 16, shall be used.

32.16 	EFFECTIVE DATE. This section is effective the day following final enactment for 
32.17 	computing taxes payable in 2006.

32.18 	 Sec. 10. Minnesota Statutes 2004, section 275.025, subdivision 1, is amended to read:
32.19 		 Subdivision 1.Levy amount. (a) The state general levy is levied against 
32.20 	commercial-industrial property and seasonal residential recreational property, as defined 
32.21 	in this section. The state general levy base amount is $592,000,000 for taxes payable in 
32.22 	2002.  For taxes payable in subsequent years on seasonal residential recreational property, 
32.23 	the levy base amount is increased each year by multiplying the levy base amount for that 
32.24 	class of property for the prior year by the sum of one plus the rate of increase, if any, in the 
32.25 	implicit price deflator for government consumption expenditures and gross investment for 
32.26 	state and local governments prepared by the Bureau of Economic Analysts of the United 
32.27 	States Department of Commerce for the 12-month period ending March 31 of the year 
32.28 	prior to the year the taxes are payable. For taxes payable in 2006 and subsequent years 
32.29 	on commercial-industrial property, the tax is imposed under this subdivision at the rate 
32.30 	of the tax imposed under this subdivision for taxes payable in 2002.The tax under this 
32.31 	section is not treated as a local tax rate under section 469.177 and is not the levy of a 
32.32 	governmental unit under chapters 276A and 473F.
32.33 	 (b) Beginning with taxes payable in 2008, and in each year thereafter, the 
32.34 	commissioner of finance shall deposit in the education reserve account established in 2005 
33.1 	S.F. No. 1683, article 4, section 73, if enacted, the increased amount of the state general 
33.2 	levy for that year over the state general levy base amount for taxes payable in 2002.
33.3 	 (c) The commissioner shall increase or decrease the preliminary or final rate for a 
33.4 	year as necessary to account for errors and tax base changes that affected a preliminary or 
33.5 	final rate for either of the two preceding years.  Adjustments are allowed to the extent that 
33.6 	the necessary information is available to the commissioner at the time the rates for a year 
33.7 	must be certified, and for the following reasons:
33.8 	 (1) an erroneous report of taxable value by a local official;
33.9 	 (2) an erroneous calculation by the commissioner; and
33.10 	 (3) an increase or decrease in taxable value for commercial-industrial or seasonal 
33.11 	residential recreational property reported on the abstracts of tax lists submitted under 
33.12 	section 275.29 that was not reported on the abstracts of assessment submitted under 
33.13 	section 270.11, subdivision 2, for the same year.
33.14 	 The commissioner may, but need not, make adjustments if the total difference in the tax 
33.15 	levied for the year would be less than $100,000.

33.16 	EFFECTIVE DATE. This section is effective for taxes payable in 2006 and 
33.17 	subsequent years.

33.18 	 Sec. 11. Minnesota Statutes 2004, section 275.065, subdivision 3, is amended to read:
33.19 		 Subd. 3.Notice of proposed property taxes.  (a) The county auditor shall prepare 
33.20 	and the county treasurer shall deliver after November 10 and on or before November 24 
33.21 	each year, by first class mail to each taxpayer at the address listed on the county's current 
33.22 	year's assessment roll, a notice of proposed property taxes.
33.23 	 (b) The commissioner of revenue shall prescribe the form of the notice.
33.24 	 (c) The notice must inform taxpayers that it contains the amount of property taxes 
33.25 	each taxing authority proposes to collect for taxes payable the following year.  In the case 
33.26 	of a town, or in the case of the state general tax, the final tax amount will be its proposed 
33.27 	tax.  In the case of taxing authorities required to hold a public meeting under subdivision 6, 
33.28 	the notice must clearly state that each taxing authority, including regional library districts 
33.29 	established under section 134.201, and including the metropolitan taxing districts as 
33.30 	defined in paragraph (i), but excluding all other special taxing districts and towns, will 
33.31 	hold a public meeting to receive public testimony on the proposed budget and proposed or 
33.32 	final property tax levy, or, in case of a school district, on the current budget and proposed 
33.33 	property tax levy.  It must clearly state the time and place of each taxing authority's 
34.1 	meeting, a telephone number for the taxing authority that taxpayers may call if they have 
34.2 	questions related to the notice, and an address where comments will be received by mail.
34.3 	 (d) The notice must state for each parcel:
34.4 	 (1) the market value of the property as determined under section 273.11, and used 
34.5 	for computing property taxes payable in the following year and for taxes payable in the 
34.6 	current year as each appears in the records of the county assessor on November 1 of the 
34.7 	current year; and, in the case of residential property, whether the property is classified as 
34.8 	homestead or nonhomestead.  The notice must clearly inform taxpayers of the years to 
34.9 	which the market values apply and that the values are final values;
34.10 	 (2) the items listed below, shown separately by county, city or town, and state general 
34.11 	tax, net of the residential and agricultural homestead credit under section 273.1384, voter 
34.12 	approved school levy, other local school levy, and the sum of the special taxing districts, 
34.13 	and as a total of all taxing authorities:
34.14 	 (i) the actual tax for taxes payable in the current year; and
34.15 	 (ii) the proposed tax amount.
34.16 	 If the county levy under clause (2) includes an amount for a lake improvement 
34.17 	district as defined under sections 103B.501 to 103B.581, the amount attributable for that 
34.18 	purpose must be separately stated from the remaining county levy amount.
34.19 	 In the case of a town or the state general tax, the final tax shall also be its proposed 
34.20 	tax unless the town changes its levy at a special town meeting under section 365.52.  If a 
34.21 	school district has certified under section 126C.17, subdivision 9, that a referendum will 
34.22 	be held in the school district at the November general election, the county auditor must 
34.23 	note next to the school district's proposed amount that a referendum is pending and that, if 
34.24 	approved by the voters, the tax amount may be higher than shown on the notice.  In the 
34.25 	case of the city of Minneapolis, the levy for the Minneapolis Library Board and the levy 
34.26 	for Minneapolis Park and Recreation shall be listed separately from the remaining amount 
34.27 	of the city's levy.  In the case of the city of St. Paul, the levy for the St. Paul Library 
34.28 	Agency must be listed separately from the remaining amount of the city's levy.  In the 
34.29 	case of a parcel where tax increment or the fiscal disparities areawide tax under chapter 
34.30 	276A or 473F applies, the proposed tax levy on the captured value or the proposed tax 
34.31 	levy on the tax capacity subject to the areawide tax must each be stated separately and 
34.32 	not included in the sum of the special taxing districts; and
34.33 	 (3) the increase or decrease between the total taxes payable in the current year and 
34.34 	the total proposed taxes, expressed as a percentage.
35.1 	 For purposes of this section, the amount of the tax on homesteads qualifying under 
35.2 	the senior citizens' property tax deferral program under chapter 290B is the total amount 
35.3 	of property tax before subtraction of the deferred property tax amount.
35.4 	 (e) The notice must clearly state that the proposed or final taxes do not include 
35.5 	the following:
35.6 	 (1) special assessments;
35.7 	 (2) levies approved by the voters after the date the proposed taxes are certified, 
35.8 	including bond referenda and school district levy referenda;
35.9 	 (3) a levy limit increase approved by the voters by the first Tuesday after the first 
35.10 	Monday in November of the levy year as provided under section 275.73;
35.11 	 (4) amounts necessary to pay cleanup or other costs due to a natural disaster 
35.12 	occurring after the date the proposed taxes are certified;
35.13 	 (5) amounts necessary to pay tort judgments against the taxing authority that become 
35.14 	final after the date the proposed taxes are certified; and
35.15 	 (6) the contamination tax imposed on properties which received market value 
35.16 	reductions for contamination.
35.17 	 (f) Except as provided in subdivision 7, failure of the county auditor to prepare or 
35.18 	the county treasurer to deliver the notice as required in this section does not invalidate the 
35.19 	proposed or final tax levy or the taxes payable pursuant to the tax levy.
35.20 	 (g) If the notice the taxpayer receives under this section lists the property as 
35.21 	nonhomestead, and satisfactory documentation is provided to the county assessor by the 
35.22 	applicable deadline, and the property qualifies for the homestead classification in that 
35.23 	assessment year, the assessor shall reclassify the property to homestead for taxes payable 
35.24 	in the following year.
35.25 	 (h) In the case of class 4 residential property used as a residence for lease or rental 
35.26 	periods of 30 days or more, the taxpayer must either:
35.27 	 (1) mail or deliver a copy of the notice of proposed property taxes to each tenant, 
35.28 	renter, or lessee; or
35.29 	 (2) post a copy of the notice in a conspicuous place on the premises of the property.
35.30 	 The notice must be mailed or posted by the taxpayer by November 27 or within 
35.31 	three days of receipt of the notice, whichever is later.  A taxpayer may notify the county 
35.32 	treasurer of the address of the taxpayer, agent, caretaker, or manager of the premises to 
35.33 	which the notice must be mailed in order to fulfill the requirements of this paragraph.
35.34 	 (i) For purposes of this subdivision, subdivisions 5a and 6, "metropolitan special 
35.35 	taxing districts" means the following taxing districts in the seven-county metropolitan area 
35.36 	that levy a property tax for any of the specified purposes listed below:
36.1 	 (1) Metropolitan Council under section 473.132, 473.167, 473.249, 473.325, 
36.2 	473.446, 473.521, 473.547, or 473.834;
36.3 	 (2) Metropolitan Airports Commission under section 473.667, 473.671, or 473.672; 
36.4 	and
36.5 	 (3) Metropolitan Mosquito Control Commission under section 473.711.
36.6 	 For purposes of this section, any levies made by the regional rail authorities in the 
36.7 	county of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
36.8 	398A shall be included with the appropriate county's levy and shall be discussed at that 
36.9 	county's public hearing.
36.10 	 (j) The governing body of a county, city, or school district may, with the consent 
36.11 	of the county auditor, include supplemental information with the statement of proposed 
36.12 	property taxes about the impact of state aid increases or decreases on property tax 
36.13 	increases or decreases and on the level of services provided in the affected jurisdiction. 
36.14 	This supplemental information may include information for the following year, the current 
36.15 	year, and for as many consecutive preceding years as deemed appropriate by the governing 
36.16 	body of the county, city, or school district.  It may include only information regarding:
36.17 	 (1) the impact of inflation as measured by the implicit price deflator for state and 
36.18 	local government purchases;
36.19 	 (2) population growth and decline;
36.20 	 (3) state or federal government action; and 
36.21 	 (4) other financial factors that affect the level of property taxation and local services 
36.22 	that the governing body of the county, city, or school district may deem appropriate to 
36.23 	include.
36.24 	 The information may be presented using tables, written narrative, and graphic 
36.25 	representations and may contain instruction toward further sources of information or 
36.26 	opportunity for comment.

36.27 	 Sec. 12. Minnesota Statutes 2004, section 469.033, subdivision 6, is amended to read:
36.28 		 Subd. 6.Operation area as taxing district, special tax.  All of the territory 
36.29 	included within the area of operation of any authority shall constitute a taxing district for 
36.30 	the purpose of levying and collecting special benefit taxes as provided in this subdivision.  
36.31 	All of the taxable property, both real and personal, within that taxing district shall be 
36.32 	deemed to be benefited by projects to the extent of the special taxes levied under this 
36.33 	subdivision.  Subject to the consent by resolution of the governing body of the city in and 
36.34 	for which it was created, an authority may levy a tax upon all taxable property within that 
36.35 	taxing district.  The tax shall be extended, spread, and included with and as a part of 
37.1 	the general taxes for state, county, and municipal purposes by the county auditor, to be 
37.2 	collected and enforced therewith, together with the penalty, interest, and costs.  As the tax, 
37.3 	including any penalties, interest, and costs, is collected by the county treasurer it shall be 
37.4 	accumulated and kept in a separate fund to be known as the "housing and redevelopment 
37.5 	project fund."  The money in the fund shall be turned over to the authority at the same time 
37.6 	and in the same manner that the tax collections for the city are turned over to the city, and 
37.7 	shall be expended only for the purposes of sections 469.001 to 469.047.  It shall be paid 
37.8 	out upon vouchers signed by the chair of the authority or an authorized representative.  
37.9 	The amount of the levy shall be an amount approved by the governing body of the city, 
37.10 	but shall not exceed 0.0144 percent of taxable market value for the current levy year, 
37.11 	notwithstanding section 273.032.  The authority shall each year formulate and file a budget 
37.12 	in accordance with the budget procedure of the city in the same manner as required of 
37.13 	executive departments of the city or, if no budgets are required to be filed, by August 1.  
37.14 	The amount of the tax levy for the following year shall be based on that budget.

37.15 	 Sec. 13. Minnesota Statutes 2004, section 473F.08, subdivision 3a, is amended to read:
37.16 		 Subd. 3a.Bloomington computation.  Beginning in 1987 and each subsequent year 
37.17 	through 1998, the city of Bloomington shall determine the interest payments for that year 
37.18 	for the bonds which have been sold for the highway improvements pursuant to Laws 
37.19 	1986, chapter 391, section 2, paragraph (g).  Effective for property taxes payable in 1988 
37.20 	through property taxes payable in 1999, after the Hennepin County auditor has computed 
37.21 	the areawide portion of the levy for the city of Bloomington pursuant to subdivision 3, 
37.22 	clause (a), the auditor shall annually add a dollar amount to the city of Bloomington's 
37.23 	areawide portion of the levy equal to the amount which has been certified to the auditor 
37.24 	by the city of Bloomington for the interest payments for that year for the bonds which 
37.25 	were sold for highway improvements.  The total areawide portion of the levy for the city 
37.26 	of Bloomington including the additional amount for interest repayment certified pursuant 
37.27 	to this subdivision shall be certified by the Hennepin County auditor to the administrative 
37.28 	auditor pursuant to subdivision 5.  The Hennepin County auditor shall distribute to the 
37.29 	city of Bloomington the additional areawide portion of the levy computed pursuant to this 
37.30 	subdivision at the same time that payments are made to the other counties pursuant to 
37.31 	subdivision 7a.  For property taxes payable from the year 2006 2014 through 2015 2023, 
37.32 	the Hennepin County auditor shall adjust Bloomington's contribution to the areawide 
37.33 	gross tax capacity upward each year by a value equal to ten percent of the total additional 
37.34 	areawide levy distributed to Bloomington under this subdivision from 1988 to 1999, 
37.35 	divided by the areawide tax rate for taxes payable in the previous year.

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

38.2 	 Sec. 14. Minnesota Statutes 2004, section 477A.011, subdivision 34, is amended to 
38.3 	read:
38.4 		 Subd. 34.City revenue need.  (a) For a city with a population equal to or greater 
38.5 	than 2,500, "city revenue need" is the sum of (1) 5.0734098 times the pre-1940 housing 
38.6 	percentage; plus (2) 19.141678 times the population decline percentage; plus (3) 
38.7 	2504.06334 times the road accidents factor; plus (4) 355.0547; minus (5) the metropolitan 
38.8 	area factor; minus (6) 49.10638 times the household size.
38.9 	 (b) For a city with a population less than 2,500, "city revenue need" is the sum of 
38.10 	(1) 2.387 times the pre-1940 housing percentage; plus (2) 2.67591 times the commercial 
38.11 	industrial percentage; plus (3) 3.16042 times the population decline percentage; plus (4) 
38.12 	1.206 times the transformed population; minus (5) 62.772.
38.13 	 (c) The city revenue need cannot be less than zero.
38.14 	 (d) For calendar year 2005 and subsequent years, the city revenue need for a city, as 
38.15 	determined in paragraphs (a) to (c), is multiplied by the ratio of the annual most recently 
38.16 	available first quarter implicit price deflator for government consumption expenditures 
38.17 	and gross investment for state and local governments as prepared by the United States 
38.18 	Department of Commerce, for the most recently available year to the 2003 first quarter 
38.19 	2002 implicit price deflator for state and local government purchases.
38.20 	 (e) For a city with a population of 2,500 or more and a population in one of the most 
38.21 	recently available five years that was less than 2,500, "city revenue need" is the sum of (1) 
38.22 	its city revenue need calculated under paragraph (a) multiplied by its transition factor; 
38.23 	plus (2) its city revenue need calculated under the formula in paragraph (b) multiplied 
38.24 	by the difference between one and its transition factor.  For purposes of this paragraph, a 
38.25 	city's "transition factor" is equal to 0.2 multiplied by the number of years that the city's 
38.26 	population estimate has been 2,500 or more.  This provision only applies for aids payable 
38.27 	in calendar years 2006 to 2008 to cities with a 2002 population of less than 2,500.  It 
38.28 	applies to any city for aids payable in 2009 and thereafter.

38.29 	EFFECTIVE DATE. This section is effective for aids payable in 2006 and 
38.30 	thereafter.

38.31 	 Sec. 15. Minnesota Statutes 2004, section 477A.011, subdivision 36, as amended by 
38.32 	Laws 2005, chapter 38, section 1, is amended to read:
38.33 		 Subd. 36.City aid base. (a) Except as otherwise provided in this subdivision, 
38.34 	"city aid base" is zero.
39.1 	 (b) The city aid base for any city with a population less than 500 is increased by 
39.2 	$40,000 for aids payable in calendar year 1995 and thereafter, and the maximum amount 
39.3 	of total aid it may receive under section 477A.013, subdivision 9, paragraph (c), is also 
39.4 	increased by $40,000 for aids payable in calendar year 1995 only, provided that:
39.5 	 (i) the average total tax capacity rate for taxes payable in 1995 exceeds 200 percent;
39.6 	 (ii) the city portion of the tax capacity rate exceeds 100 percent; and
39.7 	 (iii) its city aid base is less than $60 per capita.
39.8 	 (c) The city aid base for a city is increased by $20,000 in 1998 and thereafter and 
39.9 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
39.10 	paragraph (c), is also increased by $20,000 in calendar year 1998 only, provided that:
39.11 	 (i) the city has a population in 1994 of 2,500 or more;
39.12 	 (ii) the city is located in a county, outside of the metropolitan area, which contains a 
39.13 	city of the first class;
39.14 	 (iii) the city's net tax capacity used in calculating its 1996 aid under section 
39.15 	477A.013 is less than $400 per capita; and
39.16 	 (iv) at least four percent of the total net tax capacity, for taxes payable in 1996, of 
39.17 	property located in the city is classified as railroad property.
39.18 	 (d) The city aid base for a city is increased by $200,000 in 1999 and thereafter and 
39.19 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
39.20 	paragraph (c), is also increased by $200,000 in calendar year 1999 only, provided that:
39.21 	 (i) the city was incorporated as a statutory city after December 1, 1993;
39.22 	 (ii) its city aid base does not exceed $5,600; and
39.23 	 (iii) the city had a population in 1996 of 5,000 or more.
39.24 	 (e) The city aid base for a city is increased by $450,000 in 1999 to 2008 and the 
39.25 	maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
39.26 	paragraph (c), is also increased by $450,000 in calendar year 1999 only, provided that:
39.27 	 (i) the city had a population in 1996 of at least 50,000;
39.28 	 (ii) its population had increased by at least 40 percent in the ten-year period ending 
39.29 	in 1996; and
39.30 	 (iii) its city's net tax capacity for aids payable in 1998 is less than $700 per capita.
39.31 	 (f) The city aid base for a city is increased by $150,000 for aids payable in 2000 and 
39.32 	thereafter, and the maximum amount of total aid it may receive under section 477A.013, 
39.33 	subdivision 9, paragraph (c), is also increased by $150,000 in calendar year 2000 only, 
39.34 	provided that:
39.35 	 (1) the city has a population that is greater than 1,000 and less than 2,500;
40.1 	 (2) its commercial and industrial percentage for aids payable in 1999 is greater 
40.2 	than 45 percent; and
40.3 	 (3) the total market value of all commercial and industrial property in the city 
40.4 	for assessment year 1999 is at least 15 percent less than the total market value of all 
40.5 	commercial and industrial property in the city for assessment year 1998.
40.6 	 (g) The city aid base for a city is increased by $200,000 in 2000 and thereafter, and 
40.7 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
40.8 	paragraph (c), is also increased by $200,000 in calendar year 2000 only, provided that:
40.9 	 (1) the city had a population in 1997 of 2,500 or more;
40.10 	 (2) the net tax capacity of the city used in calculating its 1999 aid under section 
40.11 	477A.013 is less than $650 per capita;
40.12 	 (3) the pre-1940 housing percentage of the city used in calculating 1999 aid under 
40.13 	section 477A.013 is greater than 12 percent;
40.14 	 (4) the 1999 local government aid of the city under section 477A.013 is less than 
40.15 	20 percent of the amount that the formula aid of the city would have been if the need 
40.16 	increase percentage was 100 percent; and
40.17 	 (5) the city aid base of the city used in calculating aid under section 477A.013
40.18 	is less than $7 per capita.
40.19 	 (h) The city aid base for a city is increased by $102,000 in 2000 and thereafter, and 
40.20 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
40.21 	paragraph (c), is also increased by $102,000 in calendar year 2000 only, provided that:
40.22 	 (1) the city has a population in 1997 of 2,000 or more;
40.23 	 (2) the net tax capacity of the city used in calculating its 1999 aid under section 
40.24 	477A.013 is less than $455 per capita;
40.25 	 (3) the net levy of the city used in calculating 1999 aid under section 477A.013 is 
40.26 	greater than $195 per capita; and
40.27 	 (4) the 1999 local government aid of the city under section 477A.013 is less than 
40.28 	38 percent of the amount that the formula aid of the city would have been if the need 
40.29 	increase percentage was 100 percent.
40.30 	 (i) The city aid base for a city is increased by $32,000 in 2001 and thereafter, and 
40.31 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
40.32 	paragraph (c), is also increased by $32,000 in calendar year 2001 only, provided that:
40.33 	 (1) the city has a population in 1998 that is greater than 200 but less than 500;
40.34 	 (2) the city's revenue need used in calculating aids payable in 2000 was greater 
40.35 	than $200 per capita;
41.1 	 (3) the city net tax capacity for the city used in calculating aids available in 2000 
41.2 	was equal to or less than $200 per capita;
41.3 	 (4) the city aid base of the city used in calculating aid under section 477A.013
41.4 	is less than $65 per capita; and
41.5 	 (5) the city's formula aid for aids payable in 2000 was greater than zero.
41.6 	 (j) The city aid base for a city is increased by $7,200 in 2001 and thereafter, and 
41.7 	the maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
41.8 	paragraph (c), is also increased by $7,200 in calendar year 2001 only, provided that:
41.9 	 (1) the city had a population in 1998 that is greater than 200 but less than 500;
41.10 	 (2) the city's commercial industrial percentage used in calculating aids payable in 
41.11 	2000 was less than ten percent;
41.12 	 (3) more than 25 percent of the city's population was 60 years old or older according 
41.13 	to the 1990 census;
41.14 	 (4) the city aid base of the city used in calculating aid under section 477A.013
41.15 	is less than $15 per capita; and
41.16 	 (5) the city's formula aid for aids payable in 2000 was greater than zero.
41.17 	 (k) The city aid base for a city is increased by $45,000 in 2001 and thereafter and 
41.18 	by an additional $50,000 in calendar years 2002 to 2011, and the maximum amount of 
41.19 	total aid it may receive under section 477A.013, subdivision 9, paragraph (c), is also 
41.20 	increased by $45,000 in calendar year 2001 only, and by $50,000 in calendar year 2002 
41.21 	only, provided that:
41.22 	 (1) the net tax capacity of the city used in calculating its 2000 aid under section 
41.23 	477A.013 is less than $810 per capita;
41.24 	 (2) the population of the city declined more than two percent between 1988 and 1998;
41.25 	 (3) the net levy of the city used in calculating 2000 aid under section 477A.013 is 
41.26 	greater than $240 per capita; and
41.27 	 (4) the city received less than $36 per capita in aid under section 477A.013, 
41.28 	subdivision 9, for aids payable in 2000.
41.29 	 The city aid base for a city described in this paragraph is also increased by $250,000 in 
41.30 	calendar year 2006 and the maximum amount of total aid it may receive under section 
41.31 	477A.013, subdivision 9, paragraph (c), is also increased by $250,000 in calendar year 
41.32 	2006 only.
41.33 	 (l) The city aid base for a city with a population of 10,000 or more which is located 
41.34 	outside of the seven-county metropolitan area is increased in 2002 and thereafter, and the 
41.35 	maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
42.1 	paragraph (b) or (c), is also increased in calendar year 2002 only, by an amount equal to 
42.2 	the lesser of:
42.3 	 (1)(i) the total population of the city, as determined by the United States Bureau of 
42.4 	the Census, in the 2000 census,(ii) minus 5,000, (iii) times 60; or
42.5 	 (2) $2,500,000.
42.6 	 (m) The city aid base is increased by $50,000 in 2002 and thereafter, and the 
42.7 	maximum amount of total aid it may receive under section 477A.013, subdivision 9, 
42.8 	paragraph (c), is also increased by $50,000 in calendar year 2002 only, provided that:
42.9 	 (1) the city is located in the seven-county metropolitan area;
42.10 	 (2) its population in 2000 is between 10,000 and 20,000; and
42.11 	 (3) its commercial industrial percentage, as calculated for city aid payable in 2001, 
42.12 	was greater than 25 percent.
42.13 	 (n) The city aid base for a city is increased by $150,000 in calendar years 2002 
42.14 	to 2011 and the maximum amount of total aid it may receive under section 477A.013, 
42.15 	subdivision 9, paragraph (c), is also increased by $150,000 in calendar year 2002 only, 
42.16 	provided that:
42.17 	 (1) the city had a population of at least 3,000 but no more than 4,000 in 1999;
42.18 	 (2) its home county is located within the seven-county metropolitan area;
42.19 	 (3) its pre-1940 housing percentage is less than 15 percent; and
42.20 	 (4) its city net tax capacity per capita for taxes payable in 2000 is less than $900 
42.21 	per capita.
42.22 	 (o) The city aid base for a city is increased by $200,000 beginning in calendar 
42.23 	year 2003 and the maximum amount of total aid it may receive under section 477A.013, 
42.24 	subdivision 9, paragraph (c), is also increased by $200,000 in calendar year 2003 only, 
42.25 	provided that the city qualified for an increase in homestead and agricultural credit aid 
42.26 	under Laws 1995, chapter 264, article 8, section 18.
42.27 	 (p) The city aid base for a city is increased by $200,000 in 2004 only and the 
42.28 	maximum amount of total aid it may receive under section 477A.013, subdivision 9, is 
42.29 	also increased by $200,000 in calendar year 2004 only, if the city is the site of a nuclear 
42.30 	dry cask storage facility.
42.31 	 (q) The city aid base for a city is increased by $10,000 in 2004 and thereafter and the 
42.32 	maximum total aid it may receive under section 477A.013, subdivision 9, is also increased 
42.33 	by $10,000 in calendar year 2004 only, if the city was included in a federal major disaster 
42.34 	designation issued on April 1, 1998, and its pre-1940 housing stock was decreased by 
42.35 	more than 40 percent between 1990 and 2000.
43.1 	 (r) The city aid base for a city is increased by $25,000 in 2006 only and the 
43.2 	maximum total aid it may receive under section 477A.013, subdivision 9, is also increased 
43.3 	by $25,000 in 2006 only, if the city (1) received no aid under section 477A.013 in 2004; 
43.4 	(2) had a population in 2002 greater than 20,000 and less than 50,000; and (3) had an 
43.5 	adjusted net tax capacity of less than $750 per capita for aids payable in 2004.
43.6 	 (s) The city aid base for a city is increased by $500,000 in calendar year 2006 and 
43.7 	thereafter, and the maximum amount of total aid the city may receive under section 
43.8 	477A.013, subdivision 9, paragraph (c), is also increased by $500,000 in calendar year 
43.9 	2006 only, provided that:
43.10 	 (1) the city is located outside of the seven-county metropolitan area;
43.11 	 (2) the city's 2000 population is between 10,000 and 20,000;
43.12 	 (3) the net levy of the city used in calculating 2005 aid under section 477A.013 is 
43.13 	greater than $350 per capita; and 
43.14 	 (4) the city's commercial industrial percentage under subdivision 32, for aids 
43.15 	payable in 2005, was at least 20 percent.
43.16 	 (t) The city aid base for a city is increased by $25,000 in 2006 only and the 
43.17 	maximum total aid it may receive under section 477A.013, subdivision 9, is also increased 
43.18 	by $25,000 in calendar year 2006 only if the city had a population in 2003 of at least 1,000 
43.19 	and has a state park for which the city provides rescue services and which comprised at 
43.20 	least 14 percent of the total geographic area included within the city boundaries in 2000.

43.21 	EFFECTIVE DATE. This section is effective beginning with aids payable in 2006, 
43.22 	except that the striking of paragraph (f) is effective beginning with aids payable in 2004.

43.23 	 Sec. 16. Minnesota Statutes 2004, section 477A.0124, subdivision 4, is amended to 
43.24 	read:
43.25 		 Subd. 4.County tax-base equalization aid.  (a) For 2005 2006 and subsequent 
43.26 	years, the money appropriated to county tax-base equalization aid each calendar year, after 
43.27 	the payment under paragraph (f),shall be apportioned among the counties according to 
43.28 	each county's tax-base equalization aid factor.
43.29 	 (b) A county's tax-base equalization aid factor is equal to the amount by which (i) 
43.30 	$185 times the county's population, exceeds (ii) 9.45 percent of the county's net tax 
43.31 	capacity.
43.32 	 (c) In the case of a county with a population less than 10,000, the factor determined 
43.33 	in paragraph (b) shall be multiplied by a factor of three.
43.34 	 (d) In the case of a county with a population greater than or equal to 10,000, but less 
43.35 	than 12,500, the factor determined in paragraph (b) shall be multiplied by a factor of two.
44.1 	 (e) In the case of a county with a population greater than 500,000, the factor 
44.2 	determined in paragraph (b) shall be multiplied by a factor of 0.25.
44.3 	 (f) Before the money appropriated to county base equalization aid is apportioned 
44.4 	among the counties as provided in paragraph (a), an amount up to $73,259 is allocated 
44.5 	annually to Anoka County and up to $59,664 is annually allocated to Washington County 
44.6 	for the county to pay postretirement costs of health insurance premiums for court 
44.7 	employees.  The allocation under this paragraph is in addition to the allocations under 
44.8 	paragraphs (a) to (e).

44.9 	EFFECTIVE DATE. This section is effective for aids payable in 2006 and 
44.10 	thereafter.

44.11 	 Sec. 17. Minnesota Statutes 2004, section 477A.013, subdivision 8, is amended to read:
44.12 		 Subd. 8.City formula aid.  In calendar year 2004 and subsequent years, the formula 
44.13 	aid for a city is equal to the need increase percentage multiplied by the difference between 
44.14 	(1) the city's revenue need multiplied by its population, and (2) the sum of the city's net 
44.15 	tax capacity multiplied by the tax effort rate, and the taconite aids under sections 298.28
44.16 	and 298.282, multiplied by the following percentages:
44.17 	 (i) zero percent for aids payable in 2004;
44.18 	 (ii) 25 percent for aids payable in 2005;
44.19 	 (iii) 50 percent for aids payable in 2006;
44.20 	 (iv) 75 percent for aids payable in 2007; and 
44.21 	 (v) 100 percent for aids payable in 2008 and thereafter.
44.22 	 No city may have a formula aid amount less than zero.  The need increase percentage 
44.23 	must be the same for all cities.
44.24 	 The applicable need increase percentage must be calculated by the Department of 
44.25 	Revenue so that the total of the aid under subdivision 9 equals the total amount available 
44.26 	for aid under section 477A.03 after the subtraction under section 477A.014, subdivisions 
44.27 	4 and 5.

44.28 	EFFECTIVE DATE. This section is effective for aids payable in 2006 and 
44.29 	thereafter.

44.30 	 Sec. 18. Minnesota Statutes 2004, section 477A.013, subdivision 9, is amended to read:
44.31 		 Subd. 9.City aid distribution.  (a) In calendar year 2002 and thereafter, each 
44.32 	city shall receive an aid distribution equal to the sum of (1) the city formula aid under 
44.33 	subdivision 8, and (2) its city aid base.
45.1 	 (b) The aid for a city in calendar year 2004 shall not exceed the amount of its aid in 
45.2 	calendar year 2003 after the reductions under Laws 2003, First Special Session chapter 21, 
45.3 	article 5.
45.4 	 (c) For aids payable in 2005 and thereafter, the total aid for any city shall not exceed 
45.5 	the sum of (1) ten 50 percent of the city's net levy for the year prior to the aid distribution 
45.6 	plus (2) its total aid in the previous year.  For aids payable in 2005 and thereafter, the total 
45.7 	aid for any city with a population of 2,500 or more may not decrease from its total aid 
45.8 	under this section in the previous year by an amount greater than ten percent of its net 
45.9 	levy in the year prior to the aid distribution.
45.10 	 (d) (c) For aids payable in 2004 only, the total aid for a city with a population less 
45.11 	than 2,500 may not be less than the amount it was certified to receive in 2003 minus the 
45.12 	greater of (1) the reduction to this aid payment in 2003 under Laws 2003, First Special 
45.13 	Session chapter 21, article 5, or (2) five percent of its 2003 aid amount.For aids payable in 
45.14 	2005 and thereafter, the total aid for a city with a population less than 2,500 must not be 
45.15 	less than the amount it was certified to receive in the previous year minus five percent 
45.16 	of its 2003 certified aid amount.
45.17 	 (d) For aids payable in 2006 only, the total aid for a city with a population less than 
45.18 	1,000 must not be less than 105 percent of the amount it was certified to receive in 2005.

45.19 	EFFECTIVE DATE. This section is effective for aids payable in 2006 and 
45.20 	thereafter.

45.21 	 Sec. 19. [477A.0133] COUNTY CRIMINAL JUSTICE AID.
45.22 		 Subdivision 1.Purpose. County criminal justice aid is provided for the sole 
45.23 	purpose of reducing the reliance of county criminal justice and corrections programs and 
45.24 	associated costs on local property taxes.
45.25 	 County criminal justice aids must be used to pay expenses associated with criminal 
45.26 	justice activities, specifically probation and supervised release caseload reductions, 
45.27 	chemical dependency treatment, mental health programs, and assistance to crime victims.
45.28 		 Subd. 2.Definitions. For the purposes of this section, the following definitions 
45.29 	apply:
45.30 	 (1) "population" means the population according to the most recent federal census, 
45.31 	or according to the state demographer's most recent estimate if it has been issued 
45.32 	subsequent to the most recent federal census; and 
45.33 	 (2) "Part I crimes" means the three-year average annual number of Part I crimes 
45.34 	reported for each county by the Department of Public Safety for the most recent years 
45.35 	available.  By July 1 of each year, the commissioner of public safety shall certify to the 
46.1 	commissioner of revenue the number of Part I crimes reported for each county for the 
46.2 	three most recent calendar years available.
46.3 		 Subd. 3.Formula. Each calendar year, the commissioner of revenue shall distribute 
46.4 	county criminal justice aid to each county in an amount determined according to the 
46.5 	following formula:
46.6 	 (1) one-half shall be distributed to each county in the same proportion that the 
46.7 	county's population is to the population of all counties in the state; and 
46.8 	 (2) one-half shall be distributed to each county in the same proportion that the 
46.9 	county's Part I crimes are to the total Part I crimes for all counties in the state.
46.10 		 Subd. 4.Payment dates. The aid amounts for each calendar year shall be paid 
46.11 	as provided in section 477A.015.
46.12 		 Subd. 5.Report. By March 15 of each year following the year in which criminal 
46.13 	justice aids are received, each county must file a report with the commissioner of revenue 
46.14 	describing how criminal justice aids were spent, and demonstrating that they were used 
46.15 	for criminal justice purposes.
46.16 		 Subd. 6.Annual appropriation. Aid payments to counties under this section are 
46.17 	limited to $15,000,000 in 2006 and 2007 only.

46.18 	 Sec. 20. Minnesota Statutes 2004, section 477A.03, subdivision 2a, is amended to read:
46.19 		 Subd. 2a.Cities. For aids payable in 2004, the total aids paid under section 
46.20 	477A.013, subdivision 9, are limited to $429,000,000.For aids payable in 2005 and 
46.21 	thereafter 2006, the total aids paid under section 477A.013, subdivision 9, are increased 
46.22 	to $437,052,000 $523,052,000.  For aids payable in 2007 and subsequent years, the total 
46.23 	aids paid under section 477A.013, subdivision 9, are increased by one plus the percentage 
46.24 	increase in the implicit price deflator for government consumption expenditures and gross 
46.25 	investment for state and local governments prepared by the Bureau of Economic Analysis 
46.26 	of the United States Department of Commerce for the 12-month period ending March 31 
46.27 	of the previous year.  The percentage increase used in this subdivision shall be no less than 
46.28 	2.5 percent and no greater than 5.0 percent.  The total aids paid under section 477A.013, 
46.29 	subdivision 9, shall not exceed the amount required for the need increase percentage to 
46.30 	equal one.  It is the intention of the legislature that the increased aid provided to cities 
46.31 	be used to pay for public safety functions.

46.32 	EFFECTIVE DATE. This section is effective for aids payable in 2006 and 
46.33 	thereafter.

46.34 	 Sec. 21. Minnesota Statutes 2004, section 477A.03, subdivision 2b, is amended to read:
47.1 		 Subd. 2b.Counties.  (a) For aids payable in calendar year 2005 and thereafter, 
47.2 	the total aids paid to counties under section 477A.0124, subdivision 3, are limited to 
47.3 	$100,500,000. Each calendar year, $500,000 shall be retained by the commissioner of 
47.4 	revenue to make reimbursements to the commissioner of finance for payments made 
47.5 	under section 611.27. For calendar year 2004, the amount shall be in addition to the 
47.6 	payments authorized under section 477A.0124, subdivision 1.  For calendar year 2005 
47.7 	and subsequent years, the amount shall be deducted from the appropriation under 
47.8 	this paragraph.  The reimbursements shall be to defray the additional costs associated 
47.9 	with court-ordered counsel under section 611.27.  Any retained amounts not used for 
47.10 	reimbursement in a year shall be included in the next distribution of county need aid 
47.11 	that is certified to the county auditors for the purpose of property tax reduction for the 
47.12 	next taxes payable year.
47.13 	 (b) For aids payable in 2005 and thereafter 2006, the total aids under section 
47.14 	477A.0124, subdivision 4, are limited to $105,000,000. For aids payable in 2007 
47.15 	and thereafter, the total aid under section 477A.0124, subdivision 4, is limited to 
47.16 	$105,132,923.The commissioner of finance shall bill the commissioner of revenue 
47.17 	for the cost of preparation of local impact notes as required by section 3.987, not to 
47.18 	exceed $207,000 in fiscal year 2004 and thereafter.  The commissioner of education shall 
47.19 	bill the commissioner of revenue for the cost of preparation of local impact notes for 
47.20 	school districts as required by section 3.987, not to exceed $7,000 in fiscal year 2004 
47.21 	and thereafter.  The commissioner of revenue shall deduct the amounts billed under 
47.22 	this paragraph from the appropriation under this paragraph.  The amounts deducted are 
47.23 	appropriated to the commissioner of finance and the commissioner of education for the 
47.24 	preparation of local impact notes.

47.25 	EFFECTIVE DATE. This section is effective for aids payable in 2007 and 
47.26 	thereafter.

47.27 	 Sec. 22. Laws 1994, chapter 587, article 9, section 8, subdivision 1, is amended to read:
47.28 		 Subdivision 1.Tax levies. Notwithstanding Minnesota Statutes, section 471.24, 
47.29 	each of the following cities or towns is authorized to levy a tax and make an appropriation 
47.30 	not to exceed $15,000 $25,000 annually to the Lakeview Cemetery Association, operated 
47.31 	by the town of Iron Range, for cemetery purposes:  the city of Coleraine, the city of Bovey, 
47.32 	and each town which is a member of the cemetery association.

47.33 	EFFECTIVE DATE. This section is effective for taxes levied in 2005, payable 
47.34 	in 2006, and thereafter.
48.1 	 Sec. 23.  2005 S.F. No. 467, section 1, the effective date, if enacted, is amended to 
48.2 	read:

48.3 	 EFFECTIVE DATE. This section is effective for taxes levied in 2005 2004, 
48.4 	payable in 2006 2005, and thereafter.

48.5 	 Sec. 24. COURT AID ADJUSTMENT.
 48.6 	 For aids payable in 2005 only, the amount of court aid paid to Anoka County under 
48.7 	Minnesota Statutes, section 273.1398, subdivision 4, is increased by $36,630 for aids 
48.8 	payable in 2005 only and the amount paid to Washington County under Minnesota Statutes, 
48.9 	section 273.1398, subdivision 4, is increased by $29,832 for aids payable in 2005 only.

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

48.11 	 Sec. 25. SUPREME COURT BUDGET.
 48.12 	 The district courts general fund appropriation is reduced by $66,462 in fiscal year 
48.13 	2006 and $132,923 beginning in fiscal year 2007 to fund the amount transferred to 
48.14 	county tax base equalization aid to fund the payments under Minnesota Statutes, section 
48.15 	477A.0124, subdivision 4, paragraph (f), and section 20.

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

48.17 	 Sec. 26. CROW WING COUNTY SEWER DISTRICT; PILOT PROJECT.
 48.18 		 Subdivision 1.Powers. In addition to the powers granted in Minnesota Statutes, 
48.19 	chapter 116A, the county board for Crow Wing County, by resolution, may grant the 
48.20 	following powers to a sewer district created by the county board under Minnesota 
48.21 	Statutes, chapter 116A:
48.22 	 (1) provide that an authorized representative of the district, after presentation of 
48.23 	credentials, may enter at reasonable times any premise to inspect or maintain an individual 
48.24 	sewage treatment system, as defined in Minnesota Statutes, section 115.55, subdivision 1, 
48.25 	paragraph (g);
48.26 	 (2) include areas of the county within the sewer district that are not contiguous and 
48.27 	establish different systems for wastewater treatment in specific areas of the county;
48.28 	 (3) provide that each special service area that is managed by the sewer system or 
48.29 	combination thereof constitutes a system under Minnesota Statutes, chapter 116A;
48.30 	 (4) delegate to the sewer district, by resolution, all or a portion of its administrative 
48.31 	and enforcement obligations with respect to individual sewage treatment systems under 
48.32 	Minnesota Statutes, chapter 115, and rules adopted by the Pollution Control Agency;
49.1 	 (5) modify any individual sewage treatment system to provide reasonable access 
49.2 	to it for inspection and maintenance; and 
49.3 	 (6) neither the approval nor the waiver of the county board, nor confirmation by 
49.4 	order of the district court, shall be required for the sewer commission to exercise the 
49.5 	powers set forth in Minnesota Statutes, section 116A.24.
49.6 		 Subd. 2.Report. If the Crow Wing County Board exercises the additional powers 
49.7 	granted under subdivision 1, the county shall provide a report by January 15, 2009, to the 
49.8 	senate and house committees with jurisdiction over environmental policy and taxes on the 
49.9 	establishment and operation of the sewer district. The report must include:
49.10 	 (1) a description of the implementation of the additional powers granted under 
49.11 	subdivision 1;
49.12 	 (2) available information on the effectiveness of the additional powers to control 
49.13 	pollution in the county; and 
49.14 	 (3) any recommendations for changes to Minnesota Statutes, chapter 116A, to 
49.15 	broaden the authority for sewer districts to include any of the additional powers granted 
49.16 	under subdivision 1.

49.17 	EFFECTIVE DATE. This section is effective the day following compliance with 
49.18 	Minnesota Statutes, section 645.021, subdivision 2.

49.19 	 Sec. 27. DEVELOPMENT AUTHORIZED.
 49.20 	 Dakota County Regional Railroad Authority may exercise the powers conferred 
49.21 	by Minnesota Statutes, section 398A.04, to plan, establish, acquire, develop, construct, 
49.22 	purchase, enlarge, extend, improve, maintain, equip, operate, regulate, and protect a bus 
49.23 	rapid transit system located within the Cedar Avenue transitway corridor within Dakota 
49.24 	County.  The authority may levy for this purpose under Minnesota Statutes, section 
49.25 	398A.04, subdivision 8, to the extent the levy authority under that subdivision is not 
49.26 	required to be used for that levy year for railroad purposes.

49.27 	 EFFECTIVE DATE. Pursuant to Minnesota Statutes, section 645.023, subdivision 
49.28 	1, paragraph (a), this section is effective without local approval the day following final 
49.29 	enactment.

49.30 	 Sec. 28. CITY OF WHITE BEAR LAKE.
 49.31 		 Subdivision 1.Payment required. The commissioner of revenue must make 
49.32 	payments of $52,482 on each of July 20, 2005, and December 26, 2005, to the city of 
49.33 	White Bear Lake.
50.1 		 Subd. 2.Appropriation. $104,964 is appropriated from the general fund to the 
50.2 	commissioner of revenue to make the payments required in this section.

50.3 	 Sec. 29. APPROPRIATION.
 50.4 	 $1,287,000 in fiscal year 2006 and $1,933,000 in fiscal year 2007 is appropriated 
50.5 	from the general fund to the commissioner of human services for the consolidated 
50.6 	chemical dependency treatment fund.

50.7 	 ARTICLE 5
50.8 	 INTERNATIONAL ECONOMIC DEVELOPMENT ZONE

50.9 	 Section 1. Minnesota Statutes 2004, section 272.02, is amended by adding a 
50.10 	subdivision to read:
50.11 		 Subd. 69.International economic development zone property. (a) Improvements 
50.12 	to real property, and personal property, classified under section 273.13, subdivision 24, 
50.13 	and located within an international economic development zone designated under section 
50.14 	469.322, are exempt from ad valorem taxes levied under chapter 275, if the occupant of 
50.15 	the property is a qualified business, as defined in section 469.321.
50.16 	 (b) The exemption applies beginning for the first assessment year after designation of 
50.17 	the international economic development zone.  The exemption applies to each assessment 
50.18 	year that begins during the duration of the international economic development zone 
50.19 	and to property occupied by July 1 of the assessment year by a qualified business.  This 
50.20 	exemption does not apply to:
50.21 	 (1) the levy under section 475.61 or similar levy provisions under any other law to 
50.22 	pay general obligation bonds; or 
50.23 	 (2) a levy under section 126C.17, if the levy was approved by the voters before the 
50.24 	designation of the zone.

50.25 	EFFECTIVE DATE. This section is effective beginning for property taxes assessed 
50.26 	in 2006, payable in 2007.

50.27 	 Sec. 2. Minnesota Statutes 2004, section 290.06, is amended by adding a subdivision 
50.28 	to read:
50.29 		 Subd. 33.International economic development zone job credit. A taxpayer that 
50.30 	is a qualified business, as defined in section 469.321, subdivision 6, is allowed a credit as 
50.31 	determined under section 469.327 against the tax imposed by this chapter.

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

51.3 	 Sec. 3. Minnesota Statutes 2004, section 297A.68, is amended by adding a subdivision 
51.4 	to read:
51.5 		 Subd. 40.International economic development zones. (a) Purchases of tangible 
51.6 	personal property or taxable services by a qualified business, as defined in section 469.321, 
51.7 	are exempt if the property or services are primarily used or consumed in an international 
51.8 	economic development zone designated under section 469.322.
51.9 	 (b) Purchase and use of construction materials and supplies for construction of 
51.10 	improvements to real property in an international economic development zone are exempt 
51.11 	if the improvements after completion of construction are to be used in the conduct of a 
51.12 	qualified business, as defined in section 469.321.  This exemption applies regardless of 
51.13 	whether the purchases are made by the business or a contractor.
51.14 	 (c) The exemptions under this subdivision apply to a local sales and use tax, 
51.15 	regardless of whether the local tax is imposed on sales taxable under this chapter or in 
51.16 	another law, ordinance, or charter provision.
51.17 	 (d) This subdivision applies to sales, if the purchase was made and delivery received 
51.18 	during the period provided under section 469.324, subdivision 2.

51.19 	EFFECTIVE DATE. This section is effective for sales made after December 31, 
51.20 	2005.

51.21 	 Sec. 4. [469.321] DEFINITIONS.
51.22 		 Subdivision 1.Scope. For purposes of sections 469.321 to 469.326, the following 
51.23 	terms have the meanings given.
51.24 		 Subd. 2.Foreign trade zone. "Foreign trade zone" means a foreign trade zone 
51.25 	designated pursuant to United States Code, title 19, section 81b, for the right to use 
51.26 	the powers provided in United States Code, title 19, sections 81a to 81u, or a subzone 
51.27 	authorized by the foreign trade zone.
51.28 		 Subd. 3.Foreign trade zone authority. "Foreign trade zone authority" means 
51.29 	the Greater Metropolitan Foreign Trade Zone Commission number 119, a joint powers 
51.30 	authority created by the county of Hennepin, the cities of Minneapolis and Bloomington, 
51.31 	and the Metropolitan Airports Commission, under the authority of section 469.059, 
51.32 	469.101, or 471.59, which includes any other political subdivisions that enter into the 
51.33 	authority after its creation.
52.1 		 Subd. 4.International economic development zone. An "international economic 
52.2 	development zone" or "zone" is a zone so designated under section 469.322.
52.3 		 Subd. 5.Person. "Person" includes an individual, corporation, partnership, limited 
52.4 	liability company, association, or any other entity.
52.5 		 Subd. 6.Qualified business. (a) "Qualified business" means a person carrying 
52.6 	on a trade or business at a place of business located within an international economic 
52.7 	development zone that is:
52.8 	 (1) engaged in the furtherance of international export or import of goods; and 
52.9 	 (2) certified by the foreign trade zone authority as a trade or business that furthers 
52.10 	the purpose of developing international distribution capacity and capability.
52.11 	 (b) A person that relocates a trade or business from within Minnesota but outside an 
52.12 	international economic development zone into an international economic development 
52.13 	zone is not a qualified business, unless the business:
52.14 	 (1)(i) increases full-time employment in the first full year of operation within the 
52.15 	international economic development zone by at least 20 percent measured relative to the 
52.16 	operations that were relocated and maintains the required level of employment for each 
52.17 	year that tax incentives under section 469.324 are claimed; or 
52.18 	 (ii) makes a capital investment in the property located within a zone equal to at least 
52.19 	ten percent of the gross revenues of the operations that were relocated in the immediately 
52.20 	proceeding taxable year; and 
52.21 	 (2) enters a binding written agreement with the foreign trade zone authority that:
52.22 	 (i) pledges that the business will meet the requirements of clause (1);
52.23 	 (ii) provides for repayment of all tax benefits enumerated under section 469.324 to 
52.24 	the business under the procedures in section 469.328, if the requirements of clause (1) are 
52.25 	not met for the taxable year or for taxes payable during a year in which the requirements 
52.26 	were not met; and 
52.27 	 (iii) contains any other terms the foreign trade zone authority determines appropriate.
52.28 	 Clause (1) of this paragraph does not apply to a freight forwarder.
52.29 	 (c) A qualified business must pay each employee total compensation, including 
52.30 	benefits not mandated by law, that on an annualized basis is equal to at least 110 percent of 
52.31 	the federal poverty guidelines for a family of four.
52.32 		 Subd. 7.Regional distribution center. A "regional distribution center" is a 
52.33 	distribution center developed within a foreign trade zone.  The regional distribution center 
52.34 	must have as its primary purpose to facilitate gathering of freight for the purpose of 
52.35 	centralizing the functions necessary for the shipment of freight in international commerce, 
52.36 	including, but not limited to, security and customs functions.
53.1 		 Subd. 8.Relocate. (a) "Relocate" means that a trade or business:
53.2 	 (1) ceases one or more operations or functions at another location in Minnesota 
53.3 	and begins performing substantially the same operations or functions at a location in an 
53.4 	international economic development zone; or 
53.5 	 (2) reduces employment at another location in Minnesota during a period starting 
53.6 	one year before and ending one year after it begins operations in an international economic 
53.7 	development zone and its employees in the international economic development zone are 
53.8 	engaged in the same line of business as the employees at the location where it reduced 
53.9 	employment.
53.10 	 (b) "Relocate" does not include an expansion by a business that establishes a new 
53.11 	facility that does not replace or supplant an existing operation or employment, in whole 
53.12 	or in part.
53.13 	 (c) "Trade or business" includes any business entity that is substantially similar in 
53.14 	operation or ownership to the business entity seeking to be a qualified business under 
53.15 	this section.
53.16 		 Subd. 9.Freight forwarder. "Freight forwarder" is a business that, for 
53.17 	compensation, ensures that goods produced or sold by another business move from point 
53.18 	of origin to point of destination.

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

53.20 	 Sec. 5. [469.322] DESIGNATION OF INTERNATIONAL ECONOMIC 
53.21 	DEVELOPMENT ZONE.
53.22 	 (a) An area designated as a foreign trade zone may be designated by the foreign 
53.23 	trade zone authority as an international economic development zone if within the zone 
53.24 	a regional distribution center is being developed pursuant to section 469.323.  The zone 
53.25 	must be not less than 500 acres and not more than 1,000 acres in size.
53.26 	 (b) In making the designation, the foreign trade zone authority, in consultation with 
53.27 	the Minnesota Department of Transportation and the Metropolitan Council, shall consider 
53.28 	access to major transportation routes, consistency with current state transportation and 
53.29 	air cargo planning, adequacy of the size of the site, access to airport facilities, present 
53.30 	and future capacity at the designated airport, the capability to meet integrated present 
53.31 	and future air cargo, security, and inspection services, and access to other infrastructure 
53.32 	and financial incentives.  The border of the international economic development zone 
53.33 	must be no more than 60 miles distant or 90 minutes drive time from the border of the 
53.34 	Minneapolis-St. Paul International Airport.  The county in which the zone is located must 
53.35 	be a member of the foreign trade zone authority.

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

54.2 	 Sec. 6. [469.323] FOREIGN TRADE ZONE AUTHORITY POWERS.
54.3 		 Subdivision 1.Development of regional distribution center. The foreign trade 
54.4 	zone authority is responsible for creating a development plan for the regional distribution 
54.5 	center.  The regional distribution center must be developed with the purpose of expanding, 
54.6 	on a regional basis, international distribution capacity and capability.  The foreign trade 
54.7 	zone authority shall consult with municipalities that have indicated to the authority an 
54.8 	interest in locating the international economic development zone within their boundaries 
54.9 	and a willingness to establish a tax increment financing district coterminous with 
54.10 	the boundaries of the zone, as well as interested businesses, potential financiers, and 
54.11 	appropriate state and federal agencies.
54.12 		 Subd. 2.Business plan. Before designation of an international economic 
54.13 	development zone under section 469.322, the governing body of the foreign trade zone 
54.14 	authority shall prepare a business plan.  The plan must include an analysis of the economic 
54.15 	feasibility of the regional distribution center once it becomes operational and of the 
54.16 	operations of freight forwarders and other businesses that choose to locate within the 
54.17 	boundaries of the zone.  The analysis must provide profitability models that:
54.18 	 (1) include the benefits of the incentives;
54.19 	 (2) estimate the amount of time needed to achieve profitability; and 
54.20 	 (3) analyze the length of time incentives will be necessary to the economic viability 
54.21 	of the regional distribution center.
54.22 	 If the governing body of the foreign trade authority determines that the models do 
54.23 	not establish the economic feasibility of the project, the regional distribution center does 
54.24 	not meet the development requirements of this section and section 469.322.
54.25 		 Subd. 3.Port authority powers. The governing body of the foreign trade zone 
54.26 	authority may establish a port authority that has the same powers as a port authority 
54.27 	established under section 469.049.  If the foreign trade zone authority establishes a port 
54.28 	authority, the governing body of the foreign trade zone authority may exercise all powers 
54.29 	granted to a city by sections 469.048 to 469.068 within the area of the international 
54.30 	economic development zone, except it may not impose or request imposition of a property 
54.31 	tax levy under section 469.053 by any city.
54.32 		 Subd. 4.Business subsidy law. Tax exemptions, job credits, and tax increment 
54.33 	financing provided under this section are business subsidies for the purpose of sections 
54.34 	116J.993 to 116J.995.

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

55.1 	 Sec. 7. [469.324] TAX INCENTIVES IN INTERNATIONAL ECONOMIC 
55.2 	DEVELOPMENT ZONE.
55.3 		 Subdivision 1.Availability. Qualified businesses that operate in an international 
55.4 	economic development zone, individuals who invest in a regional distribution center, or 
55.5 	qualified businesses that operate in an international economic development zone qualify 
55.6 	for:
55.7 	 (1) exemption from the property tax as provided in section 272.02, subdivision 69;
55.8 	 (2) exemption from the state sales and use tax and any local sales and use taxes on 
55.9 	qualifying purchases as provided in section 297A.68, subdivision 40;
55.10 	 (3) the jobs credit allowed under section 469.327; and 
55.11 	 (4) tax increment financing as provided in this chapter.
55.12 		 Subd. 2.Duration. (a) Except as provided in paragraph (b), the tax incentives 
55.13 	described in subdivision 1, clauses (1) and (3), are available for no more than 12 
55.14 	consecutive taxable years for any taxpayer that claims them.  The tax incentives described 
55.15 	in subdivision 1, clause (2), are available for each taxpayer that claims them for taxes 
55.16 	otherwise payable on transactions during a period of 12 years from the date when the first 
55.17 	exemption is claimed by that taxpayer under each exemption.  No exemptions described in 
55.18 	subdivision 1, clauses (1) to (4), are available after December 31, 2020.
55.19 	 (b) For taxpayers that are freight forwarders, the durations provided under paragraph 
55.20 	(a) are reduced to six years.
55.21 		 Subd. 3.Qualification. To receive the tax incentives under this section, a qualified 
55.22 	business must, by December 31 of each year, certify to the commissioner of revenue the 
55.23 	percentage of its business activity within the zone that constitutes international business 
55.24 	activity for the year, measured by value or volume of activity.  If the percentage is less than 
55.25 	100 percent, the amount of the tax benefits provided under sections 290.06, subdivision 
55.26 	33, and 469.327 are reduced in proportion to the percentage of business activity that is 
55.27 	not international business activity.  The commissioner of revenue may audit the business 
55.28 	activities of a qualifying business to determine its eligibility for tax benefits under this 
55.29 	section.

55.30 	 Sec. 8. [469.325] JOBS CREDIT.
55.31 		 Subdivision 1.Credit allowed. A qualified business is allowed a credit against the 
55.32 	taxes imposed under chapter 290. The credit equals seven percent of the:
55.33 	 (1) lesser of:
55.34 	 (i) zone payroll for the taxable year, less the zone payroll for the base year; or 
56.1 	 (ii) total Minnesota payroll for the taxable year, less total Minnesota payroll for 
56.2 	the base year; minus 
56.3 	 (2) $30,000 multiplied by the number of full-time equivalent employees that the 
56.4 	qualified business employs in the international economic development zone for the taxable 
56.5 	year, minus the number of full-time equivalent employees the business employed in the 
56.6 	zone in the base year, but not less than zero.
56.7 		 Subd. 2.Definitions. (a) For purposes of this section, the following terms have 
56.8 	the meanings given.
56.9 	 (b) "Base year" means the taxable year beginning during the calendar year prior to 
56.10 	the calendar year in which the zone designation took effect.
56.11 	 (c) "Full-time equivalent employees" means the equivalent of annualized expected 
56.12 	hours of work equal to 2,080 hours.
56.13 	 (d) "Minnesota payroll" means the wages or salaries attributed to Minnesota under 
56.14 	section 290.191, subdivision 12, for the qualified business or the unitary business of which 
56.15 	the qualified business is a part, whichever is greater.
56.16 	 (e) "Zone payroll" means wages or salaries used to determine the zone payroll 
56.17 	factor for the qualified business, less the amount of compensation attributable to any 
56.18 	employee that exceeds $70,000.
56.19 		 Subd. 3.Inflation adjustment. For taxable years beginning after December 31, 
56.20 	2006, the dollar amounts in subdivision 1, clause (2), and subdivision 2, paragraph (e), are 
56.21 	annually adjusted for inflation.  The commissioner of revenue shall adjust the amounts by 
56.22 	the percentage determined under section 290.06, subdivision 2d, for the taxable year.
56.23 		 Subd. 4.Refundable. If the amount of the credit exceeds the liability for tax under 
56.24 	chapter 290, the commissioner of revenue shall refund the excess to the qualified business.
56.25 		 Subd. 5.Appropriation. An amount sufficient to pay the refunds authorized by this 
56.26 	section is appropriated to the commissioner of revenue from the general fund.

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

56.29 	 Sec. 9. [469.326] REPAYMENT OF TAX BENEFITS.
56.30 		 Subdivision 1.Repayment obligation. A person must repay the amount of the tax 
56.31 	reduction received under section 469.324, subdivision 1, clauses (2) and (3), and refund 
56.32 	received under section 469.327, during the two years immediately before it ceased to 
56.33 	operate in the zone, if the person ceased to operate its facility located within the zone or 
56.34 	otherwise ceases to be or is not a qualified business.
57.1 		 Subd. 2.Disposition of repayment. The repayment must be paid to the state to the 
57.2 	extent it represents a state tax reduction.  Any amount repaid to the state must be deposited 
57.3 	in the general fund.  Any repayment of local sales or use taxes must be repaid to the 
57.4 	jurisdiction imposing the local sales or use tax.
57.5 		 Subd. 3.Repayment procedures. (a) For the repayment of taxes imposed under 
57.6 	chapter 290 or 297A or local taxes collected pursuant to section 297A.99, a person must 
57.7 	file an amended return with the commissioner of revenue and pay any taxes required to be 
57.8 	repaid within 30 days after ceasing to be a qualified business.  The amount required to be 
57.9 	repaid is determined by calculating the tax for the period for which repayment is required 
57.10 	without regard to the tax reductions allowed under section 469.324.
57.11 	 (b) The provisions of chapters 270 and 289A relating to the commissioner of 
57.12 	revenue's authority to audit, assess, and collect the tax and to hear appeals are applicable 
57.13 	to the repayment required under paragraph (a).  The commissioner may impose civil 
57.14 	penalties as provided in chapter 289A, and the additional tax and penalties are subject to 
57.15 	interest at the rate provided in section 270.75, from 30 days after ceasing to do business 
57.16 	in the zone until the date the tax is paid.
57.17 	 (c) For determining the tax required to be repaid, a tax reduction is deemed to have 
57.18 	been received on the date that the tax would have been due if the person had not been 
57.19 	entitled to the tax reduction.
57.20 	 (d) The commissioner of revenue may assess the repayment of taxes under paragraph 
57.21 	(b) at any time within two years after the person ceases to be a qualified business, 
57.22 	or within any period of limitations for the assessment of tax under section 289A.38, 
57.23 	whichever is later.

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

57.25 	 Sec. 10. [469.327] ADDITIONAL BENEFITS CONTINGENT ON JOBZ 
57.26 	DETERMINATIONS.
57.27 	 Notwithstanding section 469.312, subdivision 3, the governor may designate the 
57.28 	international economic development zone as a job opportunity building zone if the 
57.29 	governor reports to the tax committees of the senate and the house of representatives 
57.30 	the following information:
57.31 	 (1) the estimated cost of providing the additional tax incentives provided under 
57.32 	sections 469.310 to 469.320 to the international economic development zone; and 
57.33 	 (2) the estimated cost of tax expenditures projected to have been obligated for all job 
57.34 	opportunity building zone projects that have been approved before June 1, 2005.

58.1 	 Sec. 11. DEPARTMENT OF EMPLOYMENT AND ECONOMIC 
58.2 	DEVELOPMENT STUDY; INTERNATIONAL AIR FREIGHT.
 58.3 	 The commissioner of employment and economic development must study and 
58.4 	analyze the issue of whether the state would benefit from more than one international 
58.5 	economic development zone as defined in Minnesota Statutes, section 469.321.  The 
58.6 	commissioner shall solicit input on the issue from businesses, communities, and economic 
58.7 	development organizations.  The commissioner must report the results of the study 
58.8 	and analysis to the committees of the legislature having jurisdiction over economic 
58.9 	development issues by December 1, 2005, along with any legislative recommendations.

58.10 	 ARTICLE 6
58.11 	 MISCELLANEOUS

58.12 	 Section 1. Minnesota Statutes 2004, section 270.0603, subdivision 3, is amended to 
58.13 	read:
58.14 		 Subd. 3.Distribution.  The appropriate statement prepared in accordance with 
58.15 	subdivisions 1 and 2 must be distributed by the commissioner to all taxpayers contacted 
58.16 	with respect to the determination or collection of a tax, other than the providing of tax 
58.17 	forms.  Failure to receive the statement does not invalidate the determination or collection 
58.18 	action, nor does it affect, modify, or alter any statutory time limits applicable to the 
58.19 	determination or collection action, including the time limit for filing a claim for refund.

58.20 	EFFECTIVE DATE. This section is effective the day following final enactment, 
58.21 	except that for claims for refund, it is effective for claims filed after August 31, 2005.

58.22 	 Sec. 2. Minnesota Statutes 2004, section 270.0682, subdivision 1, is amended to read:
58.23 		 Subdivision 1.Biennial report.  The commissioner of revenue shall report to the 
58.24 	legislature by March 1 of each odd-numbered year on the overall incidence of the income 
58.25 	tax, sales and excise taxes, and property tax taxes as defined in section 645.44, subdivision 
58.26 	19.  The report shall present information on the distribution of the tax burden (1) for the 
58.27 	overall income distribution, using a systemwide incidence measure such as the Suits 
58.28 	index or other appropriate measures of equality and inequality, (2) by income classes, 
58.29 	including at a minimum deciles of the income distribution, and (3) by other appropriate 
58.30 	taxpayer characteristics.

58.31 	 Sec. 3. Minnesota Statutes 2004, section 272.02, subdivision 64, is amended to read:
59.1 		 Subd. 64.Job opportunity building zone property.  (a) Improvements to real 
59.2 	property, and personal property, classified under section 273.13, subdivision 24, and 
59.3 	located within a job opportunity building zone, designated under section 469.314, are 
59.4 	exempt from ad valorem taxes levied under chapter 275.
59.5 	 (b) Improvements to real property, and tangible personal property, of an agricultural 
59.6 	production facility located within an agricultural processing facility zone, designated 
59.7 	under section 469.314, is exempt from ad valorem taxes levied under chapter 275.
59.8 	 (c) For property to qualify for exemption under paragraph (a), the occupant must be 
59.9 	a qualified business, as defined in section 469.310.
59.10 	 (d) The exemption applies beginning for the first assessment year after designation 
59.11 	of the job opportunity building zone by the commissioner of employment and economic 
59.12 	development.  The exemption applies to each assessment year that begins during the 
59.13 	duration of the job opportunity building zone and to property occupied by July 1 of the 
59.14 	assessment year by a qualified business.  This exemption does not apply to:
59.15 	 (1) the levy under section 475.61 or similar levy provisions under any other law to 
59.16 	pay general obligation bonds; or
59.17 	 (2) a levy under section 126C.17, if the levy was approved by the voters before the 
59.18 	designation of the job opportunity building zone.
59.19 	 (e) This subdivision does not apply to captured net tax capacity in a tax increment 
59.20 	financing district to the extent necessary to meet the debt repayment obligations of the 
59.21 	authority if the property is also located within an agricultural processing zone.

59.22 	EFFECTIVE DATE. This section is effective for taxes payable in 2005 and 
59.23 	thereafter.

59.24 	 Sec. 4. Minnesota Statutes 2004, section 429.021, subdivision 1, is amended to read:
59.25 		 Subdivision 1.Improvements authorized.  The council of a municipality shall have 
59.26 	power to make the following improvements:
59.27 	 (1) To acquire, open, and widen any street, and to improve the same by constructing, 
59.28 	reconstructing, and maintaining sidewalks, pavement, gutters, curbs, and vehicle parking 
59.29 	strips of any material, or by grading, graveling, oiling, or otherwise improving the same, 
59.30 	including the beautification thereof and including storm sewers or other street drainage 
59.31 	and connections from sewer, water, or similar mains to curb lines.
59.32 	 (2) To acquire, develop, construct, reconstruct, extend, and maintain storm and 
59.33 	sanitary sewers and systems, including outlets, holding areas and ponds, treatment plants, 
59.34 	pumps, lift stations, service connections, and other appurtenances of a sewer system, 
59.35 	within and without the corporate limits.
60.1 	 (3) To construct, reconstruct, extend, and maintain steam heating mains.
60.2 	 (4) To install, replace, extend, and maintain street lights and street lighting systems 
60.3 	and special lighting systems.
60.4 	 (5) To acquire, improve, construct, reconstruct, extend, and maintain water works 
60.5 	systems, including mains, valves, hydrants, service connections, wells, pumps, reservoirs, 
60.6 	tanks, treatment plants, and other appurtenances of a water works system, within and 
60.7 	without the corporate limits.
60.8 	 (6) To acquire, improve and equip parks, open space areas, playgrounds, and 
60.9 	recreational facilities within or without the corporate limits.
60.10 	 (7) To plant trees on streets and provide for their trimming, care, and removal.
60.11 	 (8) To abate nuisances and to drain swamps, marshes, and ponds on public or private 
60.12 	property and to fill the same.
60.13 	 (9) To construct, reconstruct, extend, and maintain dikes and other flood control 
60.14 	works.
60.15 	 (10) To construct, reconstruct, extend, and maintain retaining walls and area walls.
60.16 	 (11) To acquire, construct, reconstruct, improve, alter, extend, operate, maintain, and 
60.17 	promote a pedestrian skyway system.  Such improvement may be made upon a petition 
60.18 	pursuant to section 429.031, subdivision 3.
60.19 	 (12) To acquire, construct, reconstruct, extend, operate, maintain, and promote 
60.20 	underground pedestrian concourses.
60.21 	 (13) To acquire, construct, improve, alter, extend, operate, maintain, and promote 
60.22 	public malls, plazas or courtyards.
60.23 	 (14) To construct, reconstruct, extend, and maintain district heating systems.
60.24 	 (15) To construct, reconstruct, alter, extend, operate, maintain, and promote fire 
60.25 	protection systems in existing buildings, but only upon a petition pursuant to section 
60.26 	429.031, subdivision 3.
60.27 	 (16) To acquire, construct, reconstruct, improve, alter, extend, and maintain highway 
60.28 	sound barriers.
60.29 	 (17) To improve, construct, reconstruct, extend, and maintain gas and electric 
60.30 	distribution facilities owned by a municipal gas or electric utility.
60.31 	 (18) To purchase, install, and maintain signs, posts, and other markers for addressing 
60.32 	related to the operation of enhanced 911 telephone service.
60.33 	 (19) To improve, construct, extend, and maintain facilities for Internet access and 
60.34 	other communications purposes, if the council finds that:
61.1 	 (i) the facilities are necessary to make available Internet access or other 
61.2 	communications services that are not and will not be available through other providers or 
61.3 	the private market in the reasonably foreseeable future; and
61.4 	 (ii) the service to be provided by the facilities will not compete with service provided 
61.5 	by private entities.
61.6 	 (20) To assess affected property owners for all or a portion of the costs agreed to 
61.7 	with an electric utility, telecommunications carrier, or cable system operator to bury or 
61.8 	alter a new or existing distribution system within the public right-of-way that exceeds the 
61.9 	utility's design and construction standards, or those set by law, tariff, or franchise, but only 
61.10 	upon petition under section 429.031, subdivision 3.

61.11 	 Sec. 5. Minnesota Statutes 2004, section 469.015, subdivision 4, is amended to read:
61.12 		 Subd. 4.Exceptions.  (a) An authority need not require competitive bidding in the 
61.13 	following circumstances:
61.14 	 (1) in the case of a contract for the acquisition of a low-rent housing project:
61.15 	 (i) for which financial assistance is provided by the federal government;
61.16 	 (ii) which does not require any direct loan or grant of money from the municipality 
61.17 	as a condition of the federal financial assistance; and
61.18 	 (iii) for which the contract provides for the construction of the project upon land that 
61.19 	is either owned by the authority for redevelopment purposes or not owned by the authority 
61.20 	at the time of the contract but the contract provides for the conveyance or lease to the 
61.21 	authority of the project or improvements upon completion of construction;
61.22 	 (2) with respect to a structured parking facility:
61.23 	 (i) constructed in conjunction with, and directly above or below, a development; and
61.24 	 (ii) financed with the proceeds of tax increment or parking ramp general obligation 
61.25 	or revenue bonds; and 
61.26 	 (3) until August 1, 2009, with respect to a facility built for the purpose of facilitating 
61.27 	the operation of public transit or encouraging its use:
61.28 	 (i) constructed in conjunction with, and directly above or below, a development; and 
61.29 	 (ii) financed with the proceeds of parking ramp general obligation or revenue bonds 
61.30 	or with at least 60 percent of the construction cost being financed with funding provided 
61.31 	by the federal government; and 
61.32 	 (4) in the case of any building in which at least 75 percent of the usable square 
61.33 	footage constitutes a housing development project if:
61.34 	 (i) the project is financed with the proceeds of bonds issued under section 469.034 or 
61.35 	from nongovernmental sources;
62.1 	 (ii) the project is either located on land that is owned or is being acquired by the 
62.2 	authority only for development purposes, or is not owned by the authority at the time the 
62.3 	contract is entered into but the contract provides for conveyance or lease to the authority 
62.4 	of the project or improvements upon completion of construction; and
62.5 	 (iii) the authority finds and determines that elimination of the public bidding 
62.6 	requirements is necessary in order for the housing development project to be economical 
62.7 	and feasible.
62.8 	 (b) An authority need not require a performance bond for the following projects:
62.9 	 (1) a contract described in paragraph (a), clause (1);
62.10 	 (2) a construction change order for a housing project in which 30 percent of the 
62.11 	construction has been completed;
62.12 	 (3) a construction contract for a single-family housing project in which the authority 
62.13 	acts as the general construction contractor; or
62.14 	 (4) a services or materials contract for a housing project.
62.15 	 For purposes of this paragraph, "services or materials contract" does not include 
62.16 	construction contracts.

62.17 	 Sec. 6. Minnesota Statutes 2004, section 469.175, subdivision 2, is amended to read:
62.18 		 Subd. 2.Consultations; comment and filing. (a) Before formation of a tax 
62.19 	increment financing district, the authority shall provide the county auditor and clerk of 
62.20 	the school board with the proposed tax increment financing plan for the district and the 
62.21 	authority's estimate of the fiscal and economic implications of the proposed tax increment 
62.22 	financing district. The authority must provide the proposed tax increment financing plan 
62.23 	and the information on the fiscal and economic implications of the plan to the county 
62.24 	auditor and the clerk of the school district board at least 30 days before the public hearing 
62.25 	required by subdivision 3.  The information on the fiscal and economic implications may 
62.26 	be included in or as part of the tax increment financing plan.  The county auditor and 
62.27 	clerk of the school board shall provide copies to the members of the boards, as directed 
62.28 	by their respective boards.  The 30-day requirement is waived if the boards of the county 
62.29 	and school district submit written comments on the proposal and any modification of the 
62.30 	proposal to the authority after receipt of the information.
62.31 	 (b) For purposes of this subdivision, "fiscal and economic implications of the 
62.32 	proposed tax increment financing district" includes:
62.33 	 (1) an estimate of the total amount of tax increment that will be generated over the 
62.34 	life of the district;
63.1 	 (2) a description of the probable impact of the district on city-provided services 
63.2 	such as police and fire protection, public infrastructure, and borrowing costs attributable 
63.3 	to the district;
63.4 	 (3) the estimated amount of tax increments over the life of the district that would 
63.5 	be attributable to school district levies, assuming the school district's share of the total 
63.6 	local tax rate for all taxing jurisdictions remained the same;
63.7 	 (4) the estimated amount of tax increments over the life of the district that would be 
63.8 	attributable to county levies, assuming the county's share of the total local tax rate for all 
63.9 	taxing jurisdictions remained the same; and 
63.10 	 (5) any additional information requested by the county or the school district that 
63.11 	would enable it to determine additional costs that will accrue to it due to the development 
63.12 	proposed for the district.

63.13 	EFFECTIVE DATE. This section is effective for all districts for which certification 
63.14 	is requested after December 31, 2005.

63.15 	 Sec. 7. Minnesota Statutes 2004, section 645.44, is amended by adding a subdivision 
63.16 	to read:
63.17 		 Subd. 19.Fee and tax. (a) "Tax" means any fee, charge, surcharge, or assessment 
63.18 	imposed by a governmental entity on an individual, person, entity, transaction, good, 
63.19 	service, or other thing.  It excludes:
63.20 	 (1) a price that an individual or entity chooses voluntarily to pay in return for receipt 
63.21 	of goods or services provided by the governmental entity; and 
63.22 	 (2) a fine or penalty imposed for violation of a state or local law or ordinance.
63.23 	 A government good or service does not include access to or the authority to engage in 
63.24 	private market transactions with a nongovernmental party, such as licenses to engage in a 
63.25 	trade, profession, or business or to improve private property.
63.26 	 (b) For purposes of applying the laws of this state, a "fee," "charge," or other similar 
63.27 	term that satisfies the functional requirements of paragraph (a) must be treated as a tax 
63.28 	for all purposes, regardless of whether the statute or law names or describes it as a tax. 
63.29 	The provisions of this subdivision do not preempt or supersede limitations under law 
63.30 	that apply to fees, charges, or assessments.
63.31 	 (c) This subdivision is not intended to extend or limit the application of article 4, 
63.32 	section 18, of the Constitution of Minnesota.

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

64.1 	 Sec. 8. Laws 2003, chapter 128, article 1, section 172, is amended to read:
64.2 	 Sec. 172TEMPORARY PETROFUND FEE EXEMPTION FOR MINNESOTA 
64.3 	COMMERCIAL AIRLINES.
 64.4 	 (a) A commercial airline providing regularly scheduled jet service and with its 
64.5 	corporate headquarters in Minnesota is exempt from the fee established in Minnesota 
64.6 	Statutes, section 115C.08, subdivision 3, until July 1, 2005 2007, provided the airline 
64.7 	develops a plan approved by the commissioner of commerce demonstrating that the 
64.8 	savings from this exemption will go towards minimizing job losses in Minnesota, and to 
64.9 	support the airline's efforts to avoid filing for federal bankruptcy protections.
64.10 	 (b) A commercial airline exempted from the fee is ineligible to receive 
64.11 	reimbursement under Minnesota Statutes, chapter 115C, until July 1, 2005 2007.  A 
64.12 	commercial airline that has a release during the fee exemption period is ineligible to 
64.13 	receive reimbursement under Minnesota Statutes, chapter 115C, for the costs incurred in 
64.14 	response to that release.

64.15 	 Sec. 9. CITY OF ROSEMOUNT; TAX INCREMENT FINANCING.
 64.16 	 The city of Rosemount or a development authority of the city may spend increment 
64.17 	from its Downtown - Brockway Tax Increment Financing (TIF) District to acquire 
64.18 	parcels of property that the Department of Transportation or Dakota County acquired in 
64.19 	connection with the realignment of marked Trunk Highway 3, notwithstanding the limits 
64.20 	under Minnesota Statutes, section 469.1763, on the amount of increments that may be 
64.21 	spent outside of the district or Minnesota Statutes, section 469.176, subdivision 4j, on the 
64.22 	purposes for which increments may be spent.

64.23 	 EFFECTIVE DATE. This section is effective upon local approval by the governing 
64.24 	body of the city of Rosemount under Minnesota Statutes, section 645.021.

64.25 	 Sec. 10. APPROPRIATION.
 64.26 	 (a) $125,000 in fiscal year 2006, $125,000 in fiscal year 2007, and $200,000 in each 
64.27 	fiscal year thereafter, are appropriated from the general fund to the commissioner of 
64.28 	revenue to make grants to one or more nonprofit organizations, qualifying under section 
64.29 	501(c)(3) of the Internal Revenue Code of 1986, to coordinate, facilitate, encourage, and 
64.30 	aid in the provision of taxpayer assistance services.
64.31 	 (b) "Taxpayer assistance services" mean accounting and tax preparation services 
64.32 	provided by volunteers to low-income and disadvantaged Minnesota residents to help 
64.33 	them file federal and state income tax returns and Minnesota property tax refund claims 
65.1 	and to provide personal representation before the Department of Revenue and Internal 
65.2 	Revenue Service.

65.3 	 Sec. 11. APPROPRIATION.
 65.4 	 $320,000 is appropriated from the general fund in fiscal year 2006 only to the 
65.5 	commissioner of employment and economic development to be distributed to the city of 
65.6 	Duluth to be used by the city for grants to enterprises related to environmental cleanup 
65.7 	of Lake Superior and long-term community health care.

65.8 	 Sec. 12. APPROPRIATION.
 65.9 	 The following amounts are appropriated from the general fund to the commissioner 
65.10 	of finance for transfer to the clean water legacy account in the environmental fund:
65.11 	 (1) $31,500,000 in fiscal year 2006;
65.12 	 (2) $3,000,000 in fiscal year 2007; and 
65.13 	 (3) $40,000,000 in fiscal year 2008 and $80,000,000 in fiscal year 2009 and 
65.14 	subsequent years, but only after at least 50 percent of the Minnesota Total Maximum Daily 
65.15 	Loads (TMDLs) have been established and approved by the Environmental Protection 
65.16 	Agency under the federal Clean Water Act.

65.17 	 Sec. 13. APPROPRIATION; AID PAYMENT SHIFTS.
 65.18 	 In fiscal year 2008, $25,000,000 is appropriated from the general fund to the 
65.19 	commissioner of finance to be used to buy back the aid payment shift provided in 
65.20 	Minnesota Statutes, section 16A.152, subdivision 2, clause (3).

65.21 	 Sec. 14. DEFERRED MAINTENANCE AID.
 65.22 	 For fiscal years 2006 and 2007 only, a district's deferred maintenance aid is equal 
65.23 	to $13.25 multiplied times its adjusted average daily membership for that year.  Aid 
65.24 	received under this section must be used for deferred maintenance, to make accessibility 
65.25 	improvements, or to make fire, safety, or health repairs.

65.26 	 Sec. 15. APPROPRIATIONS.
 65.27 		 Subdivision 1.Department of education. The sums indicated in this section are 
65.28 	appropriated from the general fund to the Department of Education for the fiscal years 
65.29 	designated.
66.1 		 Subd. 2.Deferred maintenance aid. For deferred maintenance revenue under 
66.2 	section 14, $10,574,000 in fiscal year 2006 and $10,416,000 in fiscal year 2007.

66.3 	 Sec. 16. APPROPRIATION.
 66.4 	 $2,000,000 is appropriated from the general fund on a onetime basis to the Higher 
66.5 	Education Services Office.  The appropriation must be deposited into the Rochester higher 
66.6 	education development account.  With the approval of the Higher Education Services 
66.7 	Office, money in this account may be used to provide initial funding for academic program 
66.8 	development for upperclass and graduate students.  This appropriation is intended to be 
66.9 	expended when matched by tax-deductible contributions from individuals and corporate 
66.10 	taxpayers.

66.11 	 ARTICLE 7
66.12 	 TAX SHELTER AND VOLUNTARY COMPLIANCE INITIATIVES

66.13 	 Section 1. [289A.121] REGISTRATION OF TAX SHELTERS.
66.14 		 Subdivision 1.Definitions. For the purposes of this section, the following terms 
66.15 	have the meanings given.
66.16 	 (a) "Abusive tax avoidance transaction" means a Minnesota tax shelter or a 
66.17 	reportable transaction.
66.18 	 (b) "Material advisor" has the meaning given in section 111(b)(1) of the Internal 
66.19 	Revenue Code, and must be interpreted in accordance with any regulations or rulings 
66.20 	adopted or issued by the Internal Revenue Service that govern that section.
66.21 	 (c) "Minnesota tax shelter" means a transaction which is not a reportable transaction, 
66.22 	which substantially reduces a tax imposed under chapter 290 and has one or more of the 
66.23 	following characteristics:
66.24 	 (1) it is offered to the taxpayer under conditions of confidentiality, as that term is 
66.25 	defined in Treas. Reg. section 1.6011-4(3)(ii), and for which the taxpayer has paid a fee;
66.26 	 (2) the terms of the transaction offer the taxpayer or a related party the right to a full 
66.27 	or partial refund of fees if all or part of the intended tax consequences of the transaction 
66.28 	are not realized, or if fees are contingent upon the taxpayer realizing tax benefits;
66.29 	 (3) it is a transaction or a series of related transactions that result in a corporation or 
66.30 	a partnership with only corporate partners claiming a reduction in net income in excess of 
66.31 	$10,000,000 in any combination of tax years;
66.32 	 (4) it is a transaction or a series of related transactions that result in an individual, 
66.33 	a partnership with one or more noncorporate partners, S corporation, or trust claiming a 
67.1 	reduction in net income in excess of $4,000,000 in any combination of taxable years, 
67.2 	whether or not any losses flow through to one or more shareholders or beneficiaries; or 
67.3 	 (5) it is a transaction or series of related transactions, identified as a Minnesota 
67.4 	tax shelter in a rule promulgated by the commissioner of revenue, entered into after the 
67.5 	date the rule becomes effective.
67.6 	 (d) "Reportable transaction" has the meaning given in Treas. Reg. section 1.6011-4
67.7 	between February 29, 2000, and January 1, 2006.
67.8 		 Subd. 2.Reports by material advisors. (a) On the first day that a material advisor 
67.9 	sells a Minnesota tax shelter or reportable transaction, the material advisor must file with 
67.10 	the commissioner a copy of any federal tax shelter registration information relating to 
67.11 	reportable transactions if that registration is applicable to any person subject to taxation 
67.12 	under chapter 290.
67.13 	 (b) On or before April 15, 2006, material advisors must report to the commissioner 
67.14 	all federal tax shelters used by a person subject to tax under chapter 290 that the material 
67.15 	advisor offered for sale between February 28, 2000, and January 1, 2006, which were 
67.16 	reportable transactions.
67.17 	 (c) On or before April 15, 2006, material advisors must report to the commissioner 
67.18 	all Minnesota tax shelters that the material advisor offered for sale between February 28, 
67.19 	2000, and January 1, 2006, if the transactions would have had to be disclosed under 
67.20 	subdivision 3 had it been in effect at that time.
67.21 	 (d) In addition to the requirements set forth in paragraphs (a), (b), and (c), a material 
67.22 	advisor must report to the commissioner any transactions entered into on or after April 15, 
67.23 	2006, that become listed as reportable transactions or a Minnesota tax shelter.
67.24 		 Subd. 3.Maintaining participant lists. Any person organizing or selling 
67.25 	Minnesota tax shelters or reportable transactions must maintain a list of participants that 
67.26 	are subject to a tax imposed by chapter 290.
67.27 		 Subd. 4.Reporting. All persons, including material advisors who organize 
67.28 	or sell Minnesota tax shelters or reportable transactions, must provide the following 
67.29 	information to the commissioner within 20 days from receiving a written request from the 
67.30 	commissioner to provide the information:
67.31 	 (1) legal name of the taxpayer;
67.32 	 (2) Minnesota tax identification number;
67.33 	 (3) federal tax identification number; and 
67.34 	 (4) description of the Minnesota tax shelter or reportable transaction.
67.35 		 Subd. 5.Disclosure statements by taxpayers. Every person subject to taxation 
67.36 	under chapter 290 who has participated in a reportable transaction or a Minnesota tax 
68.1 	shelter which resulted in a tax decrease must file a disclosure statement on a form 
68.2 	prescribed by the commissioner.  The form must be filed with the tax return.

68.3 	 Sec. 2. Minnesota Statutes 2004, section 289A.38, is amended by adding a subdivision 
68.4 	to read:
68.5 		 Subd. 15.Voluntary compliance initiative. Notwithstanding other limitations in 
68.6 	the subdivision, an amount of tax related to a reportable transaction or a Minnesota tax 
68.7 	shelter that is not reported in the voluntary compliance initiative described in section 4 
68.8 	may be assessed within eight and one-half years after the date the return is filed.

68.9 	 Sec. 3. Minnesota Statutes 2004, section 289A.60, is amended by adding a subdivision 
68.10 	to read:
68.11 		 Subd. 26.Penalty for failure to report a tax shelter. (a) A penalty of $15,000 is 
68.12 	imposed on a person who fails to register a tax shelter as required under section 289A.121 
68.13 	on or before the date prescribed.
68.14 	 (b) A penalty of $10,000 is imposed on a person who fails to report to the 
68.15 	commissioner a Minnesota tax shelter or a reportable transaction within 20 days of the 
68.16 	date prescribed under section 289A.121.  For each day after the 20th day that the person 
68.17 	organizing or selling the Minnesota tax shelter or reportable transaction failed to make the 
68.18 	information required in section 289A.121, subdivision 2, available to the commissioner 
68.19 	after the commissioner made a written request for the list, an additional $10,000 penalty is 
68.20 	imposed on that person.
68.21 	 (c) A penalty is imposed on a person who fails to make a report required by section 
68.22 	289A.121, subdivision 2, on or before the date prescribed.  The penalty is the greater of:
68.23 	 (1) $100,000; or 
68.24 	 (2) 50 percent of the gross income that the person derived from the activity.
68.25 	 (d) A penalty is imposed on a person who intentionally disregards the requirement 
68.26 	to maintain and provide information required in section 289A.121.  The penalty is the 
68.27 	greater of:
68.28 	 (1) $100,000; or 
68.29 	 (2) 75 percent of the gross income that the person derived from the activity.
68.30 	 (e) A penalty of $15,000 is imposed on a person who fails to provide a list required 
68.31 	under section 289A.121, subdivision 4, which does not contain all the information 
68.32 	required in that section.

68.33 	 Sec. 4. TAX SHELTER VOLUNTARY COMPLIANCE INITIATIVE.
 69.1 		 Subdivision 1.Commissioner to initiate. The commissioner of revenue shall 
69.2 	develop and administer a Minnesota tax shelter voluntary compliance initiative for 
69.3 	taxpayers subject to Minnesota Statutes, section 289A.60, subdivision 26, as provided 
69.4 	in this chapter.
69.5 		 Subd. 2.Term; application. The Minnesota tax shelter voluntary compliance 
69.6 	initiative shall be conducted from July 1, 2005, to December 31, 2005, pursuant to 
69.7 	Minnesota Statutes, section 270.07.  The Minnesota tax shelter voluntary compliance 
69.8 	initiative shall apply to tax liabilities and penalties attributable to Minnesota tax shelters 
69.9 	and reportable transactions for tax years beginning before January 1, 2005.  An abusive tax 
69.10 	avoidance transaction means a Minnesota tax shelter or a reportable transaction as defined 
69.11 	in Minnesota Statutes, section 289A.121, subdivision 1.
69.12 		 Subd. 3.Implementation. The commissioner of revenue may issue forms and 
69.13 	instructions and take other actions necessary, including the use of agreements pursuant 
69.14 	to Minnesota Statutes, section 270.67, to implement the Minnesota tax shelter voluntary 
69.15 	compliance initiative.
69.16 		 Subd. 4.Persons not eligible to participate. (a) Any person is not eligible for 
69.17 	participation in the Minnesota tax shelter voluntary compliance initiative, if:
69.18 	 (1) the taxpayer was convicted of a crime in connection with an abusive tax 
69.19 	avoidance transaction or transactions;
69.20 	 (2) a criminal complaint was filed against the taxpayer in connection with an abusive 
69.21 	tax avoidance transaction or transactions;
69.22 	 (3) the taxpayer is the subject of a criminal investigation in connection with an 
69.23 	abusive tax avoidance transaction or transactions; or 
69.24 	 (4) the taxpayer was eligible to participate in the Internal Revenue Service's 
69.25 	Offshore Voluntary Compliance Initiative, as set forth in Revenue Procedure 2003-11.
69.26 		 Subd. 5.Eligible participants. (a) Any person who is not ineligible to participate in 
69.27 	the Minnesota tax shelter voluntary compliance initiative under subdivision 4, is eligible 
69.28 	to participate in the Minnesota tax shelter voluntary compliance initiative.
69.29 	 (b) A person participating in the Minnesota tax shelter voluntary compliance 
69.30 	initiative waiving the right to an administrative appeal, a claim for refund, or an action in 
69.31 	district court must do both of the following:
69.32 	 (1) the participating person must file an amended return for each taxable year for 
69.33 	which the taxpayer has filed a tax return using an abusive tax avoidance transaction to 
69.34 	underreport the taxpayer's tax liability for that tax year.  Each amended return shall report 
69.35 	all income from all sources, without regard to the abusive tax avoidance transaction; and 
70.1 	 (2) the participating person must pay taxes and interest due in full, except that the 
70.2 	commissioner of revenue may enter into an installment payment agreement pursuant to 
70.3 	Minnesota Statutes, section 270.67, prior to taxpayer filing an amended return.
70.4 	 (c) The commissioner of revenue shall abate all penalties imposed under Minnesota 
70.5 	Statutes, chapter 289A, which could have been assessed in connection with the use of an 
70.6 	abusive tax avoidance transaction, for each taxable year for which the taxpayer elects to 
70.7 	participate in the Minnesota tax shelter voluntary compliance initiative, to the extent those 
70.8 	penalties are a result of underreporting of tax liabilities attributable to the use of abusive 
70.9 	tax avoidance transactions, for which a participating person files an amended return in 
70.10 	compliance with paragraph (b).
70.11 	 (d) No criminal action shall be brought against a taxpayer for the taxable years 
70.12 	reported under the Minnesota tax shelter voluntary compliance initiative with respect to 
70.13 	the issues for which a taxpayer voluntarily complies under this chapter.
70.14 	 (e) A person filing an amended return under this paragraph of the Minnesota tax 
70.15 	shelter voluntary compliance initiative may not file a claim for refund, an administrative 
70.16 	appeal, or an action in district court in regard to the amount of taxes or interest paid 
70.17 	with the amended return.
70.18 	 (f) A person participating in the Minnesota tax shelter voluntary compliance 
70.19 	initiative not waiving the right to an administrative appeal, a claim for refund, or an action 
70.20 	in district court must do both of the following:
70.21 	 (1) the participating person must file an amended return for each taxable year for 
70.22 	which the taxpayer has filed a tax return using an abusive tax avoidance transaction to 
70.23 	underreport the taxpayer's tax liability for that tax year.  Each amended return shall report 
70.24 	all income from all sources, without regard to the abusive tax avoidance transactions; and 
70.25 	 (2) the participating person must pay taxes and interest due in full, except that the 
70.26 	commissioner of revenue may enter into an installment payment agreement pursuant to 
70.27 	Minnesota Statutes, section 270.67, prior to taxpayer filing an amended return.
70.28 	 (g) The commissioner of revenue shall abate all penalties imposed under Minnesota 
70.29 	Statutes, chapter 289A, except for the penalty for intentional disregard of law or rules 
70.30 	imposed under Minnesota Statutes, section 289A.60, subdivision 5, which could have 
70.31 	been assessed in connection with the use of an abusive tax avoidance transaction, for each 
70.32 	taxable year for which the taxpayer elects to participate in the Minnesota tax shelter 
70.33 	voluntary compliance initiative, to the extent those penalties are a result of underreporting 
70.34 	of tax liabilities attributable to the use of abusive tax avoidance transactions, for which a 
70.35 	participating person files an amended return in compliance with paragraph (b).
71.1 	 (h) No criminal action shall be brought against a taxpayer for the taxable years 
71.2 	reported under the Minnesota tax shelter voluntary compliance initiative with respect to 
71.3 	the issues for which a taxpayer voluntarily complies under this chapter.

71.4 	 Sec. 5. COMMISSIONER ORDERS AND PENALTIES.
 71.5 	 After December 31, 2005, the commissioner of revenue may issue an order of 
71.6 	assessment within the time period permitted under Minnesota Statutes, section 289A.38, 
71.7 	upon an amended return filed under this chapter for an underreported amount of tax, may 
71.8 	impose penalties on an underreported amount of tax on an amended return filed under 
71.9 	this chapter, or initiate a criminal action against any person based on any underreported 
71.10 	amount of tax on an amended return filed under this chapter.
71.11 	 A penalty is imposed upon any person who:
71.12 	 (1) is not ineligible to file an amended return pursuant to this chapter;
71.13 	 (2) has engaged in abusive tax shelter transactions; and 
71.14 	 (3) fails to voluntarily amend their tax returns for each taxable year for which an 
71.15 	amended return may be filed and the person underreported income attributable to an 
71.16 	abusive tax shelter transaction.
71.17 	 The penalty is equal to 200 percent of the underreported tax that is attributable to the 
71.18 	abusive tax shelter transaction.

71.19 	 ARTICLE 8
71.20 	 PROPERTY TAX FREEZE

71.21 	 Section 1. CITATION.
 71.22 	 This article may be cited as the "Truth and Fairness in Taxation Act" (TAFTA) or 
71.23 	the "State/Local Fiscal Relations: Truth in Taxation Act." 

71.24 	 Sec. 2. STATEMENT OF PURPOSE.
 71.25 	 The legislature finds that the state of Minnesota is continuing to experience a 
71.26 	persistent budget deficit and that reductions in state spending have resulted in increased 
71.27 	burdens on school districts, counties, cities, and other units of local government.  In order 
71.28 	to maintain stability in state and local fiscal relations, the purpose of this act is to prevent 
71.29 	property tax rate increases and to illuminate the impact of reductions in revenue to school 
71.30 	districts, counties, cities, and other units of local government.

71.31 	 Sec. 3. BENEFIT RATIO FOR RURAL SERVICE DISTRICTS.
 72.1 	 Notwithstanding Minnesota Statutes, section 272.67, subdivision 6, the benefit 
72.2 	ratio used for apportioning levies to a rural service district for taxes payable in 2006 and 
72.3 	any subsequent year prior to the freeze termination year must not be greater than that in 
72.4 	effect for taxes payable in 2005.

72.5 	 Sec. 4. PROHIBITION AGAINST INCURRING NEW DEBT.
 72.6 		 Subdivision 1.Actions prohibited. After May 31, 2006, no municipality as 
72.7 	defined in Minnesota Statutes, section 475.51, or any special taxing district as defined in 
72.8 	Minnesota Statutes, section 275.066, may sell obligations, certificates of indebtedness, 
72.9 	or capital notes under Minnesota Statutes, section 412.301, chapter 475, or any other 
72.10 	law authorizing obligations, certificates of indebtedness, capital notes, or other debt 
72.11 	instruments, or enter into installment purchase contracts or lease purchase agreements 
72.12 	under Minnesota Statutes, section 465.71, or any other law authorizing installment 
72.13 	purchase contracts or lease purchase agreements, if issuing those debt instruments or 
72.14 	entering into those contracts would require a levy first becoming payable in 2007 or any 
72.15 	subsequent year prior to the freeze termination year.
72.16 		 Subd. 2.Exceptions. This prohibition does not apply to:
72.17 	 (1) refunding bonds sold to refund bonds originally sold before June 1, 2006;
72.18 	 (2) obligations for which the amount of the levy first becoming due in 2007 would 
72.19 	not exceed the amount by which the municipality's total debt service levy for taxes 
72.20 	payable in 2007 prior to issuance of those obligations is less than the municipality's total 
72.21 	debt service levy for taxes payable in 2006; or 
72.22 	 (3) obligations with respect to which the municipality makes a finding at the time 
72.23 	of the issuance of the obligations that no levy will be required for taxes payable in 2007 
72.24 	or any subsequent year prior to the freeze termination year or to pay the debt service 
72.25 	on the obligations because sufficient funds are available from nonproperty tax sources 
72.26 	to pay the debt service.
72.27 	 As used in clauses (2) and (3), "obligations" includes certificates of indebtedness, 
72.28 	capital notes, or other debt instruments or installment purchase contracts or lease purchase 
72.29 	agreements.
72.30 		 Subd. 3.Date when bonds are deemed sold. For purposes of this section, bonds 
72.31 	will be deemed to have been sold before June 1, 2006, if:
72.32 	 (1) an agreement has been entered into between the municipality and a purchaser or 
72.33 	underwriter for the sale of the bonds by that date;
72.34 	 (2) the issuing municipality is a party to a contract or letter of understanding 
72.35 	entered into before June 1, 2006, with the federal government or the state government 
73.1 	that requires the municipality to pay for a project, and the project will be funded with the 
73.2 	proceeds of the bonds; or 
73.3 	 (3) the proceeds of the bonds will be used to fund a project or acquisition with 
73.4 	respect to which the municipality has entered into a contract with a builder or supplier 
73.5 	before June 1, 2006.

73.6 	 Sec. 5. LEVY LIMITATION FOR TAXES PAYABLE IN 2007 AND 
73.7 	SUBSEQUENT YEARS.
 73.8 		 Subdivision 1.Proposed levy. Notwithstanding any other law to the contrary, for 
73.9 	purposes of the certification required by Minnesota Statutes, section 275.065, subdivision 
73.10 	1, in 2006 and any subsequent year prior to the freeze termination year, no taxing authority, 
73.11 	other than a school district, shall certify to the county auditor a proposed property tax levy 
73.12 	or, in the case of a township, a final property tax levy, greater than the levy certified to the 
73.13 	county auditor pursuant to Minnesota Statutes, section 275.07, subdivision 1, in the prior 
73.14 	year, except as provided in this section.
73.15 		 Subd. 2.Final levy. Notwithstanding any other law to the contrary, for purposes of 
73.16 	the certification required by Minnesota Statutes, section 275.07, subdivision 1, in 2006 
73.17 	and any subsequent year prior to the freeze termination year, no taxing authority, other 
73.18 	than a school district, shall certify to the county auditor a property tax levy greater than 
73.19 	the amount certified to the county auditor pursuant to Minnesota Statutes, section 275.07, 
73.20 	subdivision 1, in the prior year, except as provided in this section.
73.21 		 Subd. 3.Debt service exception. If a levy for taxes payable in 2007 or any 
73.22 	subsequent year prior to the freeze termination year, for debt service on obligations, 
73.23 	certificates of indebtedness, capital notes, or other debt instruments sold prior to June 1, 
73.24 	2006, or to make payments on installment purchase contracts or lease purchase agreements 
73.25 	entered into prior to June 1, 2006, exceeds the levy a taxing authority certified pursuant to 
73.26 	Minnesota Statutes, section 275.07, subdivision 1, for taxes payable in 2006 for the same 
73.27 	purpose, the excess may be levied notwithstanding the limitations of subdivisions 1 and 2.
73.28 		 Subd. 4.Annexation exception. The city tax rate for taxes payable in 2007 or 
73.29 	any subsequent year prior to the freeze termination year on any property annexed under 
73.30 	Minnesota Statutes, chapter 414, may not be increased over the city or township tax rate 
73.31 	in effect on the property for taxes payable in 2006, notwithstanding any law, municipal 
73.32 	board order, or ordinance to the contrary.  The limit on the annexing city's levy under 
73.33 	subdivisions 1 and 2 may be increased in excess of that limit by an amount equal to the net 
73.34 	tax capacity of the property annexed times the city or township tax rate in effect on that 
74.1 	property for taxes payable in 2006.  The levy limit of the city or township from which the 
74.2 	property was annexed shall be reduced by the same amount.
74.3 		 Subd. 5.School district exceptions. (a) For taxes payable in 2007 and subsequent 
74.4 	years prior to the freeze termination year, no school district shall certify to the county 
74.5 	auditor a property tax levy that exceeds the maximum levy that may be imposed by that 
74.6 	district under 2005 S.F. No. 2267, if enacted, except as provided in paragraph (b).
74.7 	 (b) A school district that is in statutory operating debt under Minnesota Statutes, 
74.8 	section 123B.81, and has an approved plan under Minnesota Statutes, section 123B.83, 
74.9 	that includes an increase to its referendum allowance under Minnesota Statutes, section 
74.10 	126C.17, is exempt from the levy freeze on referenda according to this section.

74.11 	 Sec. 6. FREEZE ON LOCAL MATCH REQUIREMENTS.
 74.12 	 Notwithstanding any other law to the contrary, the local funding or local match 
74.13 	required from any city, town, or county for any state grant or program shall not be 
74.14 	increased for calendar year 2007 or any subsequent year prior to the freeze termination 
74.15 	year above the dollar amount of the local funding or local match required for the same 
74.16 	grant or program in 2006, regardless of the level of state funding provided.  Any local 
74.17 	match or local funding requirement that first becomes effective after December 31, 2006, 
74.18 	for new or changed state grants or programs shall not be effective until the freeze has been 
74.19 	terminated for that taxing jurisdiction under section 14. Nothing in this section shall 
74.20 	affect the eligibility of a city, town, or county for the receipt of state grants or program 
74.21 	funds in 2007 or any subsequent year prior to the freeze termination year, or reduce the 
74.22 	amount of state funding a city, town, or county would otherwise receive in 2007 or any 
74.23 	subsequent year prior to the freeze termination year if the local match requirements of the 
74.24 	state grant or program were met in 2006.

74.25 	 Sec. 7. SUSPENSION OF SALARY AND BUDGET APPEAL 
74.26 	AUTHORIZATION.
 74.27 	 After March 1, 2006, no county sheriff may exercise the authority granted under 
74.28 	Minnesota Statutes, section 387.20, subdivision 7, and no county attorney may exercise 
74.29 	the authority granted under Minnesota Statutes, section 388.18, subdivision 6, to the 
74.30 	extent that the salary or budget increase sought in the appeal would result in an increase 
74.31 	in county expenditures in calendar year 2007 or any subsequent year prior to the freeze 
74.32 	termination year.

74.33 	 Sec. 8. SUSPENSION OF PUBLICATION AND HEARING REQUIREMENTS.
 75.1 	 A local taxing authority is not required to comply with the public advertisement 
75.2 	notice of Minnesota Statutes, section 275.065, subdivision 5a, or the public hearing 
75.3 	requirement of Minnesota Statutes, section 275.065, subdivision 6, with respect to taxes 
75.4 	payable in 2007 and any subsequent year prior to the freeze termination year.

75.5 	 Sec. 9. TAX RATE FREEZE; REDUCTION OF LEVY.
 75.6 	 If in the course of determining local tax rates for taxes payable in 2007 or any 
75.7 	subsequent year prior to the freeze termination year after reductions for disparity reduction 
75.8 	aid under Minnesota Statutes, section 275.08, subdivisions 1c and 1d, the county auditor 
75.9 	finds the local tax rate exceeds that in effect for taxes payable in 2006, the county auditor 
75.10 	shall reduce the local government's levy so that the local tax rate does not exceed that in 
75.11 	effect for taxes payable in 2006, adjusted as provided in section 5.

75.12 	 Sec. 10. PENSION LIABILITIES.
 75.13 	 Notwithstanding any other law or charter provision to the contrary, no levy for 
75.14 	taxes payable in 2007 or any subsequent year prior to the freeze termination year for a 
75.15 	local police and fire relief association for the purpose of amortizing an unfunded pension 
75.16 	liability may exceed the levy for that purpose for taxes payable in 2006.

75.17 	 Sec. 11. DUTIES OF TOWNSHIP BOARD OF SUPERVISORS.
 75.18 	 Notwithstanding Minnesota Statutes, section 365.10, in 2006 the township board of 
75.19 	supervisors shall adjust the levy and in any subsequent year prior to the freeze termination 
75.20 	year, the township board of supervisors may adjust the expenditures of a township below 
75.21 	the level authorized by the electors to adjust for any reduction in the previously authorized 
75.22 	levy of the township pursuant to section 5.

75.23 	 Sec. 12. PROHIBITION ON NEW OR INCREASED FEES.
 75.24 	 After March 1, 2006, no municipality as defined in Minnesota Statutes, section 
75.25 	475.51, or special taxing district as defined in Minnesota Statutes, section 275.066, and no 
75.26 	executive branch state agency may impose a new fee or increase the rate or amount of an 
75.27 	existing fee.  As used in this section, a fee is any charge for goods, services, regulations, or 
75.28 	licensure, and includes charges for admission to or for use of public facilities.

75.29 	 Sec. 13. SAVINGS CLAUSE.
 75.30 	 Notwithstanding any provision in this article, nothing in this article constitutes an 
75.31 	impairment of any obligations, certificates of indebtedness, capital notes, or other debt 
76.1 	instruments, including installment purchase contracts or lease purchase agreements, issued 
76.2 	before the date of final enactment of this act, by a municipality as defined in Minnesota 
76.3 	Statutes, section 469.174, subdivision 6; a school district; or a special taxing district as 
76.4 	defined in Minnesota Statutes, section 275.066.

76.5 	 Sec. 14. EFFECTIVE DATE; TERMINATION.
 76.6 	 (a) This article is effective the day following final enactment and applies to taxes 
76.7 	payable in 2007 and subsequent years prior to the termination date provided in paragraph 
76.8 	(b), (c), (d), or (e) for the taxing jurisdiction described in each of those paragraphs.
76.9 	 (b) For cities and towns, the termination date is the taxes payable year that is the 
76.10 	calendar year when local government aids payable to cities under Minnesota Statutes, 
76.11 	section 477A.013, are sufficient to fully fund the formula without any reduction due to the 
76.12 	limitation in Minnesota Statutes, section 477A.03.
76.13 	 (c) For counties, the termination date is the taxes payable year when the total amount 
76.14 	to be paid to all counties under Minnesota Statutes, section 477A.0124, exceeds the 
76.15 	amount paid to all counties under Minnesota Statutes 2002, sections 273.138; 273.1398, 
76.16 	subdivision 2, minus the amount certified under Minnesota Statutes, section 273.1398, 
76.17 	subdivision 4a, paragraph (b), for counties in Judicial Districts One, Three, Six, and Ten, 
76.18 	and by 25 percent of the amount certified under Minnesota Statutes, section 273.1398, 
76.19 	subdivision 4a, paragraph (b), for counties located in Judicial Districts Two and Four; 
76.20 	273.166; 477A.0121; and 477A.0122, increased by the rate of increase in the annual 
76.21 	implicit price deflator for government consumption expenditures from 2003 to the current 
76.22 	year.
76.23 	 (d) For school districts, the termination date is the taxes payable year that is the 
76.24 	year in which the state provides a real state aid inflationary increase to the basic formula 
76.25 	allowance under Minnesota Statutes, section 126C.10, subdivision 2, over the amount 
76.26 	paid in the prior year.
76.27 	 (e) For special taxing districts, the termination date is the 2009 taxes payable year.