1.1 	A bill for an act
1.2 	relating to taxation; income, corporate franchise, and property; providing a 
1.3 	federal update; modifying green acres program; creating rural preserve property 
1.4 	tax program; requiring reports; amending Minnesota Statutes 2008, sections 
1.5 	273.111, subdivisions 3, 3a, 9, 11a; 273.13, subdivision 23; 289A.02, subdivision 
1.6 	7; 290.01, subdivisions 19, 19a, 19c, 19d, 31, by adding a subdivision; 290.067, 
1.7 	subdivision 2a; 290A.03, subdivisions 3, 15; 291.005, subdivision 1; proposing 
1.8 	coding for new law in Minnesota Statutes, chapter 273.
1.9 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.10 	ARTICLE 1
1.11 	FEDERAL UPDATE

1.12 	Section 1. Minnesota Statutes 2008, section 289A.02, subdivision 7, is amended to 
1.13 	read:
1.14 		Subd. 7.Internal Revenue Code. Unless specifically defined otherwise, "Internal 
1.15 	Revenue Code" means the Internal Revenue Code of 1986, as amended through February 
1.16 	13, 2008 December 31, 2008.

1.17 	EFFECTIVE DATE. This section is effective the day following final enactment, 
1.18 	except the changes incorporated by federal changes are effective at the same time as the 
1.19 	changes were effective for federal purposes.

1.20 	Sec. 2. Minnesota Statutes 2008, section 290.01, subdivision 19, is amended to read:
1.21 		Subd. 19. Net income. The term "net income" means the federal taxable income, 
1.22 	as defined in section 63 of the Internal Revenue Code of 1986, as amended through the 
1.23 	date named in this subdivision, incorporating the federal effective dates of changes to the 
1.24 	Internal Revenue Code and any elections made by the taxpayer in accordance with the 
2.1 	Internal Revenue Code in determining federal taxable income for federal income tax 
2.2 	purposes, and with the modifications provided in subdivisions 19a to 19f. 
2.3 	In the case of a regulated investment company or a fund thereof, as defined in section 
2.4 	851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment 
2.5 	company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, 
2.6 	except that: 
2.7 	(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal 
2.8 	Revenue Code does not apply; 
2.9 	(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal 
2.10 	Revenue Code must be applied by allowing a deduction for capital gain dividends and 
2.11 	exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal 
2.12 	Revenue Code; and 
2.13 	(3) the deduction for dividends paid must also be applied in the amount of any 
2.14 	undistributed capital gains which the regulated investment company elects to have treated 
2.15 	as provided in section 852(b)(3)(D) of the Internal Revenue Code. 
2.16 	The net income of a real estate investment trust as defined and limited by section 
2.17 	856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust 
2.18 	taxable income as defined in section 857(b)(2) of the Internal Revenue Code. 
2.19 	The net income of a designated settlement fund as defined in section 468B(d) of 
2.20 	the Internal Revenue Code means the gross income as defined in section 468B(b) of the 
2.21 	Internal Revenue Code. 
2.22 	The Internal Revenue Code of 1986, as amended through February 13, 2008
2.23 	December 31, 2008, shall be in effect for taxable years beginning after December 31, 1996. 
2.24 	Except as otherwise provided, references to the Internal Revenue Code in 
2.25 	subdivisions 19 to 19f mean the code in effect for purposes of determining net income for 
2.26 	the applicable year. 

2.27 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
2.28 	December 31, 2007.

2.29 	Sec. 3. Minnesota Statutes 2008, section 290.01, subdivision 19a, is amended to read:
2.30 		Subd. 19a. Additions to federal taxable income. For individuals, estates, and 
2.31 	trusts, there shall be added to federal taxable income: 
2.32 	(1)(i) interest income on obligations of any state other than Minnesota or a political 
2.33 	or governmental subdivision, municipality, or governmental agency or instrumentality 
2.34 	of any state other than Minnesota exempt from federal income taxes under the Internal 
2.35 	Revenue Code or any other federal statute; and 
3.1 	(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue 
3.2 	Code, except the portion of the exempt-interest dividends derived from interest income 
3.3 	on obligations of the state of Minnesota or its political or governmental subdivisions, 
3.4 	municipalities, governmental agencies or instrumentalities, but only if the portion of the 
3.5 	exempt-interest dividends from such Minnesota sources paid to all shareholders represents 
3.6 	95 percent or more of the exempt-interest dividends that are paid by the regulated 
3.7 	investment company as defined in section 851(a) of the Internal Revenue Code, or the 
3.8 	fund of the regulated investment company as defined in section 851(g) of the Internal 
3.9 	Revenue Code, making the payment; and 
3.10 	(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal 
3.11 	government described in section 7871(c) of the Internal Revenue Code shall be treated as 
3.12 	interest income on obligations of the state in which the tribe is located; 
3.13 	(2) the amount of income or sales and use taxes paid or accrued within the taxable 
3.14 	year under this chapter and the amount of taxes based on net income paid or sales and 
3.15 	use taxes paid to any other state or to any province or territory of Canada, to the extent 
3.16 	allowed as a deduction under section 63(d) of the Internal Revenue Code, but the addition 
3.17 	may not be more than the amount by which the itemized deductions as allowed under 
3.18 	section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction 
3.19 	as defined in section 63(c) of the Internal Revenue Code, disregarding the amount allowed 
3.20 	under section 63(c)(1)(C) of the Internal Revenue Code. For the purpose of this paragraph, 
3.21 	the disallowance of itemized deductions under section 68 of the Internal Revenue Code of 
3.22 	1986, income or sales and use tax is the last itemized deduction disallowed; 
3.23 	(3) the capital gain amount of a lump-sum distribution to which the special tax under 
3.24 	section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies; 
3.25 	(4) the amount of income taxes paid or accrued within the taxable year under this 
3.26 	chapter and taxes based on net income paid to any other state or any province or territory 
3.27 	of Canada, to the extent allowed as a deduction in determining federal adjusted gross 
3.28 	income. For the purpose of this paragraph, income taxes do not include the taxes imposed 
3.29 	by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
3.30 	(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10 
3.31 	other than expenses or interest used in computing net interest income for the subtraction 
3.32 	allowed under subdivision 19b, clause (1); 
3.33 	(6) the amount of a partner's pro rata share of net income which does not flow 
3.34 	through to the partner because the partnership elected to pay the tax on the income under 
3.35 	section 6242(a)(2) of the Internal Revenue Code; 
4.1 	(7) 80 percent of the depreciation deduction allowed under section 168(k) of the 
4.2 	Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that 
4.3 	in the taxable year generates a deduction for depreciation under section 168(k) and the 
4.4 	activity generates a loss for the taxable year that the taxpayer is not allowed to claim for 
4.5 	the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is 
4.6 	limited to excess of the depreciation claimed by the activity under section 168(k) over the 
4.7 	amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
4.8 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
4.9 	under section 168(k) is allowed; 
4.10 	(8) 80 percent of the amount by which the deduction allowed by section 179 of the 
4.11 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
4.12 	Revenue Code of 1986, as amended through December 31, 2003; 
4.13 	(9) to the extent deducted in computing federal taxable income, the amount of the 
4.14 	deduction allowable under section 199 of the Internal Revenue Code; 
4.15 	(10) the exclusion allowed under section 139A of the Internal Revenue Code for 
4.16 	federal subsidies for prescription drug plans; 
4.17 	(11) the amount of expenses disallowed under section 290.10, subdivision 2;
4.18 	(12) for taxable years beginning after December 31, 2006, and before January 1, 
4.19 	2008, the amount deducted for qualified tuition and related expenses under section 222 of 
4.20 	the Internal Revenue Code, to the extent deducted from gross income; and
4.21 	(13) for taxable years beginning after December 31, 2006, and before January 1, 
4.22 	2008, the amount deducted for certain expenses of elementary and secondary school 
4.23 	teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted 
4.24 	from gross income.; and
4.25 	(14) the additional standard deduction for property taxes payable that is allowable 
4.26 	under section 63(c)(1)(C) of the Internal Revenue Code.

4.27 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
4.28 	December 31, 2007.

4.29 	Sec. 4. Minnesota Statutes 2008, section 290.01, subdivision 19c, is amended to read:
4.30 		Subd. 19c. Corporations; additions to federal taxable income. For corporations, 
4.31 	there shall be added to federal taxable income: 
4.32 	(1) the amount of any deduction taken for federal income tax purposes for income, 
4.33 	excise, or franchise taxes based on net income or related minimum taxes, including but not 
4.34 	limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota, 
5.1 	another state, a political subdivision of another state, the District of Columbia, or any 
5.2 	foreign country or possession of the United States; 
5.3 	(2) interest not subject to federal tax upon obligations of: the United States, its 
5.4 	possessions, its agencies, or its instrumentalities; the state of Minnesota or any other 
5.5 	state, any of its political or governmental subdivisions, any of its municipalities, or any 
5.6 	of its governmental agencies or instrumentalities; the District of Columbia; or Indian 
5.7 	tribal governments; 
5.8 	(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal 
5.9 	Revenue Code; 
5.10 	(4) the amount of any net operating loss deduction taken for federal income tax 
5.11 	purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss 
5.12 	deduction under section 810 of the Internal Revenue Code; 
5.13 	(5) the amount of any special deductions taken for federal income tax purposes 
5.14 	under sections 241 to 247 and 965 of the Internal Revenue Code; 
5.15 	(6) losses from the business of mining, as defined in section 290.05, subdivision 1, 
5.16 	clause (a), that are not subject to Minnesota income tax; 
5.17 	(7) the amount of any capital losses deducted for federal income tax purposes under 
5.18 	sections 1211 and 1212 of the Internal Revenue Code; 
5.19 	(8) the exempt foreign trade income of a foreign sales corporation under sections 
5.20 	921(a) and 291 of the Internal Revenue Code; 
5.21 	(9) the amount of percentage depletion deducted under sections 611 through 614 and 
5.22 	291 of the Internal Revenue Code; 
5.23 	(10) for certified pollution control facilities placed in service in a taxable year 
5.24 	beginning before December 31, 1986, and for which amortization deductions were elected 
5.25 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
5.26 	31, 1985, the amount of the amortization deduction allowed in computing federal taxable 
5.27 	income for those facilities; 
5.28 	(11) the amount of any deemed dividend from a foreign operating corporation 
5.29 	determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend 
5.30 	shall be reduced by the amount of the addition to income required by clauses (20), (21), 
5.31 	(22), and (23); 
5.32 	(12) the amount of a partner's pro rata share of net income which does not flow 
5.33 	through to the partner because the partnership elected to pay the tax on the income under 
5.34 	section 6242(a)(2) of the Internal Revenue Code; 
5.35 	(13) the amount of net income excluded under section 114 of the Internal Revenue 
5.36 	Code; 
6.1 	(14) any increase in subpart F income, as defined in section 952(a) of the Internal 
6.2 	Revenue Code, for the taxable year when subpart F income is calculated without regard 
6.3 	to the provisions of section 103 of Public Law 109-222 Division C, title III, section 
6.4 	304(a)(1)-(2) of Public Law 110-343; 
6.5 	(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A) 
6.6 	and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer 
6.7 	has an activity that in the taxable year generates a deduction for depreciation under 
6.8 	section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year 
6.9 	that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed 
6.10 	under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the 
6.11 	depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the 
6.12 	amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
6.13 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
6.14 	under section 168(k)(1)(A) and (k)(4)(A) is allowed; 
6.15 	(16) 80 percent of the amount by which the deduction allowed by section 179 of the 
6.16 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
6.17 	Revenue Code of 1986, as amended through December 31, 2003; 
6.18 	(17) to the extent deducted in computing federal taxable income, the amount of the 
6.19 	deduction allowable under section 199 of the Internal Revenue Code; 
6.20 	(18) the exclusion allowed under section 139A of the Internal Revenue Code for 
6.21 	federal subsidies for prescription drug plans; 
6.22 	(19) the amount of expenses disallowed under section 290.10, subdivision 2;
6.23 	(20) an amount equal to the interest and intangible expenses, losses, and costs paid, 
6.24 	accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit 
6.25 	of a corporation that is a member of the taxpayer's unitary business group that qualifies 
6.26 	as a foreign operating corporation. For purposes of this clause, intangible expenses and 
6.27 	costs include:
6.28 	(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition, 
6.29 	use, maintenance or management, ownership, sale, exchange, or any other disposition of 
6.30 	intangible property;
6.31 	(ii) losses incurred, directly or indirectly, from factoring transactions or discounting 
6.32 	transactions;
6.33 	(iii) royalty, patent, technical, and copyright fees;
6.34 	(iv) licensing fees; and
6.35 	(v) other similar expenses and costs. 
7.1 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
7.2 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
7.3 	secrets, and similar types of intangible assets.
7.4 	This clause does not apply to any item of interest or intangible expenses or costs paid, 
7.5 	accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect 
7.6 	to such item of income to the extent that the income to the foreign operating corporation 
7.7 	is income from sources without the United States as defined in subtitle A, chapter 1, 
7.8 	subchapter N, part 1, of the Internal Revenue Code;
7.9 	(21) except as already included in the taxpayer's taxable income pursuant to clause 
7.10 	(20), any interest income and income generated from intangible property received or 
7.11 	accrued by a foreign operating corporation that is a member of the taxpayer's unitary 
7.12 	group. For purposes of this clause, income generated from intangible property includes:
7.13 	(i) income related to the direct or indirect acquisition, use, maintenance or 
7.14 	management, ownership, sale, exchange, or any other disposition of intangible property;
7.15 	(ii) income from factoring transactions or discounting transactions;
7.16 	(iii) royalty, patent, technical, and copyright fees;
7.17 	(iv) licensing fees; and
7.18 	(v) other similar income.
7.19 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
7.20 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
7.21 	secrets, and similar types of intangible assets. 
7.22 	This clause does not apply to any item of interest or intangible income received or accrued 
7.23 	by a foreign operating corporation with respect to such item of income to the extent that 
7.24 	the income is income from sources without the United States as defined in subtitle A, 
7.25 	chapter 1, subchapter N, part 1, of the Internal Revenue Code;
7.26 	(22) the dividends attributable to the income of a foreign operating corporation that 
7.27 	is a member of the taxpayer's unitary group in an amount that is equal to the dividends 
7.28 	paid deduction of a real estate investment trust under section 561(a) of the Internal 
7.29 	Revenue Code for amounts paid or accrued by the real estate investment trust to the 
7.30 	foreign operating corporation; 
7.31 	(23) the income of a foreign operating corporation that is a member of the taxpayer's 
7.32 	unitary group in an amount that is equal to gains derived from the sale of real or personal 
7.33 	property located in the United States; and
7.34 	(24) for taxable years beginning after December 31, 2006, and before January 1, 
7.35 	2008, the additional amount allowed as a deduction for donation of computer technology 
8.1 	and equipment under section 170(e)(6) of the Internal Revenue Code, to the extent 
8.2 	deducted from taxable income. 

8.3 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
8.4 	December 31, 2007.

8.5 	Sec. 5. Minnesota Statutes 2008, section 290.01, subdivision 19d, is amended to read:
8.6 		Subd. 19d. Corporations; modifications decreasing federal taxable income. For 
8.7 	corporations, there shall be subtracted from federal taxable income after the increases 
8.8 	provided in subdivision 19c: 
8.9 	(1) the amount of foreign dividend gross-up added to gross income for federal 
8.10 	income tax purposes under section 78 of the Internal Revenue Code; 
8.11 	(2) the amount of salary expense not allowed for federal income tax purposes due to 
8.12 	claiming the work opportunity credit under section 51 of the Internal Revenue Code; 
8.13 	(3) any dividend (not including any distribution in liquidation) paid within the 
8.14 	taxable year by a national or state bank to the United States, or to any instrumentality of 
8.15 	the United States exempt from federal income taxes, on the preferred stock of the bank 
8.16 	owned by the United States or the instrumentality; 
8.17 	(4) amounts disallowed for intangible drilling costs due to differences between 
8.18 	this chapter and the Internal Revenue Code in taxable years beginning before January 
8.19 	1, 1987, as follows: 
8.20 	(i) to the extent the disallowed costs are represented by physical property, an amount 
8.21 	equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09, 
8.22 	subdivision 7, subject to the modifications contained in subdivision 19e; and 
8.23 	(ii) to the extent the disallowed costs are not represented by physical property, an 
8.24 	amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section 
8.25 	290.09, subdivision 8; 
8.26 	(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the 
8.27 	Internal Revenue Code, except that: 
8.28 	(i) for capital losses incurred in taxable years beginning after December 31, 1986, 
8.29 	capital loss carrybacks shall not be allowed; 
8.30 	(ii) for capital losses incurred in taxable years beginning after December 31, 1986, 
8.31 	a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be 
8.32 	allowed; 
8.33 	(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a 
8.34 	capital loss carryback to each of the three taxable years preceding the loss year, subject to 
8.35 	the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and 
9.1 	(iv) for capital losses incurred in taxable years beginning before January 1, 1987, 
9.2 	a capital loss carryover to each of the five taxable years succeeding the loss year to the 
9.3 	extent such loss was not used in a prior taxable year and subject to the provisions of 
9.4 	Minnesota Statutes 1986, section 290.16, shall be allowed; 
9.5 	(6) an amount for interest and expenses relating to income not taxable for federal 
9.6 	income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and 
9.7 	expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or 
9.8 	291 of the Internal Revenue Code in computing federal taxable income; 
9.9 	(7) in the case of mines, oil and gas wells, other natural deposits, and timber for 
9.10 	which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a 
9.11 	reasonable allowance for depletion based on actual cost. In the case of leases the deduction 
9.12 	must be apportioned between the lessor and lessee in accordance with rules prescribed 
9.13 	by the commissioner. In the case of property held in trust, the allowable deduction must 
9.14 	be apportioned between the income beneficiaries and the trustee in accordance with the 
9.15 	pertinent provisions of the trust, or if there is no provision in the instrument, on the basis 
9.16 	of the trust's income allocable to each; 
9.17 	(8) for certified pollution control facilities placed in service in a taxable year 
9.18 	beginning before December 31, 1986, and for which amortization deductions were elected 
9.19 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
9.20 	31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes 
9.21 	1986, section 290.09, subdivision 7; 
9.22 	(9) amounts included in federal taxable income that are due to refunds of income, 
9.23 	excise, or franchise taxes based on net income or related minimum taxes paid by the 
9.24 	corporation to Minnesota, another state, a political subdivision of another state, the 
9.25 	District of Columbia, or a foreign country or possession of the United States to the extent 
9.26 	that the taxes were added to federal taxable income under section 290.01, subdivision 19c, 
9.27 	clause (1), in a prior taxable year; 
9.28 	(10) 80 percent of royalties, fees, or other like income accrued or received from a 
9.29 	foreign operating corporation or a foreign corporation which is part of the same unitary 
9.30 	business as the receiving corporation, unless the income resulting from such payments or 
9.31 	accruals is income from sources within the United States as defined in subtitle A, chapter 
9.32 	1, subchapter N, part 1, of the Internal Revenue Code; 
9.33 	(11) income or gains from the business of mining as defined in section 290.05, 
9.34 	subdivision 1, clause (a), that are not subject to Minnesota franchise tax; 
9.35 	(12) the amount of disability access expenditures in the taxable year which are not 
9.36 	allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code; 
10.1 	(13) the amount of qualified research expenses not allowed for federal income tax 
10.2 	purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that 
10.3 	the amount exceeds the amount of the credit allowed under section 290.068; 
10.4 	(14) the amount of salary expenses not allowed for federal income tax purposes due 
10.5 	to claiming the Indian employment credit under section 45A(a) of the Internal Revenue 
10.6 	Code; 
10.7 	(15) for taxable years beginning before January 1, 2008, the amount of the federal 
10.8 	small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
10.9 	which is included in gross income under section 87 of the Internal Revenue Code; 
10.10 	(16) for a corporation whose foreign sales corporation, as defined in section 922 
10.11 	of the Internal Revenue Code, constituted a foreign operating corporation during any 
10.12 	taxable year ending before January 1, 1995, and a return was filed by August 15, 1996, 
10.13 	claiming the deduction under section 290.21, subdivision 4, for income received from 
10.14 	the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of 
10.15 	income excluded under section 114 of the Internal Revenue Code, provided the income is 
10.16 	not income of a foreign operating company; 
10.17 	(17) any decrease in subpart F income, as defined in section 952(a) of the Internal 
10.18 	Revenue Code, for the taxable year when subpart F income is calculated without regard 
10.19 	to the provisions of section 103 of Public Law 109-222 Division C, title III, section 
10.20 	304(a)(1)-(2) of Public Law 110-343; 
10.21 	(18) in each of the five tax years immediately following the tax year in which an 
10.22 	addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of 
10.23 	the delayed depreciation. For purposes of this clause, "delayed depreciation" means the 
10.24 	amount of the addition made by the taxpayer under subdivision 19c, clause (15). The 
10.25 	resulting delayed depreciation cannot be less than zero; and 
10.26 	(19) in each of the five tax years immediately following the tax year in which an 
10.27 	addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of the 
10.28 	amount of the addition. 

10.29 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
10.30 	December 31, 2007.

10.31 	Sec. 6. Minnesota Statutes 2008, section 290.01, is amended by adding a subdivision 
10.32 	to read:
10.33 		Subd. 19h.Certain preferred stock losses. A taxpayer must compute net income 
10.34 	by treating losses from the sale or transfer of certain preferred stock, which the taxpayer 
10.35 	treated as ordinary losses pursuant to Division A, title III, section 301 of Public Law 
11.1 	110-343, as capital losses. The amount of net income under subdivision 19, taxable net 
11.2 	income under subdivision 22, taxable income under subdivision 29, the numerator and 
11.3 	denominator in section 290.06, subdivision 2c, paragraph (e), individual alternative 
11.4 	minimum taxable income under section 290.091, subdivision 2, corporate alternative 
11.5 	minimum taxable income under section 290.0921, subdivision 3, and net operating losses 
11.6 	under section 290.095 must be computed for each taxable year as if those losses had been 
11.7 	treated by the taxpayer as capital losses under the Internal Revenue Code, including the 
11.8 	limitations under section 1211 of the Internal Revenue Code.

11.9 	EFFECTIVE DATE. This section is effective at the same time as Division A, title 
11.10 	III, section 301 of Public Law 110-343, is effective and applies to losses incurred after 
11.11 	December 31, 2007.

11.12 	Sec. 7. Minnesota Statutes 2008, section 290.01, subdivision 31, is amended to read:
11.13 		Subd. 31.Internal Revenue Code. Unless specifically defined otherwise, "Internal 
11.14 	Revenue Code" means the Internal Revenue Code of 1986, as amended through February 
11.15 	13, 2008 December 31, 2008. Internal Revenue Code also includes any uncodified 
11.16 	provision in federal law that relates to provisions of the Internal Revenue Code that are 
11.17 	incorporated into Minnesota law.

11.18 	EFFECTIVE DATE. This section is effective the day following final enactment, 
11.19 	except the changes incorporated by federal changes are effective at the same time as the 
11.20 	changes were effective for federal purposes.

11.21 	Sec. 8. Minnesota Statutes 2008, section 290.067, subdivision 2a, is amended to read:
11.22 		Subd. 2a.Income. (a) For purposes of this section, "income" means the sum of 
11.23 	the following:
11.24 	(1) federal adjusted gross income as defined in section 62 of the Internal Revenue 
11.25 	Code; and
11.26 	(2) the sum of the following amounts to the extent not included in clause (1):
11.27 	(i) all nontaxable income;
11.28 	(ii) the amount of a passive activity loss that is not disallowed as a result of section 
11.29 	469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity 
11.30 	loss carryover allowed under section 469(b) of the Internal Revenue Code;
11.31 	(iii) an amount equal to the total of any discharge of qualified farm indebtedness 
11.32 	of a solvent individual excluded from gross income under section 108(g) of the Internal 
11.33 	Revenue Code;
12.1 	(iv) cash public assistance and relief;
12.2 	(v) any pension or annuity (including railroad retirement benefits, all payments 
12.3 	received under the federal Social Security Act, supplemental security income, and veterans 
12.4 	benefits), which was not exclusively funded by the claimant or spouse, or which was 
12.5 	funded exclusively by the claimant or spouse and which funding payments were excluded 
12.6 	from federal adjusted gross income in the years when the payments were made;
12.7 	(vi) interest received from the federal or a state government or any instrumentality 
12.8 	or political subdivision thereof;
12.9 	(vii) workers' compensation;
12.10 	(viii) nontaxable strike benefits;
12.11 	(ix) the gross amounts of payments received in the nature of disability income or 
12.12 	sick pay as a result of accident, sickness, or other disability, whether funded through 
12.13 	insurance or otherwise;
12.14 	(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 
12.15 	1986, as amended through December 31, 1995;
12.16 	(xi) contributions made by the claimant to an individual retirement account, 
12.17 	including a qualified voluntary employee contribution; simplified employee pension plan; 
12.18 	self-employed retirement plan; cash or deferred arrangement plan under section 401(k) 
12.19 	of the Internal Revenue Code; or deferred compensation plan under section 457 of the 
12.20 	Internal Revenue Code;
12.21 	(xii) nontaxable scholarship or fellowship grants;
12.22 	(xiii) the amount of deduction allowed under section 199 of the Internal Revenue 
12.23 	Code; and
12.24 	(xiv) the amount of deduction allowed under section 220 or 223 of the Internal 
12.25 	Revenue Code.;
12.26 	(xv) the amount of tuition expenses required to be added to income under section 
12.27 	290.01, subdivision 19a, clause (12); and
12.28 	(xvi) the amount deducted for certain expenses of elementary and secondary school 
12.29 	teachers under section 62(a)(2)(D) of the Internal Revenue Code.
12.30 	In the case of an individual who files an income tax return on a fiscal year basis, the 
12.31 	term "federal adjusted gross income" means federal adjusted gross income reflected in the 
12.32 	fiscal year ending in the next calendar year. Federal adjusted gross income may not be 
12.33 	reduced by the amount of a net operating loss carryback or carryforward or a capital loss 
12.34 	carryback or carryforward allowed for the year.
12.35 	(b) "Income" does not include:
13.1 	(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 
13.2 	102;
13.3 	(2) amounts of any pension or annuity that were exclusively funded by the claimant 
13.4 	or spouse if the funding payments were not excluded from federal adjusted gross income 
13.5 	in the years when the payments were made;
13.6 	(3) surplus food or other relief in kind supplied by a governmental agency;
13.7 	(4) relief granted under chapter 290A;
13.8 	(5) child support payments received under a temporary or final decree of dissolution 
13.9 	or legal separation; and
13.10 	(6) restitution payments received by eligible individuals and excludable interest as 
13.11 	defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 
13.12 	2001, Public Law 107-16.

13.13 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
13.14 	December 31, 2007.

13.15 	Sec. 9. Minnesota Statutes 2008, section 290A.03, subdivision 3, is amended to read:
13.16 		Subd. 3.Income. (1) "Income" means the sum of the following:
13.17 	(a) federal adjusted gross income as defined in the Internal Revenue Code; and
13.18 	(b) the sum of the following amounts to the extent not included in clause (a):
13.19 	(i) all nontaxable income;
13.20 	(ii) the amount of a passive activity loss that is not disallowed as a result of section 
13.21 	469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity 
13.22 	loss carryover allowed under section 469(b) of the Internal Revenue Code;
13.23 	(iii) an amount equal to the total of any discharge of qualified farm indebtedness 
13.24 	of a solvent individual excluded from gross income under section 108(g) of the Internal 
13.25 	Revenue Code;
13.26 	(iv) cash public assistance and relief;
13.27 	(v) any pension or annuity (including railroad retirement benefits, all payments 
13.28 	received under the federal Social Security Act, Supplemental Security Income, and 
13.29 	veterans benefits), which was not exclusively funded by the claimant or spouse, or which 
13.30 	was funded exclusively by the claimant or spouse and which funding payments were 
13.31 	excluded from federal adjusted gross income in the years when the payments were made;
13.32 	(vi) interest received from the federal or a state government or any instrumentality 
13.33 	or political subdivision thereof;
13.34 	(vii) workers' compensation;
13.35 	(viii) nontaxable strike benefits;
14.1 	(ix) the gross amounts of payments received in the nature of disability income or 
14.2 	sick pay as a result of accident, sickness, or other disability, whether funded through 
14.3 	insurance or otherwise;
14.4 	(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 
14.5 	1986, as amended through December 31, 1995;
14.6 	(xi) contributions made by the claimant to an individual retirement account, 
14.7 	including a qualified voluntary employee contribution; simplified employee pension plan; 
14.8 	self-employed retirement plan; cash or deferred arrangement plan under section 401(k) 
14.9 	of the Internal Revenue Code; or deferred compensation plan under section 457 of the 
14.10 	Internal Revenue Code;
14.11 	(xii) nontaxable scholarship or fellowship grants;
14.12 	(xiii) the amount of deduction allowed under section 199 of the Internal Revenue 
14.13 	Code; and
14.14 	(xiv) the amount of deduction allowed under section 220 or 223 of the Internal 
14.15 	Revenue Code.;
14.16 	(xv) the amount of tuition expenses required to be added to income under section 
14.17 	290.01, subdivision 19a, clause (12); and
14.18 	(xvi) the amount deducted for certain expenses of elementary and secondary school 
14.19 	teachers under section 62(a)(2)(D) of the Internal Revenue Code.
14.20 	In the case of an individual who files an income tax return on a fiscal year basis, the 
14.21 	term "federal adjusted gross income" shall mean federal adjusted gross income reflected 
14.22 	in the fiscal year ending in the calendar year. Federal adjusted gross income shall not be 
14.23 	reduced by the amount of a net operating loss carryback or carryforward or a capital loss 
14.24 	carryback or carryforward allowed for the year.
14.25 	(2) "Income" does not include:
14.26 	(a) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 
14.27 	102;
14.28 	(b) amounts of any pension or annuity which was exclusively funded by the claimant 
14.29 	or spouse and which funding payments were not excluded from federal adjusted gross 
14.30 	income in the years when the payments were made;
14.31 	(c) surplus food or other relief in kind supplied by a governmental agency;
14.32 	(d) relief granted under this chapter;
14.33 	(e) child support payments received under a temporary or final decree of dissolution 
14.34 	or legal separation; or
15.1 	(f) restitution payments received by eligible individuals and excludable interest as 
15.2 	defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 
15.3 	2001, Public Law 107-16.
15.4 	(3) The sum of the following amounts may be subtracted from income:
15.5 	(a) for the claimant's first dependent, the exemption amount multiplied by 1.4;
15.6 	(b) for the claimant's second dependent, the exemption amount multiplied by 1.3;
15.7 	(c) for the claimant's third dependent, the exemption amount multiplied by 1.2;
15.8 	(d) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;
15.9 	(e) for the claimant's fifth dependent, the exemption amount; and
15.10 	(f) if the claimant or claimant's spouse was disabled or attained the age of 65 
15.11 	on or before December 31 of the year for which the taxes were levied or rent paid, the 
15.12 	exemption amount.
15.13 	For purposes of this subdivision, the "exemption amount" means the exemption 
15.14 	amount under section 151(d) of the Internal Revenue Code for the taxable year for which 
15.15 	the income is reported.

15.16 	EFFECTIVE DATE. This section is effective for property tax refunds based on 
15.17 	property taxes payable after December 31, 2008, and rent paid after December 31, 2007, 
15.18 	and thereafter.

15.19 	Sec. 10. Minnesota Statutes 2008, section 290A.03, subdivision 15, is amended to read:
15.20 		Subd. 15.Internal Revenue Code.  "Internal Revenue Code" means the Internal 
15.21 	Revenue Code of 1986, as amended through February 13, 2008 December 31, 2008.

15.22 	EFFECTIVE DATE. This section is effective for property tax refunds based on 
15.23 	property taxes payable after December 31, 2008, and rent paid after December 31, 2007, 
15.24 	and thereafter.

15.25 	Sec. 11. Minnesota Statutes 2008, section 291.005, subdivision 1, is amended to read:
15.26 		Subdivision 1.Scope. Unless the context otherwise clearly requires, the following 
15.27 	terms used in this chapter shall have the following meanings:
15.28 	(1) "Federal gross estate" means the gross estate of a decedent as valued and 
15.29 	otherwise determined for federal estate tax purposes by federal taxing authorities pursuant 
15.30 	to the provisions of the Internal Revenue Code.
15.31 	(2) "Minnesota gross estate" means the federal gross estate of a decedent after (a) 
15.32 	excluding therefrom any property included therein which has its situs outside Minnesota, 
15.33 	and (b) including therein any property omitted from the federal gross estate which is 
16.1 	includable therein, has its situs in Minnesota, and was not disclosed to federal taxing 
16.2 	authorities.
16.3 	(3) "Personal representative" means the executor, administrator or other person 
16.4 	appointed by the court to administer and dispose of the property of the decedent. If there 
16.5 	is no executor, administrator or other person appointed, qualified, and acting within this 
16.6 	state, then any person in actual or constructive possession of any property having a situs in 
16.7 	this state which is included in the federal gross estate of the decedent shall be deemed 
16.8 	to be a personal representative to the extent of the property and the Minnesota estate tax 
16.9 	due with respect to the property.
16.10 	(4) "Resident decedent" means an individual whose domicile at the time of death 
16.11 	was in Minnesota.
16.12 	(5) "Nonresident decedent" means an individual whose domicile at the time of 
16.13 	death was not in Minnesota.
16.14 	(6) "Situs of property" means, with respect to real property, the state or country in 
16.15 	which it is located; with respect to tangible personal property, the state or country in which 
16.16 	it was normally kept or located at the time of the decedent's death; and with respect to 
16.17 	intangible personal property, the state or country in which the decedent was domiciled 
16.18 	at death.
16.19 	(7) "Commissioner" means the commissioner of revenue or any person to whom the 
16.20 	commissioner has delegated functions under this chapter.
16.21 	(8) "Internal Revenue Code" means the United States Internal Revenue Code of 
16.22 	1986, as amended through February 13, 2008 December 31, 2008.
16.23 	(9) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as 
16.24 	defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of 
16.25 	deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.

16.26 	EFFECTIVE DATE. This section is effective the day following final enactment, 
16.27 	except the changes incorporated by federal changes are effective at the same time as the 
16.28 	changes were effective for federal purposes.

16.29 	Sec. 12. WITHHOLDING ON DIFFERENTIAL PAY.
 16.30 	The commissioner must not assess tax, penalty, or interest against an employer for 
16.31 	failing to withhold tax from differential wages, as defined in section 3401(h)(2) of the 
16.32 	Internal Revenue Code, paid before January 1, 2010, to an employee who has been called 
16.33 	to active duty in the military services.

17.1 	EFFECTIVE DATE. This section is effective the day following final enactment 
17.2 	and applies to any failure to withhold that occurs after December 31, 2008, but before 
17.3 	January 1, 2010.

17.4 	ARTICLE 2
17.5 	GREEN ACRES

17.6 	Section 1. Minnesota Statutes 2008, section 273.111, subdivision 3, is amended to read:
17.7 		Subd. 3.Requirements. (a) Real estate consisting of ten acres or more or a nursery 
17.8 	or greenhouse, and qualifying for classification as class 2a under section 273.13, shall be 
17.9 	entitled to valuation and tax deferment under this section if it is primarily devoted to 
17.10 	agricultural use, and either:
17.11 	(1) is the homestead of the owner, or of a surviving spouse, child, or sibling of the 
17.12 	owner or is real estate which is farmed with the real estate which contains the homestead 
17.13 	property; or
17.14 	(2) has been in possession of the applicant, the applicant's spouse, parent, or sibling, 
17.15 	or any combination thereof, for a period of at least seven years prior to application for 
17.16 	benefits under the provisions of this section, or is real estate which is farmed with the 
17.17 	real estate which qualifies under this clause and is within four townships or cities or 
17.18 	combination thereof from the qualifying real estate; or
17.19 	(3) is the homestead of an individual who is part of an entity described in paragraph 
17.20 	(b), clause (1), (2), or (3); or
17.21 	(4) is in the possession of a nursery or greenhouse or an entity owned by a proprietor, 
17.22 	partnership, or corporation which also owns the nursery or greenhouse operations on the 
17.23 	parcel or parcels, provided that only the acres used to produce nursery stock qualify 
17.24 	for treatment under this section.
17.25 	(b) Valuation of real estate under this section is limited to parcels owned by 
17.26 	individuals except for:
17.27 	(1) a family farm entity or authorized farm entity regulated under section 500.24;
17.28 	(2) a poultry an entity other than a limited liability entity, not regulated under section 
17.29 	500.24, in which the majority of the members, partners, or shareholders are related 
17.30 	and at least one of the members, partners, or shareholders either resides on the land or 
17.31 	actively operates the land; and
17.32 	(3) corporations that derive 80 percent or more of their gross receipts from the 
17.33 	wholesale or retail sale of horticultural or nursery stock.
17.34 	The terms in this paragraph have the meanings given in section 500.24, where 
17.35 	applicable.
18.1 	(c) Land that previously qualified for tax deferment under this section and no longer 
18.2 	qualifies because it is not primarily used for agricultural purposes but would otherwise 
18.3 	qualify under Minnesota Statutes 2006, section 273.111, subdivision 3, for a period of at 
18.4 	least three years will not be required to make payment of the previously deferred taxes, 
18.5 	notwithstanding the provisions of subdivision 9. Sale of the land prior to the expiration 
18.6 	of the three-year period requires payment of deferred taxes as follows: sale in the year 
18.7 	the land no longer qualifies requires payment of the current year's deferred taxes plus 
18.8 	payment of deferred taxes for the two prior years; sale during the second year the land 
18.9 	no longer qualifies requires payment of the current year's deferred taxes plus payment of 
18.10 	the deferred taxes for the prior year; and sale during the third year the land no longer 
18.11 	qualifies requires payment of the current year's deferred taxes. Deferred taxes shall be 
18.12 	paid even if the land qualifies pursuant to subdivision 11a. When such property is sold or 
18.13 	no longer qualifies under this paragraph, or at the end of the three-year period, whichever 
18.14 	comes first, all deferred special assessments plus interest are payable in equal installments 
18.15 	spread over the time remaining until the last maturity date of the bonds issued to finance 
18.16 	the improvement for which the assessments were levied. If the bonds have matured, the 
18.17 	deferred special assessments plus interest are payable within 90 days. The provisions of 
18.18 	section 429.061, subdivision 2, apply to the collection of these installments. Penalties are 
18.19 	not imposed on any such special assessments if timely paid.
18.20 	(d) Land that is enrolled in the reinvest in Minnesota program under sections 
18.21 	103F.501 to 103F.535, the federal Conservation Reserve Program as contained in Public 
18.22 	Law 99-198, or a similar state or federal conservation program does not qualify qualifies 
18.23 	 for valuation and assessment deferral under this section if it was in agricultural use before 
18.24 	enrollment and, provided that, in the case of land enrolled in the reinvest in Minnesota 
18.25 	program, it is not subject to a perpetual easement. This paragraph applies to land that has 
18.26 	not qualified under this section for taxes payable in 2009 or previous years.

18.27 	EFFECTIVE DATE. This section is effective for assessment year 2009 and 
18.28 	thereafter.

18.29 	Sec. 2. Minnesota Statutes 2008, section 273.111, subdivision 3a, is amended to read:
18.30 		Subd. 3a.Property no longer eligible for deferment. (a) Real estate receiving 
18.31 	the tax deferment under this section for assessment year 2008, but that does not qualify 
18.32 	for the 2009 assessment year due to changes in qualification requirements under Laws 
18.33 	2008, chapter 366, shall continue to qualify until any part of: (1) the land is sold, 
18.34 	transferred, or subdivided, or (2) the 2013 assessment, whichever is earlier, provided that 
19.1 	the property continues to meet the requirements of Minnesota Statutes 2006, section 
19.2 	273.111, subdivision 3.
19.3 	(b) Except as provided in paragraph (c), and subdivision 9, paragraph (b), when 
19.4 	property assessed under this subdivision is withdrawn from the program or becomes 
19.5 	ineligible, the property shall be subject to additional taxes, in the amount equal to the 
19.6 	average difference between the taxes determined in accordance with subdivision 4, and the 
19.7 	amount determined under subdivision 5, for the current year and the two preceding years, 
19.8 	multiplied by (1) three, in the case of class 2a property under section 273.13, subdivision 
19.9 	23, or any property withdrawn before January 2, 2009, or (2) seven, in the case of property 
19.10 	withdrawn after January 2, 2009, that is not class 2a property. The number of years used as 
19.11 	the multiplier must not exceed the number of years during which the property was subject 
19.12 	to this section. The amount determined under subdivision 5 shall not be greater than it 
19.13 	would have been had the actual bona fide sale price of the real property at an arm's-length 
19.14 	transaction been used in lieu of the market value determined under subdivision 5. The 
19.15 	additional taxes shall be extended against the property on the tax list for the current year, 
19.16 	provided that no interest or penalties shall be levied on the additional taxes if timely 
19.17 	paid as provided in subdivision 9.
19.18 	(c) If land described in paragraph (a) is sold or otherwise transferred to a son or 
19.19 	daughter of the owner, it will continue to qualify for treatment under this section as long 
19.20 	as it continues to meet the requirements of Minnesota Statutes 2006, section 273.111, 
19.21 	subdivision 3, but no later than the 2013 assessment.
19.22 	(d) When property assessed under this subdivision is removed from the program 
19.23 	and is enrolled in the rural preserve property tax law program under section 273.114, 
19.24 	the property is not subject to the additional taxes required under this subdivision or 
19.25 	subdivision 9.

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

19.27 	Sec. 3. Minnesota Statutes 2008, section 273.111, subdivision 9, is amended to read:
19.28 		Subd. 9.Additional taxes. (a) Except as provided in paragraph (b), when real 
19.29 	property which is being, or has been valued and assessed under this section no longer 
19.30 	qualifies under subdivision 3, the portion no longer qualifying shall be subject to additional 
19.31 	taxes, in the amount equal to the difference between the taxes determined in accordance 
19.32 	with subdivision 4, and the amount determined under subdivision 5. Provided, however, 
19.33 	that the amount determined under subdivision 5 shall not be greater than it would have 
19.34 	been had the actual bona fide sale price of the real property at an arm's-length transaction 
19.35 	been used in lieu of the market value determined under subdivision 5. Such additional 
20.1 	taxes shall be extended against the property on the tax list for the current year, provided, 
20.2 	however, that no interest or penalties shall be levied on such additional taxes if timely 
20.3 	paid, and provided further, that such additional taxes shall only be levied with respect to 
20.4 	the last three years that the said property has been valued and assessed under this section.
20.5 	(b) Real property that has been valued and assessed under this section prior to 
20.6 	May 29, 2008, and that ceases to qualify under this section after May 28, 2008, and is 
20.7 	withdrawn from the program before May 1, 2010, is not subject to additional taxes under 
20.8 	this subdivision or subdivision 3, paragraph (c). If additional taxes have been paid under 
20.9 	this subdivision with respect to property described in this paragraph prior to the date of 
20.10 	enactment of this act, the county must repay the property owner in the manner prescribed 
20.11 	by the commissioner of revenue.

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

20.13 	Sec. 4. Minnesota Statutes 2008, section 273.111, subdivision 11a, is amended to read:
20.14 		Subd. 11a.Continuation of tax treatment upon sale or other events. (a) When 
20.15 	real property qualifying under subdivision 3 is sold or transferred, no additional taxes or 
20.16 	deferred special assessments plus interest shall be extended against the property provided 
20.17 	the property continues to qualify pursuant to subdivision 3, and provided the new owner 
20.18 	files an application for continued deferment within 30 days after the sale or transfer.
20.19 	(b) The following transfers do not constitute a change of ownership of property 
20.20 	qualifying under subdivision 3:
20.21 	(1) death of a property owner when a surviving owner retains ownership of the 
20.22 	property thereafter;
20.23 	(2) divorce of a married couple when one of the spouses retains ownership of the 
20.24 	property thereafter;
20.25 	(3) marriage of a single property owner when that owner retains ownership of the 
20.26 	property in whole or in part thereafter;
20.27 	(4) organization into or reorganization of a farm entity ownership under section 
20.28 	500.24, if all owners maintain the same beneficial interest both before and after the 
20.29 	organizational changes; and
20.30 	(5) placement of the property in trust provided that the individual owners of the 
20.31 	property are the grantors of the trust and they maintain the same beneficial interest both 
20.32 	before and after placement of the property in trust.

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

21.1 	Sec. 5. [273.114] RURAL PRESERVE PROPERTY TAX PROGRAM.
21.2 		Subdivision 1.Definitions. (a) In this section, the terms defined in this subdivision 
21.3 	have the meanings given them.
21.4 	(b) "Conservation management plan" means a written document approved by the 
21.5 	soil and water conservation district providing a framework for site-specific healthy, 
21.6 	productive, and sustainable conservation resources. A conservation management plan 
21.7 	must include at least the following:
21.8 	(1) conservation management goals for the land;
21.9 	(2) a reliable field inventory of the individual conservation practices and cover types;
21.10 	(3) a description of the soil type and quality;
21.11 	(4) an aerial photo or map of the vegetation and other natural features of the land 
21.12 	clearly indicating the boundaries of the conservation land;
21.13 	(5) the proposed future conditions of the land;
21.14 	(6) prescriptions to meet proposed future conditions of the land;
21.15 	(7) a recommended timetable for implementing the prescribed practices; and
21.16 	(8) a legal description of the land encompassing the parcels included in the plan.
21.17 	(c) The Board of Water and Soil Resources shall develop and distribute guidance for 
21.18 	conservation management plan preparation and approval.
21.19 	(d) The commissioner of revenue is the final arbiter of disputes arising over plan 
21.20 	approvals.
21.21 		Subd. 2.Requirements. Class 2a or 2b property that had been assessed under 
21.22 	Minnesota Statutes 2006, section 273.111, or that is part of an agricultural homestead 
21.23 	under section 273.13, subdivision 23, paragraph (a), is entitled to valuation and tax 
21.24 	deferment under this section if:
21.25 	(1) the land consists of at least ten acres;
21.26 	(2) a conservation management plan for the land must be prepared by an approved 
21.27 	plan writer and implemented during the period in which the land is subject to valuation 
21.28 	and deferment under this section;
21.29 	(3) the land must be enrolled for a minimum of ten years; and
21.30 	(4) there are no delinquent property taxes on the land.
21.31 	Real estate may not be enrolled for valuation and deferment under this section and 
21.32 	section 273.111, 273.112, or 273.117, or chapter 290C concurrently.
21.33 	No more than 50 percent of the total acreage of an agricultural homestead may be 
21.34 	class 2b property enrolled in this program.
21.35 		Subd. 3.Determination of value. Notwithstanding sections 272.03, subdivision 
21.36 	8, and 273.11, the value of any real estate that qualifies under subdivision 2 must, upon 
22.1 	timely application by the owner in the manner provided in subdivision 5, not exceed the 
22.2 	value prescribed by the commissioner of revenue for class 2a tillable property in that 
22.3 	county. The house and garage, if any, and the immediately surrounding one acre of land 
22.4 	and a minor, ancillary nonresidential structure, if any, shall be valued according to their 
22.5 	appropriate value. In determining the value for ad valorem tax purposes, the assessor shall 
22.6 	not consider the presence of commercial, industrial, residential, or seasonal recreational 
22.7 	land use influences that may affect the value of real estate subject to this section.
22.8 		Subd. 4.Separate determination of market value and tax. The assessor shall 
22.9 	make a separate determination of the market value of the real estate based on its highest 
22.10 	and best use. The tax based upon that value and the appropriate local tax rate applicable to 
22.11 	the property in the taxing district shall be recorded on the property assessment records.
22.12 		Subd. 5.Application and covenant agreement. (a) Application for deferment 
22.13 	of taxes and assessment under this section shall be filed by May 1 of the year prior to 
22.14 	the year in which the taxes are payable. Any application filed under this subdivision 
22.15 	and granted shall continue in effect for subsequent years until the termination of the 
22.16 	covenant agreement under paragraph (b). The application must be filed with the assessor 
22.17 	of the taxing district in which the real property is located on the form prescribed by the 
22.18 	commissioner of revenue. The assessor may require proof by affidavit or otherwise that 
22.19 	the property qualifies under subdivision 2.
22.20 	(b) The owner of the property must sign a covenant agreement that is filed with the 
22.21 	county recorder and recorded in the county where the property is located. The covenant 
22.22 	agreement must include all of the following:
22.23 	(1) legal description of the area to which the covenant applies;
22.24 	(2) name and address of the owner;
22.25 	(3) a statement that the land described in the covenant must be kept as rural preserve 
22.26 	land, which meets the requirements of subdivision 2, for the duration of the covenant;
22.27 	(4) a statement that the landowner may terminate the covenant agreement by 
22.28 	notifying the county assessor in writing five years in advance of the date of proposed 
22.29 	termination, provided that the notice of intent to terminate may not be given at any time 
22.30 	before the land has been subject to the covenant for a period of five years;
22.31 	(5) a statement that the covenant is binding on the owner or the owner's successor or 
22.32 	assigns and runs with the land; and
22.33 	(6) a witnessed signature of the owner, agreeing by covenant, to maintain the land as 
22.34 	described in subdivision 2.
23.1 	(c) After a covenant under this section has been terminated, the land that had been 
23.2 	subject to the covenant is ineligible for subsequent valuation under this section for a 
23.3 	period of three years after the termination.
23.4 		Subd. 6.Additional taxes. Upon termination of a covenant agreement in 
23.5 	subdivision 5, paragraph (b), the land to which the covenant applied shall be subject to 
23.6 	additional taxes in the amount equal to the difference between the taxes determined in 
23.7 	accordance with subdivision 3 and the amount determined under subdivision 4, provided 
23.8 	that the amount determined under subdivision 4 shall not be greater than it would have 
23.9 	been had the actual bona fide sale price of the real property at an arm's-length transaction 
23.10 	been used in lieu of the market value determined under subdivision 4. The additional taxes 
23.11 	shall be extended against the property on the tax list for the current year, provided that 
23.12 	no interest or penalties shall be levied on the additional taxes if timely paid and that the 
23.13 	additional taxes shall only be levied with respect to the current year plus two prior years 
23.14 	that the property has been valued and assessed under this section.
23.15 		Subd. 7.Lien. The additional tax imposed by this section shall be a lien upon the 
23.16 	property assessed to the same extent and for the same duration as other taxes imposed on 
23.17 	the property in this state. The tax shall be annually extended by the county auditor and if 
23.18 	and when payable shall be collected and distributed in the manner provided by law for the 
23.19 	collection and distribution of other property taxes.
23.20 		Subd. 8.Special local assessments. The payment of special local assessments 
23.21 	levied after June 1, 2011, for improvements made to any real property described in 
23.22 	subdivision 1 together with the interest thereon shall, on timely application as provided 
23.23 	in subdivision 6, be deferred as long as the property meets the conditions contained in 
23.24 	this section. If special assessments against the property have been deferred pursuant to 
23.25 	this subdivision, the governmental unit shall file with the county recorder in the county 
23.26 	in which the property is located a certificate containing the legal description of the 
23.27 	affected property and of the amount deferred. When the property no longer qualifies 
23.28 	under subdivision 1, all deferred special assessments plus interest shall be payable in 
23.29 	equal installments spread over the time remaining until the last maturity date of the bonds 
23.30 	issued to finance the improvement for which the assessments were levied. If the bonds 
23.31 	have matured, the deferred special assessments plus interest shall be payable within 90 
23.32 	days. The provisions of section 429.061, subdivision 2, apply to the collection of these 
23.33 	installments. Penalty shall not be levied on these special assessments if timely paid. This 
23.34 	subdivision does not apply to special assessments levied at any time by a county or district 
23.35 	court under chapter 116A or by a watershed district under chapter 103D.

24.1 	EFFECTIVE DATE. This section is effective for deferred taxes payable in 2012 
24.2 	and thereafter.

24.3 	Sec. 6. Minnesota Statutes 2008, section 273.13, subdivision 23, is amended to read:
24.4 		Subd. 23.Class 2. (a) An agricultural homestead consists of class 2a agricultural 
24.5 	land that is homesteaded, along with any class 2b rural vacant land that is contiguous to 
24.6 	the class 2a land under the same ownership. The market value of the house and garage 
24.7 	and immediately surrounding one acre of land has the same class rates as class 1a or 1b 
24.8 	property under subdivision 22. The value of the remaining land including improvements 
24.9 	up to the first tier valuation limit of agricultural homestead property has a net class rate 
24.10 	of 0.5 percent of market value. The remaining property over the first tier has a class rate 
24.11 	of one percent of market value. For purposes of this subdivision, the "first tier valuation 
24.12 	limit of agricultural homestead property" and "first tier" means the limit certified under 
24.13 	section 273.11, subdivision 23.
24.14 	(b) Class 2a agricultural land consists of parcels of property, or portions thereof, 
24.15 	that are agricultural land and buildings. Class 2a property has a net class rate of one 
24.16 	percent of market value, unless it is part of an agricultural homestead under paragraph 
24.17 	(a). Class 2a property may contain must also include any property that would otherwise 
24.18 	be classified as 2b, but is interspersed with class 2a property, including but not limited to 
24.19 	sloughs, wooded wind shelters, acreage abutting ditches, ravines, rock piles, land subject 
24.20 	to a setback requirement, and other similar land that is impractical for the assessor to value 
24.21 	separately from the rest of the property or that is unlikely to be able to be sold separately 
24.22 	from the rest of the property.
24.23 	An assessor may classify the part of a parcel described in this subdivision that is used 
24.24 	for agricultural purposes as class 2a and the remainder in the class appropriate to its use.
24.25 	(c) Class 2b rural vacant land consists of parcels of property, or portions thereof, 
24.26 	that are unplatted real estate, rural in character and not used for agricultural purposes, 
24.27 	including land used for growing trees for timber, lumber, and wood and wood products, 
24.28 	that is not improved with a structure. The presence of a minor, ancillary nonresidential 
24.29 	structure as defined by the commissioner of revenue does not disqualify the property from 
24.30 	classification under this paragraph. Any parcel of 20 acres or more improved with a 
24.31 	structure that is not a minor, ancillary nonresidential structure must be split-classified, and 
24.32 	ten acres must be assigned to the split parcel containing the structure. Class 2b property 
24.33 	has a net class rate of one percent of market value unless it is part of an agricultural 
24.34 	homestead under paragraph (a), or qualifies as class 2c under paragraph (d).
25.1 	(d) Class 2c managed forest land consists of no less than 20 and no more than 1,920 
25.2 	acres statewide per taxpayer that is being managed under a forest management plan that 
25.3 	meets the requirements of chapter 290C, but is not enrolled in the sustainable forest 
25.4 	resource management incentive program. It has a class rate of .65 percent, provided that 
25.5 	the owner of the property must apply to the assessor to receive the reduced class rate and 
25.6 	provide the information required by the assessor to verify that the property qualifies for 
25.7 	the reduced rate. The commissioner of natural resources must concur that the land is 
25.8 	qualified. The commissioner of natural resources shall annually provide county assessors 
25.9 	verification information on a timely basis.
25.10 	(e) Agricultural land as used in this section means contiguous acreage of ten 
25.11 	acres or more, used during the preceding year for agricultural purposes. "Agricultural 
25.12 	purposes" as used in this section means the raising, cultivation, drying, or storage of 
25.13 	agricultural products for sale, or the storage of machinery or equipment used in support 
25.14 	of agricultural production by the same farm entity. For a property to be classified as 
25.15 	agricultural based only on the drying or storage of agricultural products, the products 
25.16 	being dried or stored must have been produced by the same farm entity as the entity 
25.17 	operating the drying or storage facility. "Agricultural purposes" also includes enrollment 
25.18 	in the Reinvest in Minnesota program under sections 103F.501 to 103F.535 or the federal 
25.19 	Conservation Reserve Program as contained in Public Law 99-198 or a similar state 
25.20 	or federal conservation program if the property was classified as agricultural (i) under 
25.21 	this subdivision for the assessment year 2002 or (ii) in the year prior to its enrollment. 
25.22 	Agricultural classification shall not be based upon the market value of any residential 
25.23 	structures on the parcel or contiguous parcels under the same ownership.
25.24 	(f) Real estate of less than ten acres, which is exclusively or intensively used for 
25.25 	raising or cultivating agricultural products, shall be considered as agricultural land. To 
25.26 	qualify under this paragraph, property that includes a residential structure must be used 
25.27 	intensively for one of the following purposes:
25.28 	(i) for drying or storage of grain or storage of machinery or equipment used to 
25.29 	support agricultural activities on other parcels of property operated by the same farming 
25.30 	entity;
25.31 	(ii) as a nursery, provided that only those acres used to produce nursery stock are 
25.32 	considered agricultural land;
25.33 	(iii) for livestock or poultry confinement, provided that land that is used only for 
25.34 	pasturing and grazing does not qualify; or
25.35 	(iv) for market farming; for purposes of this paragraph, "market farming" means the 
25.36 	cultivation of one or more fruits or vegetables or production of animal or other agricultural 
26.1 	products for sale to local markets by the farmer or an organization with which the farmer 
26.2 	is affiliated.
26.3 	(g) Land shall be classified as agricultural even if all or a portion of the agricultural 
26.4 	use of that property is the leasing to, or use by another person for agricultural purposes.
26.5 	Classification under this subdivision is not determinative for qualifying under 
26.6 	section 273.111.
26.7 	(h) The property classification under this section supersedes, for property tax 
26.8 	purposes only, any locally administered agricultural policies or land use restrictions that 
26.9 	define minimum or maximum farm acreage.
26.10 	(i) The term "agricultural products" as used in this subdivision includes production 
26.11 	for sale of:
26.12 	(1) livestock, dairy animals, dairy products, poultry and poultry products, fur-bearing 
26.13 	animals, horticultural and nursery stock, fruit of all kinds, vegetables, forage, grains, 
26.14 	bees, and apiary products by the owner;
26.15 	(2) fish bred for sale and consumption if the fish breeding occurs on land zoned 
26.16 	for agricultural use;
26.17 	(3) the commercial boarding of horses if the boarding is done in conjunction with 
26.18 	raising or cultivating agricultural products as defined in clause (1);
26.19 	(4) property which is owned and operated by nonprofit organizations used for 
26.20 	equestrian activities, excluding racing;
26.21 	(5) game birds and waterfowl bred and raised for use on a shooting preserve licensed 
26.22 	under section 97A.115;
26.23 	(6) insects primarily bred to be used as food for animals;
26.24 	(7) trees, grown for sale as a crop, including short rotation woody crops, and not 
26.25 	sold for timber, lumber, wood, or wood products; and
26.26 	(8) maple syrup taken from trees grown by a person licensed by the Minnesota 
26.27 	Department of Agriculture under chapter 28A as a food processor.
26.28 	(j) If a parcel used for agricultural purposes is also used for commercial or industrial 
26.29 	purposes, including but not limited to:
26.30 	(1) wholesale and retail sales;
26.31 	(2) processing of raw agricultural products or other goods;
26.32 	(3) warehousing or storage of processed goods; and
26.33 	(4) office facilities for the support of the activities enumerated in clauses (1), (2), 
26.34 	and (3),
26.35 	the assessor shall classify the part of the parcel used for agricultural purposes as class 
26.36 	1b, 2a, or 2b, whichever is appropriate, and the remainder in the class appropriate to its 
27.1 	use. The grading, sorting, and packaging of raw agricultural products for first sale is 
27.2 	considered an agricultural purpose. A greenhouse or other building where horticultural 
27.3 	or nursery products are grown that is also used for the conduct of retail sales must be 
27.4 	classified as agricultural if it is primarily used for the growing of horticultural or nursery 
27.5 	products from seed, cuttings, or roots and occasionally as a showroom for the retail sale of 
27.6 	those products. Use of a greenhouse or building only for the display of already grown 
27.7 	horticultural or nursery products does not qualify as an agricultural purpose.
27.8 	The assessor shall determine and list separately on the records the market value of 
27.9 	the homestead dwelling and the one acre of land on which that dwelling is located. If any 
27.10 	farm buildings or structures are located on this homesteaded acre of land, their market 
27.11 	value shall not be included in this separate determination.
27.12 	(k) Class 2d airport landing area consists of a landing area or public access area of 
27.13 	a privately owned public use airport. It has a class rate of one percent of market value. 
27.14 	To qualify for classification under this paragraph, a privately owned public use airport 
27.15 	must be licensed as a public airport under section 360.018. For purposes of this paragraph, 
27.16 	"landing area" means that part of a privately owned public use airport properly cleared, 
27.17 	regularly maintained, and made available to the public for use by aircraft and includes 
27.18 	runways, taxiways, aprons, and sites upon which are situated landing or navigational aids. 
27.19 	A landing area also includes land underlying both the primary surface and the approach 
27.20 	surfaces that comply with all of the following:
27.21 	(i) the land is properly cleared and regularly maintained for the primary purposes of 
27.22 	the landing, taking off, and taxiing of aircraft; but that portion of the land that contains 
27.23 	facilities for servicing, repair, or maintenance of aircraft is not included as a landing area;
27.24 	(ii) the land is part of the airport property; and
27.25 	(iii) the land is not used for commercial or residential purposes.
27.26 	The land contained in a landing area under this paragraph must be described and certified 
27.27 	by the commissioner of transportation. The certification is effective until it is modified, 
27.28 	or until the airport or landing area no longer meets the requirements of this paragraph. 
27.29 	For purposes of this paragraph, "public access area" means property used as an aircraft 
27.30 	parking ramp, apron, or storage hangar, or an arrival and departure building in connection 
27.31 	with the airport.
27.32 	(l) Class 2e consists of land with a commercial aggregate deposit that is not actively 
27.33 	being mined and is not otherwise classified as class 2a or 2b. It has a class rate of one 
27.34 	percent of market value. To qualify for classification under this paragraph, the property 
27.35 	must be at least ten contiguous acres in size and the owner of the property must record with 
27.36 	the county recorder of the county in which the property is located an affidavit containing:
28.1 	(1) a legal description of the property;
28.2 	(2) a disclosure that the property contains a commercial aggregate deposit that is not 
28.3 	actively being mined but is present on the entire parcel enrolled;
28.4 	(3) documentation that the conditional use under the county or local zoning 
28.5 	ordinance of this property is for mining; and
28.6 	(4) documentation that a permit has been issued by the local unit of government 
28.7 	or the mining activity is allowed under local ordinance. The disclosure must include a 
28.8 	statement from a registered professional geologist, engineer, or soil scientist delineating 
28.9 	the deposit and certifying that it is a commercial aggregate deposit.
28.10 	For purposes of this section and section 273.1115, "commercial aggregate deposit" 
28.11 	means a deposit that will yield crushed stone or sand and gravel that is suitable for use 
28.12 	as a construction aggregate; and "actively mined" means the removal of top soil and 
28.13 	overburden in preparation for excavation or excavation of a commercial deposit.
28.14 	(m) When any portion of the property under this subdivision or subdivision 22 
28.15 	begins to be actively mined, the owner must file a supplemental affidavit within 60 days 
28.16 	from the day any aggregate is removed stating the number of acres of the property that is 
28.17 	actively being mined. The acres actively being mined must be (1) valued and classified 
28.18 	under subdivision 24 in the next subsequent assessment year, and (2) removed from the 
28.19 	aggregate resource preservation property tax program under section 273.1115, if the 
28.20 	land was enrolled in that program. Copies of the original affidavit and all supplemental 
28.21 	affidavits must be filed with the county assessor, the local zoning administrator, and the 
28.22 	Department of Natural Resources, Division of Land and Minerals. A supplemental 
28.23 	affidavit must be filed each time a subsequent portion of the property is actively mined, 
28.24 	provided that the minimum acreage change is five acres, even if the actual mining activity 
28.25 	constitutes less than five acres.

28.26 	EFFECTIVE DATE. This section is effective for assessments in 2010 for taxes 
28.27 	payable in 2011, and thereafter.

28.28 	Sec. 7. ANNUAL REPORT ON AGRICULTURAL VALUATION AND 
28.29 	CLASSIFICATION.
 28.30 	The commissioner of revenue must study and, by March 1 each year, report to 
28.31 	the chairs and ranking minority members of the committees on taxes of the senate and 
28.32 	the house of representatives on:
28.33 	(1) trends in market values of class 2a and 2b properties;
28.34 	(2) green acres value methodology and determinations; and
28.35 	(3) assessment and classification practices pertaining to class 2a and 2b property.